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As filed with the Securities and Exchange Commission on September 8, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SPEEDWAY MOTORSPORTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
Delaware 7948 51-0363307
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
U.S. Highway 29 North
P.O. Box 600
Concord, North Carolina 28026-0600
Telephone (704) 455-3239
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Mr. O. Bruton Smith
Chairman and Chief Executive Officer
Speedway Motorsports, Inc.
U.S. Highway 29 North
P.O Box 600
Concord, North Carolina 28026-0600
Telephone (704) 455-3239
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
Copies to:
Gary C. Ivey, 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. h
CALCULATION OF REGISTRATION FEE
[CAPTION]
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<S> <C> <C> <C>
Title of Each Class Proposed Maximum Proposed Maximum
Of Securities To Amount To Be Offering Price Aggregate Offering
Be Registered Registered Per Unit (1) Price (1)
<S> <C> <C> <C>
8 1/2% Senior Subordinated Notes Due 2007..... $125,000,000 100.375% $125,468,750
<CAPTION>
Title of Each Class Amount Of
Of Securities To Registration
Be Registered Fee
<S> <C>
8 1/2% Senior Subordinated Notes Due 2007..... $38,021
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(f) of Regulation C under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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SPEEDWAY MOTORSPORTS, INC.
Cross Reference Sheet
Furnished Pursuant to Item 501(b) of Registration S-K
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<CAPTION>
Form S-4 Item Number and Heading Location in Prospectus
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front Cover Page of Prospectus and Outside Back
Cover Page of Prospectus; Available Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information.................. Forepart of Registration Statement; Prospectus Summary;
Risk Factors; Selected Financial Data
4. Terms of the Transaction........................ Prospectus Summary; Risk Factors; The Exchange Offer;
Description of Certain Indebtedness; Description of
Notes; Certain Federal Income Tax Considerations
5. Pro Forma Financial Information................. Not Applicable
6. Material Contracts with the Company Being
Acquired........................................ Not Applicable
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters.................................... Not Applicable
8. Interests of Named Experts and Counsel.......... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Not Applicable
10. Information with Request to S-3 Registrants..... Not Applicable
11. Incorporation of Certain Information by
Reference....................................... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants..................................... Not Applicable
13. Incorporation of Certain Information by
Reference....................................... Not Applicable
14. Information with Respect to Registrants Other
than S-3 or S-2 Registrants..................... Selected Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Legal Matters; Business; National
Association for Stock Car Auto Racing, Inc. (NASCAR);
Consolidated Financial Statements
15. Information with Respect to S-3 Companies....... Not Applicable
16. Information with Respect to S-2 or S-3
Companies....................................... Not Applicable
17. Information with Respect to Companies Other than
S-3 or S-2 Companies............................ Not Applicable
18. Information if Proxies, Consents or Authori-
zations are to be Solicited..................... Not Applicable
19. Information if Proxies, Consents or Authori-
zations are not to be Solicited or in an
Exchange Offer.................................. Certain Transactions; Management
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1997
PROSPECTUS
(Speedway Motorsports, Inc. logo appears here)
Offer to Exchange
All Outstanding
8 1/2% Senior Subordinated Notes Due 2007
($125,000,000 Principal Amount Outstanding)
for
8 1/2% Senior Subordinated Notes Due 2007
This Exchange Offer (as defined below) and all withdrawal rights hereunder will
expire at 5:00 p.m., New York City time, on , 1997 (as such date
may be extended from time to time, the "Expiration Date").
Speedway Motorsports, Inc., a Delaware corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal"), to exchange $1,000 in principal amount of its 8 1/2% Senior
Subordinated Notes Due 2007 (the "New Notes") for each $1,000 in principal
amount of its currently outstanding 8 1/2% Senior Subordinated Notes Due 2007
(the "Old Notes") (the Old Notes and the New Notes are collectively referred to
herein as the "Notes"). An aggregate principal amount of $125.0 million of Old
Notes is currently outstanding. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging 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, as amended (the "Securities Act"). 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 New Notes received in exchange for
Notes where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business one
year after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of the Old Notes being tendered for exchange. However,
the Exchange Offer is subject to the terms and provisions of the Registration
Rights Agreement dated as of August 4, 1997 (the "Registration Rights
Agreement"), among the Company, each of the Company's existing domestic
subsidiaries (other than the Unrestricted Subsidiary (as defined herein)) and
NationsBanc Capital Markets, Inc., Wheat First Butcher Singer, Montgomery
Securities and J.C. Bradford & Co. (the "Initial Purchasers"). The Old Notes may
be tendered only in multiples of $1,000. See "The Exchange Offer."
The Old Notes were issued in a transaction (the "Prior Offering") pursuant
to which the Company issued an aggregate of $125.0 million principal amount of
the Old Notes to the Initial Purchasers on August 4, 1997 pursuant to a Purchase
Agreement dated as of July 30, 1997 (the "Purchase Agreement") among the
Company, the Company's existing domestic subsidiaries (other than the
Unrestricted Subsidiary) and the Initial Purchasers. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act. The Company and the Initial Purchasers also entered into the Registration
Rights Agreement, pursuant to which the Company granted certain registration
rights for the benefit of the holders of the Old Notes. The Exchange Offer is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement with respect to the Old Notes. See "The Exchange
Offer -- Purpose and Effect."
The Old Notes were, and the New Notes will be, issued under the Indenture
dated as of August 4, 1997 (the "Indenture") among the Company, the Company's
existing domestic subsidiaries (other than the Unrestricted Subsidiary), and
First Trust National Association, as trustee (in such capacity, the "Trustee").
The form and terms of the New Notes will be identical in all material respects
to the form and terms of the Old Notes, except that (i) the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, (ii) holders of New Notes will not be entitled
to liquidated damages equal to $.05 per week per $1,000 principal amount of Old
Notes held by such
(cover continued on next page)
See "Risk Factors" beginning on page 11 for a discussion of certain factors
that should be considered in evaluating the Exchange Offer.
THE NEW NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of Prospectus is , 1997.
<PAGE>
<PAGE>
holders (up to a maximum amount of $0.30 per week per $1,000 principal amount)
otherwise payable under the terms of the Registration Rights Agreement in
respect of the Old Notes held by such holders during any period in which a
Registration Default (as defined herein) is continuing (the "Liquidated
Damages") and (iii) holders of New Notes will not be, and upon the consummation
of the Exchange Offer, holders of Old Notes will no longer be, entitled to
certain rights under the Registration Rights Agreement intended for the holders
of unregistered securities. The Exchange Offer shall be deemed consummated upon
the occurrence of the delivery by the Company to First Trust National
Association, as registrar of the Old Notes (in such capacity, the "Registrar")
under the Indenture of New Notes in the same aggregate principal amount as the
aggregate principal amount of Old Notes that are validly tendered by holders
thereof pursuant to the Exchange Offer. See "The Exchange Offer -- Termination
of Certain Rights," " -- Procedures for Tendering Old Notes" and "Description of
Notes."
The Notes will bear interest at a rate equal to 8 1/2% per annum. Interest
on the Notes is payable semiannually, commencing February 15, 1998, on February
15 and August 15 of each year (each an "Interest Payment Date") and shall accrue
from August 4, 1997 or from the most recent Interest Payment Date with respect
to the Old Notes to which interest was paid or duly provided for. The Notes will
mature on August 15, 2007. See "Description of Notes."
The Notes will not be redeemable by the Company at its option prior to
August 15, 2002. Thereafter, the Notes will be redeemable by the Company at the
redemption prices and subject to the conditions set forth in "Description of
Notes -- Optional Redemption." Upon the occurrence of a Change of Control (as
defined herein), the Company will be required to make an offer to repurchase all
outstanding Notes at 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of purchase. There is
no assurance that the Company will have adequate funds to repurchase the Notes
upon a Change in Control. See "Description of Notes -- Repurchase at the Option
of Holders -- Change of Control."
The Notes will be general unsecured obligations of the Company subordinated
in right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company, including borrowings under the 1997 Credit Facility (as
defined herein). Subject to the Guarantees (as defined herein) the Notes also
will be effectively subordinated to all of the indebtedness of the Company's
existing subsidiaries. As of August 29, 1997, the Notes were subordinate to
approximately $20.2 million of Senior Indebtedness. Under the 1997 Credit
Facility, the Company had an unfunded commitment of $175.0 million at August 29,
1997 which, if funded, would be Senior Indebtedness. See "Description of Notes"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Indenture permits the
Company and its subsidiaries to incur additional indebtedness, including
additional Senior Indebtedness, subject to certain limitations.
Based on existing interpretations of the Securities Act by the staff of the
Securities and Exchange Commission (the "Commission") set forth in "no-action"
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer to any holder of Old Notes in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by such holder
(other than (i) a broker-dealer who purchased Old 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 (ii) a person 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 holder is acquiring the New Notes in
the ordinary course of business and is not participating, and has no arrangement
or understanding with any person to participate, in a distribution of the New
Notes. Holders wishing to accept the Exchange Offer must represent to the
Company, as required by the Registration Rights Agreement, that such conditions
have been met. In addition, if such holder is not a broker-dealer, it must
represent that it is not engaged in, and does not intend to engage in, a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "The
Exchange Offer -- Resales of the New Notes" and "Plan of Distribution." 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 New Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities.
As of August 29, 1997, Cede & Co. ("Cede"), as nominee for The Depository
Trust Company, New York, New York ("DTC"), was the sole registered holder of the
Old Notes and held the Old Notes for certain of its participants. The Company
believes that no such participant is an affiliate (as such term is defined in
Rule 405 of the Securities Act) of the Company. There has previously been only a
limited secondary market, and no public market, for the Old Notes. The Old Notes
are eligible for trading in the Private Offering, Resales and Trading through
Automatic Linkages ("PORTAL") market. In addition, the Initial Purchasers have
advised the Company that they currently intend to make a market in the New
Notes; however, the Initial Purchasers are not obligated to do so and any market
making activities may be discontinued by the Initial Purchasers at any time.
Therefore, there can be no assurance that an active market for the New Notes
will develop. If such a trading market develops for the New Notes, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on such factors, the New Notes may trade at a
discount from their principal amount. See "Risk Factors -- Absence of Public
Market."
The Company will not receive any proceeds from this Exchange Offer. Pursuant
to the Registration Rights Agreement, the Company will bear certain registration
expenses.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes were issued originally in global form (the "Global Old Note").
The Global Old Note was deposited with, or on behalf of, the DTC, as the initial
depository with respect to the Old Notes (in such capacity, the "Depositary").
The Global Old Note is registered in the name of Cede, as nominee of DTC, and
beneficial interests in the Global Old Note are shown on, and transfers thereof
are effected only through, records maintained by the Depositary and its
participants. The use of the Global Old Note to represent certain of the Old
Notes permits the Depositary's participants, and anyone holding a beneficial
interest in an Old Note registered in the name of such a participant, to
transfer interests in the Old Notes electronically in accordance with the
Depositary's established procedures without the need to transfer a physical
certificate. New Notes issued in exchange for the Global Old Note also will be
issued initially as a note in global form (the "Global New Note," and, together
with the Global Old Note, the "Global Notes") and deposited with, or on behalf
of, the Depositary. After the initial issuance of the Global New Note, New Notes
in certificated form will be issued in exchange for a holder's proportionate
interest in the Global New Note only as set forth in the Indenture.
This prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Ms. Marylaurel E. Wilks, Corporate Counsel & Director of Investor Relations,
P.O. Box 600, U.S. Highway 29 North, Concord, North Carolina 28026-0600,
telephone (704) 455-3239. In order to ensure timely delivery of the documents,
any request should be made at least five days before the Expiration Date.
<PAGE>
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
ANNOTATED, 1955, AS AMENDED ("RSA"), WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE NEW HAMPSHIRE SECRETARY OF
STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS
AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS
PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
NOTICE TO FLORIDA RESIDENTS
PURSUANT TO SECTION 517.061(11)(A)(5) OF THE FLORIDA SECURITIES ACT, YOU
HAVE THE RIGHT TO RESCIND YOUR SUBSCRIPTION (UNLESS YOU ARE AN INSTITUTIONAL
INVESTOR DESCRIBED IN SECTION 517.061(7) OF THE FLORIDA SECURITIES ACT) BY
GIVING NOTICE OF SUCH RESCISSION BY TELEPHONE, TELEGRAPH OR LETTER, WITHIN THREE
DAYS AFTER YOU FIRST TENDER CONSIDERATION TO THE INITIAL PURCHASERS. IF NOTICE
IS NOT RECEIVED BY SUCH TIME, THE FOREGOING RIGHT OF RESCISSION SHALL BE NULL
AND VOID.
INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH
AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE
STATEMENTS IN "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS.
THE INFORMATION CONTAINED IN THIS PROSPECTUS HAS BEEN FURNISHED BY THE
COMPANY AND OTHER SOURCES BELIEVED BY THE COMPANY TO BE RELIABLE. THIS
PROSPECTUS CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN TERMS OF
CERTAIN DOCUMENTS BUT REFERENCE IS MADE TO THE ACTUAL DOCUMENTS, COPIES OF WHICH
WILL BE MADE AVAILABLE UPON REQUEST, FOR THE COMPLETE INFORMATION CONTAINED
THEREIN. ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS PROSPECTUS
AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT ITS OWN
COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX BUSINESS, FINANCIAL OR
RELATED ASPECTS OF AN EXCHANGE OF OLD NOTES FOR NEW NOTES. THE COMPANY MAKES NO
REPRESENTATION TO ANY OFFEREE OR PURCHASER OF THE NOTES REGARDING THE LEGALITY
OF ANY INVESTMENT THEREIN BY SUCH OFFEREE OR PURCHASER UNDER APPROPRIATE LEGAL
INVESTMENT OR SIMILAR LAWS.
"ATLANTA MOTOR SPEEDWAY(Register mark)", "CHARLOTTE MOTOR
SPEEDWAY(Register mark)" AND THE COMPANY'S CORPORATE LOGOS ARE REGISTERED
TRADEMARKS AND SERVICE MARKS OF THE COMPANY. THE COMPANY ALSO HAS TRADEMARK
RIGHTS WITH RESPECT TO ITS "LEGENDS CARS(tm)" AND "600 RACING(tm)". TRADEMARK
AND SERVICE MARK APPLICATIONS BY THE COMPANY ARE PENDING WITH RESPECT TO
"SPEEDWAY MOTORSPORTS(tm)", "BRISTOL MOTOR SPEEDWAY(tm)", "SEARS POINT
RACEWAY(tm)" AND "TEXAS MOTOR SPEEDWAY(tm)". "NASCAR(Register mark)" AND "GRAND
NATIONAL(Register mark)" ARE REGISTERED TRADEMARKS AND SERVICE MARKS OF THE
NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. ("NASCAR").
AVAILABLE INFORMATION
The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith is required to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Such reports, proxy statements and other information, may be
inspected and copied at the Public Reference Section 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. The
Commission maintains an Internet Web site that contains reports, proxy and
information statements and other information regarding the Company and other
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov. Copies of all or any part of such materials may be
obtained from any such office upon payment of the fees prescribed by the
Commission. Such information may also be inspected and copied at the offices of
the New York Stock Exchange at 20 Broad Street, New
i
<PAGE>
York, New York 10005. The Company's common stock, par value $.01 per share (the
"Common Stock"), is traded on the New York Stock Exchange under the symbol
"TRK."
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will furnish to the holders of
Notes within 15 days after it is or would have been required to file such with
the Commission (i) 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 the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, at any time after the Company files a
registration statement with respect to the Exchange Offer or a Shelf
Registration Statement, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company has
agreed that, for so long as any Transfer Restricted Securities (as defined in
the Registration Rights Agreement) remain outstanding as Transfer Restricted
Securities, it will furnish to the holders and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act. See "Description of Notes -- Reports." Any such
request and requests for the agreements summarized herein should be directed to:
Ms. Marylaurel E. Wilks, Corporate Counsel & Director of Investor Relations of
the Company, at P.O. Box 600, U.S. Highway 29 North, Concord, North Carolina
28026-0600, telephone: (704) 455-3239.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated Financial
Statements (including the notes thereto) appearing elsewhere in this Prospectus.
NASCAR-related data used throughout this Prospectus were obtained or derived
from industry publications or third-party sources which the Company believes to
be reliable, but the accuracy thereof is not guaranteed. Unless otherwise
indicated, all information contained herein assumes no exercise of options
granted pursuant to the Company's stock option plans or conversions of the
Company's 5 3/4% Convertible Subordinated Debentures Due 2003 (the
"Debentures"). In addition to other information in this Prospectus, the factors
set forth under "Risk Factors" below should be considered carefully in
evaluating an investment in the Notes. hereby. Unless the context requires
otherwise, references herein to the "Company" or "SMI" mean Speedway
Motorsports, Inc. and its subsidiaries considered as one enterprise. As used
herein, the terms "permanent seating capacity" and "permanent seats" include
grandstand and suite seats and exclude infield admission, temporary seats and
general admission.
The Company
Speedway Motorsports, Inc. is a leading promoter, marketer and sponsor of
motorsports activities in the United States. As the owner and operator of
Atlanta Motor Speedway ("AMS"), Bristol Motor Speedway ("BMS"), Charlotte Motor
Speedway ("CMS") and Texas Motor Speedway ("TMS"), and the operator of Sears
Point Raceway ("SPR"), the Company has one of the largest portfolios of major
speedway facilities in the motorsports industry. The Company also owns, operates
and sanctions the Legends Car Racing Circuit (the "Legends Circuit"), an
entry-level stock car racing series for which it manufactures and sells
5/8-scale modified cars (the "Legends Cars") and parts through its 600 Racing
Inc. subsidiary ("600 Racing").
The Company will sponsor 15 major racing events in 1997 sanctioned by
NASCAR, including nine races associated with the Winston Cup professional stock
car racing circuit (the "Winston Cup") and six races associated with the Busch
Grand National circuit. The Company also currently sponsors two Indy Racing
League ("IRL") racing events, three NASCAR Craftsman Truck Series racing events
and one International Race of Champions ("IROC") racing event.
Management believes that spectator demand for its largest events exceeds
existing permanent seating capacity at each of AMS, BMS and CMS, which had, at
December 31, 1996, permanent seating capacity of approximately 102,000, 77,000
and 110,000, respectively. As of March 31, 1997, the Company had completed the
construction of approximately 150,000 permanent seats at TMS, the second largest
sports facility in the United States in terms of permanent seating capacity. In
1997, the Company has contracted for and is in the process of completing
approximately 22,000 additional permanent seats at AMS, and has completed
approximately 39,000 additional permanent seats at BMS and approximately 25,000
additional permanent seats at CMS. SPR currently does not have permanent seating
capacity but provides temporary seating and suites for approximately 18,000
spectators in addition to other general admission seating arrangements along its
2.52 mile road course.
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedway facilities, the sale of
food, beverages, and souvenirs during such events, the sale of sponsorships to
companies that desire to advertise or sell their products or services at such
events and from the licensing of television, cable network and radio rights to
broadcast such events. In 1996, the Company derived approximately 83% of its
total revenues from events sanctioned by NASCAR. The Company has experienced
substantial growth in revenues and profitability as a result of the continued
improvement and expansion of and investment in its facilities, its consistent
marketing and promotional efforts and the overall increase in popularity of
Winston Cup, Busch Grand National and other motorsports events in the United
States.
Industry Overview
Motorsports is the fastest growing spectator sport in the United States,
and NASCAR-sanctioned stock car racing is the fastest growing industry segment.
In 1996, NASCAR sanctioned 81 Winston Cup, Busch Grand National and Craftsman
Truck Series races which were attended by approximately 8.1 million spectators.
Attendance of such NASCAR events has increased at a compound annual growth rate
of 14.1% since 1994. Based on information developed independently by The
Goodyear Tire & Rubber Co. ("Goodyear"), spectator attendance at
1
<PAGE>
Winston Cup and Busch Grand National events increased at compound annual growth
rates of 6.8% and 13.1%, respectively, from 1994 to 1996. Races are generally
heavily promoted, with a number of supporting events surrounding the main race
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 Grand
National events are currently broadcast by ABC, CBS, ESPN, TBS or TNN. According
to NASCAR, major national corporate sponsorships (which currently include over
70 Fortune 500 companies) of NASCAR-sanctioned events has also increased
significantly. Sponsors include such companies as Coca-Cola, General Motors,
Ford, Texaco, Procter & Gamble, McDonald's, and RJR Nabisco.
The dramatic increase in corporate interest in the sport has been driven by
the attractive advertising demographics of stock car racing fans. The most
recent surveys published by NASCAR show the following fan characteristics: 38%
are women; 53% work in professional, managerial or skilled jobs; 58% are
married; 65% own homes; and median family income exceeds $39,000 per annum.
Additionally, 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 1996.
Fueled by popular and accessible drivers, strong fan brand loyalty, a
widening geographic reach, increasing appeal to corporate sponsors and rising
broadcast revenues, industry competitors are actively pursuing internal growth
and industry consolidation. Speedway operations generate high operating margins
and are protected by high barriers to competitive entry, including capital
requirements for new speedway construction, marketing and promotional expertise
and license agreements with NASCAR.
Business Strategy
The Company's strategy is to increase revenues and profitability through
the promotion and production of racing and related events at modern facilities.
The Company markets its 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 and pre-race
promotional activities. The key components of the Company's strategy are (i)
expansion and improvement of existing facilities, (ii) maximization of media
exposure and enhancement of broadcast and sponsorship revenues, (iii) further
development of the Legends Car business, (iv) increases in the daily usage of
existing facilities and (v) acquisition and development of additional
motorsports facilities.
(Bullet) Expansion and improvement of existing facilities -- Management
believes that spectator demand for its largest events exceeds
existing permanent seating capacity. The Company plans to continue
its expansion by adding permanent grandstand seating and luxury
suites, and making other significant renovations and improvements
at several of its facilities. The following table sets forth the
Company's permanent seating capacity as of December 31, 1996, and
planned 1997 expansion of such capacity currently under contract:
<TABLE>
<CAPTION>
At December 31, 1996 1997 Planned Additional Capacity
Approx. Length Permanent Net New Percent Net New Percent
Track Location Acreage (miles) Seating Suites Permanent Increase Suites Increase
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMS Hampton, GA 870 1.5 102,000 83 22,000 22% 58 70%
BMS Bristol, TN 530 0.5 77,000 24 39,000 51% 31 129%
CMS Concord, NC 1,000 1.5 110,000 83 25,000 23% 26 31%
TMS Fort Worth, TX 950 1.5 N/A N/A 150,000 100% 194 100%
Total 289,000 190 236,000 82% 309 163%
</TABLE>
TMS is substantially complete, and there is work in progress at all of
the Company's other speedway facilities. SPR currently does not have
permanent seating capacity but provides general admission seating and
other temporary seating arrangements. Additionally, the Company continues
to make capital improvements, including additional restrooms, other fan
amenities and increased parking, at all of its facilities consistent with
management's commitment to quality and customer satisfaction.
(Bullet) Maximization of media exposure and enhancement of broadcast and
sponsorship revenues -- Management believes that spectator
interest in stock car racing will continue to grow, thereby
increasing broadcast media and sponsors' interest in the sport.
This growth has allowed the Company to expand its television
coverage to include more races and to negotiate more favorable
broadcast rights fees with television
2
<PAGE>
networks as well as to negotiate more favorable contract terms
with sponsors. The Company intends to increase media exposure of
its current NASCAR events, to add television coverage to other
speedway events and to further increase sponsorship revenue.
(Bullet) Further development of the Legends Car business -- In 1992, the
Company developed the Legends Circuit for which it manufactures
and sells cars and parts used in Legends Circuit racing events and
is the official sanctioning body. At retail prices starting at
less than $12,900, management believes 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 increasingly important part of the Company's business, as
revenues for this business have grown from $5.7 million in 1994 to
$9.8 million in 1996. As an extension of the Legends Car concept,
the Company recently released a new, smaller, lower-priced
"Bandolero" stock car, which is expected to appeal to younger
racing enthusiasts.
(Bullet) Increases in the daily usage of existing facilities -- Management
constantly seeks revenue-producing uses for the Company's speedway
facilities on days not committed to racing events. Such other uses
include car and truck shows, supercross motorcycle racing, auto
fairs, driving schools, vehicle testing and settings for
television commercials, concerts, print advertisements and motion
pictures. For example, in June 1997, the Company hosted two music
concerts at its newly constructed TMS facility with the music
promoter's reported total attendance in excess of 600,000.
(Bullet) Acquisition and development of additional motorsports
facilities -- The Company also considers growth by acquisition and
development of motorsports facilities as appropriate opportunities
arise. The Company continuously seeks to locate, acquire, develop
and operate venues which the Company feels are underdeveloped or
underutilized and to capitalize on markets where the pricing of
sponsorship and television rights are considerably more lucrative.
For example, as part of this strategy, the acquisition of SPR's
operations marked the Company's entry into the Northern California
market, which is also currently the 5th largest television market
in the United States.
Recent Developments
New Speedway Events. On July 26, 1997, CMS sponsored its first IRL racing
event, which was attended by the third largest crowd ever for that series. On
August 22 and 23, 1997, BMS sponsored NASCAR-sanctioned Busch Grand National and
Winston Cup racing events, the "Food City 250" and the "Goody's Headache Powder
500", respectively. Weekend attendance figures totaled more than 184,000 for
both the Winston Cup and the Busch Grand National races.
NCMS. On April 2, 1997, the Company submitted a proposal of merger to the
board of directors of North Carolina Motor Speedway, Inc., which owns and
operates a Winston Cup-circuit race track in Rockingham, North Carolina
("NCMS"). The Company's current merger proposal contemplates the purchase of all
outstanding NCMS capital stock for an aggregate of approximately $72.0 million
(or $32.00 per share), payable in cash or shares of Common Stock at the election
of each NCMS stockholder. On May 19, 1997, an affiliate of Penske Motorsports,
Inc., a promoter of motorsports events unaffiliated with the Company, announced
that it had acquired from the principal shareholder of NCMS approximately 65% of
the outstanding capital stock of NCMS. On July 7, 1997, the Company's merger
proposal was recommended by a special committee of the NCMS board for approval
by the NCMS board. On August 5, 1997, however, the NCMS board of directors
rejected the Company's proposal. Subsequently, O. Bruton Smith, the Company's
Chairman and Chief Executive Officer, filed a civil complaint against NCMS, the
directors of NCMS and certain others in his individual capacity as a NCMS
shareholder alleging, among other things, breach of director duties.
1997 Credit Facility. On August 4, 1997, the Company consummated a new
long-term, unsecured, senior revolving credit facility (the "1997 Credit
Facility") with a borrowing limit of up to $175.0 million. The 1997 Credit
Facility is with a syndicate of banks led by NationsBank, N.A. ("NationsBank")
and was consummated concurrently with the Prior Offering of the Old Notes.
Proceeds from the sale of the Old Notes were used, among other things, to repay
and retire the 1996 Credit Facility (as defined herein), which the Company
replaced with the 1997 Credit Facility. As of the date hereof, no borrowings are
outstanding under the 1997 Credit Facility. For further discussion of the
Company's 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."
3
<PAGE>
The Prior Offering
The outstanding $125.0 million aggregate principal amount of Old Notes were
sold by the Company to the Initial Purchasers on August 4, 1997, pursuant to the
Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Rights Agreement pursuant to which
the Company granted certain registration rights for the benefit of the holders
of the Old Notes. The Exchange Offer is intended to satisfy certain of the
Company's obligations under the Registration Rights Agreement with respect to
the Old Notes. See "The Exchange Offer -- Purpose and Effect."
The Company was incorporated on December 20, 1994 as a Delaware
corporation. The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "TRK." The Company'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
<TABLE>
<S> <C>
The Exchange Offer.................. The Company is offering upon the terms and subject to the conditions set
forth herein and in the Letter of Transmittal to exchange the New Notes for
the outstanding Old Notes. As of the date of this Prospectus, $125.0
million in aggregate principal amount of the Old Notes is outstanding. As
of August 29, 1997, there was one registered holder of the Old Notes, Cede
& Co., which held the Old Notes for several of its participants. See "The
Exchange Offer -- Terms of the Exchange Offer."
Expiration Date..................... 5:00 p.m., New York City time, on , 1998 as the same may be
extended. See "The Exchange Offer -- Expiration Date; Extensions;
Amendments."
Conditions of the Exchange Offer.... The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. The only condition to the Exchange
Offer is the declaration by the Commission of the effectiveness of the
Registration Statement of which this Prospectus constitutes a part (the
"Exchange Offer Registration Statement"). See "The Exchange
Offer -- Conditions of the Exchange Offer."
Termination of Certain Rights....... Pursuant to the Registration Rights Agreement and the Old Notes, holders of
Old Notes (i) have rights to receive Liquidated Damages and (ii) have
certain rights intended for the holders of unregistered securities. 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 unregistered
securities. See "The Exchange Offer -- Termination of Certain Rights" and
"Procedures for Tendering Old Notes."
Accrued Interest.................... The New Notes will bear interest at a rate equal to 8 1/2% per annum.
Interest shall accrue from August 4, 1997, or from the most recent Interest
Payment Date with respect to the Old Notes to which interest was paid or
duly provided for. See "Description of Notes -- Principal, Maturity and
Interest."
Procedures for Tendering Old
Notes............................. Unless a tender of Old Notes is effected pursuant to the procedures for
book-entry transfer as provided herein, each holder desiring to accept the
Exchange Offer must complete and sign the Letter of Transmittal, have the
signature thereon guaranteed if required by the Letter of Transmittal, and
mail or deliver the Letter of Transmittal, together with the Old Notes or a
Notice of Guaranteed Delivery (as defined in the Letter of Transmittal) and
any other required documents (such as evidence of authority to act, if the
Letter of Transmittal is signed by someone acting in a fiduciary or
representative capacity), to the Exchange Agent (as defined herein) at the
address set forth on the back cover page of this Prospectus prior to 5:00
p.m., New York City time, on the Expiration Date. Any Beneficial Owner (as
defined herein) of the Old Notes whose Old Notes are registered in the name
of a nominee, such as a broker, dealer, commercial bank or trust company
and who wishes to tender Old Notes in the Exchange Offer, should instruct
such entity or person to promptly tender on such Beneficial Owner's behalf.
See "The Exchange Offer -- Procedures for Tendering Old Notes."
Guaranteed Delivery Procedures...... Holders of Old Notes who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available or (ii) who cannot deliver their Old
Notes or any other documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date (or complete the
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
procedure for book-entry transfer on a timely basis), may tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Letter of Transmittal. See "The Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of Old Notes and Delivery
of New Notes...................... Upon effectiveness of the Exchange Offer Registration Statement of which
this Prospectus constitutes a part and consummation of the Exchange Offer,
the Company will accept any and all Old Notes that are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to the Exchange Offer will
be delivered promptly after acceptance of the Old Notes. See "The Exchange
Offer -- Acceptance of Old Notes for Exchange; Delivery of New Notes."
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. See "The Exchange Offer --
Withdrawal Rights."
The Exchange Agent.................. First Trust National Association is the exchange agent (in such capacity,
the "Exchange Agent"). The address and telephone number of the Exchange
Agent are set forth in "The Exchange Offer -- The Exchange Agent;
Assistance."
Fees and Expenses................... All expenses incident to the Company's consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will be borne by the
Company. The Company will also pay certain transfer taxes applicable to the
Exchange Offer. See "The Exchange Offer -- Fees and Expenses."
Resales of the New Notes............ Based on existing interpretations by the staff of the Commission set forth
in "no-action" letters issued to third parties, the Company believes that
New Notes issued pursuant to the Exchange Offer to a holder in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder (other than (i) a broker-dealer who purchased the Old 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 (ii) a person
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
Holder is acquiring the New Notes in the ordinary course of business and is
not participating, and has no arrangement or understanding with any person
to participate, in a distribution of the New Notes. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker as a result of market-making or
other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "The
Exchange Offer -- Resales of the New Notes" and "Plan of Distribution."
Effect of Not Tendering Old Notes
for Exchange...................... Old Notes that are not tendered or that are not properly tendered will,
following the expiration of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof. The Company will have no
further obligations to provide for the registration under the Securities
Act of such Old Notes and such Old Notes will, following the expiration of
the Exchange Offer, bear interest at the same rate as the New Notes.
</TABLE>
6
<PAGE>
Description of New Notes
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of the New Notes will not
be entitled to Liquidated Damages and (iii) holders of the New Notes will not
be, and upon consummation of the Exchange Offer, holders of the Old Notes will
no longer be, entitled to certain rights under the Registration Rights Agreement
intended for the holders of unregistered securities, except in limited
circumstances. See "Exchange Offer -- Termination of Certain Rights." The
Exchange Offer shall be deemed consummated upon the occurrence of the delivery
by the Company to the Registrar under the Indenture of the 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. See "The
Exchange Offer -- Termination of Certain Rights," " -- Procedures for Tendering
Old Notes" and "Description of Notes."
<TABLE>
<S> <C>
Securities Offered.................. $125,000,000 aggregate principal amount of 8 1/2% Senior Subordinated Notes
Due 2007 of the Company (the "New Notes").
Maturity Date....................... August 15, 2007.
Interest Payment Dates.............. February 15 and August 15, commencing February 15, 1998.
Optional Redemption................. On or after August 15, 2002, the Company may redeem the Notes, in whole or
in part, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption.
Mandatory Redemption................ None.
Ranking............................. The Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness, which will include borrowings under the 1997 Credit Facility.
As of June 30, 1997, on a pro forma basis after giving effect to the
Offering and application of the net proceeds therefrom, the Company would
have had approximately $20.1 million of outstanding Senior Indebtedness,
which would rank senior in right of payment to the Notes. The Indenture
pursuant to which the New Notes will be issued permits the Company and its
subsidiaries to incur additional indebtedness, including additional Senior
Indebtedness, subject to certain limitations. See "Description of
Notes -- Subordination."
Guarantees.......................... The New Notes will be, and the Old Notes are, unconditionally guaranteed
(the "Guarantees"), jointly and severally, on a senior subordinated basis
by each of the existing and future domestic subsidiaries of the Company
(other than the Company's Unrestricted Subsidiary) and each other
subsidiary of the Company that guarantees the Company's obligations under
the 1997 Credit Facility (each a "Guarantor" and, collectively, the
"Guarantors"). The Guarantees will be subordinated in right of payment to
all existing and future Guarantor Senior Indebtedness (as defined herein)
of the relevant Guarantor. As of June 30, 1997, on a pro forma basis after
giving effect to the Prior Offering and the application of the net proceeds
therefrom, the outstanding aggregate amount of Guarantor Senior
Indebtedness would have been approximately $20.1 million, which amount is
the same indebtedness constituting outstanding Senior Indebtedness noted
above. See "Description of Notes -- Subsidiary Guarantees."
Change of Control................... Upon a Change of Control (as defined herein), the Company will be required
to make an offer to repurchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of repurchase.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Covenants........................... The Indenture will restrict, among other things, the Company's ability to
incur additional indebtedness and issue preferred stock, incur liens to
secure pari passu or subordinated indebtedness, pay dividends or make
certain restricted payments, apply net proceeds from certain asset sales,
enter into certain transactions with affiliates, incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in
right of payment to the Notes, merge or consolidate with any other person,
sell stock of subsidiaries or sell, assign, transfer, lease, convey or
otherwise dispose of substantially all of the assets of the Company. See
"Description of Notes -- Certain Covenants."
Absence of a Public Market for the The New Notes are a new issue of securities with no established market.
New Notes......................... Accordingly, there can be no assurance as to the development or liquidity
of any market for the New Notes. The Initial Purchasers have advised the
Company that they currently intend to make a market in the New Notes.
However, the Initial Purchasers are not obligated to do so, and any market
making with respect to the New Notes may be discontinued at any time
without notice. The Company does not intend to apply for listing of the New
Notes on a securities exchange.
</TABLE>
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating the Exchange Offer.
8
<PAGE>
Summary Financial Data(1)
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended December 31, June 30,
1992 1993 1994 1995 1996 1996
<S> <C> <C> <C> <C> <C> <C>
(in thousands, except per share, ratios and selected data)
Income Statement Data:
Total revenues......................... $47,774 $54,568 $64,537 $75,573 $102,113 $53,146
Total operating expenses............... 32,736 36,497 43,749 45,884 62,771 31,884
Operating income....................... 15,038 18,071 20,788 29,689 39,342 21,262
Interest expense (2)................... 4,527 4,520 4,282 917 693 566
Income from continuing operations...... 6,453 9,241 10,470 19,590 26,405 13,680
Net income............................. 5,878 9,203 10,176 19,457 26,405 13,680
Other Data:
EBITDA(3).............................. $19,915 $24,273 $27,307 $39,100 $51,348 $27,039
Depreciation and amortization.......... 4,289 4,375 4,500 4,893 7,598 3,796
Capital expenditures................... 5,294 3,696 5,009 40,718 147,741 69,102
Ratio of EBITDA to interest
charges(3)........................... 4.4x 5.4x 6.4x 42.6x 14.6x 24.3x
Ratio of earnings to fixed
charges(4)........................... 3.4x 4.3x 5.2x 36.1x 11.5x 19.8x
Ratio of total debt to EBITDA.......... 2.3x
Pro forma ratio of EBITDA to interest
charges(5)........................... 12.3x 18.7x
Pro forma ratio of earnings to fixed
charges(5)........................... 9.2x 13.9x
Selected Data:
SMI major NASCAR-sanctioned events..... 8 8 8 8 12 7
Total SMI admissions(6)................ 770,000 818,000 866,000 934,000 1,114,000
Attendance at all Winston Cup
events(7)............................ 3,700,000 4,020,000 4,896,000 5,327,000 5,588,000
<CAPTION>
1997
<S> <C>
Income Statement Data:
Total revenues......................... $119,594
Total operating expenses............... 69,504
Operating income....................... 50,090
Interest expense (2)................... 1,482
Income from continuing operations...... 29,254
Net income............................. 29,254
Other Data:
EBITDA(3).............................. $58,331
Depreciation and amortization.......... 7,119
Capital expenditures................... 104,671
Ratio of EBITDA to interest
charges(3)........................... 11.7x
Ratio of earnings to fixed
charges(4)........................... 9.7x
Ratio of total debt to EBITDA..........
Pro forma ratio of EBITDA to interest
charges(5)........................... 10.8x
Pro forma ratio of earnings to fixed
charges(5)........................... 8.8x
Selected Data:
SMI major NASCAR-sanctioned events..... 10
Total SMI admissions(6)................
Attendance at all Winston Cup
events(7)............................
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30, 1997
1996 Actual Pro Forma(8)
<S> <C> <C> <C>
Balance Sheet Data (at end of period):
Working capital........................................................ $ 3,644 $ 13,799 $ 35,347
Total assets........................................................... 409,284 528,617 553,277
Total long-term debt, including current maturities(9).................. 115,630 194,077 218,737
Stockholders' equity................................................... 204,735 234,014 234,014
</TABLE>
(Footnotes on following page)
9
<PAGE>
(1) The year end data for 1992 to 1995 include AMS and CMS, and for 1996 include
as well BMS, acquired in January 1996, and SPR, acquired in November 1996.
The quarterly data for the six-month period ended June 30, 1997 include AMS,
BMS, CMS, TMS and SPR, and for the six-month period ended June 30, 1996
include AMS, BMS, CMS and TMS and exclude SPR. See Note 1 to each of the
Unaudited and Audited Consolidated Financial Statements.
(2) Interest expense excludes interest income and is net of capitalized interest
of $2,834,000, $546,000 and $3,515,000 for the year ended December 31, 1996,
and the six-month periods ended June 30, 1996 and 1997, respectively. No
interest costs were capitalized from 1992 through 1995.
(3) EBITDA represents income from continuing operations 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 the Company's operating performance or for cash
flow as a measure of liquidity. The ratio of EDITDA to interest charges is
computed by dividing interest, whether expensed or capitalized, into EBITDA.
This ratio should be examined in conjunction with the Audited and Unaudited
Consolidated Financial Statements of the Company included elsewhere herein.
(4) The ratio of earnings to fixed charges is computed by dividing fixed charges
into income from continuing operations before income taxes plus fixed
charges, adjusted to exclude interest capitalized during the period. Fixed
charges consist of interest, whether expensed or capitalized, amortization
of financing costs and the estimated interest component of rent expense.
(5) Pro forma ratio of earnings to fixed charges and pro forma ratio of EBITDA
to interest charges assume that all bank debt outstanding during 1996, and
the six-month periods ended June 30, 1996 and 1997 was refinanced with the
proceeds of the Old Notes. The effect of such refinancing is an increase in
fixed charges of $950,000, $492,000 and $558,000 and an increase in interest
charges of $639,000, $336,000 and $402,000 for 1996, and the six-month
periods ended June 30, 1996 and 1997, respectively. The pro forma ratio of
earnings to fixed charges and pro forma ratio of EBITDA to interest charges
do not reflect any income earned from the proceeds of the Prior Offering in
excess of the refinanced bank debt amounts.
(6) "Total SMI admissions" consists of tickets issued for Winston Cup, Busch
Grand National and Automobile Racing Club of America ("ARCA") races and
other race-related events.
(7) Source: Goodyear.
(8) Adjusted to give effect to the sale of the Old Notes offered by the Company
in the Prior Offering and the use of the net proceeds therefrom. See "Use of
Proceeds."
(9) As of June 30, 1997, on a pro forma basis after giving effect to the
issuance of the Old Notes and application of the net proceeds therefrom, the
Company would have had $20,077,000 of outstanding Senior Indebtedness.
10
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors, in
addition to the other information in this Prospectus and in the documents
incorporated herein by reference, before deciding to accept the Exchange Offer.
Significant Leverage and Debt Service.
Upon consummation of the Prior Offering and the application of the net
proceeds therefrom, the Company was significantly leveraged. At June 30, 1997,
on a pro forma basis after giving effect to the consummation of the Prior
Offering and the application of the net proceeds therefrom in the manner
described in "Use of Proceeds," the Company would have had total consolidated
outstanding long-term debt of approximately $218.7 million. In addition, subject
to the restrictions in the 1997 Credit Facility and the Indenture, the Company
and its subsidiaries may incur additional indebtedness (including additional
Senior Indebtedness) from time to time to finance acquisitions, capital
expenditures or for general corporate purposes. Senior Indebtedness includes all
indebtedness of the Company, whether existing on or created or incurred after
the date of the issuance of the Notes, that is not made subordinate to or pari
passu with the Notes by the instrument creating the indebtedness. See
"Description of Notes -- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock." At the closing of the Prior Offering and after the
application of the net proceeds therefrom, the Company had unused borrowing
capacity of approximately $175.0 million under the 1997 Credit Facility. See
"Use of Proceeds" and "Description of Certain Indebtedness."
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for other acquisitions, working capital or capital
expenditures may be limited; and (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in its industry or economic
conditions generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control, as well as the availability of
borrowings under the 1997 Credit Facility or any successor credit facilities.
The Company will require substantial amounts of cash to fund scheduled payments
of principal and interest on its outstanding indebtedness as well as future
capital expenditures and any increased working capital requirements. If the
Company is unable to meet its cash requirements out of cash flow from operations
and its available borrowings, there can be no assurance that it will be able to
obtain alternative financing. In the absence of such financing, the Company's
ability to respond to changing business and economic conditions, to absorb
adverse operating results, to fund capital expenditures or to make future
acquisitions may be adversely affected. In addition, actions taken by the
lending banks under the 1997 Credit Facility are not subject to approval by the
holders of the Notes. If the Company does not generate sufficient increases in
cash flow from operations to repay the Notes at maturity, it could attempt to
refinance the Notes; however, no assurance can be given that such a refinancing
would be available on terms acceptable to the Company, if at all. Any failure by
the Company to satisfy its obligations with respect to the Notes at maturity
(with respect to payments of principal) or prior thereto (with respect to
payments of interest or required repurchases) would constitute a default under
the Indenture and could cause a default under the 1997 Credit Facility and
agreements governing other indebtedness, if any, of the Company. See
"Description of Certain Indebtedness."
Subordination of Notes and Guarantees.
The Old Notes are, and the New Notes will be, subordinated in right of
payment to all existing and future Senior Indebtedness of the Company, including
borrowings under the 1997 Credit Facility. In the event of insolvency,
bankruptcy, liquidation, reorganization, dissolution or winding up of the
business of the Company or upon a default in payment with respect to any Senior
Indebtedness of the Company or an event of default with respect to such
indebtedness resulting in the acceleration thereof, the assets of the Company
will be available to pay the amounts due on the Notes only after all Senior
Indebtedness of the Company has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes then
outstanding. Each Guarantee
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will be similarly subordinated in right of payment to all existing and future
Guarantor Senior Indebtedness, including such Guarantor's guaranty of the
Company's indebtedness under the 1997 Credit Facility and such Guarantor's
obligations under its capital leases. In addition, under certain circumstances,
the Company will not be permitted to pay its obligations under the Notes in the
event of a default under certain Senior Indebtedness. The aggregate principal
amount of Senior Indebtedness of the Company as of August 29, 1997 was
approximately $20.2 million. Additional Senior Indebtedness may be incurred by
the Company from time to time, subject to certain restrictions. See "Description
of Notes -- Subordination."
Holding Company Structure.
The Company conducts its operations through its direct and indirect
subsidiaries and has no operations of its own. The Company will be dependent on
the cash flow from its subsidiaries in order to meet its debt service
obligations, including its obligations under the Notes. Except as required under
the Guarantees, the Company's subsidiaries have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends and certain loans and advances to the Company by such
subsidiaries may be subject to certain statutory or contractual restrictions,
are contingent upon the earnings of such subsidiaries and are subject to various
business considerations. For a description of restrictions on the ability of the
Company's subsidiaries to pay dividends, see "Description of Certain
Indebtedness" and "Description of Notes -- Certain Covenants." Although the
Company expects to receive sufficient funds from its subsidiaries to enable it
to meet its debt service obligations under the Notes, there can be no assurance
that it will be able to do so.
Subject to the Guarantees, the Company's holding company structure
effectively subordinates payments on the Notes to any liabilities of
subsidiaries of the Company. As of August 29, 1997, the Company had
approximately $20.2 million of Senior Indebtedness.
Restrictions Imposed by Terms of the Company's Indebtedness.
The Indenture restricts, among other things, the ability of the Company and
its subsidiaries to incur additional indebtedness, pay dividends or make certain
other restricted payments, incur liens to secure pari passu or subordinated
indebtedness, sell stock of subsidiaries, apply net proceeds from certain asset
sales, merge or consolidate with any other person, sell, assign, transfer,
lease, convey or otherwise dispose of substantially all of the assets of the
Company, enter into certain transactions with affiliates, or incur indebtedness
that is subordinate in right of payment to any Senior Indebtedness and senior in
right of payment to the Notes. As a result of these covenants, the ability of
the Company to respond to changing business and economic conditions and to
secure additional financing, if needed, may be significantly restricted, and the
Company may be prevented from engaging in transactions that might otherwise be
considered beneficial to the Company. See "Description of Notes" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The 1997 Credit Facility contains more extensive and restrictive covenants
and restrictions than the Indenture and requires the Company to maintain
specified financial ratios and satisfy certain financial condition tests. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet those tests. A breach of any of these covenants could result in a default
under the 1997 Credit Facility. Upon the occurrence of an event of default under
the 1997 Credit Facility, the lenders thereunder could elect to declare all
amounts outstanding, including accrued interest or other obligations, to be
immediately due and payable. If the Company 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,
there can be no assurance that the assets of the Company would be sufficient to
repay in full the Senior Indebtedness and the other indebtedness of the Company,
including the Notes. See "Description of Certain Indebtedness -- 1997 Credit
Facility."
Fraudulent Conveyance Statutes.
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Company
or any Guarantor, at the time it incurred the indebtedness evidenced by the
Notes or its Guarantee, as the case may be, (i)(a) was or is insolvent or
rendered insolvent by reason of such occurrence or (b) was or is engaged in a
business or transaction for which the assets remaining with the Company
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or such Guarantor constituted unreasonably small capital or (c) intended or
intends to incur, or believed or believes that it would incur, debts beyond its
ability to pay such debts as they mature, and (ii) the Company or such Guarantor
received or receives less than reasonably equivalent value or fair consideration
for the incurrence of such indebtedness, the Notes and the Guarantee could be
voided, or claims in respect of the Notes or the Guarantees could be
subordinated to all other debts of the Company or such Guarantor, as the case
may be. The voiding or subordination of any of such pledges or other security
interests or of any of such indebtedness could result in an Event of Default (as
defined in the Indenture) with respect to such indebtedness, which could result
in acceleration thereof. In addition, the payment of interest and principal by
the Company pursuant to the Notes or the payment of amounts by a Guarantor
pursuant to a Guarantee could be voided and required to be returned to the
person making such payment, or to a fund for the benefit of the creditors of the
Company or such Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets at a fair valuation or
if 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 (ii) it could not
pay its debts as they become due.
To the extent any Guarantees were voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of Notes would cease to have any
claim in respect of such Guarantor and would be creditors solely of the Company
and any Guarantor whose Guarantee was not voided or held unenforceable. In such
event, the claims of the holders of Notes against the issuer of an invalid
Guarantee would be subject to the prior payment of all liabilities of such
Guarantor. There can be no assurance that, after providing for all prior claims,
if any, there would be sufficient assets to satisfy the claims of the holders of
Notes relating to any voided portions of any of the Guarantees.
On the basis of their historical financial information, recent operating
history as discussed in "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and other
factors, each of the Company and the Guarantors believes that, after giving
effect to the indebtedness incurred in connection with the Prior Offering, it
(i) is not insolvent, does not have unreasonably small capital for the
businesses in which it is engaged and has not incurred debts beyond its ability
to pay such debts as they mature and (ii) has sufficient assets to satisfy any
probable money judgment against it in any pending action. There can be no
assurance, however, as to what standard a court would apply in making such
determinations.
Potential Inability to Fund a Change of Control Offer.
Upon a Change of Control, the Company is required to offer to repurchase
all outstanding Notes at 101% of the principal amount thereof plus accrued and
unpaid interest to the repurchase date and Liquidated Damages (as applicable to
the Old Notes prior to consummation of the Exchange Offer). However, there can
be no assurance that sufficient funds will be available at the time of any
Change of Control to make any required repurchases of Notes tendered. Moreover,
the 1997 Credit Facility provides that certain change of control events with
respect to the Company would constitute a default thereunder. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to holders of Notes. There can be no assurance that the
Company will be able to obtain appropriate consents under the 1997 Credit
Facility to enable it to fulfill such repurchase obligations. Notwithstanding
these provisions, the Company could enter into certain transactions, including
certain recapitalizations, that would not constitute a Change of Control but
would increase the amount of debt outstanding at such time. See "Description of
Notes -- Repurchase at the Option of Holders."
Relationship with NASCAR.
The Company's 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 Grand National races. The Company currently holds
licenses to sponsor nine Winston Cup races and six Busch Grand National races.
In 1996, NASCAR-sanctioned races accounted for approximately 83% of the
Company's total revenues (80% on a
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pro forma basis if SPR were owned by the Company for the entire year ended
December 31, 1996). Each NASCAR event license is awarded on an annual basis.
Although management believes that its relationship with NASCAR is good, NASCAR
is under no obligation to continue to license the Company to sponsor any event.
Nonrenewal of a NASCAR event license would have a material adverse effect on the
Company's financial condition and results of operations. The Company's strategy
has included growth through the addition of motorsports facilities. There can be
no assurance that the Company will continue to obtain NASCAR licenses to sponsor
races at such facilities. See "NASCAR."
Competition.
Motorsports promotion is a competitive industry. The Company competes in
regional and national markets to sponsor events, especially NASCAR-sanctioned
events. Certain of the Company's competitors have resources that exceed those of
the Company. NASCAR is owned by Bill France, Jr. and the France family, who also
control International Speedway Corporation ("ISC"). ISC presently holds licenses
to sponsor nine Winston Cup races, more than any other track owner except for
the Company. Bill France, Jr. also has made a substantial investment in Penske
Motorsports, Inc., another track operator. The Company also competes locally
with other sports and entertainment businesses, many of which have resources
that exceed those of the Company. There can be no assurance that the Company
will maintain or improve its position in light of such competition. See
"Offering Memorandum Summary -- Recent Developments -- NCMS" and
"Business -- Competition."
Financial Impact of Bad Weather.
The Company sponsors and promotes outdoor motorsports events. Weather
conditions affect sales of tickets, concessions and souvenirs, among other
things, at these events. Although the Company sells tickets well in advance of
its events, poor weather conditions can have an effect on the Company's results
of operations.
Industry Sponsorships and Government Regulation.
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 the Company's events. In addition, certain
of the Company's 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. Implementation of the new regulations affecting
sponsorship is scheduled to occur in February 1998. The Company is aware of
several pending legal challenges to the regulations by third parties which, the
Company believes, are likely to extend the regulatory process. The final outcome
of this regulatory process is uncertain, and the impact on the Company, 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. No assurance can be given that the tobacco industry will continue to
sponsor sporting events, that suitable alternative sponsors could be located or
that NASCAR will continue to sanction individual racing events sponsored by the
tobacco industry at any of the Company's facilities. Advertising and sponsorship
revenue from the tobacco industry accounted for approximately 1% of the
Company's total revenues in both fiscal 1995 and 1996. In addition, the tobacco
industry provides financial support to the motorsports industry through, among
other things, its purchase of advertising time, sponsorship of racing teams and
racing series such as NASCAR's Winston Cup series.
Dependence on Key Personnel.
The Company's success depends upon the availability and performance of its
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 the Company as a team for over 20 years.
Their
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experience within the industry, especially their working relationship with
NASCAR, will continue to be of considerable importance to the Company. The loss
of any of the Company's key personnel or its inability to attract and retain key
employees in the future could have a material adverse effect on the Company's
operations and business plans. See "NASCAR," "Business -- Growth Strategy" and
"Management."
Seasonality and Expected Quarterly Losses.
The Company has derived a substantial portion of its total revenues from
admissions and event-related revenue attributable to NASCAR-sanctioned races
held in March, April, May, August, October and November. As a result, the
Company's business has been, and is expected to remain, highly seasonal. During
1995 and 1996, the Company's second and fourth quarters accounted, on average,
for approximately 77% of the Company's total annual revenues and approximately
100% of its total annual operating income. During 1997, the Company expects the
second quarter to represent a significantly higher percentage of annual revenues
and operating income as a result of the addition of racing events at TMS and the
scheduling of racing events at SPR. The Company sometimes produces an operating
loss during its first quarter, when it sponsors only one Winston Cup race. The
concentration of the Company's racing events in the second quarter and the
growth in the Company's operations with attendant increases in overhead expenses
will tend to increase operating losses in future first and third quarters.
Additionally, race dates at the Company's 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 the
Company's business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" and " -- Seasonality and
Quarterly Results."
Control of the Company.
As of August 29, 1997, Mr. Smith, who is the Chairman of the Company,
owned, directly and indirectly, approximately 70.2% of the outstanding shares of
Common Stock. As a result, Mr. Smith will continue to control the outcome of
substantially all issues submitted to the Company's stockholders, including the
election of all of the Company's directors.
Legal Proceedings.
As a result of an audit of AMS with respect to its tax years ended November
30, 1988 and October 31, 1990, the Internal Revenue Service (the "IRS") has
asserted that AMS is liable for additional income taxes, penalties and interest.
The total assessment including taxes, penalties and interest (net of tax benefit
for deductibility of interest) through June 30, 1997 is approximately $7.7
million. In November 1993, AMS filed a protest contesting the assessment.
Management intends to continue contesting the allegations of a deficiency. There
can be no assurance, however, that the ultimate resolution of this proceeding,
which is expected in 1997, will not have a material adverse effect on the
Company's results of operations or financial condition. For additional
information concerning such IRS audit and certain other legal proceedings, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 11 to Audited
Consolidated Financial Statements.
Liability for Personal Injuries.
Motorsports can be dangerous to participants and to spectators. The Company
maintains insurance policies that provide coverage within limits that are
sufficient, in management's judgment, to protect the Company from material
financial loss due to liability for personal injuries sustained by persons on
the Company's premises in the ordinary course of the Company business.
Nevertheless, there can be no assurance that such insurance will be adequate at
all times and in all circumstances. The Company also may be subject to product
liability claims, for which it is self-insured, with respect to the manufacture
and sale of Legends Cars. The Company's financial condition and results of
operations would be adversely affected to the extent claims and associated
expenses exceed insurance recoveries. See " -- Legal Proceedings."
Environmental Matters.
Solid waste landfilling has occurred on and around the Company's property
at CMS for many years. Landfilling of general categories of municipal solid
waste on the CMS property ceased in 1992. There are two landfills currently
operating at CMS, however, that are permitted to receive inert debris and waste
from land
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clearing activities. Management believes that the Company's operations,
including the landfills on its 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 the Company's
business or by pollutants, substances, contaminants or wastes used, generated or
disposed of by the Company, or which may be found on the property of the
Company, the Company 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 caused thereby. The amount of such liability, as to which the Company is
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 the Company. For further discussion of
environmental matters, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Absence of Public Market.
The New Notes are a new issue of securities, have no established trading
market and may not be widely distributed. The Company does not intend to list
the New Notes on any national securities exchange or to seek the admission
thereof to trading in the National Association of Securities Dealers Automation
Quotation System. The Company has been advised by the Initial Purchasers that
they presently intend to make a market in the New Notes. However, the Initial
Purchasers are not obligated to do so and any market making activities with
respect to the New Notes may be discontinued at any time without notice. In
addition, such market making activity will be subject to the limitations imposed
by the Exchange Act and may be limited during the Exchange Offer and at certain
other times. No assurance can be given that an active public or other market
will develop for the New Notes or as to the liquidity of or the trading market
for the New Notes. If a trading market does not develop or is not maintained,
holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may be discontinued at any time. If a public trading market develops
for the New Notes, future trading prices of the New Notes will depend on many
factors including, among other things, prevailing interest rates, the Company's
results of operations and the market for similar securities. Depending on
prevailing interest rates, the market for similar securities and other factors,
including the financial condition of the Company, the New Notes may trade at a
discount from their principal amount.
THE EXCHANGE OFFER
Purpose and Effect
The Old Notes were sold by the Company to the Initial Purchasers on August
4, 1997, pursuant to the Purchase Agreement. The Initial Purchasers subsequently
resold the Old Notes in reliance on Rule 144A under the Securities Act. The
Company, each existing domestic subsidiary of the Company (other than the
Unrestricted Subsidiary) and the Initial Purchasers also entered into the
Registration Rights Agreement, pursuant to which the Company agreed, with
respect to the Old Notes and subject to the Company's determination that the
Exchange Offer is permitted under applicable law, to (i) cause to be filed, on
or prior to October 3, 1997, a registration statement with the Commission under
the Securities Act concerning the Exchange Offer, (ii) use its best efforts (a)
to cause such registration statement to be declared effective by the Commission
on or prior to December 2, 1997 and (b) to commence the Exchange Offer and to
issue, on or prior to 30 business days after the date on which the registration
statement is declared effective by the Commission, New Notes in exchange for all
Old Notes tendered prior thereto in the Exchange Offer. This Exchange Offer is
intended to satisfy the Company's exchange offer obligations under the
Registration Rights Agreement.
Consequences of Failure to Exchange Old Notes
Following the expiration of the Exchange Offer, holders of Old Notes not
tendered, or not properly tendered, will not have any further registration
rights and such Old Notes will continue to be subject to the existing
restrictions on transfer thereof. Accordingly, the liquidity of the market for a
holder's Old Notes could be adversely affected upon expiration of the Exchange
Offer if such holder elects to not participate in the Exchange Offer.
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Terms of the Exchange Offer
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to the terms and provisions
of the Registration Rights Agreement. See " -- Conditions of the Exchange
Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders of Old Notes may tender less than the aggregate principal
amount represented by the Old Notes held by them, provided that they
appropriately indicate this fact on the Letter of Transmittal accompanying the
tendered Old Notes (or so indicate pursuant to the procedures for book-entry
transfer).
As of the date of this Prospectus, $125.0 million in aggregate principal
amount of the Old Notes is outstanding. As of August 29, 1997, there was one
registered holder of the Old Notes, Cede, as nominee for DTC, which held the Old
Notes for certain of its participants. Solely for reasons of administration, the
Company has fixed the close of business on , 1997 as the
record date (the "Record Date") for purposes of determining the persons to whom
this Prospectus and the Letter of Transmittal will be mailed initially. Only a
holder of the Old Notes (or such holder's legal representative or
attorney-in-fact) may participate in the Exchange Offer. There will be no fixed
record date for determining holders of the Old Notes entitled to participate in
the Exchange Offer. The Company believes that, as of the date of this
Prospectus, no such holder is an affiliate (as defined in Rule 405 under the
Securities Act) of the Company.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purposes of receiving the New Notes from the Company.
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 the Expiration Date.
Expiration Date; Extensions; Amendments
The Expiration Date shall be , 1997 at 5:00 p.m., New
York City time, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the Expiration Date shall be the latest date and time to
which the Exchange Offer is extended.
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.
The Company reserves the right, in its sole discretion (subject to the
terms and provisions of the Registration Rights Agreement), (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the
conditions set forth below under " -- Conditions of 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,
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 amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Old Notes. Modification 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 below under " -- Conditions of the
Exchange Offer", may require that at least ten business days remain in the
Exchange Offer.
Conditions of the Exchange Offer
The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Exchange Offer Registration Statement of which this Prospectus constitutes a
part.
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Termination of Certain Rights
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default, 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 Company fails to file any of the
registration statements prescribed by the Registration Rights Agreement with the
Commission on or prior to October 3, 1997; (ii) such a registration statement is
not declared effective by the Commission on or prior to December 2, 1997 (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, or (d) 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
Liquidated Damages or (ii) certain other rights under the Registration Rights
Agreement intended for holders of Old Notes, except in certain limited
circumstances. The Exchange Offer shall be deemed consummated upon 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.
Accrued Interest
The New Notes will bear interest at a rate equal to 8 1/2% per annum, which
interest shall accrue from August 4, 1997 or from the most recent Interest
Payment Date with respect to the Old Notes to which interest was paid or duly
provided for. See "Description of Notes -- Principal, Maturity and Interest."
Procedures for Tendering Old Notes
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
holder and the Company upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a holder who wishes to tender Old Notes for exchange pursuant to
the Exchange Offer must transmit such Old Notes, together with a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth on the back cover page of this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. 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 TO ASSURE TIMELY
DELIVERY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
by an Eligible Institution (as defined herein). In the event that a signature on
a Letter of Transmittal or a notice of withdrawal, as the case may be, is
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or otherwise be an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If the Letter of Transmittal is signed
by a person other than the registered holder of the Old Notes, the Old Notes
surrendered for exchange must either (i) be endorsed by the registered holder,
with the signature thereon guaranteed by an Eligible Institution, or (ii) be
accompanied by a bond power, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution. The term "registered
holder" as used herein with respect to the Old Notes means any person in whose
name the Old Notes are registered on the books of the Registrar.
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All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgement of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such notification. Tenders of the Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "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 Old Notes in the Exchange
Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangements to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
By tendering, each registered holder will represent to the Company that,
among other things (i) the New Notes to be acquired in connection with the
Exchange Offer by the holder and each Beneficial Owner of the Old Notes are
being acquired by the holder and each Beneficial Owner in the ordinary course of
business of the holder and each Beneficial Owner, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer for
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the staff of the Commission set forth in "no-action"
letters that are discussed herein under " -- Resales of the New Notes," (iv)
that if the holder is a broker-dealer that acquired Old Notes as a result of
market making or other trading activities, it will deliver a prospectus in
connection with any resale of New Notes acquired in the Exchange Offer, (v) the
holder and each Beneficial Owner understand that a secondary resale transaction
described in clause (iii) above should be covered by an effective registration
statement containing the selling security holder information required by Item
507 of Regulation S-K of the Securities Act, and (vi) neither the holder nor any
Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of Transmittal. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
and a Notice of Guaranteed Delivery (as defined in the Letter of Transmittal)
must be signed by such holder, (ii) on or prior to the Expiration Date, the
Exchange Agent must have received from the holder and the 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, the certificate number or numbers of the tendered Old Notes, and the
principal amount of tendered Old Notes, stating that the tender is
19
<PAGE>
being made thereby and guaranteeing that, within four business days after the
date of delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a
duly executed Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) such
properly completed and executed documents required by the Letter of Transmittal
and the tendered Old Notes in proper form for transfer must be received by the
Exchange Agent within four business days after the Expiration Date. Any Holder
who wishes to tender Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery and Letter of Transmittal relating to such Old Notes prior
to 5:00 p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted validly tendered Old Notes, when, as,
and if the Company has given oral or written notice thereof to the Exchange
Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents; provided, however, that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Old Notes are
not accepted for any reason, such unaccepted Old Notes will be returned without
expense to the tendering holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Withdrawal Rights
Tenders of the Old Notes may be withdrawn by delivery of a written notice
to the Exchange Agent at its address set forth on the back cover page of this
Prospectus at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes, as applicable), (iii) 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 a bond power in the name of the person
withdrawing the tender, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder, with the signature
thereon guaranteed by an Eligible Institution together with any other documents
required upon transfer by the Indenture, and (iv) specify the name in which such
Old Notes are to be re-registered, if different from the Depositor, pursuant to
such documents of transfer. Any questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, in its sole discretion. The Old Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Old Notes which have been tendered for exchange but which are
withdrawn will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal. Properly withdrawn Old Notes may be
re-tendered by following one of the procedures described under "The Exchange
Offer -- Procedures for Tendering Old Notes" at any time on or prior to the
Expiration Date.
The Exchange Agent; Assistance
First Trust National Association is the Exchange Agent. 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 this Prospectus, the Letter of Transmittal and
other related documents should be addressed to the Exchange Agent as follows:
20
<PAGE>
BY REGISTERED OR CERTIFIED MAIL:
First Trust National Association
180 East Fifth Street
Suite 200
St. Paul, Minnesota 55101
Attn: Kathe Barrett
BY HAND OR OVERNIGHT COURIER:
First Trust National Association
180 East Fifth Street
Suite 200
St. Paul, Minnesota 55101
Attn: Kathe Barrett
BY FACSIMILE:
(612) 244-0711 (MN)
Confirm by Telephone: (612) 244-0719 (MN)
Fees and Expenses
All expenses incident to the Company's consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will be borne by the
Company including, without limitation: (i) all registration and filing fees and
expenses(including fees and expenses of compliance with state securities or Blue
Sky laws), (ii) printing expenses (including expenses of printing certificates
for the New Notes in a form eligible for deposit with DTC and of printing
Prospectuses), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, and (v) fees and disbursements of
independent certified public accountants.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
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, then 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 is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
Resales of the New Notes
Based on an interpretation by the staff of the Commission set forth in
"no-action" letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer to a holder in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by such holder
(other than (i) a broker-dealer who purchased Old 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 (ii) a person 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 holder is acquiring the New Notes in
the ordinary course of business and is not participating, and has no arrangement
or understanding with any person to participate, in a distribution of the New
Notes. The Company has not requested or obtained an interpretive letter from the
Commission staff with respect to this Exchange Offer, and the Company and the
holders are not entitled to rely on interpretive advice provided by the staff to
other persons, which advice was based on the facts and conditions represented in
such letters. However, the Exchange Offer is being conducted in a manner
intended to be consistent with the facts and conditions represented in such
letters. If any holder acquires New Notes in the
21
<PAGE>
Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission enunciated in Morgan Stanley & Co., Incorporated
(available June 5, 1991) and Exxon Capital Holdings Corporation (available April
13, 1989), or interpreted in the Commission's letter to Shearman & Sterling
(available July 2, 1993), or similar "no-action" or interpretive letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction, unless an
exemption from registration is otherwise available. Each broker-dealer that
receives New 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 or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Company within the meaning of the Securities
Act will be subject to certain limitations on resale under Rule 144 of the
Securities Act. Such persons will only be entitled to sell New Notes in
compliance with the volume limitations set forth in Rule 144, and sales of New
Notes by affiliates will be subject to certain Rule 144 requirements as to the
manner of sale, notice and the availability of current public information
regarding the Company. Any such persons must consult their own legal counsel for
advice as to any restrictions that might apply to the resale of their Notes.
USE OF PROCEEDS
There will be no cash proceeds payable to the Company from the Exchange
Offer. The Company is conducting the Exchange Offer to satisfy certain of the
Company's obligations under the Registration Rights Agreement executed in
connection with the issuance of the Old Notes.
22
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on a
historical basis as of June 30, 1997, and on a pro forma basis to give effect to
the sale of the Old Notes in the Prior Offering and the application of the net
proceeds therefrom as described under "Use of Proceeds." This table should be
read in conjunction with the Audited and Unaudited Consolidated Financial
Statements (including the notes thereto) included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1997
(in thousands)
Actual Pro Forma(1)
<S> <C> <C>
Long-term debt, including current maturities:
Bank and other loans payable......................................................... $101,300 $ 1,300
Capital lease obligation............................................................. 18,777 18,777
8 1/2% Senior subordinated notes..................................................... -- 124,660
5 3/4% Convertible subordinated debentures........................................... 74,000 74,000
Total long-term debt.............................................................. 194,077 218,737
Stockholders' equity:
Preferred stock, par value $0.10 per share,
3,000,000 shares authorized, no shares issued
and outstanding................................................................... -- --
Common stock, par value $0.01 per share, 200,000,000 shares authorized, 41,309,000
shares issued and outstanding(2).................................................. 413 413
Additional paid-in capital........................................................... 155,246 155,246
Retained earnings.................................................................... 78,602 78,602
Deduct:
Unrealized loss on marketable equity securities................................... (247) (247)
Total stockholders' equity........................................................ 234,014 234,014
Total capitalization......................................................... $428,091 $452,751
</TABLE>
(1) Assumes that net proceeds of $121,547,500 from the sale of the Old Notes
were applied to pay down approximately $100.0 million in bank debt
outstanding as of June 30, 1997, with the remaining net proceeds being
placed in short-term investments. See "Use of Proceeds."
(2) Excludes 1,404,000 shares of Common Stock reserved for issuance upon the
exercise of options granted to date pursuant to the Company's stock option
plans and excludes any Common Stock that may be issued upon conversion of
the Debentures.
23
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1996 have been derived from audited financial statements. The financial
statements for the three years ended December 31, 1996 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
six-month periods ended June 30, 1996 and 1997 are derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company's management considers necessary for a fair presentation of
the financial position and the results of operations for these periods.
Operating results for the six months ended June 30, 1997 are not indicative of
the results that may be expected for the entire year ending December 31, 1997.
All of the data set forth below are qualified by reference to, and should be
read in conjunction with, the Company's Audited and Unaudited 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>
Six Months Ended
Year Ended December 31, June 30,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Income Statement Data(1):
Revenues:
Admissions................................... $26,018 $27,727 $31,523 $36,569 $52,451 $27,306 $56,455
Event-related revenue........................ 19,096 22,115 24,814 27,783 36,414 19,040 55,117
Other operating revenue...................... 2,660 4,726 8,200 11,221 13,248 6,800 8,022
Total revenues........................... 47,774 54,568 64,537 75,573 102,113 53,146 119,594
Operating Expenses:
Direct expense of events..................... 16,553 17,778 18,327 19,999 30,173 15,133 39,893
Other direct operating expense............... 1,844 3,715 6,110 7,611 8,005 4,333 4,850
General and administrative................... 10,050 10,629 11,812 13,381 16,995 8,622 15,792
Non-cash stock compensation(2)............... -- -- 3,000 -- -- -- --
Depreciation and amortization................ 4,289 4,375 4,500 4,893 7,598 3,796 7,119
Preoperating expense of new facility(3)...... -- -- -- -- -- -- 1,850
Total operating expenses................. 32,736 36,497 43,749 45,884 62,771 31,884 69,504
Operating income............................... 15,038 18,071 20,788 29,689 39,342 21,262 50,090
Interest income (expense), net(4).............. (4,291) (4,128) (3,855) (24) 1,316 449 (382)
Other income................................... 352 1,435 1,592 3,625 2,399 966 22
Income from continuing operations before income
taxes........................................ 11,099 15,378 18,525 33,290 43,057 22,677 49,730
Provision for income taxes..................... 4,646 6,137 8,055 13,700 16,652 8,997 20,476
Income from continuing operations.............. 6,453 9,241 10,470 19,590 26,405 13,680 29,254
Discontinued operations........................ (575) (38) (294) -- -- -- --
Income before extraordinary
item......................................... 5,878 9,203 10,176 19,590 26,405 13,680 29,254
Extraordinary item, net........................ -- -- -- (133) -- -- --
Net income..................................... $ 5,878 $ 9,203 $10,176 $19,457 $26,405 $13,680 $29,254
Income from continuing operations applicable to
Common Stock(5).............................. $ 7,464 $19,590 $26,405 $13,680 $29,254
Income per share from continuing operations
applicable to Common Stock(6)................ $ 0.25 $ 0.53 $ 0.64 $ 0.34 $ 0.69
Weighted average shares outstanding(6)......... 30,400 37,275 41,301 40,490 42,093
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except per share, ratios and selected data)
Other Data:
Cash flows provided by (used
in):
Operating activities.......... $10,610 $12,582 $13,993 $31,045 $37,384 $24,789 $45,079
Financing activities.......... (5,310) (3,687) (11,423) 18,371 171,861 118,648 77,906
Investing activities.......... (6,527) (4,770) (3,887) (46,330) (197,125) (93,966) (112,340 )
EBITDA(7)....................... 19,915 24,273 27,307 39,100 51,348 27,039 58,331
Depreciation and
amortization.................. 4,289 4,375 4,500 4,893 7,598 3,796 7,119
Capital expenditures............ 5,294 3,696 5,009 40,718 147,741 69,102 104,671
Ratio of EBITDA to interest
charges(7).................... 4.4x 5.4x 6.4x 42.6x 14.6x 24.3x 11.7x
Ratio of earnings to fixed
charges(8).................... 3.4x 4.3x 5.2x 36.1x 11.5x 19.8x 9.7x
Ratio of total debt
to EBITDA..................... 2.3x
Pro forma ratio of EBITDA
to interest charges(9)........ 12.3x 18.7x 10.8x
Pro forma ratio of earnings to
fixed charges(9).............. 9.2x 13.9x 8.8x
Selected Data:
SMI major NASCAR-sanctioned
events........................ 8 8 8 8 12 7 10
Total SMI admissions(10)........ 770,000 818,000 866,000 934,000 1,114,000
Attendance at all Winston Cup
events(11).................... 3,700,000 4,020,000 4,896,000 5,327,000 5,588,000
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30, 1997
1992 1993 1994 1995 1996 Actual Pro Forma(12)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (at end of
period)(1):
Working capital........................ $(6,307) $(2,039) $(1,344) $ (1,816) $ 3,644 $ 13,799 $ 35,347
Total assets........................... 79,999 89,184 93,453 136,446 409,284 528,617 553,277
Total long-term debt, including current
maturities(13)....................... 46,081 43,564 47,261 1,806 115,630 194,077 218,737
Stockholders' equity................... 11,086 16,517 19,232 95,380 204,735 234,014 234,014
</TABLE>
(1) The year-end data for 1992 to 1995 include AMS and CMS, and for 1996
include as well BMS, acquired in January 1996, and SPR, acquired in
November 1996. The data for the six-month period ended June 30, 1997
include AMS, BMS, CMS, SPR and TMS, and for the six-month period ended June
30, 1996 include AMS, BMS, CMS and TMS and exclude SPR. See Note 1 to each
of the Unaudited and Audited Consolidated Financial Statements.
(2) On December 21, 1994, the Company 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, the Company recorded a non-cash
stock compensation charge of $3.0 million (before taxes) in December 1994.
See Note 15 to the Audited Consolidated Financial Statements.
(3) Preoperating expenses consist of non-recurring and non-event related costs
to develop, organize and open the Company's new superspeedway facility,
Texas Motor Speedway, which hosted its first racing event on April 6, 1997.
(4) Interest income (expense), net is net of capitalized interest of
$2,834,000, $546,000 and $3,515,000 for the year ended December 31, 1996,
and the six month periods ended June 30, 1996 and 1997, respectively. No
interest costs were capitalized from 1992 through 1995.
(5) These data represent reported income from continuing operations less
accretion in 1994 in the estimated redemption value of certain warrants to
purchase AMS stock. On December 16, 1994, AMS redeemed such warrants from
an affiliate of NationsBank. See Note 10 to the Audited Consolidated
Financial Statements.
(6) The 1994 income per share from continuing operations applicable to Common
Stock has been prepared on a pro forma basis to reflect the 30.4 million
common shares outstanding after giving effect to a restructuring whereby
CMS and AMS became wholly-owned subsidiaries of SMI, including 400,000
common equivalent shares arising from stock options. See Note 1 to the
Audited Consolidated Financial Statements.
(7) EBITDA represents income from continuing operations before interest
expense, income taxes and depreciation and amortization. EBITDA is included
herein because management believes 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 the Company's operating
performance or for cash flow as a measure of liquidity. The ratio of EBITDA
to interest charges is computed by dividing interest, whether expensed or
capitalized, into EBITDA. This ratio should be
25
<PAGE>
examined in conjunction with the Audited and Unaudited Consolidated
Financial Statements of the Company included elsewhere herein.
(8) The ratio of earnings to fixed charges is computed by dividing fixed
charges into income from continuing operations before income taxes plus
fixed charges, adjusted to exclude interest capitalized during the period.
Fixed charges consist of interest, whether expensed or capitalized,
amortization of financing costs and the estimated interest component of
rent expense.
(9) Pro forma ratio of earnings to fixed charges and pro forma ratio of EBITDA
to interest charges assume that all bank debt outstanding during 1996, and
the six month periods ended June 30, 1996 and 1997 was refinanced with the
proceeds of the Old Notes. The effect of such refinancing is an increase in
fixed charges of $950,000, $492,000 and $558,000 and an increase in
interest charges of $639,000, $336,000 and $402,000 for 1996, and the six
month periods ended June 30, 1996 and 1997, respectively. The pro forma
ratio of earnings to fixed charges and pro forma ratio of EBITDA to
interest charges do not reflect any income earned from the proceeds of the
Prior Offering in excess of the financed bank debt amounts.
(10) "Total SMI admissions" consists of tickets issued for Winston Cup, Busch
Grand National and ARCA races and other race-related events.
(11) Source: Goodyear.
(12) Adjusted to give effect to the sale of the Old Notes offered by the Company
in the Prior Offering and the use of the net proceeds therefrom. See "Use
of Proceeds."
(13) As of June 30, 1997, on a pro forma basis after giving effect to the
issuance of the Old Notes and application of the net proceeds therefrom,
the Company would have had $20,077,000 of outstanding Senior Indebtedness.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is qualified in its entirety by and
should be read in conjunction with the Audited and Unaudited Consolidated
Financial Statements (including the notes thereto) appearing elsewhere in this
Prospectus.
Overview
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedway facilities, from food and
beverage concession sales and souvenir sales made during such events, from the
sale of sponsorships to companies that desire to advertise or sell their
products or services at such events and from the licensing of television, cable
network and radio rights to broadcast such events. The Company derives
additional revenue from The Speedway Club, a dining and entertainment facility
at CMS, and Legends Car operations.
The Company classifies its revenues as admissions, event-related revenues
and other operating revenue. "Admissions" includes ticket sales for all of the
Company's events. "Event related revenues" includes concession and souvenir
sales, luxury suite rentals, sponsorship fees and broadcast right fees. "Other
operating revenue" includes the Speedway Club and Legends Car revenues.
The Company classifies its 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 and, prior to 1995, management
fees to Sonic Financial Corporation ("Sonic"), a majority shareholder of the
Company controlled by the Company's Chairman. "Other direct operating expense"
includes the cost of the Speedway Club and Legends Car sales.
The Company's 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.
The Company sponsors and promotes outdoor motorsports events. Weather
conditions affect sales of tickets, concessions and souvenirs, among other
things, at these events. Although the Company sells tickets well in advance of
its events, poor weather conditions can have an effect on the Company's results
of operations.
The Company has derived a substantial portion of its total revenues from
admissions and event-related revenue attributable to NASCAR-sanctioned races
held in March, April, May, August, October and November. As a result, the
Company's business has been, and is expected to remain, highly seasonal. During
1995 and 1996, the Company's second and fourth quarters accounted, on average,
for approximately 77% of the Company's total annual revenues and approximately
100% of its total annual operating income. During 1997, the Company expects the
second quarter to represent a significantly higher percentage of annual revenues
and operating income as a result of the addition of racing events at TMS and the
scheduling of racing events at SPR. The Company sometimes produces an operating
loss during its first quarter, when it hosts only one NASCAR race weekend. The
concentration of the Company's racing events in the second quarter and the
growth in the Company's operations with attendant increases in overhead expenses
will tend to increase operating losses in future first and third quarters.
Additionally, race dates at the Company's 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 the
Company's business.
Significant growth in the Company's revenues will depend on consistent
investment in facilities. In addition to several capital projects underway at
AMS, BMS, CMS, and SPR, the construction of TMS was substantially completed
before hosting its first major NASCAR Winston Cup race on April 6, 1997.
The Company does not believe that its financial performance has been
materially affected by inflation. The Company has been able to mitigate the
effects of inflation by increasing prices.
27
<PAGE>
Results of Operations
The table below shows the relationship of income and expense items relative
to total revenue for the fiscal years ended December 31, 1994, 1995 and 1996 and
for the three and six months ended June 30, 1996 and 1997.
<TABLE>
<CAPTION>
Percentage of Total Revenue for
Three Months Six Months
Year Ended December 31, Ended June 30, Ended June 30,
1994 1995 1996 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Admissions.............................. 48.8% 48.4% 51.4% 55.3% 49.2% 51.4% 47.2%
Event-related revenue................... 38.5 36.8 35.6 35.4 46.5 35.8 46.1
Other operating revenue................. 12.7 14.8 13.0 9.3 4.3 12.8 6.7
Total revenues....................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Expenses:
Direct expense of events................ 28.4% 26.5% 29.6% 28.0 33.8 28.5% 33.4%
Other direct operating expense.......... 9.5 10.0 7.8 6.0 2.7 8.2 4.1
General and administrative.............. 18.3 17.7 16.7 11.3 8.3 16.2 13.2
Non-cash stock compensation............. 4.6 -- -- -- -- -- --
Depreciation and amortization........... 7.0 6.5 7.4 5.0 4.3 7.1 6.0
Preoperating expense of new facility.... -- -- -- -- 1.8 -- 1.5
Total operating expenses............. 67.8 60.7 61.5 50.3 50.9 60.0 58.1
Operating income.......................... 32.2 39.3 38.5 49.7 49.1 40.0 41.9
Interest income (expense), net............ (6.0) -- 1.3 1.7 (0.8) 0.8 (0.3)
Other income (expense), net............... 2.5 4.7 2.4 2.4 (0.2) 1.8 0.0
Income tax provision...................... (12.5) (18.1) (16.3) (21.2) (19.8) (16.9) (17.1)
Net income................................ 16.2% 25.9% 25.9% 32.6% 28.3% 25.7% 24.5%
</TABLE>
Three Months Ended June 30, 1997 Compared To Three Months Ended June 30, 1996
Total Revenues. Total revenues for the three months ended June 30, 1997
increased by $63.3 million, or 155.1%, to $104.1 million, over such revenues for
the same year earlier period. This improvement was due to increases in all
revenue items, particularly admissions and event related revenues.
Admissions for the three months ended June 30, 1997 increased by $28.7
million or 127.1%, over admissions for the same year earlier period. This
increase was due primarily to hosting major NASCAR Winston Cup series racing
events at each of the Company's new speedways, TMS and SPR, to hosting a NASCAR
Craftsman Truck Series and an IRL racing event at TMS, and to growth in NASCAR
sanctioned racing events held at BMS and CMS during the current quarter. 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 the three months ended June 30, 1997 increased by
$34.0 million, or 235.1%, over such revenue for the same year earlier period.
The increase was due primarily to hosting major NASCAR Winston Cup series racing
events at the Company's new speedways, TMS and SPR, to hosting NASCAR Craftsman
Truck Series and IRL racing events at TMS, and to the growth in attendance,
including related increases in concessions and souvenir sales, at BMS and CMS.
Other operating revenue for the three months ended June 30, 1997 increased
by $680,000, or 17.9%, over such revenue for the same year earlier period. This
increase was primarily attributable to operating revenues derived from rental
revenues of SPR, which was acquired in November 1996, and to an increase in
Legends Car revenues.
28
<PAGE>
Direct Expense of Events. Direct expense of events for the three months
ended June 30, 1997 increased by $23.8 million, or 207.9%, over such expense for
the same year earlier period. This increase was due primarily to hosting major
NASCAR Winston Cup series racing events at TMS and SPR, to hosting NASCAR
Craftsman Truck Series and IRL racing events at TMS, to higher operating costs
associated with the growth in attendance and seating capacity at BMS and CMS,
and to increases in the size of race purses required for NASCAR sanctioned
racing events held during the current quarter. As a percentage of admissions and
event related revenues combined, direct expense of events for the three months
ended June 30, 1997 was 35.3% compared to 30.9% for the same year earlier
period. Such increase, which was expected, results primarily from
proportionately higher operating expenses associated with TMS's inaugural race
weekend, and at SPR, relative to operating margins historically achieved at the
Company's other speedways.
Other Direct Operating Expense. Other direct operating expense for the
three months ended June 30, 1997 increased by $355,000, or 14.6%, over such
expense for the same year earlier period. The increase occurred primarily due to
the expenses associated with the increase in other operating revenues derived
from SPR and Legends Cars.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased from 11.2% for the three months ended June 30,
1996 to 8.4% for the three months ended June 30, 1997. This improvement reflects
continuing scale efficiencies associated with revenue increases outpacing
increases in general and administrative expenses. General and administrative
expense for the three months ended June 30, 1997 increased by $4.1 million, or
89.5%, over such expense for the same year earlier period. The increase was due
primarily to general and administrative expenses incurred during the three
months ended June 30, 1997 by SPR, acquired in November 1996, and at TMS.
Depreciation and Amortization. Depreciation and amortization expense for
the three months ended June 30, 1997 increased by $2.4 million or 116.5%, over
such expense for the same year earlier period. 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 CMS, and
from the property and equipment and goodwill and other intangible assets related
to the acquisition of SPR.
Preoperating Expense Of New Facility. Preoperating expenses for the three
months ended June 30, 1997 of $1.85 million consist of non-recurring and
non-event related costs to develop, organize and open TMS.
Operating Income. Operating income for the three month period ended June
30, 1997 increased by $30.9 million, or 152.0%, over such income for the same
year earlier period. This increase was due to the factors discussed above.
Interest Income (Expense), Net. Interest expense, net for the three months
ended June 30, 1997 was $877,000, compared to interest income, net for the three
months ended June 30, 1996 of $686,000. This change was due to higher average
borrowings for construction funding and lower levels of cash invested in the
three months ended June 30, 1997 as compared to the same year earlier period.
The change was also due to capitalizing interest costs of $1.4 million in the
three months ended June 30, 1997 compared to $546,000 in the three months ended
June 30, 1996.
Other Income (Expense). Other expense for the three months ended June 30,
1997 was $179,000, compared to other income of $971,000 for the same year
earlier period. This change was due to fewer gains recognized on sales of
marketable equity securities during the three months ended June 30, 1997
compared to the same year earlier period. In addition, the decrease reflects
recognition of the Company's loss in equity method investee of $105,000 in the
three months ended June 30, 1997 compared to equity income of $299,000 in the
three months ended June 30, 1996. The decrease also reflects the expensing of
unamortized debt issuance costs of $242,000 in connection with replacing the
bank Credit Facility.
Income Tax Provision. The Company's effective income tax rate for the three
months ended June 30, 1997 and 1996 was 41% and 40%, respectively.
Net Income. Net income for the three months ended June 30, 1997 increased
by $16.2 million, or 122.0%, compared to the three months ended June 30, 1996.
This increase was due to the factors discussed above.
29
<PAGE>
Six Months Ended June 30, 1997 Compared To Six Months Ended June 30, 1996
Total Revenues. Total revenues for the six months ended June 30, 1997
increased by $66.4 million, or 125.0%, to $119.6 million, over such revenues for
the same year earlier period. This improvement was due to increases in all
revenue items, particularly admissions and event related revenues.
Admissions for the six months ended June 30, 1997 increased by $29.1
million, or 106.7%, over admissions for the same year earlier period. This
increase was due primarily to hosting major NASCAR Winston Cup series racing
events at each of the Company's new speedways, TMS and SPR, to hosting a NASCAR
Craftsman Truck Series and an IRL racing event at TMS, and to growth in NASCAR
sanctioned racing events held at AMS, BMS, and CMS during the current period.
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 the six months ended June 30, 1997 increased by
$36.1 million, or 189.5%, over such revenue for the same year earlier period.
The increase was due primarily to hosting major NASCAR Winston Cup series racing
events at the Company's new speedways, TMS and SPR, to hosting a NASCAR
Craftsman Truck Series and an IRL 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 the six months ended June 30, 1997 increased by
$1.2 million, or 18.0%, over such revenue for the same year earlier period. This
increase was primarily attributable to operating revenues derived from Oil-Chem
Research Corp. and its subsidiary ("Oil-Chem") and to rental revenues from SPR,
which were acquired in April and November 1996, respectively, and to an increase
in Legends Car revenues.
Direct Expense of Events. Direct expense of events for the six months ended
June 30, 1997 increased by $24.8 million, or 163.6%, over such expense for the
same year earlier period. This increase was due primarily to hosting major
NASCAR Winston Cup series racing events at TMS and SPR, to hosting NASCAR
Craftsman Truck Series and IRL racing events at TMS, to higher operating costs
associated with the growth in attendance and seating capacity at BMS and CMS,
and to increases in the size of race purses required for NASCAR sanctioned
racing events held during the current period. As a percentage of admissions and
event related revenues combined, direct expense of events for the six months
ended June 30, 1997 was 35.8% compared to 32.7% for the same year earlier
period. Such increase, which was expected, results primarily from
proportionately higher operating expenses associated with TMS's inaugural race
weekend, and at SPR, relative to operating margins historically achieved at the
Company's other speedways.
Other Direct Operating Expense. Other direct operating expense for the six
months ended June 30, 1997 increased by $517,000, or 11.9%, over such expense
for the same year earlier period. The increase occurred primarily due to the
expenses associated with the increase in other operating revenues derived from
SPR, Oil-Chem and Legends Cars.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased from 16.2% for the six months ended June 30,
1996 to 13.2% for the six months ended June 30, 1997. This improvement reflects
continuing scale efficiencies associated with revenue increases outpacing
increases in general and administrative expenses. General and administrative
expense for the six months ended June 30, 1997 increased by $7.2 million, or
83.2%, over such expense for the same year earlier period. The increase was due
primarily to general and administrative expenses incurred during the six months
ended June 30, 1997 by Oil-Chem and SPR, acquired in April 1996 and November
1996, respectively, and at TMS.
Depreciation and Amortization. Depreciation and amortization expense for
the six months ended June 30, 1997 increased by $3.3 million, or 87.5%, over
such expense for the same year earlier period. 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 CMS, and
from the property and equipment and goodwill and other intangible assets related
to the acquisitions of BMS and SPR.
Preoperating Expense Of New Facility. Preoperating expenses for the six
months ended June 30, 1997 of $1.85 million consist of non-recurring and
non-event related costs to develop, organize and open TMS.
Operating Income. Operating income for the six month period ended June 30,
1997 increased by $28.8 million, or 135.6%, over such income for the same year
earlier period. This increase was due to the factors discussed above.
30
<PAGE>
Interest Income (Expense), Net. Interest expense, net for the six months
ended June 30, 1997 was $382,000, compared to interest income, net for the six
months ended June 30, 1996 of $449,000. This change was due to higher average
borrowings for construction funding and lower levels of cash invested during the
six months ended June 30, 1997 as compared to the same year earlier period. The
change also reflects the capitalizing of $3.5 million in interest costs incurred
during the six months ended June 30, 1997 on TMS and other construction projects
compared to $546,000 for the same year earlier period.
Other Income. Other income for the six months ended June 30, 1997 decreased
by $944,000 over such income for the same year earlier period. This decrease was
primarily due to fewer gains recognized on sales of marketable equity securities
during the six months ended June 30, 1997 compared to the same year earlier
period. In addition, the decrease reflects recognition of the Company's loss in
equity method investee of $210,000 in the six months ended June 30, 1997
compared to equity income of $185,000 for the same year earlier period. The
decrease also reflects the expensing of unamortized debt issuance costs of
$242,000 in connection with replacing the 1996 Credit Facility.
Income Tax Provision. The Company's effective income tax rate for the six
months ended June 30, 1997 and 1996 was 41% and 40%, respectively.
Net Income. Net income for the six months ended June 30, 1997 increased by
$15.6 million, or 113.8%, compared to the six months ended June 30, 1996. This
increase was due to the factors discussed above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Total Revenues. Total revenues for 1996 increased by $26.5 million, or
35.1%, to $102.1 million, over such revenues for 1995. This improvement was due
to increases in all revenue items, particularly admissions and event related
revenues. Admissions for 1996 increased by $15.9 million, or 43.4%, over
admissions for 1995. This increase was due primarily to the acquisition of BMS
in January 1996, which hosted race events in the first and third quarters of
1996, and to growth in admissions to NASCAR-sanctioned racing events. The growth
in admissions reflects the continued increases in attendance, additions to
permanent seating capacity and price increases. Event related revenue for 1996
increased by $8.6 million, or 31.1%, over such revenue for 1995. This increase
was due primarily to the acquisition of BMS, the growth in admissions, including
related increases in concessions and souvenir sales, to increases in sponsorship
and broadcast right fees, and to increased rental revenue from newly constructed
VIP suites. Other operating revenue for 1996 increased by $2.0 million, or
18.1%, over such revenue for 1995. Legends Car revenues accounted for the
substantial portion of this increase.
Direct Expense of Events. Direct expense of events for 1996 increased by
$10.2 million, or 50.9%, over such expense for 1995. Such increase was due
primarily to the acquisition of BMS, to increased operating costs associated
with the growth in attendance and seating capacity at AMS and CMS, and to
increases in the size of purses and sanctioning fees required for
NASCAR-sanctioned racing events.
Other Direct Operating Expense. Other direct operating expense for 1996
increased by $394,000, or 5.2%, over such expense for 1995. The increase was due
primarily to increased revenues overall, and the change in sales mix to higher
margin part sales, for Legends Cars compared to 1995.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased from 17.7% for 1995 to 16.7% for 1996. This
improvement reflects continuing scale efficiencies associated with revenue
increases outpacing increases in general and administrative expenses. General
and administrative expense for 1996 increased by $3.6 million, or 27.0%, over
such expense for 1995. This change was due primarily to general and
administrative expenses incurred at BMS which was acquired in the first quarter
of 1996, and to a lesser extent, an increase in the average compensation of
employees.
Depreciation and Amortization. Depreciation and amortization expense for
1996 increased by $2.7 million, or 55.3%, over such expense for 1995. This
increase was due primarily to additions to property and equipment at CMS and AMS
and from the property and equipment and goodwill and other intangible assets
related to the acquisition of BMS.
Operating Income. Operating income for 1996 increased by $9.7 million, or
32.5%, over such income for 1995. This increase was due to the factors discussed
above.
31
<PAGE>
Interest Income (Expense), Net. Interest income, net for 1996 was $1.3
million, compared to interest expense, net for 1995 of $24,000. This change was
due to higher levels of cash invested, from the public stock offering that
occurred in April 1996 and the convertible subordinated debentures offered in
October 1996, as compared to 1995. The change was also due to capitalizing $2.8
million in interest costs incurred in 1996 on TMS and other construction
projects. Interest costs capitalized in 1995 were insignificant.
Other Income. Other income for 1996 decreased by $1.2 million from such
income for 1995. This change was due primarily to decreased sales of AMS
condominiums and CMS land.
Provision for Income Taxes. The Company's effective income tax rate for
1996 was 39%, compared to an effective income tax rate for 1995 of 41%.
Income from Continuing Operations before Extraordinary Item. Income before
extraordinary item for 1996 increased by $9.8 million, or 29.3%, over such
income for 1995, due to the factors discussed above.
Extraordinary Item, Net. Upon repaying the long-term debt, related net debt
issuance costs previously amortized were written off in 1995, as an
extraordinary item. There were no similar charges in 1996.
Net Income. Net Income for 1996, when compared to 1995, reflects improved
earnings in the Company's historical operations, and an increase in income due
to the newly acquired BMS facility which hosted two NASCAR sanctioned racing
events in 1996.
Year Ended December 31, 1995 Compared To The Year Ended December 31, 1994
Total Revenues. Total revenues for 1995 increased by $11.0 million, or
17.1%, to $75.6 million, over such revenues for 1994. This improvement was due
to increases in each of the revenue categories. Admissions for 1995 increased by
$5.0 million, or 16.0%, over admissions for 1994. This increase was due
primarily to additions to permanent seating capacity, growth in attendance at
NASCAR-sanctioned racing events, price increases and one additional non-NASCAR
event in 1995. Event-related revenue for 1995 increased by $3.0 million, or
12.0%, over such revenue for 1994. This increase was attributable to a
significant increase in luxury suite rentals, increased souvenir and concession
sales and, to a lesser extent, sponsorship revenue. Other operating revenue for
1995 increased by $3.0 million, or 36.8%, over such revenue for 1994. Legends
Car revenues accounted for the substantial portion of this increase.
Direct Expense of Events. Direct expense of events for 1995 increased by
$1.7 million, or 9.1%, over such expense for 1994. Such increase was due to
increases in the size of purses and sanctioning fees required for the Company's
NASCAR-sanctioned racing events and, to a lesser extent, one additional
non-NASCAR event.
Other Direct Operating Expense. Other direct operating expense for 1995
increased by $1.5 million, or 24.6%, over such expense for 1994. The increase
was primarily attributable to the cost of sales associated with the increase in
Legends Car revenues.
General and Administrative. As a percentage of total revenues, general and
administrative expense decreased to 17.7% for 1995 from 18.3% for 1994. This
improvement was due to scale efficiencies resulting from increases in revenues
outpacing increases in general and administrative costs. General and
administrative expense for 1995 increased by $1.6 million, or 13.3%, over such
expense for 1994. This change was due primarily to the increase in the number of
employees, predominantly at 600 Racing, and in average compensation. Increases
in Social Security, health insurance and other similar charges associated with
increased levels and amounts of employment also occurred.
Depreciation and Amortization. Depreciation and amortization expense for
1995 increased by $393,000, or 8.7%, over such expense for 1994. This increase
was due to additions to property and equipment at AMS, CMS and 600 Racing.
Operating Income. Operating income for 1995 increased by $8.9 million, or
42.8%, over such income for 1994. This increase was due to the factors discussed
above.
Interest Expense, Net. Interest expense, net, for 1995 decreased by $3.8
million, or 99.4%, from such expense for 1994. This decrease was due to the
repayment of substantially all of the long-term debt with the proceeds of the
Company's initial public offering ("IPO") and interest income on short-term
investments.
32
<PAGE>
Other Income. Other income for 1995 increased by $1.8 million over such
income for 1994. This increase was due to gains on sale of land and
condominiums.
Provision for Income Taxes. The Company's effective income tax rate for
1995 was 41%, compared to an effective tax rate for 1994 of 43%.
Income from Continuing Operations. Income from continuing operations for
1995 increased by $9.1 million, or 87.1% over such income for 1994, due to the
factors discussed above.
Extraordinary Item, Net. Upon repaying the Company's long-term debt with
proceeds from the IPO, related net debt issuance costs previously unamortized
were written off as an extraordinary item. There were no similar charges for
1994.
Seasonality and Quarterly Results
The Company has derived a substantial portion of its 1996 total revenues
from admissions and event-related revenue attributable to 12 major
NASCAR-sanctioned races held in March, May, August, October and November. In
1997, the Company is hosting 15 major NASCAR-sanctioned races, including a major
racing event at TMS in April and at SPR in May. As a result, although the
Company's business has been highly seasonal, it is expected to remain seasonal
but to a lesser degree than in prior years when the Company held
NASCAR-sanctioned races only in the second and fourth quarters. In 1995 and
1996, the Company's second and fourth quarters accounted for approximately 80%
and 75%, respectively, of its total annual revenues, and approximately 106% and
96%, respectively, of its total annual operating income. The Company sometimes
produces minimal operating income or operating losses during its first and third
quarters, when it sponsors only one Winston Cup race each quarter. Set forth
below is certain summary information with respect to the Company's operations
for the most recent ten quarters.
<TABLE>
<CAPTION>
1995 1996 1997
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter Quarter Total Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except NASCAR-sanctioned events)
Total revenues....... $11,245 $27,709 $4,098 $32,521 $75,573 $12,330 $40,816 $13,505 $35,462 $102,113 $15,453 $104,141
Operating income
(loss)............. 1,457 14,120 (3,147 ) 17,259 29,689 963 20,299 438 17,642 39,342 (1,065 ) 51,155
Net income (loss).... 278 9,242 (637 ) 10,574 19,457 387 13,293 685 12,040 26,405 (263 ) 29,517
Major NASCAR-
sanctioned
events............. 2 3 0 3 8 2 5 2 3 12 2 8
</TABLE>
Liquidity and Capital Resources
The Company has historically met its working capital and capital
expenditure requirements through a combination of cash flow from operations,
borrowings, particularly bank loans, and other debt and equity offerings. The
Company has expended significant amounts of cash in 1996 and the first half of
1997 for the construction of TMS, the acquisitions of BMS and SPR, and the
improvement and expansion at AMS, BMS, and CMS. The Company's financial
condition and liquidity strengthened during the year ended December 31, 1996.
Cash flows during the 1996 fiscal year were positively impacted by: (i) in April
1996, the receipt of net cash proceeds of approximately $78,354,000 from the
sale of 3,000,000 shares of Common Stock in a public stock offering; (ii) in
October 1996, the receipt of net cash proceeds of approximately $72,150,000 from
an offering of the Debentures; (iii) record operating results for the year ended
December 31, 1996, during which net income amounted to $26,405,000 and net cash
generated by operations amounted to $37,384,000; and (iv) an increase in net
long-term borrowings under the 1996 Credit Facility by $22,000,000 as of
December 31, 1996. During the six months ended June 30, 1997, the Company
generated $45,079,000 in net cash from operations and increased its net long-
term borrowings by $78,000,000.
Company management anticipates that the net proceeds from issuance of the
Old Notes, together with cash from operations and borrowings under the 1997
Credit Facility, will sustain the Company's operating needs, including planned
capital expenditures at AMS, BMS, CMS, SPR and TMS through 1998 and any exercise
price under the SPR real property option. Based upon the anticipated future
growth and financing requirements of the Company, management expects that the
Company will, from time to time, engage in additional financing of a character
and in amounts to be determined. While the Company expects to continue to
generate positive cash
33
<PAGE>
flows from its existing speedway operations, and has experienced improvement in
its financial condition, liquidity and credit availability, such resources, as
well as possibly others, will be needed to fund the Company's continued growth,
including the future expansion and improvement of AMS, BMS, CMS, SPR and TMS.
In March 1996, the Company obtained an unsecured senior revolving credit
facility from a syndicate of banks led by NationsBank, as amended to date (the
"1996 Credit Facility"). The 1996 Credit Facility was a long-term working
capital and letter of credit facility with an overall borrowing limit of $110.0
million. The Company repaid and retired the 1996 Credit Facility with a portion
of the proceeds from the sale of the Old Notes.
On October 1, 1996, the Company completed a private placement of the
Debentures in the aggregate principal amount of $74.0 million. Net proceeds to
the Company after commissions and discounts were $72.15 million. The Debentures
are unsecured, mature on September 30, 2003, are currently convertible into
Common Stock at the holder's option 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 senior indebtedness of the Company,
including the Notes and the 1997 Credit Facility. 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. The proceeds
from the sale of the Debentures were used to repay outstanding borrowings under
the 1996 Credit Facility, fund construction costs of TMS and for working capital
needs of the Company.
As of June 30, 1997, the Company entered into the Interim Facility, which
was a short-term, unsecured, senior revolving credit facility from NationsBank
with a borrowing limit of up to $30.0 million. No borrowings under the Interim
Facility were made by the Company. The Interim Facility was retired upon the
consummation of the 1997 Credit Facility.
The 1997 Credit Facility is an unsecured senior revolving credit facility
provided by a syndicate of banks led by NationsBank. The 1997 Credit Facility
has an overall borrowing limit of $175.0 million with a sub-limit of $10.0
million for standby letters of credit. Amounts outstanding under the 1997 Credit
Facility constitute Senior Indebtedness. The 1997 Credit Facility will mature on
July 31, 2002. Draws are permitted under the 1997 Credit Facility for the
following purposes: (i) financing seasonal working capital needs, (ii) financing
capital expenditures, including the costs of reconfiguring AMS, purchasing the
SPR real estate and additional improvements at BMS, CMS and TMS, (iii)
refinancing existing debt and (iv) other corporate purposes. Although the 1997
Credit Facility is unsecured, the Company agreed not to pledge its assets to any
third party. In addition, the Company made certain financial covenants,
including specified levels of net worth and ratios of (i) debt to consolidated
net worth plus debt, (ii) debt to EBITDA, and (iii) earnings before interest and
taxes ("EBIT") to interest expense. The 1997 Credit Facility also limits the
Company's 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 its consolidated capital expenditures to certain levels. The 1997
Credit Facility contains certain other limitations or prohibitions concerning
the incurrence of other indebtedness, prepayment of other indebtedness,
guarantees, asset sales and purchases, investments, mergers, consolidations,
issuance of capital stock, dividends, distributions and redemptions. The 1997
Credit Facility permits additional indebtedness, within certain parameters,
including through a sale-leaseback transaction, for permanent financing of TMS.
The 1997 Credit Facility closed concurrently with the Prior Offering of the Old
Notes.
Capital Expenditures
The Company's capital expenditures totalled $147.7 million in 1996, $40.7
million in 1995 and $5.0 million in 1994. Such expenditures were directed
primarily toward the construction of grandstand seating and suites, the
acquisition and improvement of real estate at AMS and CMS, the paving of the
principal tracks at AMS and CMS, construction of the Winston Cup garage at CMS
and, in 1995 and 1996, the construction of TMS.
In 1996, the Company completed 17 new suites at AMS and reconfigured AMS's
main entrances and expanded on-site roads to ease congestion caused by the
increases in attendance. During 1996, the Company began a major renovation and
expansion of BMS and added approximately 6,000 permanent grandstand seats and
relocated various mezzanine level souvenir, concessions and restroom facilities
at BMS to increase spectator convenience and accessibility.
34
<PAGE>
Management currently estimates that total 1997 capital expenditures will be
approximately $148.0 million, however, no assurance can be given that the actual
cost will remain within this estimate. In 1997, the Company has contracted for
and is in the process of completing approximately 22,000 additional permanent
seats at AMS, and completed approximately 39,000 additional permanent seats at
BMS and approximately 25,000 additional permanent seats at CMS, including
approximately 58 suites at AMS, 31 suites at BMS and 26 suites at CMS. Also, the
Company substantially completed construction of TMS in April 1997, which has
approximately 150,000 permanent seats, including 194 suites. The Company expects
to continue to make substantial capital improvements in its facilities to meet
increasing demand and to increase revenue. Currently, a number of major capital
projects are underway. The Company expects in 1997 to convert AMS to a quad-oval
configuration, including changing the start-finish line location, and make
certain other site improvements at BMS and CMS. At SPR, the Company expects in
1997 to complete parking, road improvements, and grading to improve spectator
sight lines, and to increase and improve seating and facilities for spectators
and members of the media. Numerous factors, many of which are beyond the
Company's control, may influence the ultimate cost, including undetected soil or
land conditions, additional land acquisition costs, increases in the cost of
construction materials and labor, unforeseen changes in the design, litigation,
accidents or natural disasters affecting the construction site and national or
regional economic changes. In addition, the actual cost could vary materially
from the foregoing estimate if the Company's 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.
On November 18, 1996, the Company acquired certain assets of SPR and
executed a 14-year capital lease with the seller for all of the real property of
the SPR complex. SMI has the option to purchase the real property for $38.1
million during a six-month option period commencing November 1, 1999, subject to
acceleration at the election of the seller after March 31, 1997 and through
December 31, 1999. Monthly lease payments range from $67,000 in 1997 to $631,000
in 2010. In connection with the acquisition, the Company loaned the seller
approximately $13.4 million under a promissory note receivable to repay the
sellers' then outstanding obligations on the real property. Amounts due under
the note, a $3.5 million purchase option payment, and a $3.0 million lease
security deposit are to be credited against amounts due from the Company upon
exercise of the purchase option. In management's opinion, it is probable that
the purchase option will be exercised as soon as it becomes exercisable.
In addition to expansion and improvements of its existing speedway
facilities and business operations, the Company is continually evaluating new
opportunities that will add value for the Company's stockholders, including the
expansion and development of its existing Legends Cars products and markets and
the expansion into complementary businesses.
Legal Proceedings
As a result of an audit of AMS with respect to its tax years ended November
30, 1988 and October 31, 1990, the IRS has asserted that AMS is liable for
additional income taxes, penalties and interest. The total assessment including
taxes, penalties and interest (net of tax benefit for deductibility of interest)
through June 30, 1997 is approximately $7.7 million. In November 1993, AMS filed
a protest contesting the assessment. Management intends to continue contesting
the allegations of a deficiency. There can be no assurance, however, that the
ultimate resolution of this proceeding, which is expected in 1997, will not have
a material adverse effect on the Company's results of operations or financial
condition.
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 the statutory basis for any claimed tax exemption for
TMS is unconstitutional under the Texas Constitution and that TMS will be
required to pay ad valorem taxes on the TMS facility. The Texas School District
has the power to levy ad valorem taxes against TMS if the TMS facility is not
exempt property. All defendants successfully moved for dismissal on the grounds
that the School District Litigation had been improperly brought in Travis
County, Texas, rather than in the county in which TMS is located, as provided in
Texas statutory procedural rules for challenging claims of ad valorem tax
exemptions. In June 1997, the Texas Court of Appeals, an intermediate
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appellate court in Austin, Texas denied the Texas School District's appeal and
sustained the dismissal by the state district court. 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 and challenges 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 Company will vigorously contest any attempt to declare the TMS
facilities taxable. Management is unable to quantify with any certainty the tax
effect on the Company of any outcome in this matter.
On May 23, 1997, two substantially similar complaints styled Steven K.
Robinson, et al. v. Charlotte Motor Speedway, Inc., O. Bruton Smith, Bonnie
Smith, Browning Ferris Industries of South Atlantic, Inc., et al. were filed in
the Hamilton County, Ohio Court of Common Pleas and the U.S. District Court for
the Southern District of Ohio (Western Division), both located in Cincinnati,
Ohio, against CMS, among others, claiming negligence and seeking $20.0 million
in damages as well as unspecified punitive damages. The plantiffs allege they
are the survivors of an individual who was killed in 1995 from a fall while
intoxicated after an event at CMS. The Company's insurer has assumed the defense
of this litigation, which the Company intends to contest vigorously.
Environmental Matters
Solid waste landfilling has occurred on and around the Company's property
at CMS for many years. Landfilling of general categories of municipal solid
waste on the CMS property ceased in 1992. There are two landfills currently
operating at CMS, however, that are permitted to receive inert debris and waste
from land clearing activities ("LCID" landfills). Two other LCID landfills on
the CMS property were closed in 1994. CMS intends to allow similar LCID
landfills to be operated on the CMS property in the future. CMS also leases
certain CMS 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
cannot receive inert debris, land-clearing debris or yard debris. In addition,
the subsidiary of BFI owns and operates an active solid waste landfill adjacent
to CMS. Management believes 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 CMS property are
subject to a groundwater monitoring program and data are submitted to the North
Carolina Department of Environment, Health and Natural Resources ("DEHNR").
DEHNR 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. DEHNR
has not acted to require any remedial action by the Company at this time with
respect to this situation. It is possible that action could be required of the
Company by DEHNR in the future with respect to this situation, which could
require the Company to incur costs that could be material.
Management believes that the Company's operations, including the landfills
and facilities on its 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 the Company's
business or by pollutants, substances, contaminants or wastes used, generated or
disposed of by the Company, or which may be found on the property of the
Company, the Company 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 caused thereby. The amount of such liability, as to which the Company is
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 the Company.
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 Grand National stock car series. The
Company derives a substantial majority of its total revenues from
NASCAR-sanctioned
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racing events. In 1995, eight such events were held at the Company's facilities.
As a result of the BMS acquisition, the Company had 12 such races in 1996. As a
result of the April 1997 Winston Cup and Busch Grand National race dates at TMS
and the May 1997 Winston Cup race date at SPR, the Company will host 15 major
NASCAR-sanctioned events in 1997. See "Risk Factors -- Relationship with NASCAR"
and " -- Competition".
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 (CMS) 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. According to statistics compiled by Goodyear, total
attendance at all 1996 Winston Cup events was 5,588,069, reflecting a compound
annual growth rate of 6.8% from 1994 to 1996. The entire Winston Cup series is
broadcast to national television audiences by five networks: ABC, CBS, 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
the Company, for broadcast rights and sponsorship fees.
Management believes 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 recently 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 in excess of
$39,000. Corporate sponsors of NASCAR-sanctioned events now include most major
North American automobile producers and parts manufacturers, the largest and
best-known food, beverage and tobacco companies and leading firms in other
manufacturing and consumer products industries. See "Risk Factors -- Industry
Sponsorships and Government Regulation."
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 $3.0 million to $6.0 million
to the team.
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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. Management
estimates that the average Winston Cup team spends approximately $100,000 to
$150,000 per event, or approximately $3.2 million to $4.8 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, 34 races are licensed annually to 20
tracks operating in 16 states. The 1997 Winston Cup schedule is as follows:
<TABLE>
<CAPTION>
Date Race Location
<S> <C> <C>
Feb. 9 "Busch Clash" (all-star race) Daytona Beach, Fla.
Feb. 16 "Daytona 500" Daytona Beach, Fla.
Feb. 23 "Goodwrench Service 400" Rockingham, N.C.
Mar. 2 "Pontiac Excitement 400" Richmond, Va.
Mar. 9 "PrimeStar 500" Hampton, Ga. (AMS)
Mar. 23 "TranSouth Financial 400" Darlington, S.C.
Apr. 6 "Interstate Batteries 500" Forth Worth, Tx. (TMS)
Apr. 13 "Food City 500" Bristol, Tn. (BMS)
Apr. 20 "Goody's Headache Powder 500" Martinsville, Va.
Apr. 27 "Winston Select 500" Talledega, Ala.
May 4 "Save Mart Supermarkets 300" Sonoma, Ca. (SPR)
May 17 "The Winston" (all-star race) Concord, N.C. (CMS)
May 25 "Coca-Cola 600" Concord, N.C. (CMS)
June 1 "Miller 500" Dover, Del.
June 8 "Pocono 500" Long Pond, Pa.
June 15 "Miller 400" Brooklyn, Mich.
June 22 "California 500" Fontana, Ca.
July 5 "Pepsi 400" Daytona Beach, Fla.
July 13 "Jiffy Lube 300" Loudon, N.H.
July 20 "Pennsylvania 500" Long Pond, Pa.
Aug. 2 "Brickyard 400" Indianapolis, Ind.
Aug. 10 "The Bud at the Glen" Watkins Glen, N.Y.
Aug. 17 "ITW DeVilbiss 400" Brooklyn, Mich.
Aug. 23 "Goody's Headache Powder 500" Bristol, Tn. (BMS)
Aug. 31 "Mountain Dew Southern 500" Darlington, S.C.
Sept. 6 "Winston Cup 400" Richmond, Va.
Sept. 14 "New Hampshire 300" Loudon, N.H.
Sept. 21 "MBNA 400" Dover, Del.
Sept. 28 "Hanes 500" Martinsville, Va.
Oct. 5 "UAW-GM Quality 500" Concord, N.C. (CMS)
Oct. 12 "Sears DieHard 500" Talledega, Ala.
Oct. 26 "AC Delco 400" Rockingham, N.C.
Nov. 2 "Dura-Lube 500" Phoenix, Ariz.
Nov. 16 "NAPA 500" Hampton, Ga. (AMS)
</TABLE>
As the table indicates, no track currently sponsors more than two Winston
Cup series events. The Company holds licenses for two such events at each of
AMS, BMS and CMS, and one such event at each of SPR and TMS.
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CMS also holds the license for the all-star race held in May, "The Winston."
Every Winston Cup event in 1997 has been or is scheduled to be televised on ABC,
CBS, ESPN, TBS or TNN.
The Busch Grand National Series
The second-tier NASCAR circuit is the Busch Grand National series, which in
1997 is scheduled to include 31 races held at 24 tracks in 17 states. Many track
owners who hold Winston Cup licenses also hold Busch Grand National events on
the day preceding a Winston Cup event. Accordingly, Winston Cup drivers will
occasionally compete in Busch Grand National races, which can boost overall
attendance. The Company is licensed for six such events in 1997: the "Stihl
Outdoor Power Tools 300" at AMS on March 8, the "Moore's Snack Food 250" at BMS
on April 12, the "Coca Cola 300" at TMS on April 5, the "CARQUEST Auto Parts
300" at CMS on May 24, the "Food City 250" at BMS on August 22 and the "All Pro
Auto Parts Bumper to Bumper 300" at CMS on October 4, all of which were or are
scheduled to be televised. Each of the Busch Grand National events at the
Company's tracks will be conducted on the day before a Winston Cup event.
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 811,050 spectators to 24 events in
1996. In 1997, 26 Craftsman Truck series events will be held at 25 tracks in 19
states. The Company held one Craftsman Truck race at BMS on June 21, 1997, the
"Coca-Cola Truck 200" and another at TMS on June 6, 1997, the "Pronto Auto Parts
400" and will hold another at SPR on October 5, 1997, the "Kragan/Exide 150".
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 Grand National circuit. The Company currently sponsors two
ARCA races annually at each of AMS and CMS.
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. The
Company currently sponsors one IRL event at each of TMS and CMS.
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"). The Company 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. The Company
occasionally leases its tracks for sports car racing events.
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BUSINESS
Speedway Motorsports, Inc. is a leading promoter, marketer and sponsor of
motorsports activities in the United States. As the owner and operator of
Atlanta, Bristol, Charlotte and Texas Motor Speedways, and the operator of Sears
Point Raceway, the Company has one of the largest portfolios of speedway
facilities in the motorsports industry. The Company also owns, operates and
sanctions the Legends Circuit, for which it manufactures and sells 5/8-scale
modified cars and parts, through its 600 Racing subsidiary.
The Company will sponsor 15 major racing events in 1997 sanctioned by
NASCAR, including nine races associated with the Winston Cup and six races
associated with the Busch Grand National circuit. The Company also currently
sponsors two IRL racing events, three NASCAR Craftsman Truck Series racing
events and one IROC racing event.
Management believes that spectator demand for its largest events exceeds
existing permanent seating capacity at each of AMS, BMS, and CMS, which had, at
December 31, 1996, permanent seating capacity of approximately 102,000, 77,000
and 110,000, respectively. As of March 31, 1997, the Company had completed the
construction of approximately 150,000 permanent seats at TMS, which is the
second largest sports facility in the United States in terms of permanent
seating capacity. In 1997, the Company has contracted for and is in the process
of completing approximately 22,000 additional permanent seats at AMS, and has
completed approximately 39,000 additional permanent seats at BMS and
approximately 25,000 additional permanent seats at CMS. The Company
substantially completed construction of TMS in Fort Worth, Texas in time for its
first major NASCAR Busch Grand National and Winston Cup races at TMS, the "Coca
Cola 300" and the "Interstate Batteries 500", on April 5 and 6, 1997,
respectively, and its first Craftsman Truck and IRL races in June 1997. SPR
currently does not have permanent seating capacity but provides temporary
seating and suites for approximately 18,000 spectators in addition to other
general admission seating arrangements along its 2.52 mile road course.
The Company derives revenues principally from the sale of tickets to
automobile races and other events held at its speedway facilities, from food and
beverage concession sales made during such events, from the sale of sponsorships
to companies that desire to advertise or sell their products or services at such
events and from the licensing of television, cable network and radio rights to
broadcast such events. In 1996, the Company derived approximately 83% of its
total revenues from events sanctioned by NASCAR. The Company has experienced
substantial growth in revenues and profitability as a result of its continued
improvement and expansion of and investment in its facilities, its consistent
marketing and promotional efforts and the overall increase in popularity of
Winston Cup, Busch Grand National and other motorsports events in the United
States. Based on information developed independently by Goodyear, spectator
attendance at Winston Cup and Busch Grand National events increased at compound
annual growth rates of 6.8% and 13.1%, respectively, from 1994 to 1996.
In recent years, television coverage and corporate sponsorship have
increased for NASCAR-related events. All NASCAR Winston Cup and Busch Grand
National events currently are broadcast by ABC, CBS, ESPN, TBS or TNN. The
Company has entered into television rights contracts for all its major
sanctioned events. According to NASCAR, major national corporate sponsorship
(which currently includes over 70 Fortune 500 companies) of NASCAR-sanctioned
events also has increased significantly. Sponsors include such companies as
Coca-Cola, General Motors, Ford, Texaco, Procter & Gamble, McDonald's and RJR
Nabisco. The Company intends to increase the exposure of its current NASCAR
events, add television coverage to other speedway events, increase sponsorship
revenue, and schedule additional racing and other events at each of its speedway
facilities.
Operating Strategy
The Company's operating strategy is to increase profitability through the
promotion and production of racing and related events at modern facilities,
which serve to enhance customer loyalty. The key elements of this strategy are
as follows:
Commitment to Quality and Customer Satisfaction. Upon assuming control of
CMS in 1975, management 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, CMS became the first and only
superspeedway in North America to offer nighttime racing. Following the purchase
of AMS in 1990, the Company began to implement a similar strategy there by
constructing additional grandstand seating, luxury suites and condominiums. In
addition, the Company is constructing new
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food concessions, restroom and other fan amenities facilities at AMS, BMS, CMS,
SPR and TMS to increase spectator comfort and enjoyment as well as reconfiguring
traffic patterns, entrances, and expanded on-site roads to ease congestion
caused by the increases in attendance. For example, at BMS, the Company in 1997
will relocate various souvenir, concessions and restroom facilities to the
mezzanine level to increase spectator convenience and accessibility. Also, at
SPR, the Company plans to expand and improve spectator seating and viewing areas
in 1997. Finally, 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.
Innovative Marketing and Event Promotion. Management believes that it is
important to market the Company's scheduled events throughout the year, both
regionally and nationally. The Company markets its events by offering tours of
its 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. The Company's marketing program also includes
the solicitation of prospective event sponsors. Sponsorship provisions for a
typical NASCAR-sanctioned event include luxury suite rentals, block ticket sales
and Company-catered hospitality, as well as souvenir race program and track
signage advertising. As an example of its marketing innovations, in 1996, the
Company began offering Preferred Seat Licenses ("PSL") entitling licensees to
purchase annual TMS season-ticket packages for sanctioned racing events.
Utilization of Media. The Company negotiates directly with network and
cable television companies for live coverage of its NASCAR-sanctioned races. In
November 1996, SPR signed a five-year television rights agreement with ESPN
covering its May NASCAR Winston Cup races through the NASCAR season for 2001. In
August 1996, TMS signed a four-year television rights agreement with CBS Sports
for the April races at TMS. In May 1996, AMS signed a four-year television
rights agreement with ESPN for NASCAR seasons for 1997 through 2000. Also in May
1996, BMS entered into 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. In December 1995, CMS signed a three-year television
rights agreement with Turner Sports, Inc. ("TSI"), with a TSI renewal right for
the fourth year. The TSI agreement covers the May and October NASCAR and ARCA
races at CMS to be broadcast on TBS. In August 1997, CMS entered into a
five-year television rights agreement with TNN for "The Winston" race and
associated events to be held through 2002.
The Company also broadcasts its AMS, BMS, CMS and TMS Winston Cup Series
races over its proprietary Performance Racing Network ("PRN"), which is
syndicated to more than 300 stations. PRN also sponsors a weekly racing-oriented
program throughout the NASCAR season, which is syndicated to more than 100
stations. Management also seeks to increase the visibility of its racing events
and facilities through local and regional media interaction. For example, each
January the Company sponsors a four-day media tour of CMS to promote the
upcoming Winston Cup season. In 1997, this event featured Winston Cup drivers
and attracted media personnel representing television networks and stations from
throughout the United States. In addition, in early 1997, 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
Management believes that the Company can achieve its growth objectives by
increasing attendance and revenues at existing facilities and by expanding its
promotional and marketing expertise to take advantage of opportunities in
attractive new markets. It intends to continue implementing this growth strategy
through the following means.
Expansion and improvement of existing facilities: Management believes that
spectator demand for its largest events exceeds existing permanent seating
capacity. The Company plans to continue its expansion by adding permanent
grandstand seating and luxury suites, and making other significant renovations
and improvements at AMS, BMS, CMS and SPR in 1997, as further described in
"Business -- Motorsports Facilities" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Capital Expenditures." TMS,
which was substantially complete at the time of its April 1997 NASCAR events,
has approximately 150,000 permanent seats, including 194 suites. In 1997, the
Company began the construction of 76 condominiums at TMS. In 1997, after adding
more than approximately 236,000 permanent seats, including the opening of TMS,
permanent seating capacity at all of the Company's speedways will exceed
500,000. Management believes
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that the expansion and improvements of AMS, BMS, CMS and SPR will generate
additional admissions and event-related revenues.
Maximization of media exposure and enhancement of broadcast and sponsorship
revenues: NASCAR-sanctioned stock car racing is experiencing significant growth
in television viewership and spectator attendance. This growth has allowed the
Company to expand its 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. Management believes that
spectator interest in stock car racing will continue to grow, thereby increasing
broadcast media and sponsors' interest in the sport. The Company intends to
increase media exposure of its current NASCAR events, to add television coverage
to other speedway events and to further increase sponsorship revenue. For
example, as part of this strategy, the acquisition of SPR's operations marked
the Company's entry into the Northern California television market, which is
currently the 5th largest television market in the United States.
Further development of the Legends Car business: In 1992, the Company
developed the Legends Circuit for which it manufactures and sells cars and parts
used in Legends Circuit racing events and is the official sanctioning body. At
retail prices starting at less than $12,900, management believes 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
increasingly important part of the Company's business. In 1994, 1995 and 1996,
Legends Cars revenues were $5,744,000, $8,464,000 and $9,825,000, respectively.
As an extension of the Legends Car concept, the Company recently released a new,
smaller, lower priced "Bandolero" stock car, which is expected to appeal to
younger racing enthusiasts.
Increases in the daily usage of existing facilities: Management constantly
seeks revenue-producing uses for the Company's speedway facilities on days not
committed to racing events. Such other uses include car and truck shows,
supercross motorcycle racing, auto fairs, driving schools, vehicle testing and
settings for television commercials, concerts, print advertisements and motion
pictures. For example, in June 1997, the Company hosted two music concerts at
its newly constructed TMS facility with the music promoter's reported total
attendance in excess of 600,000. In 1994, 1995 and 1996, non-race-day track
rental revenues were $1,162,000, $1,285,000 and $1,730,000, respectively.
Acquisition and development of additional motorsports facilities: The
Company also considers growth by acquisition and development of motorsports
facilities as appropriate opportunities arise. The Company acquired BMS in
Bristol, Tennessee in January 1996 and the operations of SPR in Sonoma,
California in November 1996. In 1997, the Company substantially completed
construction at TMS in Fort Worth, Texas. The Company continuously seeks to
locate, acquire, develop and operate venues which the Company feels are
underdeveloped or underutilized and to capitalize on markets where the pricing
of sponsorships and television rights are considerably more lucrative.
Operations
The Company's operations consist principally of racing and related events.
The Company also sells Legends Cars and sanctions the Legends Circuit. Its other
activities are ancillary to its core business of racing.
Racing and Related Events
NASCAR-sanctioned races are held annually at each of the Company's
speedways. The following are summaries of racing events scheduled in 1997 at
each of the Company's speedways. Management is actively pursuing the scheduling
of additional motorsports racing and other events.
AMS. In 1997, AMS is scheduled to hold two Winston Cup races and one Busch
Grand National 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>
March 8 "Stihl Outdoor Power Tools 300" Busch Grand National
March 9 "PrimeStar 500" Winston Cup
November 16 "NAPA 500" Winston Cup
</TABLE>
In 1997, AMS is also scheduled to sponsor two ARCA races.
42
<PAGE>
BMS. In 1997, BMS is scheduled to hold two Winston Cup races and two Busch
Grand National races, as well as several other races and events. Its
NASCAR-sanctioned racing schedule is as follows:
<TABLE>
<CAPTION>
Date Event Circuit
<S> <C> <C>
April 12 "Moore's Snack Food 250" Busch Grand National
April 13 "Food City 500" Winston Cup
August 22 "Food City 250" Busch Grand National
August 23 "Goody's Headache Powder 500" Winston Cup
</TABLE>
In 1997, BMS is also scheduled to sponsor a NASCAR Craftsman Truck Series
event.
CMS. In 1997, CMS is scheduled to hold three Winston Cup races and two
Busch Grand National races, 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 17 "The Winston" Winston Cup (all-star race)
May 24 "CARQUEST Auto Parts 300" Busch Grand National
May 25 "Coca-Cola 600" Winston Cup
October 4 "All Pro Auto Parts Bumper to Bumper 300" Busch Grand National
October 5 "UAW-GM Quality 500" Winston Cup
</TABLE>
In 1997, CMS is also scheduled to sponsor an IROC event, an IRL event and
two ARCA races.
SPR. In 1997, SPR is scheduled to hold one Winston Cup 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 4 "Save Mart Supermarkets 300" Winston Cup
</TABLE>
In 1997, SPR is also scheduled to sponsor a NASCAR Craftsman Truck Series
event, a NHRA event, an AMA event and a PSR event.
TMS. In 1997, TMS is scheduled to hold one Winston Cup race and one Busch
Grand National 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>
April 5 "Coca-Cola 300" Busch Grand National
April 6 "Interstate Batteries 500" Winston Cup
</TABLE>
In 1997, the Company is also scheduled to sponsor a NASCAR Craftsman Truck
Series event and an IRL event at TMS.
The following table shows selected revenues of the Company for the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997.
All numbers for 1994 and 1995 exclude information for BMS and SPR.
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
1994 1995 1996 1997
<S> <C> <C> <C> <C>
(in thousands)
Admissions......................................... $31,523 $36,569 $ 52,451 $ 56,455
Sponsorship revenue................................ 4,916 5,758 6,989 9,782
Broadcast revenue.................................. 2,791 3,228 5,299 12,666
Other.............................................. 25,307 30,018 37,374 40,691
Total............................................ $64,537 $75,573 $102,113 $119,594
</TABLE>
Admissions. Grandstand ticket prices at the Company's NASCAR-sanctioned
events in 1997 range from $15.00 to $108.00. In general, as NASCAR increases
sanctioning fees and purses, the Company raises ticket prices.
Sponsorship Revenue. The Company's 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. The Company currently has
sponsorship contracts with such major manufacturing and consumer products
companies
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<PAGE>
as Coca-Cola, Miller Brewing Company, Anheuser-Busch, NAPA, PrimeStar,
Interstate Batteries, 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, BMS and SPR, and Chevrolet at CMS and TMS) to exclusive
advertising and promotional rights in the sponsor's product category (as with
Anheuser-Busch at AMS, BMS and TMS and Miller at CMS). None of the Company's
event sponsors accounted for as much as 5% of total revenues in 1996.
Broadcast Revenue. The Company has negotiated contracts with television
networks and stations for the broadcast coverage of all of its NASCAR-sanctioned
events. The Company has contracts with ABC, CBS, ESPN, TBS and TNN covering
events at AMS, BMS, CMS, SPR and TMS. CMS events are carried over Company-owned
PRN to over 300 radio stations. In 1997, the Company plans to carry events at
all its other speedways over PRN. The Company derives revenue from the sale of
commercial time on PRN. None of the Company's broadcast contracts accounted for
as much as 5% of total revenues in 1996.
Other Revenue. The Company derives other revenue from the sale of souvenirs
and concessions, from fees paid for catering "hospitality" receptions and
private parties and from parking. In addition, once completed, its facilities at
AMS, BMS, CMS, SPR and TMS will include a total of approximately 510 luxury
suites available for leasing to corporate sponsors or others at current 1997
annual rates ranging from $18,000 to $100,000. CMS 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 $27,600. The
Company's tracks and related facilities often are leased to others for use in
stock car driving lessons; for testing, research and development of race cars
and racing products; for use as a setting for commercials and motion pictures;
and for other outdoor events.
Quad-Cities International Raceway Park. 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 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.
Legends Cars and The Legends Circuit
Introduced by the Company 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
seven body styles modelled after classic sedans and coupes. Legends Circuit
races, at CMS and elsewhere, are sanctioned by a Company subsidiary, 600 Racing.
More than 1,000 sanctioned races were held nationwide in 1996. Since 1995,
Legends Cars have been manufactured by 600 Racing at a leased 92,000 square foot
facility located approximately two miles from CMS. Prior to 1995, Legends Cars
were manufactured by an unaffiliated company.
Management believes 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 $12,900.
At these retail prices, management believes that Legends Cars are economically
affordable to a new group of racing enthusiasts who otherwise could not race on
an organized circuit. A small percentage of these cars are purchased for "show"
rather than racing. Legends Cars are not designed for general road use. Cars and
parts are currently marketed and sold through approximately 41 distributors
doing business in approximately 33 states, Canada, England, Australia and the
United Arab Emirates. The Company's Legends Car business has experienced
substantial growth since its inception in 1992. It generated $8.4 million in
revenue in 1995 and $9.8 million in 1996, and $1.1 million in operating income
in 1995 and $2.1 million in 1996.
The Company, through its 600 Racing subsidiary, also recently released a
new "Bandolero" line of smaller, lower-priced, entry level stock cars, which is
expected to appeal to younger racing enthusiasts.
Other Activities
The Company also owns Smith Tower, a seven-story, 135,000 square foot
building adjoining the main grandstand and overlooking the principal track at
CMS. Smith Tower houses the Speedway Club, the corporate offices of CMS 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.
Open year-round, it is a focal point of the Company's
44
<PAGE>
efforts to improve the amenities and enhance the comfort of its facilities for
the benefit of spectators. The Company is planning to construct a similar office
tower adjoining the main grandstand and overlooking the track at TMS. This TMS
tower is to house the Texas Motor Speedway Club and corporate offices. The
Company is currently conducting a membership drive for the Texas Motor Speedway
Club, which is to be a dining-entertainment and health-fitness club.
Construction of the TMS tower is expected to be completed by 1999.
The Company has built 46 trackside condominiums at AMS of which 36 were
sold at June 30, 1997. Also, the Company is building 76 condominiums at TMS
above turn two of the speedway, 70 of which were contracted for sale as of June
30, 1997. It built and sold 40 trackside condominiums at CMS in the 1980's and
another 12 units at CMS from 1991 to 1994. Some are used by team owners and
drivers, which is believed to enhance their commercial appeal.
Competition
The Company is the leading motorsports promoter in the local markets served
by AMS, BMS, CMS, SPR and TMS and competes regionally and nationally with other
track owners to sponsor events, especially NASCAR-sanctioned events. The Company
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, Fort Worth, and Sonoma. The Company also competes for attendance with
a wide range of other entertainment and recreational activities available in the
Southeast, Southwest and Northern California regions. See "Risk Factors --
Competition."
Motorsports Facilities
Atlanta Motor Speedway. AMS is located on 870 acres of Company-owned land
in Hampton, Georgia, approximately 30 miles south of downtown Atlanta. Built in
1960, today it is a modern, attractive facility. The Company is currently
engaged in construction projects at AMS to add approximately 22,000 permanent
seats, including 58 new suites, and convert AMS to a 1.5 mile, banked asphalt,
quad-oval configuration including changing the start-finish line location. The
Company expects to complete this construction in time for AMS to sponsor the
"NAPA 500" on November 16, 1997. In 1996, the Company 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.
Bristol Motor Speedway. In January 1996, the Company acquired 100% of the
capital stock of BMS. BMS is located on approximately 530 acres in Bristol,
Tennessee and is a one-half mile, lighted, 36-degree banked concrete oval with
77,000 permanent seats, including 24 suites, as of December 31, 1996. BMS also
owns and operates a one-quarter mile lighted dragstrip. BMS currently sponsors
four major NASCAR-sanctioned racing events annually comprised of two Winston Cup
and two Busch Grand National events. 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. Management believes that spectator demand for its
Winston Cup events at BMS exceeds existing permanent seating capacity. In 1996,
at BMS, the Company added approximately 6,000 permanent grandstand seats and
relocated various souvenir, concessions and restroom facilities to the mezzanine
level at BMS to increase spectator convenience and accessibility. In 1997, at
BMS, the Company has constructed 55 new suites for a net increase of 31, has
added approximately 39,000 permanent grandstand seats, and has contracted to
make other site improvements, bringing the total number of its permanent seats
to approximately 116,000.
Charlotte Motor Speedway. CMS 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. CMS
was among the first few superspeedways built and today is a modern, attractive
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. CMS 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. The Company has
consistently improved and increased spectator seating arrangements at CMS. In
1997, at CMS, the Company has added approximately 25,000 permanent seats,
including 26 new suites, and has contracted to make other site improvements.
45
<PAGE>
Sears Point Raceway. SPR, located on approximately 800 acres in Sonoma,
California with temporary seating capacity of approximately 18,000, consists of
a 2.52-mile, twelve-turn road course, a one-quarter mile dragstrip, and a
157,000 square foot industrial park. The real property associated with the SPR
facilities is currently leased by the Company under a long-term lease which
includes a purchase option. See Note 7 to the Audited Consolidated Financial
Statements for information on the terms and conditions of the SPR acquisition
and lease. SPR currently sponsors a major NASCAR-sanctioned Winston Cup racing
event annually. Additional annual events include a NASCAR-sanctioned Craftsman
Truck Series, a National Hot Rod Association ("NHRA") Winston Drag Racing
Series, as well as American Motorcycle Association and SCCA, racing events. The
racetrack is also rented throughout the year by various organizations, including
the SCCA, major automobile manufacturers, and other car clubs. In 1997, at SPR,
the Company expects to complete parking, road improvements and grading to
improve spectator site lines, and to increase and improve seating and facilities
for spectator and media amenities.
Texas Motor Speedway. TMS is a 1.5-mile, lighted, banked, asphalt quad-oval
superspeedway with a permanent seating capacity of approximately 150,000,
including 194 suites, and 76 planned 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 Grand National race. In June 1997, TMS also sponsored a NASCAR Craftsman
Truck Series event, an IRL event and two music concerts. Management is actively
pursuing the scheduling of additional motorsports racing and other events at
TMS. The Company expects TMS to attract spectators from throughout the South
Central United States. The TMS facilities are subject to a lease transaction
with the Fort Worth Sports Authority as of December 31, 1996. See Note 5 to the
Audited Consolidated Financial Statements for information on the terms and
conditions of the lease transaction.
46
<PAGE>
MANAGEMENT
The directors, executive officers and certain other senior officers of the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Principal Position(s) with the Company
<S> <C> <C>
O. Bruton Smith......... 70 Chief Executive Officer and Chairman*
H.A. "Humpy" Wheeler.... 57 President, Chief Operating Officer and
Director of SMI; President and General Manager
of CMS*
William R. Brooks....... 47 Vice President, Treasurer, Chief Financial
Officer and Director*
Edwin R. Clark.......... 42 Executive Vice President and Director of SMI;
President and General Manager of AMS*
William P. Benton....... 73 Director
Mark M. Gambill......... 46 Director
William E. Gossage...... 36 Vice President and General Manager of TMS
M. Jeffrey Byrd......... 46 Vice President and General Manager of BMS
Steven Page............. 42 President and General Manager of SPR
</TABLE>
* Executive officer.
O. Bruton Smith has been Chief Executive Officer and a director of CMS
since 1975. He was a founder of CMS in 1959 and was an executive officer and
director of CMS until 1961, when it entered reorganization proceedings under the
bankruptcy laws. Mr. Smith became Chief Executive Officer, President and a
director of AMS upon acquiring it in 1990. He became Chief Executive Officer and
Chairman of SMI upon its organization in December 1994, became the Chairman and
President of BMS upon its acquisition in January 1996, of SPR upon its
acquisition in November 1996, and of TMS upon its founding in 1995. Mr. Smith
also owns and operates Sonic and Sonic Automotive, Inc. ("Sonic Automotive"),
among other private businesses.
H.A. "Humpy" Wheeler was hired in 1975 and has been a director and General
Manager of CMS since 1976. Mr. Wheeler was named President of CMS 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 a Vice President and director of TMS since its
founding in 1995.
William R. Brooks joined Sonic from Price Waterhouse in 1983. Promoted from
Tax Manager to Controller in 1985, he was promoted again, to Chief Financial
Officer, in 1989. Mr. Brooks has been Vice President of CMS for more than five
years and has been Vice President and a director of AMS, BMS and SPR since their
acquisition, and of TMS since its founding. He became Vice President, Treasurer,
Chief Financial Officer and a director of SMI upon its organization in December
1994 and has been the President and a director of Speedway Funding Corp., the
Company's financing subsidiary ("SFC"), since 1995. Mr. Brooks also has served
as a director of Sonic Automotive since its organization in early 1997.
Edwin R. Clark 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 was CMS' Vice President of Events from 1981 to 1992. Mr. Clark
became Executive Vice President of SMI upon its organization in December 1994
and became a director of SMI in 1995.
William P. Benton became a director of SMI in 1995. Since January 6, 1997,
Mr. Benton has been the Executive Director of Ogilvy & Mather, a world-wide
advertising agency. He is also a consultant to the chairmen and the chief
executive officers of TI Group plc and Allied Holdings Inc. Prior to his
appointment at Ogilvy & Mather, Mr. Benton served as Vice Chairman of Wells,
Rich, Greene/BDDP Inc. Mr. Benton retired from Ford Motor Company as its Vice
President of Marketing Worldwide in 1984 after a 37-year career with that
company.
Mark M. Gambill became a director of SMI in 1995. Mr. Gambill has been
employed continuously since 1972 by Wheat, First Securities, Inc., an investment
banking firm headquartered in Richmond, Virginia. In 1996, he was named
President of Wheat, First Securities, Inc. Previously, Mr. Gambill acted as head
of the Wheat, First
47
<PAGE>
Securities, Inc. Capital Markets division, including Corporate and Public
Finance, Taxable Fixed Income, Municipal Sales and Trading, Equity Sales,
Trading and Research. Mr. Gambill also has served on the Board of Directors of
Wheat, First Securities, Inc. since 1983.
William E. Gossage became Vice President and General Manager of TMS in
August 1995. Before that appointment, he was Vice President of Public Relations
at CMS from 1989 to 1995. Mr. Gossage previously worked with Miller Brewing
Company in its motorsports public relations program and served in various public
relations and managerial capacities at two other NASCAR-sanctioned tracks.
M. Jeffrey Byrd was hired effective March 1, 1996 as Vice President and
General Manager of BMS. Prior to working at BMS, Mr. Byrd had been continuously
employed by RJR Nabisco for 23 years in various sports marketing positions, most
recently as Vice President of business development for its Sports Marketing
Enterprises affiliate.
Steven Page was hired effective November 18, 1996 as President and General
Manager of SPR. Prior to being hired by SMI, Mr. Page had been continuously
employed by Brenda Raceway Corporation, who owned and operated SPR before its
acquisition by the Company, for several years as President.
Directors are generally elected to serve in staggered terms of three years
and until their successors shall have been elected and qualified. The terms of
Messrs. Wheeler and Clark expire in 2000; the terms of Messrs. Smith and Benton
expire in 1998; and the terms of Messrs. Brooks and Gambill expire in 1999.
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.
Messrs. Benton and Gambill serve as members of the Audit Committee of the
Board of Directors. Messrs. Benton, Gambill and Smith serve as members of the
Compensation Committee.
Information regarding executive compensation is incorporated by this
reference from the Company's Annual Report on Form 10-K (Commission File Number
1-13582) for the year ended December 31, 1996 appearing under the caption
"Executive Compensation."
Information regarding security ownership of certain beneficial owners and
management is incorporated by this reference from the Company's Annual Report on
Form 10-K (Commission File Number 1-13582) for the year ended December 31, 1996
appearing under the caption "Security Ownership of Certain Beneficial Owners and
Management."
48
<PAGE>
CERTAIN TRANSACTIONS
CMS holds a note from a partnership in which the Company's Chairman is a
partner. The outstanding balance due thereunder was $722,000 at June 30, 1997.
The note due from such partnership is collateralized by certain land owned by
the partnership and is payable on demand.
Sonic, a majority shareholder of the Company controlled by the Company's
Chairman, has made several loans and cash advances to AMS in the last three
years. Such loans and advances stood at approximately $2.6 million at June 30,
1997. Of such amount, approximately $1.8 million bears interest at 3.83% per
annum. The remainder of the amount bears interest at a rate of prime plus 1%.
Prior to the completion of SMI's IPO, CMS joined with Sonic 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 IPO. Under applicable federal tax law, each corporation included in
Sonic's consolidated return is jointly and severally liable for any resultant
tax. Under a tax allocation agreement dated January 27, 1995, however, CMS
agreed to pay Sonic, in the event that additional federal income tax is
determined to be due, an amount equal to CMS's separate federal income tax
liability computed for all periods in which CMS and Sonic have been members of
Sonic's consolidated group. Also pursuant to such agreement, Sonic agreed to
indemnify CMS for any additional amount determined to be due from Sonic's
consolidated group in excess of the federal income tax liability of CMS 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 CMS left Sonic's consolidated
group. Pursuant to such agreement, amounts payable by CMS 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 CMS may receive future tax benefits.
At June 30, 1997, the Company had a note receivable from the Company's
Chairman for approximately $1.7 million. 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. The Company pays the annual (or
shorter period) premiums on split-dollar life insurance policies for the benefit
of Mr. Smith.
For information relating to the Company's Chairman and NCMS, see
"Prospectus Summary -- Recent Developments -- NCMS."
Messrs. Benton, Gambill and Smith served on the Company's Compensation
Committee during 1996. Mr. Smith serves as the Chief Executive Officer of the
Company. Mark M. Gambill is the President of Wheat, First Securities, Inc., the
investment banking firm which acted as a lead underwriter in the Company's IPO
in February 1995, was a lead underwriter in the Company's additional equity
offering completed in March 1996, and the Company's offering of the Debentures
in October 1996 and was one of the Initial Purchasers.
No executive officer of SMI serves or served on the compensation committee
of another entity during 1996 and no executive officer of SMI serves or served
as a director of another entity who has or had an executive officer serving on
the Board of Directors of SMI.
49
<PAGE>
DESCRIPTION OF NOTES
EXCEPT AS OTHERWISE INDICATED BELOW, THE FOLLOWING SUMMARY APPLIES TO BOTH
THE OLD NOTES AND THE NEW NOTES. AS USED HEREIN, THE TERM "NOTES" SHALL MEAN THE
OLD NOTES AND THE NEW NOTES, UNLESS OTHERWISE INDICATED.
The form and terms of the New Notes are substantially identical to the form
and terms of the Old Notes, except that (i) the New Notes will have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof (ii) holders of the New Notes will not be
entitled to Liquidated Damages, which terminate upon consummation of the
Exchange Offer, and (iii) holders of the New Notes will not be, and upon
consummation of the Exchange Offer, holders of the Old Notes will no longer be,
entitled to certain rights under the Registration Rights Agreement intended for
the holders of unregistered securities, except in certain limited circumstances.
The New Notes will be issued solely in exchange for an equal principal amount of
Old Notes. As of the date hereof, $125.0 million aggregate principal amount of
Old Notes is outstanding. See "The Exchange Offer."
General
The Old Notes were, and the New Notes will be, issued pursuant to the
Indenture among the Company, the Guarantors and First Trust National
Association, as Trustee, in a private transaction that is not subject to the
registration requirements of the Securities Act. 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 (the "Trust Indenture Act"). The Notes are
subject to all such terms, and holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. A copy of the Indenture is
available as set forth under " -- Additional Information." The definitions of
certain terms used in the following summary are set forth below under
" -- Certain Definitions."
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $125.07million and
will mature on August 15, 2007. Interest on the 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 February 15, 1998, to holders of record on the
immediately preceding January 31 and July 31. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, interest and Liquidated Damages, if any, on the Notes will be payable at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the holders of Notes
at their respective addresses set forth in the register of holders of Notes;
provided, that all payments with respect to Notes the holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Old Notes were, and the New Notes will be, issued only in fully
registered form, without coupons, and in denominations of $1,000 and integral
multiples thereof.
The Indenture provides for the issuance, subject to the restrictions
contained in the 1997 Credit Facility and described below under " -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," of up
to $75.0 million aggregate principal amount of additional Notes having identical
terms and conditions to the Notes (the "Additional Notes"). Any Additional Notes
will be part of the same issue as the Notes and will vote on all matters with
the Notes. For purposes of this "Description of Notes," references to the Notes
do not include 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 the Company will issue
any such Additional Notes or as to the aggregate principal amount of such
Additional Notes.
Subsidiary Guarantees
The Company's payment obligations under the Notes are jointly and severally
guaranteed by each of the existing and future domestic Subsidiaries of the
Company (other than the Company's Unrestricted Subsidiary)
50
<PAGE>
and each other subsidiary of the Company that guarantees the Company's
obligations under the 1997 Credit Facility. The Guarantee of each such Guarantor
is subordinated to the prior payment in full of all Guarantor Senior
Indebtedness of such Guarantor, which includes the guarantees of the Company's
obligations under the 1997 Credit Facility issued by the Guarantors. The
obligations of each Guarantor under its Guarantee is limited so as not to
constitute a fraudulent conveyance under applicable law. See "Risk
Factors -- Fraudulent Conveyance Statutes."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another Person
whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under the Notes and the Indenture pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, and (ii) immediately after giving effect to such transaction, no
Default or Event of Default would exist.
The Indenture provides that (i) upon the release by all holders of Senior
Indebtedness and Guarantor Senior Indebtedness of all guarantees issued by a
Guarantor relating to such Senior Indebtedness and Guarantor Senior Indebtedness
and all Liens on the property and assets of such Guarantor relating to Senior
Indebtedness and Guarantor Senior Indebtedness or (ii) in the event of a sale or
other disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of any Guarantor, then such Guarantor (in the event of clause (i) above or
a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the Capital Stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Guarantor) will be released and relieved of any obligations
under its Guarantee; provided, that the Net Proceeds of any such sale or other
disposition described in clause (ii) above are applied in accordance with the
applicable provisions of the Indenture. See " -- Repurchase at Option of
Holders -- Asset Sales."
On a pro forma basis, after giving effect to the Prior Offering and the
application of the proceeds therefrom, the principal amount of Guarantor Senior
Indebtedness outstanding at June730, 1997 would have been approximately $20.1
million, which amount is the same Indebtedness that constitutes Senior
Indebtedness of the Company. The Indenture limits, 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 the Company may at any time designate the
Unrestricted Subsidiary to be a Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Subsidiary of the Company of
any outstanding Indebtedness of the Unrestricted Subsidiary and such designation
shall only be permitted if (i) 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 (ii) 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 (a) has no
Indebtedness other than Non-Recourse Debt; (b) is a Person with respect to which
neither the Company nor any of its Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (c) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Subsidiaries. If, at any time, the Unrestricted
Subsidiary fails to meet the requirements described in the preceding sentence,
the Unrestricted Subsidiary shall thereafter cease to be an unrestricted
subsidiary for purposes of the Indenture and any Indebtedness of the
Unrestricted Subsidiary shall be deemed to be incurred by a Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant). In the event the
Unrestricted Subsidiary is designated as a Subsidiary or ceases to be an
unrestricted subsidiary for purposes of the Indenture, the Indenture will
require the Company 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.
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<PAGE>
Subordination
The payment of principal of, and premium, if any, interest and Liquidated
Damages, if any, on the Notes is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full in cash of all obligations due in respect of such Senior
Indebtedness (including, in the case of Senior Indebtedness under the 1997
Credit Facility, interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Indebtedness) before the holders of
Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the holders of Notes would be entitled shall be made to
the holders of Senior Indebtedness (except that holders of 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").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
" -- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of the Designated Senior Indebtedness
as to which such default relates to accelerate its maturity and the Trustee
receives a written notice of such default (a "Payment Blockage Notice") from the
Company or the holders of any Designated Senior Indebtedness. Payments on the
Notes may and shall be resumed (a) in the case of a payment default, upon the
date on which such default is cured or waived and (b) in 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 Designated Senior Indebtedness
has been accelerated. No new period of payment blockage may be commenced unless
and until (i) 360 days have elapsed since the Trustee's receipt of the
immediately prior Payment Blockage Notice and (ii) all scheduled payments of
principal, premium, if any, and interest on the Notes that have come due have
been paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shall be,
or be made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been waived for a period of not less than 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. On a pro forma
basis, after giving effect to the Offering and the application of the proceeds
therefrom, the principal amount of Senior Indebtedness outstanding at June 30,
1997 would have been approximately $20.1 million. The Indenture limits, subject
to certain financial tests, the amount of additional Indebtedness, including
Senior Indebtedness, that the Company and its Subsidiaries can incur. See
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock."
Optional Redemption
The Notes are not redeemable at the Company's option prior to August 15,
2002. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest 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>
<CAPTION>
Year Percentage
<S> <C>
2002......................................................................... 104.250%
2003......................................................................... 102.830%
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
2004......................................................................... 101.420%
2005 and thereafter.......................................................... 100.000%
</TABLE>
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided,
that no 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 Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
Mandatory Redemption
Except as set forth below under " -- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon (the "Change of Control
Payment") to the date of purchase (the "Change of Control Payment Date"). Within
15 days following any Change of Control, the Company will mail a notice to each
holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes pursuant to the procedures required by
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.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an officers' certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided, that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture provides that,
prior to complying with the provisions described under this caption, but in any
event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Indebtedness to permit
the repurchase of Notes as described under this caption. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
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 Notes to require that the Company repurchase or redeem the Notes in the event
of a takeover, recapitalization or similar transaction. Although the existence
of a holder's right to require the Company to repurchase the Notes in respect of
a Change of Control may deter a third party from acquiring the Company 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 Notes protection in the event of a highly leveraged transaction,
reorganization, recapitalization,
53
<PAGE>
restructuring, merger or similar transaction involving the Company that may
adversely affect holders, if such transaction is not the type of transaction
included within the definition of a Change of Control.
The 1997 Credit Facility provides that certain change of control events
with respect to the Company will constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the 1997 Credit Facility. In such circumstances, the subordination provisions in
the Indenture would likely restrict payments to holders of Notes.
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 the Company 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 Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Restrictions in the Indenture described herein on the ability of the
Company 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 the Company, whether favored
or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Notes, and there can be no assurance that the Company 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 the Company 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 Notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors, 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) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Subsidiary is in the form of cash or
Cash Equivalents; provided, however, that (x) clause (ii) of this paragraph
shall not apply to any Asset Sale involving the Company's Unrestricted
Subsidiary and (y) this paragraph shall not apply to any Like Kind Exchange.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently
reduce Senior Indebtedness (and correspondingly reduce commitments
54
<PAGE>
with respect thereto in the case of any reduction of borrowings under the 1997
Credit Facility), (b) to the acquisition of a controlling interest in another
business, the making of a capital expenditure or the acquisition of other
long-term assets, in each case, in the same or a similar line of business as the
Company was engaged in on the date of the Indenture or (c) to reimburse the
Company or its Subsidiaries for expenditures made, and costs incurred, to
repair, rebuild, replace or restore property subject to loss, damage or taking
to the extent that the Net Proceeds consist of insurance proceeds received on
account of such loss, damage or taking. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce Senior Indebtedness or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all holders of Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
Notwithstanding the foregoing, the Company and its subsidiaries are
permitted to consummate one or more Asset Sales with respect to assets or
properties with an aggregate fair market value (evidenced by a resolution of the
Board of Directors set forth in an officers' certificate delivered to the
Trustee) not in excess of $7.5 million with respect to all such Asset Sales made
subsequent to the date of the Indenture without complying with the provisions of
the preceding paragraphs.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company as an entirety to a Person in a transaction
permitted under 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 the Company not so transferred for purposes of this
covenant and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such properties and assets of the Company or its Subsidiaries deemed to be
sold shall be deemed to be Net Proceeds for purposes of this covenant.
If at any time any non-cash consideration received by the Company in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash, then such conversion or disposition shall be deemed to constitute
an Asset Sale hereunder and the Net Proceeds thereof shall be applied in
accordance with this covenant.
The Company will comply with the requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to an Asset Sale Offer.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Equity Interests of
the Company or any of its Subsidiaries (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Subsidiaries) or to the direct or indirect holders of the Equity
Interests of the Company or any of its Subsidiaries in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company, dividends or distributions payable to the
Company or any Subsidiary of the Company or dividends or distributions made by a
Subsidiary of the Company to all holders of its Common Stock on a pro rata
basis); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company, any Subsidiary of the Company, the Unrestricted
Subsidiary or any direct or indirect parent of the Company (other than any such
Equity Interests owned by the Company or any Subsidiary of the Company); (iii)
make any principal payment on, or purchase,
55
<PAGE>
redeem, defease or otherwise acquire or retire for value, any Indebtedness that
is subordinated to the Notes (other than the Notes), except at Stated Maturity;
or (iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption " -- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of the Indenture (excluding Restricted Payments permitted by clauses (v),
(w) and (x) of the next succeeding paragraph), is less than the sum of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) commencing April 1, 1997 to the end of the Company's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds and the fair
market value, as determined in good faith by the Board of Directors, of
marketable securities received by the Company from the issue or sale since
the date of the Indenture of Equity Interests of the Company or of debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities)
sold to a Subsidiary of the Company or the Unrestricted Subsidiary and
other than Disqualified Stock or debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment plus (iv) the amount resulting from designation of the
Unrestricted Subsidiary as a Subsidiary or the Unrestricted Subsidiary
ceasing to be an unrestricted subsidiary for purposes of the Indenture
(such amount to be valued as provided in the second succeeding paragraph)
not to exceed the amount of Investments previously made by the Company or
any Subsidiary in the Unrestricted Subsidiary and which was, while the
Unrestricted Subsidiary was treated as an unrestricted subsidiary for
purposes of the Indenture, treated as a Restricted Payment under the
Indenture.
The foregoing provisions do not prohibit: (u) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (v) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company or
the Unrestricted Subsidiary) of other Equity Interests of the Company (other
than any Disqualified Stock); provided, that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (w) the defeasance, redemption or repurchase of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale (other
than to a Subsidiary of the Company or the Unrestricted Subsidiary) of Equity
Interests of the Company (other than Disqualified Stock); provided, that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (x) the making of any Restricted Investments
after the date of the Indenture not exceeding in the aggregate $25.0 million;
and (y)7the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company or any Subsidiary of the Company held by
any member of the Company's (or any of its Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement;
provided, that (A) the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period plus the aggregate cash proceeds received by the Company
during such twelve-month period from any reissuance of Equity Interests by the
Company to members of management of the Company and its Subsidiaries, and (B) no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.
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<PAGE>
In connection with the designation of the Unrestricted Subsidiary as a
Subsidiary or the Unrestricted Subsidiary ceasing to be an unrestricted
subsidiary for purposes of the Indenture, all outstanding Investments previously
made by the Company or any Subsidiary in the Unrestricted Subsidiary will be
deemed to constitute Investments in an amount equal to the greater of (x) the
net book value of such Investments at the time of such designation or the
Unrestricted Subsidiary ceasing to be an unrestricted subsidiary for purposes of
the Indenture and (y) the fair market value of such Investments at the time of
such designation or the Unrestricted Subsidiary ceasing to be an unrestricted
subsidiary for purposes of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an officers' certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an officers' certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant described above were computed, which calculations may be based upon
the Company's latest available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness) and that the Company will not issue any Disqualified
Stock and will not permit any of its Subsidiaries to issue any shares of
preferred stock; provided, however, that (x) the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock and (y)
a Guarantor may incur Acquired Indebtedness, in each case if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.0 to 1 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.
The foregoing provisions do not apply to:
(i) the incurrence by the Company of Indebtedness under the 1997 Credit
Facility (and guarantees thereof by the Guarantors) in an aggregate principal
amount at any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) not to exceed $175.0 million less the aggregate amount
of all Net Proceeds of Asset Sales applied to permanently reduce the commitments
with respect to such Indebtedness pursuant to the covenant described above under
the caption " -- Repurchase at the Option of Holders -- Asset Sales";
(ii) the incurrence by the Company of Indebtedness represented by the
Notes, excluding any Additional Notes, and the incurrence by the Guarantors of
Indebtedness represented by the Guarantees;
(iii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations (whether or not incurred
pursuant to sale and leaseback transactions), mortgage financings or purchase
money obligations, in each case incurred for the purpose of financing all or any
part of the purchase price or cost of construction or improvement of property,
plant or equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $10.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease or refund, Existing Indebtedness
or Indebtedness that was permitted by the Indenture to be incurred (other than
any such Indebtedness incurred pursuant to clause (i), (iii), (v), (vi), (vii),
(viii), (ix) or (x) of this paragraph);
(v) the incurrence by the Company or any of its Wholly Owned Subsidiaries
of intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate to the payment in
full of all Obligations with respect to the Notes and (ii) (A) any subsequent
issuance or transfer of Equity Interests
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<PAGE>
that results in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Subsidiary and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Wholly Owned
Subsidiary shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations that are incurred
for the purpose of fixing or hedging interest rate risk with respect to
Indebtedness that is permitted by the terms of the Indenture to be incurred;
(vii) the incurrence by the Company of Hedging Obligations under currency
exchange agreements; provided, that such agreements were entered into in the
ordinary course of business;
(viii) the incurrence of Indebtedness of a Guarantor represented by
guarantees of Indebtedness of the Company that has been incurred in accordance
with the terms of the Indenture;
(ix) Indebtedness for letters of credit relating to workers' compensation
claims and self-insurance or similar requirements in the ordinary course of
business; and
(x) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding not
to exceed $15.0 million.
Liens
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness on any asset now owned or hereafter
acquired, or any income or profits therefrom, or assign or convey any right to
receive income therefrom, except Permitted Liens, unless all payments due under
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.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) the Indenture, (c) the 1997 Credit
Facility 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 1997 Credit Facility as in effect on the date of the
Indenture), (d) Existing Indebtedness, (e) any instrument governing Indebtedness
or Capital Stock of a Person acquired by the Company or any of its Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, or (h)
Permitted Refinancing Indebtedness; provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or
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substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company is
the surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption " -- Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person, (ii)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $2.5 million, the
Company delivers to the Trustee, a resolution of the Board of Directors set
forth in an officers' certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
or, if there are no such disinterested directors, by a majority of the members
of the Board of Directors and (iii) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, the Company delivers to the Trustee an opinion as to
the fairness to the holders of Notes of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided, that (w) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors or the payment of fees and indemnities
to directors of the Company and its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (x) loans or advances to employees in the ordinary course of
business, (y) transactions between or among the Company and/or its Wholly Owned
Subsidiaries and (z) Restricted Payments (other than Restricted Investments)
that are permitted by the provisions of the Indenture described above under the
caption " -- Restricted Payments," in each case, shall not be deemed Affiliate
Transactions.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided,
that the Company or one of its Subsidiaries may enter into a sale and leaseback
transaction if (i) the Company 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," (ii) 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
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subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and the Company applies
the proceeds of such transaction in compliance with, the covenant described
above under the caption " -- Repurchase at the Option of Holders -- Asset
Sales."
Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
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," and (ii)
will not permit any Wholly Owned Subsidiary of the Company to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Subsidiary of the Company.
Guarantees of Certain Indebtedness
The Indenture provides that (i) the Company will not permit any of its
Subsidiaries that is not a Guarantor to incur, guarantee or secure through the
granting of Liens the payment of any Senior Indebtedness and (ii) the Company
will not, and will not permit any of its Subsidiaries to, pledge any
intercompany notes representing obligations of any of its Subsidiaries, to
secure the payment of any Senior Indebtedness, in each case unless such
Subsidiary, the Company and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional guarantee by such Subsidiary, on a senior subordinated basis, of
the Notes).
Limitation on Layering
The Indenture provides that, notwithstanding the provisions of the
Indenture described above under
" -- Incurrence of Indebtedness and Issuance of Preferred Stock," (i) the
Company 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 the Company and senior in any respect in right of payment to
the Notes, and (ii) 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
The Indenture provides that neither the Company 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 Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to holders of Notes (i) 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 the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company 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, the Company and the Guarantors have agreed that, for so
long as any Transfer Restricted Securities as remain
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outstanding as Transfer Restricted Securities, they will furnish to the Holders
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) 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); (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company to comply with the provisions described under the
captions " -- Repurchase at the Option of Holders -- Change of Control" or
" -- Asset Sales"; (iv) failure by the Company 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 the
Company by the Trustee or to the Company and the Trustee by the holders of at
least 25% in aggregate principal amount of the Notes then outstanding; (v)
failure by the Company for 60 days after notice is given to the Company by the
Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the Notes then outstanding to comply with any of
its other agreements in the Indenture or the Notes; (vi) 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; (vii) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $5.0 million (net of amounts
covered by insurance), which judgments are not paid, discharged or stayed for a
period of 60 days; (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries; or (ix) 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
Notes may declare all the Notes to be due and payable immediately; provided,
however, that if any Senior Indebtedness is outstanding under the 1997 Credit
Facility, upon a declaration of acceleration, the Notes shall be payable upon
the earlier of (x) the day which is five Business Days after the provision to
the Company and the agent under the 1997 Credit Facility of written notice of
such declaration and (y) the date of acceleration of any Indebtedness under the
1997 Credit Facility. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
the Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of Notes may
not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, holders of a majority in aggregate principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from holders of 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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to 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 Notes. If an Event of Default occurs prior to
August 15, 2002, by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to August 15, 2002, then the
premium
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specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Shareholders
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, the Guarantees, the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of the
obligations of the Company and the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of transfer of Notes, mutilated, destroyed, lost or stolen Notes
and the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee, and the Company's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have the obligations of the Company
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 Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of 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 Notes on the Stated Maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company 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 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; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be
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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; (v) 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 the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound; (vi) the Company
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; (vii) the Company must deliver to
the Trustee an officers' certificate stating that the deposit was not made by
the Company with the intent of preferring the holders of Notes over the other
creditors of the Company or any Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors, any Guarantor of the Company or
others; and (viii) the Company 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 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, and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a 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 Notes may be amended or supplemented with the consent of the
holders of at least a majority in aggregate principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a tender offer or exchange offer for Notes), and any existing default or
compliance with any provision of the Indenture, the Guarantees or the Notes may
be waived with the consent of the holders of a majority in aggregate principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (i) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption or repurchase of the
Notes (other than provisions relating to the covenants described above under the
caption " -- Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes, (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the caption " -- Repurchase at the Option of Holders") (viii) release any
Guarantor from any of its obligations under its Guarantee or the Indenture,
except in accordance with the terms of the Indenture, or (ix) 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 Notes then outstanding if such amendment would
adversely affect the rights of holders of Notes.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Guarantees or the Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to
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provide for the assumption of the Company's or a Guarantor's obligations to
holders of Notes in the case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the holders of Notes or
that does not adversely affect the legal rights under the Indenture of any such
holder, to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, or to
provide for the issuance of Additional Notes pursuant to the Indenture to the
extent permitted under the restrictions contained in the 1997 Credit Facility
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 the Company, 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 is permitted to engage in other
transactions; provided, however, if the Trustee acquires any conflicting
interest, the Trustee must (i) eliminate such conflict within 90 days, (ii) if a
registration statement with respect to the Notes is effective, apply to the
Commission for permission to continue or (iii) 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 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
Anyone who receives this Offering Memorandum 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 Old Notes initially were issued in the form of one global note (the
"Global Old Note), and the New Notes will initially be issued in the form of one
global note (the "Global New Note" and collectively with the Global Old Note,
the "Global Notes"). The Global New Note will be deposited on the date of the
Exchange Offer (the "Closing Date") with, or on behalf of, the Depositary and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").
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
evidencing Old Notes, such Certificated Securities may, unless the Global Old
Note has previously been exchanged for Certificated Securities, be exchanged for
an interest in the Global Old Note representing the principal amount of Old
Notes being transferred. Similarly, upon the transfer of Certificated Securities
evidencing New Notes, such Certificated Securities may, unless the Global New
Note has previously been exchanged for Certificated Securities, be exchanged for
an interest in the Global New Note representing the principal amount of New
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 (including the Initial
Purchasers), 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.
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The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global New Note, the Depositary will credit
the accounts of Participants exchanging Old Notes for New Notes with portions of
the principal amount of the Global New Note and (ii) ownership of the New Notes
evidenced by the Global New 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.
Prospective purchasers are advised that 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 Notes evidenced by a Global Note
will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of any
Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced by the
Global Notes 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 the
Company 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 Notes.
Payments in respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on any 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, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company 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. Payments by the Depositary's Participants and the Depositary's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and 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 Notes may, upon request to the Trustee, exchange such beneficial
interest for 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). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
under the Indenture, then, upon surrender by the Global Note Holder of its
Global Notes, 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 Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
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
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company 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.
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Certain Definitions
Set forth below are certain defined terms 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 herein for which no definition is provided.
"1997 Credit Facility" means that certain credit agreement, dated the date
of the Indenture, by and among the Company, as borrower, and the lenders named
therein, including NationsBank, N.A., as agent for the lenders and a lender,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, extended, replaced or refinanced from time to time.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person that was not
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"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 (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of (x) a sale and leaseback,
(y) the sale or other transfer of Equity Interests in or assets of the Company's
Unrestricted Subsidiary or (z) a Like Kind Exchange) other than sales of
inventory in the ordinary course of business consistent with past practices;
provided, that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company, its Subsidiaries and the
Unrestricted Subsidiary taken as a whole will be governed by 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 (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $500,000 or (b) for net proceeds in excess of $500,000.
Notwithstanding the foregoing: (i) a transfer of assets by the Company to a
Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or to
another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary,
and (iii) a Restricted Payment that is permitted by the covenant described above
under the caption " -- Certain Covenants -- Restricted Payments" will not be
deemed to be Asset Sales.
"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 (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
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"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the 1997 Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of (A) the Company and its Subsidiaries taken as
a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than O. Bruton Smith or his Related Parties or Sonic
Financial Corporation or any of their respective Affiliates or (B) Sonic
Financial Corporation to any "person" (as defined above) other than O. Bruton
Smith or his Related Parties or any of their respective Affiliates, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company or
Sonic Financial Corporation, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that (A) any "person" (as defined above), other than O. Bruton Smith or his
Related Parties or Sonic Financial Corporation or any of their respective
Affiliates, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the Voting Stock of the Company or (B) any "person" (as defined
above), other than O. Bruton Smith or his Related Parties or any of their
respective Affiliates, becomes the "beneficial owner" (as defined above),
directly or indirectly, of more than 50% of the Voting Stock of Sonic Financial
Corporation, (iv) the first day on which a majority of the members of the Board
of Directors of the Company or Sonic Financial Corporation are not Continuing
Directors or (v) a Repurchase Event occurs with respect to the Company's 5 3/4%
Convertible Subordinated Debentures Due 2003 under the Indenture dated as of
September 1, 1996 (the "Convertible Indenture"), between the Company 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 (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income minus (v) non-cash items of such Person and its Subsidiaries increasing
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the
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date of determination to be dividended to the Company by such Subsidiary without
prior governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of, or any dividends or other
distributions from, the Unrestricted Subsidiary, to the extent otherwise
included, shall be excluded, until distributed in cash to the Company or one of
its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-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, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, with respect to any Person as of any date of
determination, any member of the Board of Directors of such Person who (i) was a
member of such Board of Directors on the date of the Indenture or (ii) was
nominated for election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"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 (i) so long as Senior Indebtedness
is outstanding under the 1997 Credit Facility, all Senior Indebtedness
outstanding under the 1997 Credit Facility and (ii) thereafter, any other Senior
Indebtedness permitted under the Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Company as "Designated
Senior Indebtedness."
"Disqualified Stock" means any Capital Stock 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 (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the Indenture.
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"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Indebtedness, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Subsidiaries
or secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not such guarantee or Lien is called upon) and (iv) the product of
(a) all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred stock of such Person,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession which are in effect on the date of the Indenture.
"Government Securities" means: (i) securities that are (a) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof; and (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any Government Security which is specified in clause (i) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal or interest on any Government Security
which is so specified and held; provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Security or the specific payment of principal or
interest of the Government Security evidenced by such depositary receipt.
"Guarantee" or "guarantee" (unless the context requires otherwise) means a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any
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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, (i)
the guarantee of such Guarantor of the Company's Obligations under the 1997
Credit Facility and (ii) 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 (u) any Indebtedness of such Guarantor
representing a guarantee of Indebtedness of the Company or any other Guarantor
which is subordinate or junior to, or pari passu with, the Notes or the
Guarantee of such other Guarantor, as the case may be, (v) any Indebtedness that
is expressly subordinate or junior in right of payment to any other Indebtedness
of such Guarantor, (w) any liability for federal, state, local or other taxes
owed or owing by such Guarantor, (x) any Indebtedness of such Guarantor to any
of its Subsidiaries or other Affiliates, (y) any trade payables or (z) that
portion of any Indebtedness that is incurred in violation of the Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and the value of foreign currencies purchased by the Company or any of its
Subsidiaries in the ordinary course of business.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided, that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Like Kind Exchange" means the exchange pursuant to Section 1031 of the
Code of (i) any real property (other than any speedway that is owned on or
acquired after the date of the Indenture by the Company or any Subsidiary) used
or to be used in connection with the business of the Company or (ii) any other
real property to be used in connection with the business of the Company.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
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"Net Proceeds" means the aggregate cash proceeds (or in the case of any
Asset Sale involving the Unrestricted Subsidiary, the amount of such aggregate
cash proceeds that equals the aggregate amount of all Restricted Investments in
the Unrestricted Subsidiary that have not been repaid prior to the date of such
Asset Sale) received by the Company or any of its Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP. Notwithstanding the foregoing, in the event the Company or any of its
Subsidiaries engages in a Like Kind Exchange, Net Proceeds shall not include any
cash proceeds with respect to such Like Kind Exchange that are reinvested in or
used to purchase pursuant to Section 1031 of the Code like kind real property
used or to be used in the business of the Company.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the Company
nor any of its Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or (c)
constitutes the lender; and (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against the
Unrestricted Subsidiary) would permit (upon notice or lapse of time or both) any
holder of any other Indebtedness of the Company or any of its Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means: (i) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Subsidiary of the Company in a
Person, if as a result of such Investment (y) such Person becomes a Wholly Owned
Subsidiary of the Company or (z) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company; and (iv) any Restricted Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
" -- Repurchase at the Option of Holders -- Asset Sales."
"Permitted Liens" means: (i) Liens on assets of the Company securing Senior
Indebtedness and Liens on assets of a Guarantor securing Guarantor Senior
Indebtedness of such Guarantor; provided, that such Senior Indebtedness or
Guarantor Senior Indebtedness, as the case may be, was permitted by the terms of
the Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens relating to judgments to
the extent permitted under the Indenture; and (vii) Liens existing on the date
of the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided, that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date no earlier than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
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<PAGE>
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Notes on terms at least as favorable to the holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Subsidiary which is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or 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 (i) Indebtedness under the 1997 Credit Facility
(including interest in respect thereof accruing after the commencement of any
bankruptcy or similar proceeding to the extent that such interest is allowable
as a bankruptcy claim in such proceeding) and (ii) any other Indebtedness
permitted to be incurred by the Company under the terms of 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 (v) any Indebtedness that is expressly subordinate or junior in
right of payment to any other Indebtedness of the Company, (w) any liability for
federal, state, local or other taxes owed or owing by the Company, (x) any
Indebtedness of the Company to any of its Subsidiaries, the Unrestricted
Subsidiary or other Affiliates, (y) any trade payables or (z) that portion of
Indebtedness that is incurred in violation of 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, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (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 the Company for any purposes of the Indenture.
"Unrestricted Subsidiary" means Oil-Chem Research Corp. and its
subsidiaries taken as a whole. Oil-Chem Research Corp. is wholly owned by the
Company, had Consolidated Net Loss of $104,000 and $3,000 for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively, and had
Consolidated Net Worth of $4,355,000 and $4,352,000 at December 31, 1996 and
June 30, 1997, respectively.
"Voting Stock" means, with respect to any Person as of any date, the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
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"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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following summary of the material U.S. federal income tax consequences
of exchanging Old Notes for New Notes pursuant to the Exchange Offer is based on
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder, Internal Revenue Service ("IRS") rulings and
pronouncements, reports of congressional committees, judicial decisions and
current administrative rulings and practice, all as in effect on the date
hereof, all of which are subject to change at any time, and any such change may
be applied retroactively in a manner that could adversely affect the tax
consequences described below.
This summary applies only to Notes held as "capital assets" within the
meaning of section 1221 of the Code (generally property held for investment and
not for sale to customers in the ordinary course of a trade or business) by
holders who or which are (i) citizens or residents of the United States, (ii)
domestic corporations, partnerships or other entities or (iii) otherwise subject
to U.S. federal income taxation on a net income basis in respect of income and
gain from the Notes. This summary does not address aspects of U.S. federal
income taxation that may be applicable to holders that are subject to special
tax rules, such as certain financial institutions, tax-exempt organizations,
insurance companies, dealers in securities, foreign corporations and nonresident
alien individuals. Moreover, this summary does not address any of the U.S.
federal income tax consequences of holders that do not acquire New Notes
pursuant to the Exchange Offer, nor does it address the applicability or effect
of any state, local or foreign tax laws.
The Company has not sought and will not seek any rulings from the IRS with
respect to the position of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of exchanging Old Notes for New Notes.
Exchange Offer
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an "exchange" for U.S. federal income tax purposes
because the New Notes will not be considered to differ materially in kind or
extent from the Old Notes. New Notes received by a holder of Old Notes should be
treated as a continuation of the Old Notes in the hands of such holder.
Accordingly, there should not be any U.S. federal income tax consequences to
holders exchanging Old Notes for New Notes pursuant to the Exchange Offer. A
holder's holding period of New Notes will include the holding period of the Old
Notes exchanged therefor.
Potential Contingent Payments
Holders of New Notes should be aware that it is possible that the IRS could
assert that the Liquidated Damages which the Company would have been obligated
to pay if the Exchange Offer registration statement had not been filed or is not
declared effective within the time periods set forth herein (or certain other
actions are not taken) (as described above under "The Exchange
Offer -- Termination of Certain Rights") are "contingent payments" for U.S.
federal income tax purposes. If so treated, the New Notes would be treated as
contingent payment debt instruments and a holder of a New Note would be required
to accrue interest income over the term of such New Note under the
"noncontingent bond method" set forth in the U.S. Treasury Regulations issued by
the IRS under Code (section mark)1275 (the "Contingent Debt Regulations"). Under
the Contingent Debt Regulations, any gain recognized by a holder on the sale,
exchange or retirement of a New Note could be treated as interest income.
However, the Contingent Debt Regulations provide that, for purposes of
determining whether a debt instrument is a contingent payment debt instrument,
remote or incidental contingencies are ignored.
On the date of issue, the Company believed, prior to and on the date the
New Notes are issued, the possibility of the payment of Liquidated Damages on
the Old Notes was remote. Based on this assumption, the Old Notes
73
<PAGE>
will not be treated as contingent payment debt instruments. Accordingly, the Old
Notes should not be treated as contingent payment debt instruments.
EACH HOLDER SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
DESCRIPTION OF CERTAIN INDEBTEDNESS
1997 Credit Facility
The 1997 Credit Facility closed concurrently with the Prior Offering. The
1997 Credit Facility provides for borrowings in an aggregate principal amount of
up to $175.0 million, including a sub-limit of $10.0 million for the issuance of
standby letters of credit. Indebtedness under the 1997 Credit Facility is
guaranteed by each material domestic subsidiary of the Company. Loans made
pursuant to the 1997 Credit Facility may be borrowed, repaid and reborrowed from
time to time until the fifth anniversary of the establishment of the 1997 Credit
Facility subject to satisfaction of certain conditions on the date of any such
borrowing. As of the date of this Prospectus, the Company has not made any
borrowings under the 1997 Credit Facility.
Amounts outstanding under the 1997 Credit Facility bear interest at a rate
based, at the Company's option, upon (i) the London Interbank Offered Rate
("LIBOR") plus a margin ranging from 0.5% to 1.125%, as adjusted from time to
time in accordance with the terms of the 1997 Credit Facility, or (ii) the
greater of (A) NationsBank's prime rate or (B) the Federal Funds rate plus 0.5%.
The 1997 Credit Facility adjusts the margin applicable to the LIBOR borrowings
based upon certain ratios of funded debt to EBITDA.
The 1997 Credit Facility contains a number of financial, affirmative and
negative covenants that regulate the Company's operations. Financial covenants
require maintenance of ratios of funded debt to EBITDA, consolidated funded debt
to consolidated capitalization, and minimum interest coverage, and require the
Company to maintain a minimum net worth. Negative covenants restrict, among
other things, the incurrence and existence of liens, the making of investments,
"restricted payments," including share repurchases, capital expenditures,
transactions with affiliates, acquisitions, sales of assets, and the incurrence
of debt. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Debentures
On October 1, 1996, the Company completed a private placement of the
Debentures in the aggregate principal amount of $74.0 million. Net proceeds to
the Company after commissions and discounts were $72.15 million. The Debentures
are unsecured, mature on September 30, 2003, are currently convertible into
Common Stock at the holder's option 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 senior indebtedness of the Company,
including indebtedness under the Notes and the 1997 Credit Facility. 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. The proceeds from the sale of the Debentures were used to repay
outstanding borrowings under the 1996 Credit Facility, fund construction costs
of TMS and for working capital needs of the Company.
74
<PAGE>
PLAN OF DISTRIBUTION
Any broker-dealer who holds Old Notes that were acquired for its own
account as a result of market-making activities or other trading activities may
exchange such Old Notes pursuant to the Exchange Offer. However, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New 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 New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business one year after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 1998,
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sales of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the 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 New 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 and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Notes and any
commissions or concessions received by such persons may be deemed to be
underwriting compensation under the Securities Act. 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.
For a period of one year after the Expiration Date, the Company 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. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon by Parker,
Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina, counsel to the
Company.
INDEPENDENT AUDITORS
The audited financial statements of Speedway Motorsports, Inc. and
subsidiaries included in this Prospectus and the related financial statement
schedule included elsewhere in the Registration Statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein (which report expresses an unqualified opinion and includes an
explanatory paragraph relating to significant tax adjustments proposed by the
IRS for additional income taxes and penalties plus interest at Atlanta Motor
Speedway, Inc.), and have been so included in the reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the Commission by the Company
and are hereby incorporated by reference into this Prospectus: (i) the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 (File No.
1-13582); (ii) the Company's Quarterly Reports on Forms 10-Q for the quarters
ended March 31, 1997 and June 30, 1997; (iii) the Company's Current Reports on
Form 8-K filed on November 18, 1996 and amendment thereto on Form 8-K/A filed on
Feburary 3, 1997 and Form 8-K filed on June 30, 1997; and (iv) the description
of the Common Stock contained in the Company's Registration Statement on Form
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<PAGE>
8-A filed with the Commission pursuant to Section 12 of the Exchange Act. All
other documents and reports filed pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act from the date of this Prospectus and prior to the
termination of this Exchange Offer and for a period of one year thereafter (for
broker dealer use) shall be deemed to be incorporated by reference herein and
shall be deemed to be a part hereof from the date of the filing of such reports
and documents.
Any statement contained in a document incorporated or deemed incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document that is also deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom an Prospectus is delivered, upon written or oral request of such person, a
copy of any document incorporated herein by reference (not including exhibits to
documents that have been incorporated herein by reference unless such exhibits
are specifically incorporated by reference in the document which this Prospectus
incorporates). Requests should be directed to Ms. Marylaurel E. Wilks, Speedway
Motorsports, Inc., U.S. Highway 29 North, P.O. Box 600, Concord, North Carolina
28026-0600, telephone: (704) 455-3239.
76
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT............................................................................. F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1995 and 1996............................................. F-3
Consolidated Statements of Income for the years ended
December 31, 1994, 1995 and 1996.................................................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996.................................................................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.................................................................... F-7
Notes to Audited Consolidated Financial Statements.................................................... F-8
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets (Unaudited) at December 31, 1996 and June 30, 1997........................ F-22
Consolidated Statements of Income (Unaudited) for the three month periods ended June 30, 1996 and
1997................................................................................................. F-24
Consolidated Statements of Income (Unaudited) for the six month periods ended
June 30, 1996 and 1997.............................................................................. F-25
Consolidated Statement of Stockholders' Equity (Unaudited) for the six month period
ended June 30, 1997................................................................................. F-26
Consolidated Statements of Cash Flows (Unaudited) for the six month periods ended
June 30, 1996 and 1997.............................................................................. F-27
Notes to Unaudited Consolidated Financial Statements.................................................. F-28
</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 as of December 31, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. Our audits
also included the financial statement schedule listed at Item 21. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 11 to the consolidated financial statements, the
Internal Revenue Service has proposed significant adjustments for additional
income taxes and penalties, plus interest, at Atlanta Motor Speedway, Inc.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 28, 1997
F-2
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 10,132 $ 22,252
Restricted cash (Note 2)................................................................ 86 14,624
Trade accounts receivable (Note 2)...................................................... 6,511 11,919
Prepaid income taxes.................................................................... 727 4,784
Inventories (Note 3).................................................................... 5,372 6,218
Speedway condominiums held for sale..................................................... 3,142 3,535
Prepaid expenses........................................................................ 185 526
Total current assets................................................................. 26,155 63,858
PROPERTY AND EQUIPMENT, NET (Notes 4 and 5)............................................... 93,105 288,361
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Note 2)........................................ 12,675 48,314
OTHER ASSETS:
Marketable equity securities (Notes 2 and 6)............................................ 1,855 2,447
Notes receivable (Note 12).............................................................. 934 2,148
Other assets (Note 2)................................................................... 1,722 4,156
Total other assets................................................................... 4,511 8,751
TOTAL................................................................................ $136,446 $409,284
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (Continued)
December 31, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 7)........................................... $ 348 $ 383
Accounts payable........................................................................ 7,743 11,363
Deferred race event income, net (Note 2)................................................ 13,345 36,393
Accrued expenses and other liabilities.................................................. 6,535 12,075
Total current liabilities.......................................................... 27,971 60,214
LONG-TERM DEBT (Note 7)................................................................... 1,458 115,247
PAYABLE TO AFFILIATED COMPANY (Note 12)................................................... 2,603 2,603
DEFERRED INCOME, NET (Note 2)............................................................. 1,563 9,732
DEFERRED INCOME TAXES (Note 11)........................................................... 6,717 13,742
OTHER LIABILITIES......................................................................... 755 3,011
Total liabilities.................................................................. 41,067 204,549
COMMITMENTS AND CONTINGENCIES (Notes 5, 11 and 13)........................................
STOCKHOLDERS' EQUITY (Notes 1, 6 and 9):
Preferred stock......................................................................... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 38,000,000 and 41,305,000 shares
issued and outstanding in 1995 and 1996.............................................. 380 413
Additional paid-in capital.............................................................. 72,148 155,156
Retained earnings....................................................................... 22,943 49,348
Deduct:
Unrealized loss on marketable equity securities...................................... (92) (182)
Total stockholders' equity......................................................... 95,379 204,735
TOTAL.............................................................................. $136,446 $409,284
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1994, 1995 and 1996
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
REVENUES (Note 2):
Admissions..................................................................... $31,523 $36,569 $52,451
Event related revenue.......................................................... 24,814 27,783 36,414
Other operating revenue........................................................ 8,200 11,221 13,248
Total revenues.............................................................. 64,537 75,573 102,113
OPERATING EXPENSES:
Direct expense of events....................................................... 18,327 19,999 30,173
Other direct operating expense................................................. 6,110 7,611 8,005
General and administrative..................................................... 11,812 13,381 16,995
Non-cash stock compensation (Note 15).......................................... 3,000 -- --
Depreciation and amortization.................................................. 4,500 4,893 7,598
Total operating expenses.................................................... 43,749 45,884 62,771
OPERATING INCOME................................................................. 20,788 29,689 39,342
Interest income (expense), net (Notes 7 and 12).................................. (3,855) (24) 1,316
Other income (Note 14)........................................................... 1,592 3,625 2,399
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES................................................................... 18,525 33,290 43,057
Provision for income taxes (Note 11)............................................. (8,055) (13,700) (16,652)
INCOME FROM CONTINUING OPERATIONS................................................ 10,470 19,590 26,405
Discontinued operations -- equity in loss of joint venture (Note 8).............. (294) -- --
INCOME BEFORE EXTRAORDINARY ITEM................................................. 10,176 19,590 26,405
Extraordinary item, net (Note 7)................................................. -- (133) --
NET INCOME....................................................................... $10,176 $19,457 $26,405
NET INCOME APPLICABLE TO COMMON STOCK (Note 10).................................. $ 7,170 $19,457 $26,405
PER SHARE DATA (Notes 1, 9 and 10):
Income from continuing operations applicable to common stock................... $ 0.25 $ 0.53 $ 0.64
Discontinued operations........................................................ (0.01) -- --
Net income applicable to common stock.......................................... $ 0.24 $ 0.53 $ 0.64
WEIGHTED AVERAGE SHARES OUTSTANDING (Notes 1 and 15)............................. 30,400 37,275 41,301
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1994, 1995 and 1996
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
Unrealized Loan
Gain (Loss) Receivable
Additional on Marketable from Sonic Total
Common Stock Paid-In Retained Equity Financial Stockholders'
Shares Amount Capital Earnings Securities Corporation Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994............. 28 $ 28 $ 3,706 $ 34,344 $(284) $ (21,278) $ 16,516
Net income......................... -- -- -- 10,176 -- -- 10,176
Interest on related party loans and
advances......................... -- -- -- 508 -- -- 508
Change in estimated redemption
value of put warrants (Note
10).............................. -- -- -- (3,006) -- -- (3,006)
Net unrealized gain on marketable
equity securities................ -- -- -- -- 249 -- 249
Increase in loan receivable from
Sonic Financial Corporation,
net.............................. -- -- -- -- -- (8,213) (8,213)
Issuance of Speedway Motorsports,
Inc. common stock (Note 1)....... 2 -- 1 -- -- -- 1
Distribution to Sonic Financial
Corporation (Note 12)............ -- -- -- (29,491) -- 29,491 --
Non-cash stock compensation
(Note 15)........................ -- -- 3,000 -- -- -- 3,000
BALANCE, DECEMBER 31, 1994........... 30 28 6,707 12,531 (35) -- 19,231
Net income......................... -- -- -- 19,457 -- -- 19,457
Restructuring of ownership prior to
initial public offering (Note
1)............................... 29,970 272 (272) -- -- -- --
Issuance of common stock
(Note 1)......................... 8,000 80 65,713 -- -- -- 65,793
Joint venture disposal (Note 8).... -- -- -- (9,045) -- -- (9,045)
Net unrealized loss on marketable
equity securities................ -- -- -- -- (57) -- (57)
BALANCE, DECEMBER 31, 1995........... 38,000 380 72,148 22,943 (92) -- 95,379
Net income......................... -- -- -- 26,405 -- -- 26,405
Issuance of common stock
(Note 1)......................... 3,000 30 78,324 -- -- -- 78,354
Issuance of common stock in
business acquisition of Oil-Chem
Research Corp. (Note 1).......... 146 1 3,944 -- -- -- 3,945
Exercise of stock options
(Note 15)........................ 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
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1994, 1995 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 10,176 $ 19,457 $ 26,405
Extraordinary item, net....................................................... -- 133 --
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 4,500 4,893 7,598
Equity in earnings of equity method investee................................ -- (233) (371)
Equity in net loss of real estate joint venture............................. 491 -- --
Non-cash stock compensation................................................. 3,000 -- --
Gain on sale of marketable equity securities................................ (1,060) (242) (698)
Gain on sale of fixed assets................................................ (77) (1,199) --
Amortization of deferred membership income.................................. (274) (275) (275)
Deferred income tax provision............................................... (371) 516 3,890
Other....................................................................... (490) -- --
Changes in operating assets and liabilities:
Restricted cash........................................................... -- (86) (14,538)
Trade accounts receivable................................................. (1,209) (2,960) (4,569)
Prepaid income taxes...................................................... -- 223 (4,057)
Inventories............................................................... (942) (1,247) (819)
Other current assets and liabilities...................................... 560 (45) 3,651
Condominiums held for sale................................................ (2,623) 1,457 (393)
Accounts payable.......................................................... -- 6,175 (4,917)
Deferred race event income................................................ 1,890 4,053 15,812
Accrued expenses and other liabilities.................................... -- 1,008 3,179
Deferred income........................................................... -- -- 8,444
Other assets and liabilities.............................................. 422 (583) (958)
Net cash provided by operating activities.............................. 13,993 31,045 37,384
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt...................................... 6,429 -- 146,525
Increase in loans receivable from affiliate................................... (7,422) -- --
Principal payments on long-term debt.......................................... (10,732) (47,424) (50,866)
Payments of debt issuance costs............................................... -- -- (2,894)
Advances from related parties................................................. 301 2 --
Exercise of common stock options.............................................. -- -- 742
Issuance of common stock...................................................... 1 65,793 78,354
Net cash provided by (used in) financing activities.................... (11,423) 18,371 171,861
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................................... (5,009) (40,718) (147,741)
Purchase of Bristol Motor Speedway............................................ -- -- (27,176)
Purchase of Oil-Chem Research Corp............................................ -- -- (514)
Purchase of Sears Point Raceway assets........................................ -- -- (8,487)
Issuance of note receivable................................................... -- -- (13,453)
Investment in North Wilkesboro Speedway....................................... -- (6,050) --
Purchase of marketable equity securities...................................... (924) (2,809) (2,135)
Proceeds from sales of marketable equity securities........................... 1,345 1,451 2,094
Proceeds from sale of fixed assets............................................ 243 1,796 --
Contribution of capital to real estate joint venture.......................... (42) -- --
Repayments from related parties............................................... 500 -- 287
Net cash used in investing activities.................................. (3,887) (46,330) (197,125)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................ (1,317) 3,086 12,120
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................................. 8,363 7,046 10,132
CASH AND CASH EQUIVALENTS AT END OF YEAR........................................ $ 7,046 $ 10,132 $ 22,252
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest........................................................ $ 4,341 $ 1,486 $ 2,211
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Bank debt incurred in connection with redemption of put warrants (Note 10).... $ 8,000
Road construction costs financed with a note payable (Note 7)................. $ 1,969
Capital lease obligation incurred for Sears Point Raceway facility (Note 7)... $ 18,165
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1995 and 1996
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
Basis of Presentation -- The 1996 consolidated financial statements include
the accounts of Speedway Motorsports, Inc. (SMI), and its wholly-owned
subsidiaries, Charlotte Motor Speedway, Inc. and subsidiaries (CMS), Atlanta
Motor Speedway, Inc. (AMS), Bristol Motor Speedway (BMS), Sears Point Raceway
(SPR), Texas Motor Speedway (TMS), Oil-Chem Research Corp. and subsidiary,
Speedway Funding Corp. and Sonoma Funding Corp. (collectively, the Company).
In a corporate restructuring (Restructuring) prior to the initial public
offering of common stock by SMI on March 3, 1995, CMS and AMS became
wholly-owned subsidiaries of SMI. Sonic Financial Corporation (Sonic), an
affiliate of the Company through common ownership, and other shareholders of CMS
and AMS became shareholders of SMI. Prior to the Restructuring, the accompanying
financial statements reflect the combined accounts of SMI, CMS and AMS. The
combination of SMI, CMS and AMS was accounted for based on historical cost in a
manner similar to a pooling-of-interests because the entities were under common
management and control.
Business Acquisitions (see Description Of Business below and Note 17) -- On
January 22, 1996, the Company acquired 100% of the outstanding capital stock of
National Raceways, Inc. (NRI) for $27,176,000, including direct acquisition
costs of $146,000. NRI formerly owned and operated Bristol Motor Speedway. The
acquisition was financed through borrowings under the Company's Credit Facility
(see Note 7). 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.
On April 16, 1996, the Company acquired 100% of the outstanding capital
stock of Oil-Chem Research Corp. (ORC) for $4,459,000 in Company stock and cash.
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. In addition, the Company executed a long-term lease, including a
$38,100,000 purchase option, for the racetrack facilities and real property (see
Note 7). The Company paid a lease security deposit of $3,000,000 and the
purchase option was acquired for a cash payment of $3,500,000. The Company
operates the facility as Sears Point Raceway.
Description of Business -- CMS owns and operates a 1.5-mile oval, asphalt
speedway located in Concord, North Carolina. CMS stages three major National
Association for Stock Car Auto Racing (NASCAR) Winston Cup events annually, two
in May and one in October. Additionally, two Busch Grand National and two
Automobile Racing Club of America (ARCA) races are held annually, each preceding
a Winston Cup event. In 1996, CMS also hosted an International Race of Champions
(IROC) race. All of these events are sanctioned by NASCAR, IROC 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.
CMS 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. Additionally, CMS
has constructed 52 condominiums overlooking the main speedway, all of which had
been sold by the end of 1994.
CMS, through its wholly-owned subsidiary, 600 Racing, Inc., is also engaged
in the development and sale of 5/8-scale cars (Legends Cars) modeled after
older-style coupes and sedans. Revenue is derived from the sale of vehicles and
vehicle parts.
AMS owns and operates a 1.5-mile oval, asphalt speedway located on 870
acres in Hampton, Georgia. Two major NASCAR Winston Cup events are held
annually, one in March and one in November. Additionally, a Busch Grand National
race and two ARCA races are also held annually, each preceding a Winston Cup
event. All
F-8
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
of these events are sanctioned by NASCAR or ARCA. AMS has constructed 46
condominiums overlooking the Atlanta speedway and is in the process of selling
the eleven 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 530 acres in Bristol, Tennessee. BMS currently sponsors two major
NASCAR Winston Cup events annually. Additionally, two Busch Grand National races
are held annually, each preceding a Winston Cup event.
SPR, located on approximately 800 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 sponsors a major
NASCAR-sanctioned Winston Cup racing event annually. Additional events held
annually include a NASCAR sanctioned Craftsman Truck Series, a NHRA Winston Drag
Racing Series, as well as American Motorcycle Association and Sports Car Club of
America (SCCA), racing events. The racetrack is also rented throughout the year
by various organizations, including the SCCA, major automobile manufacturers,
and other car clubs.
TMS was established on February 13, 1995 for the purpose of constructing
and operating a 1.5-mile, banked, asphalt quad-oval superspeedway located on 950
acres in Fort Worth, Texas (see Note 5). TMS will host its first major NASCAR
Winston Cup race on April 6, 1997 preceded by a Busch Grand National race.
Management is actively pursuing the scheduling of additional motorsports racing
and other events at TMS. Other events will be announced as they are scheduled.
In July 1996, TMS began construction of 76 condominiums above turn-two
overlooking the speedway, 72 of which have been contracted for sale.
ORC produces an environmentally friendly motor oil additive that the
Company intends to promote in conjunction with its speedways.
The Company's Chairman and CEO purchased approximately 24% of the
outstanding common stock of North Carolina Motor Speedway, Inc. in 1995. The
Chairman has offered to sell this stock to the Company at his cost. The Company
has declined to purchase the shares to date but may elect to do so in the
future. The Company has offered to buy the remaining 76% equity interest in
North Carolina Motor Speedway, Inc.
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 and Combination -- All significant intercompany
accounts and transactions have been eliminated in consolidation and combination.
Revenue Recognition -- Admissions revenue consists of ticket sales. Event
related revenues consist of amounts received from sponsorships, television,
concessions, commissions and souvenir sales. Other operating revenue consists of
Legends Car sales, Speedway Club restaurant and catering, and Speedway Club
membership income.
The Company's 1996 major racing events were held in March, May, August,
October and November. As discussed above, the Company will hold a major racing
event at TMS in April 1997. Also, the Company will hold a major racing event at
SPR in May 1997. 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.
Deferred race event income, net, as of December 31, 1995 and 1996, relates
primarily to events held in March and May of 1996, and in March, April and May
of 1997. If circumstances prevent a race from being held
F-9
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
at any time during the racing season, all advance revenue must be refunded and
all direct event expenses deferred would be immediately recognized except for
race purses which would be refundable from NASCAR.
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 is composed principally of customer
deposits received on speedway condominiums under construction and held for sale
of $86,000 and $5,436,000 at December 31, 1995 and 1996, and of fee deposits on
TMS's Preferred Seat License (PSL) ticket program of $9,188,000 at December 31,
1996 (see additional information regarding the PSL ticket program below).
Condominium deposits are held in escrow accounts until sales are closed or
transactions are completed. PSL fee deposits are being held in separate accounts
as restricted cash until TMS hosts its first Winston Cup race scheduled on April
6, 1997.
Trade Accounts Receivable -- Trade accounts receivable are shown net of
allowance for doubtful accounts of $146,000 in 1995 and $161,000 in 1996.
Inventories -- Inventories consist of souvenirs, foods, finished vehicles,
parts and accessories which are stated at the lower of cost determined on a
first-in, first-out basis, or market.
Speedway Condominiums Held for Sale -- Speedway condominiums held for sale
consist primarily of 46 condominiums constructed overlooking the Atlanta
speedway, of which 35 were sold as of December 31, 1996. The remaining unsold
condominiums are substantially complete and there are no significant remaining
costs of completion to be incurred.
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. As such, 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 1997, 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.
Property and Equipment -- Property and equipment are recorded at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
respective assets. Amortization of assets under capital lease is included in
depreciation expense. 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.
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 principally on a straight-line
basis over 40 years. Goodwill and other intangible assets are shown net of
accumulated amortization of $948,000 and $1,712,000 at December 31, 1995 and
1996, respectively. Management periodically evaluates the recoverability of
goodwill and other intangible assets based on expected future profitability and
undiscounted operating cash flows of acquired businesses.
Deferred Financing Costs -- Deferred financing costs are included in other
noncurrent assets and are amortized over the term of the related debt.
Deferred Income -- Deferred income primarily consists of net deferred
Speedway Club membership income of $1,563,000 and $1,288,000 at December 31,
1995 and 1996, and TMS Preferred Seat License fee deposits of $8,402,000, net of
expenses of $843,000, at December 31, 1996.
The Speedway Club 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 the
25-year estimated useful life of the related property. In each of the years
ended December 31, 1994, 1995 and 1996, lifetime membership income of $275,000
was recognized. The Speedway Club also offers
F-10
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
executive memberships, which entitle members to certain dining privileges and
require a monthly assessment. Executive membership fees are recognized as income
as they are billed.
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
may be 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.
Fees received under PSL agreements are being deferred until TMS hosts its
first Winston Cup race scheduled on April 6, 1997. The Company plans to amortize
net PSL fee revenues into income over the estimated useful life of TMS's
racetrack facility upon opening.
Advertising Expenses -- Advertising costs are expensed as incurred.
Advertising expenses amounted to $1,568,000, $1,543,000 and $2,154,000 in 1994,
1995 and 1996, respectively.
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.
Fair Value of Financial Instruments -- The Company's financial instruments
consist of cash, accounts and notes receivable, accounts payable and long-term
debt. The carrying value of these financial instruments approximate their fair
value at December 31, 1996.
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 -- In 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but does
not require, compensation cost to be measured based on the fair value of the
equity instrument awarded. Under SFAS No. 123, companies are permitted, however,
to continue to apply Accounting Principles Board (APB) Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 and
will disclose the required pro forma effect on net income and earnings per share
under the provisions of SFAS No. 123 on an annual basis (see Note 15).
In 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of." SFAS No. 121
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds future undiscounted cash flows attributable to
such assets. Adoption of SFAS No. 121 had no impact on the Company's financial
position or results of operations, nor is any impact expected in the foreseeable
future.
Reclassifications -- Certain prior year accounts were reclassified to
conform with current year presentation.
F-11
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
3. INVENTORIES
Inventories as of December 31, 1995 and 1996 consisted of the following
components (dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Souvenirs.......................................................................... $2,242 $2,359
Finished vehicles, parts and accessories........................................... 3,057 3,753
Food and other..................................................................... 73 106
Total.............................................................................. $5,372 $6,218
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1995 and 1996 is summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Estimated
1995 1996 Useful Lives
<S> <C> <C> <C>
Land and land improvements...................................... $ 24,309 $ 47,220 5-20
Racetracks and grandstands...................................... 55,733 81,667 10-35
Buildings and luxury suites..................................... 32,336 58,966 7-30
Machinery and equipment......................................... 4,816 8,411 3-20
Furniture and fixtures.......................................... 2,752 4,365 5-10
Autos and trucks................................................ 960 1,219 3-5
Construction in progress (Note 5)............................... 12,708 133,843
Total........................................................... 133,614 335,691
Less accumulated depreciation................................. (40,509) (47,330)
Net............................................................. $ 93,105 $288,361
</TABLE>
Property and equipment includes assets under capital lease as of December
31, 1996 as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996
<S> <C>
Land....................................................................................... $ 8,074
Racetracks and grandstands................................................................. 18,599
Total...................................................................................... 26,673
Less accumulated amortization............................................................ (88)
Net........................................................................................ $26,585
</TABLE>
5. CONSTRUCTION IN PROGRESS AND DEVELOPMENT AND CONSTRUCTION OF TMS
Texas Motor Speedway -- In 1995, the Company began constructing TMS, a
1.5-mile, banked asphalt quad-oval superspeedway, on a 950 acre site in Fort
Worth, Texas. As of December 31, 1996, the Company estimates the remaining
construction costs to substantially complete TMS will approximate $40,000,000.
Management expects to finance the remaining TMS facility costs through
borrowings under the Company's Credit Facility (see Note 7) and from cash flows
generated from operations.
In connection with the development and construction of TMS, 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 to the sports authority and will lease 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
Company's Consolidated Balance Sheet.
Other Construction in Progress -- Also included in construction in progress
at December 31, 1996 are costs incurred to increase and improve grandstand
seating capacity, suites and facilities for fan amenities at AMS,
F-12
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
BMS and CMS. In addition, AMS is converting its speedway to a quad-oval
configuration in conjunction with the other improvements. The estimated
aggregate cost of capital expenditures in 1997, exclusive of TMS, will
approximate $80,000,000.
6. MARKETABLE EQUITY SECURITIES
To reduce the carrying amount of long-term marketable equity securities to
market value at December 31, 1995 and 1996, valuation allowances of $159,000 and
$314,000 (net of $67,000 and $132,000 in tax benefits), respectively, that would
be realized in the event the securities were sold at a loss, were recorded by a
charge to stockholders' equity. Net realized gains on sales of marketable equity
securities during the years ended December 31, 1994, 1995 and 1996 were
$1,060,000, $242,000 and $698,000, respectively.
7. LONG-TERM DEBT
Long-term debt as of December 31, 1995 and 1996 consists of the following
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Loans payable to NationsBank.................................................... $ -- $ 22,000
Convertible subordinated debentures............................................. -- 74,000
Capital lease obligation........................................................ -- 18,165
Note payable -- road construction............................................... 1,806 1,465
Total......................................................................... 1,806 115,630
Less current maturities......................................................... (348) (383)
$1,458 $115,247
</TABLE>
Bank Credit Facility -- In conjunction with its January 1996 acquisition of
BMS, the Company obtained from NationsBank an unsecured, short-term line of
credit in an aggregate principal amount of up to $50,000,000 (the "90-Day
Facility"). In early 1996, the Company borrowed $32,688,000 under the 90-Day
Facility to fund the purchase of BMS and the working capital needs of the
Company. In March 1996, the Company subsequently consummated longer term
financing through a credit facility ("the Credit Facility"), retired the 90-Day
Facility and borrowed additional funds for working capital purposes. At December
31, 1996, the Company has a total of $22,000,000 in outstanding borrowings under
the Credit Facility. The Credit Facility is an unsecured working capital and
letter of credit arrangement provided by a syndicate of banks led by
NationsBank.
The Credit Facility has an overall borrowing limit of $110,000,000 with a
sub-limit of $7,000,000 for standby letters of credit. The Credit Facility will
mature in March 31, 1999 unless extended annually thereafter for two additional
years at the option of the lenders. Draws are permitted under the Credit
Facility for the following purposes: (i) refinancing outstanding borrowings,
including the 90-Day Facility, (ii) financing seasonal working capital needs,
and (iii) financing general corporate purposes, including the costs of
constructing TMS. Although the Credit Facility is unsecured, the Company has
agreed not to pledge its assets to any third party. In addition, the Company
must meet certain financial covenants, including specified levels of net worth
and ratios of (i) debt to equity, (ii) debt to earnings before interest, taxes,
depreciation and amortization (EBITDA), (iii) earnings before interest and taxes
(EBIT) to interest expense, and (iv) subordinated debt to senior debt. The
Credit Facility also prohibits the Company from making cash expenditures in
excess of $10,000,000 in the aggregate to acquire additional motor speedways,
without the consent of the lenders, and limits its consolidated capital
expenditures, exclusive of expenditures on TMS, to amounts not to exceed
$80,000,000 in the aggregate for fiscal years 1996 and 1997, and $40,000,000 for
each fiscal year thereafter. The Company also agreed to certain other
limitations or prohibitions concerning the incurrence of other indebtedness,
guaranties, asset sales, investments, cash dividends to shareholders,
distributions and redemptions.
Convertible Subordinated Notes -- On October 1, 1996, the Company completed
a private placement of 5 3/4% convertible subordinated debentures in the
aggregate principal amount of $70,000,000. On October 4, 1996, the Company filed
a registration statement to register these debentures and the underlying equity
securities.
F-13
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
On October 15, 1996, the initial purchasers exercised an option to purchase
additional convertible subordinated debentures in the principal amount of
$4,000,000. Net proceeds after commissions and discounts were $72,150,000.
The debentures are unsecured, mature on September 30, 2003, are convertible
into common stock of the Company 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 commencing March 31, 1997. The debentures are subordinated to
all present and future secured indebtedness of the Company, including the Credit
Facility. 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 9). The proceeds of this offering are being
used to repay outstanding borrowings under the Credit Facility, fund
construction costs of TMS and for working capital needs of the Company.
Capital Lease Obligation And Purchase Option (Sears Point Raceway) -- In
connection with the SPR asset acquisition by SMI on November 18, 1996 (see Note
1), the Company executed a 14 year capital lease with the seller for all of the
real property of the SPR complex. SMI has the option to purchase the real
property for $38,100,000 during a six-month option period commencing November 1,
1999, subject to acceleration at the election of the seller after March 31, 1997
and through December 31, 1999 (the Purchase Option). The Purchase Option was
acquired for a payment of $3,500,000 and upon its exercise, is to be credited
against the purchase price of the real property. The Purchase Option payment is
non-refundable. Under the lease agreement terms, SMI paid a security deposit of
$3,000,000, with such amount also to be credited against the purchase price of
the real property upon exercise of the Purchase Option. Monthly lease payments
ranging from $67,000 in 1997 to $631,000 in 2010 are due, including imputed
interest at 6.5%. SMI is responsible for maintenance, insurance, taxes and other
operating costs of the leased property. Beginning January 1, 2002, minimum lease
payments are subject to annual adjustment based on changes in the Consumer Price
Index as defined.
In connection with the acquisition, SMI loaned the seller approximately
$13,450,000 under a promissory note receivable to repay their then outstanding
obligations on the SPR real property. The note bears interest at 4% and is due
in equal monthly installments of interest of $45,000 through November 1999 and,
thereafter, of principal and interest of $68,000 through November 2026. The note
is collateralized by a thirty year deed of trust on the SPR real property in
favor of SMI. Also, amounts due under the note receivable are to be credited
against amounts due from SMI upon exercise of the Purchase Option.
In management's opinion, it is probable that the Purchase Option will be
exercised. Therefore, the lease security deposit and Purchase Option payment
have been included as consideration in determining the purchase price and
capital lease obligation for SPR. Also, because a legal right of offset exists
under the lease obligation and note receivable agreements, and because it is
probable offset will occur upon exercise of the Purchase Option, the note
receivable of $13,453,000 has been netted against the capital lease obligation
in the accompanying December 31, 1996 consolidated balance sheet.
F-14
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Annual future minimum lease payments under the capital lease obligation as
of December 31, 1996 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997................................................... $ 800
1998................................................... 2,800
1999................................................... 2,800
2000................................................... 4,800
2001................................................... 5,800
Thereafter............................................. 59,429
Total minimum lease payments........................... 76,429
Less amount representing imputed interest at 6.5%...... (44,811)
Total................................................ 31,618
Less current portion................................... --
Less offset of note receivable......................... (13,453)
Net capital lease obligation........................... $ 18,165
</TABLE>
Notes Payable For Road Construction Costs -- In 1995, the Company entered
into an agreement to pay a portion of the costs to construct an improved access
road to CMS from Interstate 85 under a note arrangement. The note payable bears
interest at 8% and is collateralized by a bank letter of credit from
NationsBank.
Annual maturities of long-term debt as scheduled as of December 31, 1996
are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997.................................................. $ 383
1998.................................................. 1,090
1999.................................................. 23,168
2000.................................................. 3,072
2001.................................................. 4,058
Thereafter............................................ 97,312
Total............................................... 129,083
Less offset of note receivable against capital lease
obligation.......................................... (13,453)
$115,630
</TABLE>
Included in interest expense, net, in the accompanying consolidated
statements of income is interest income in the amounts of $426,000 and $899,000
for the years ended December 31, 1994 and 1995, respectively. Included in
interest income, net, is interest expense of $693,000 for the year ended
December 31, 1996. The Company capitalized interest costs of $2,834,000 in 1996.
No interest cost was capitalized in 1994 or 1995.
Extraordinary Item -- Long-term debt as of December 31, 1994 included
various notes payable to NationsBank totaling $46,588,000. On March 3, 1995,
these loans were repaid using the proceeds from the 1995 initial public
offering. Accordingly, unamortized debt issuance costs of $133,000, net of tax
benefit of $89,000, related to these notes were expensed in the accompanying
1995 consolidated statement of income as an extraordinary item.
8. DISPOSAL OF INVESTMENT IN REAL ESTATE JOINT VENTURE IN 1994
On December 21, 1994, CMS agreed to dispose of its 50% investment in a real
estate joint venture (Chartown), prior to completion of the Company's initial
public offering in 1995, to focus on its principal operations of motorsports
entertainment, racing and related activities. The disposition of Chartown was
completed in early 1995 and was accounted for as discontinued operations in the
year ended December 31, 1994. This disposition resulted in the transfer of CMS's
interest in the joint venture at its then net book value of approximately
F-15
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$9,045,000, consisting of the Company's investment in the joint venture of
$8,330,000 plus a related deferred tax asset of $715,000, to an affiliate, and
the subsequent dividend of the proceeds thereof to Sonic. The Company's retained
earnings was reduced by an amount equal to the net book value of the assets
distributed.
There was no effect of Chartown's operations or disposal on the
accompanying 1995 or 1996 consolidated statements of income. Total revenues and
net loss of the joint venture for year ended December 31, 1994 were $2,609,000
and $546,000, respectively. CMS's share of the 1994 loss, net of tax benefit of
$198,000, was $294,000.
Chartown leases an office and warehouse facility, located near CMS, to 600
Racing, Inc. for Legends Car operations. This operating lease is renewable
annually. The current lease provides for annual rent of approximately $132,000
through July 31, 1997. Rent expense, net of sub-rental income, under this lease
was $26,000, $44,000, and $112,000 in 1994, 1995 and 1996, respectively.
9. CAPITAL STRUCTURE, PUBLIC OFFERINGS OF COMMON STOCK AND PER SHARE DATA
Preferred Stock -- At December 31, 1996, 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, 1995 or 1996.
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 and combined
financial statements take into account this stock split.
Public Offerings of Common Stock -- The Company completed an initial public
offering of SMI common stock on March 3, 1995 at a price of $9 per share. SMI
had 38,000,000 common shares outstanding immediately after the public offering
was consummated, of which approximately 9,000,000 shares were held by new
outside investors. Net proceeds of the 1995 initial public offering of
$65,793,000 were used to repay existing bank indebtedness, expand CMS and AMS
racing facilities, and for other general corporate purposes.
The Company completed an additional 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 -- The 1995 and 1996 per share amounts reflect the
37,275,000 and 41,301,000 weighted average shares outstanding, including 612,000
and 767,000 common share equivalents arising from stock options, for the years
ended December 31, 1995 and 1996, respectively. The 1994 per share amounts have
been prepared on a pro forma basis to reflect the 30,400,000 common shares
outstanding after giving effect to the Restructuring, including 400,000 common
share equivalents arising from stock options.
Had the 1995 initial public stock offering and related repayment of debt
occurred on January 1, 1995, income from continuing operations applicable to
common stock in 1995 would have been $0.52 per share. Had the October 1996
offering of subordinated convertible debentures (see Note 7) been fully
converted on January 1, 1996, and related interest expense on such debt not
recorded in 1996, income from continuing operations applicable to common stock
in 1996 would have been $0.61 per share.
10. PUT WARRANTS AND NET INCOME APPLICABLE TO COMMON STOCK IN 1994
In connection with bank financing received in 1990, AMS issued to
NationsBank two common stock purchase warrants (Equity Warrants). These warrants
entitled the holder to purchase a 37% equity interest in AMS at a price of $1
per share. The warrants were originally exercisable through October 23, 2005.
F-16
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
In connection with additional bank financing received during 1991, AMS
issued to NationsBank a third common stock purchase warrant (Contingent
Warrant). This warrant entitled the holder to purchase shares of AMS at $1 per
share. The number of shares that could be purchased was based on the number of
events of default, if any, which occurred subsequent to December 16, 1991. These
events of default related to the aggregate capital expenditures during any
fiscal year. Each event of default entitled the holder to exercise the warrant
for 5% of the outstanding stock of AMS. However, in no event could the aggregate
warrants issued during one calendar year under this financing exceed 5% of the
outstanding stock of AMS. No event of default, as defined, occurred prior to the
date the warrant was cancelled by NationsBank on December 16, 1994 (discussed
below).
The warrants described above contained provisions whereby the holder could
require AMS to redeem the warrants for cash at any time from October 23, 1995
through October 23, 2005. The per share redemption price was determined using
the higher of book value, market price as determined in a public exchange, a
cash flow capitalization formula or appraised value. On December 16, 1994, the
Company redeemed the Equity Warrants from NationsBank for $8,000,000 and
cancelled the Contingent Warrant. In each of the years from 1991 to 1994, the
Company increased the carrying value of the Equity Warrants and decreased
retained earnings in order to accrete the aggregate value of the put provision
over the minimum stock warrant redemption period. Net income applicable to
common stock of $7,170,000 for the year ended December 31, 1994 represents
reported net income of the Company of $10,176,000 less the periodic accretion in
estimated redemption value of the Equity Warrants of $3,006,000.
11. INCOME TAXES
The components of the provision for income taxes are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Current............................................................... $8,426 $13,184 $12,762
Deferred.............................................................. (371) 516 3,890
Total............................................................... $8,055 $13,700 $16,652
</TABLE>
The tax effect of temporary differences resulting in deferred income taxes
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax liabilities:
Property and equipment......................................................... $ 9,774 $14,958
Other.......................................................................... -- 755
9,774 15,713
Deferred tax assets:
Income previously recognized for tax purposes.................................. (608) (520)
Stock option compensation expense.............................................. (1,206) (1,095)
Other.......................................................................... (1,243) (356)
(3,057) (1,971)
Total net deferred tax liability................................................. $ 6,717 $13,742
</TABLE>
No valuation allowance against deferred tax assets has been recorded for
any year presented. The differences between the effective tax rate and the
federal statutory tax rate in 1994, 1995 and 1996 are principally due to the
effect of state income taxes (approximately 5% for 1994, 4% for 1995 and 6% for
1996) and nondeductible items, including goodwill amortization.
The Company made income tax payments during 1994, 1995 and 1996 totaling
approximately $8,614,000, $13,163,000 and $17,402,000, respectively.
F-17
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
On September 9, 1993, the Internal Revenue Service (IRS) asserted that AMS,
as the successor in interest to BND, Inc. (BND), is liable for additional income
taxes, penalties and interest. The total assessment for taxes, penalties and
interest (net of tax benefit for deductibility of interest) through December 31,
1996 is approximately $7,500,000. This deficiency allegedly relates to BND's
income tax returns for the years ended November 30, 1988 and October 31, 1990.
The IRS alleges that, during the acquisition of AMS by the Company's Chairman
and Chief Executive Officer in October 1990, BND's merger into Atlanta
International Raceway, Inc., the predecessor of AMS (AIR), resulted in a taxable
gain to BND. Moreover, this taxable gain allegedly eliminates a net operating
loss carryback to the tax return filed for the year ended November 30, 1988. On
November 30, 1993, AMS filed a protest contesting the assessment with appeals
division of the IRS; as of this date, no resolution of this matter has been
obtained. However, the Company anticipates resolution of this matter during
1997. Management intends to continue contesting the allegations of a deficiency
and has not provided for this contingency in the accompanying consolidated
financial statements. There can be no assurance, however, that the ultimate
resolution of this proceeding will not have a material adverse effect on the
Company's future results of operations or financial condition.
12. RELATED PARTY TRANSACTIONS
Notes receivable at December 31, 1995 and 1996 include a note receivable of
$934,000 and $697,000, 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 1997, the balance has been classified as a noncurrent asset in the
accompanying 1996 balance sheet.
Notes receivable also include a note receivable from the Company's Chairman
and Chief Executive Officer for $528,000 at December 31, 1995 and $1,131,000 at
December 31, 1996. 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.
Amounts payable to affiliated company of approximately $2,603,000 at
December 31, 1995 and 1996 represents acquisition and other expenses paid on
behalf of AMS by Sonic in prior years. Of such amounts, approximately $1,800,000
bears interest at 3.83% per annum. The remainder of the amount bears interest at
prime plus 1%. The entire account balance is classified as long-term based on
expected repayment dates. Interest expense incurred on this obligation was
$65,000 in 1994, $130,000 in 1995, and $141,000 in 1996.
Interest income of $118,000, $75,000 and $130,000 was earned on amounts due
from related parties during the years ended December 31, 1994, 1995 and 1996,
respectively.
The Company paid Sonic management fees of $1,500,000 in 1994 for certain
accounting, administrative and management services, including assistance in the
planning and execution of racing events; maintenance of banking relationships;
tax planning; preparation of tax returns and representation in tax examinations;
record maintenance; internal audits and special audits; assistance to the
Company's independent public accountants; and litigation support to the
Company's legal counsel. In the opinion of Company management, the management
fees charged approximated the costs required for these services had the Company
operated as a separate unaffiliated entity during that year.
On December 21, 1994, the Board of Directors of CMS declared a dividend to
Sonic in the amount of $29,491,000 as part of the Restructuring. This amount
represented a loan receivable, including accrued interest, from Sonic. Prior to
the date of the dividend, the entire loan receivable had been recorded as a
reduction of stockholders' equity because repayment had not been anticipated in
the near future.
13. 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.
F-18
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
The Company's property at CMS includes areas that were used as solid waste
landfills for many years. Landfilling of general categories of municipal solid
waste on the CMS property ceased in 1992, but CMS 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.
14. OTHER INCOME
Other income for the years ended December 31, 1994, 1995 and 1996 consists
of the following (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Gain on sale of speedway condominiums................................. $ 303 $ 761 $ 163
Equity in earnings of North Wilkesboro Speedway....................... -- 233 371
Other income.......................................................... 1,289 2,631 1,865
$1,592 $ 3,625 $ 2,399
</TABLE>
Other income in 1994 consists primarily of gains on sales of marketable
equity securities. Other income in 1995 and 1996 consists primarily of gains on
sales of land and marketable equity securities, and landfill fees.
15. STOCK OPTION PLANS
1994 Stock Option Plan -- On December 21, 1994, 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 2,000,000 shares of common stock may be granted
to directors, officers and key employees of SMI and its subsidiaries. Such
options provide for the purchase of common stock at a price as determined by the
Compensation Committee of the Board of Directors.
On December 21, 1994, SMI granted options to nine officers to purchase an
aggregate of 800,000 shares of common stock at an exercise price of $3.75 per
share. The Company recorded a noncash stock compensation charge of $3,000,000
(before tax) in December 1994, which represents the difference between
management's estimate of the fair value of the SMI common stock at the date of
grant, after considering the then proposed initial public offering of the
Company's stock discussed in Note 1, and the exercise price of the options
granted. Also on December 21, 1994, SMI granted options to the same nine
officers to purchase an aggregate of 320,000 shares of common stock at an
exercise price equal to the initial public offering price of the common stock.
The exercise price of all stock options granted in 1995 and 1996 was the
fair or trading value of the Company's common stock at the date of grant. No
stock options were exercised through December 31, 1995.
F-19
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Other option information regarding the 1994 Stock Option Plan for the years
ended December 31, 1995 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
Weighted
Exercise Average
Shares in Price Exercise
Thousands Per Share Price
<S> <C> <C> <C>
Outstanding, January 1, 1995............................................... 1,120 $3.75-$ 9.00 $ 5.34
Granted.................................................................... 100 $9.00-$15.38 13.46
Exercised.................................................................. -- -- --
Outstanding, December 31, 1995............................................. 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
</TABLE>
Of the options outstanding as of December 31, 1996, 1,244,000 are currently
exercisable. The weighted average remaining contractual life of the options
outstanding at December 31, 1996 is 8.35 years.
Formula Stock Option Plan -- Effective January 1, 1996, the Company's Board
of Directors adopted the Formula Stock Option Plan for the benefit of the
Company's outside directors as approved by the Company's stockholders at the
1996 annual meeting. The plan authorizes options to purchase up to an aggregate
of 400,000 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 at an
exercise price equal to the fair market value per share of common stock at the
date of award.
In 1996, the Company granted options to purchase 20,000 common shares to
each of the Company's two outside directors at an exercise price per share at
award date of $14.94. All options to purchase shares under this plan expire ten
years from grant date. As of December 31, 1996, none of the options granted had
been exercised. Subject to stockholder approval, effective January 2, 1997, the
Company granted options to purchase an additional 20,000 shares to each of the
two outside directors.
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 100,000 and 280,000 options in
1995 and 1996 with weighted average grant-date fair values of $3.36 and $7.16,
respectively. No compensation cost has been recognized for the stock option
plans except for the charge in 1994 as described in "1994 Stock Option Plan"
above. Had compensation cost for the stock options been determined based on
their fair value method as prescribed by SFAS No. 123, the Company's pro forma
net income would have been $19,219,000, or $.52 per share, for 1995, and
$25,036,000, or $.61 per share, for 1996.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions: expected
volatility of 18.7% in 1995 and 37.3% in 1996; risk-free interest rate of 6.5%
in 1995 and 5.7% in 1996; and expected lives of 3.0 years in 1995 and 3.1 years
in 1996. The model reflects that no dividends were declared in either 1995 or
1996.
Employee Stock Purchase Plan -- Effective January 1, 1997, the Company's
Board of Directors adopted the SMI Employee Stock Purchase Plan to provide
employees the opportunity to acquire stock ownership as approved by the
Company's stockholders at the 1996 annual meeting. An aggregate total of 200,000
shares of common stock have been reserved for purchase under the new 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
F-20
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
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 will expire at the end of
each calendar year.
16. EMPLOYEE BENEFIT PLAN
Effective October 1, 1994, Sonic established the Sonic Financial
Corporation 401(k) Plan and Trust which is available to all employees of the
Company. Under the Plan provisions, participants may elect to contribute up to
12% of their annual salary and bonus to the Plan up to allowed limits, of which
the Company will match 25% of the first 4% of annual salary and bonus
contributed by the employee. Participants are fully vested in Company matching
contributions after five years. Required plan contributions by the Company for
the period from October 1, 1994 to December 31, 1994 was immaterial. The
Company's contributions to the Plan were $40,000 in 1995 and $35,000 in 1996.
17. BRISTOL MOTOR SPEEDWAY AND SEARS POINT RACEWAY ACQUISITIONS
As further described in Note 1, the Company acquired Bristol Motor Speedway
on January 22, 1996 and Sears Point Raceway on November 18, 1996. The
acquisitions have been accounted for using the purchase method, and the results
of their operations after the acquisition dates are included in the Company's
1996 consolidated statement of income. The purchase price has been allocated to
the assets and liabilities acquired at their estimated fair market values at
acquisition date. The Company obtained independent appraisals of BMS's property
and equipment and other net assets acquired, and of SPR's property and
equipment. These appraised fair values are reflected in the accompanying
financial statements. In the near future, the Company plans to obtain an
independent appraisal of the fair value of other SPR net assets acquired,
including identifiable intangibles, if any. Based on current information, the
Company's management does not expect the final allocation of the SPR purchase
price to materially differ from that used in the accompanying December 31, 1996
balance sheet.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the transactions had occurred as of
January 1, 1995 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 acquisitions been made on that date, nor are they necessarily indicative
of results which may occur in the future.
<TABLE>
<CAPTION>
(PRO FORMA)
Year Ended
December 31,
1995 1996
<S> <C> <C>
Total revenues.................................................................... $96,431,000 $110,594,000
Income before extraordinary item.................................................. 18,172,000 26,355,000
Net income........................................................................ 18,039,000 26,355,000
Net income per share.............................................................. $ 0.48 $ 0.64
</TABLE>
F-21
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 22,252 $ 32,897
Restricted cash..................................................................... 14,624 4,217
Trade accounts receivable........................................................... 11,919 23,347
Prepaid income taxes................................................................ 4,784 --
Inventories (Note 4)................................................................ 6,218 8,206
Speedway condominiums held for sale................................................. 3,535 11,640
Prepaid expenses.................................................................... 526 795
Total current assets............................................................. 63,858 81,102
PROPERTY AND EQUIPMENT, NET (Note 5).................................................. 288,361 386,797
GOODWILL AND OTHER INTANGIBLE ASSETS (Note 9)......................................... 48,314 48,362
OTHER ASSETS:
Marketable equity securities........................................................ 2,447 2,152
Notes receivable (Note 8)........................................................... 2,148 5,756
Other assets........................................................................ 4,156 4,448
Total other assets............................................................... 8,751 12,356
TOTAL............................................................................ $409,284 $ 528,617
</TABLE>
See notes to unaudited consolidated financial statements.
F-22
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6)....................................... $ 383 $ 387
Accounts payable.................................................................... 11,363 16,682
Deferred race event income, net..................................................... 36,393 29,628
Income taxes payable................................................................ -- 6,966
Accrued expenses and other liabilities.............................................. 12,075 13,640
Total current liabilities...................................................... 60,214 67,303
LONG-TERM DEBT (Notes 6 and 12)....................................................... 115,247 193,690
PAYABLE TO AFFILIATED COMPANY (Note 8)................................................ 2,603 2,603
DEFERRED INCOME, NET.................................................................. 9,732 14,390
DEFERRED INCOME TAXES................................................................. 13,742 13,104
OTHER LIABILITIES..................................................................... 3,011 3,513
Total liabilities.............................................................. 204,549 294,603
COMMITMENTS AND CONTINGENCIES (Notes 5, 7 and 11)
STOCKHOLDERS' EQUITY (Note 3):
Preferred stock, $.10 par value, shares authorized -- 3,000,000, no shares issued or
outstanding...................................................................... -- --
Common stock, $.01 par value, shares authorized -- 200,000,000, issued and
outstanding -- 41,305,000 in 1996 and 41,309,000 in 1997......................... 413 413
Additional paid-in capital.......................................................... 155,156 155,246
Retained earnings................................................................... 49,348 78,602
Deduct:
Unrealized loss on marketable equity securities.................................. (182) (247)
Total stockholders' equity..................................................... 204,735 234,014
TOTAL.......................................................................... $409,284 $ 528,617
</TABLE>
See notes to unaudited consolidated financial statements.
F-23
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1997
<S> <C> <C>
REVENUES:
Admissions............................................................................... $22,564 $ 51,249
Event related revenue.................................................................... 14,446 48,406
Other operating revenue.................................................................. 3,806 4,486
Total revenues...................................................................... 40,816 104,141
OPERATING EXPENSES:
Direct expense of events................................................................. 11,429 35,186
Other direct operating expense........................................................... 2,439 2,794
General and administrative............................................................... 4,591 8,701
Depreciation and amortization............................................................ 2,058 4,455
Preoperating expense of new facility (Note 1)............................................ -- 1,850
Total operating expenses............................................................ 20,517 52,986
OPERATING INCOME........................................................................... 20,299 51,155
INTEREST INCOME (EXPENSE), NET............................................................. 686 (877)
OTHER INCOME (EXPENSE)..................................................................... 971 (179)
INCOME BEFORE INCOME TAXES................................................................. 21,956 50,099
INCOME TAX PROVISION....................................................................... 8,663 20,582
NET INCOME................................................................................. $13,293 $ 29,517
PRIMARY EARNINGS PER SHARE AND COMMON STOCK EQUIVALENTS.................................... $ 0.32 $ 0.70
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 3)............................................... 42,106 42,080
EARNINGS PER SHARE ASSUMING FULL DILUTION.................................................. $ 0.30 $ 0.67
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 3)............................................... 44,484 44,459
</TABLE>
See notes to unaudited consolidated financial statements.
F-24
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1997
<S> <C> <C>
REVENUES:
Admissions................................................................................ $27,306 $56,455
Event related revenue..................................................................... 19,040 55,117
Other operating revenue................................................................... 6,800 8,022
Total revenues......................................................................... 53,146 119,594
OPERATING EXPENSES:
Direct expense of events.................................................................. 15,133 39,893
Other direct operating expense............................................................ 4,333 4,850
General and administrative................................................................ 8,622 15,792
Depreciation and amortization............................................................. 3,796 7,119
Preoperating expense of new facility (Note 1)............................................. -- 1,850
Total operating expenses............................................................... 31,884 69,504
OPERATING INCOME............................................................................ 21,262 50,090
INTEREST INCOME (EXPENSE), NET.............................................................. 449 (382)
OTHER INCOME................................................................................ 966 22
INCOME BEFORE INCOME TAXES.................................................................. 22,677 49,730
INCOME TAX PROVISION........................................................................ 8,997 20,476
NET INCOME.................................................................................. $13,680 $29,254
PRIMARY EARNINGS PER SHARE AND COMMON STOCK EQUIVALENTS..................................... $ 0.34 $ 0.69
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 3)................................................ 40,490 42,093
EARNINGS PER SHARE ASSUMING FULL DILUTION................................................... $ 0.32 $ 0.67
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 3)................................................ 42,869 44,472
</TABLE>
See notes to unaudited consolidated financial statements.
F-25
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
LOSS
ADDITIONAL ON MARKETABLE TOTAL
COMMON STOCK PAID-IN RETAINED EQUITY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SECURITIES EQUITY
<S> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996............... 41,305 $413 $ 155,156 $ 49,348 $(182) $ 204,735
Net income............................ -- -- -- 29,254 -- 29,254
Issuances of stock under employee
stock purchase plan (Note 10)...... 4 -- 90 -- -- 90
Net unrealized loss on marketable
equity securities.................. -- -- -- -- (65) (65)
BALANCE JUNE 30, 1997................... 41,309 $413 $ 155,246 $ 78,602 $(247) $ 234,014
</TABLE>
See notes to unaudited consolidated financial statements.
F-26
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................................................... $ 13,680 $ 29,254
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization........................................................ 3,796 7,119
Equity in operations of equity method investee....................................... (185) 210
Gain on sale of marketable equity securities and investments......................... (531) (61)
Amortization of deferred income...................................................... (137) (270)
Changes in operating assets and liabilities:
Restricted cash.................................................................... -- 10,407
Trade accounts receivable.......................................................... (1,136) (7,123)
Inventories........................................................................ (620) (1,988)
Other current assets and liabilities............................................... 2,279 (269)
Condominiums held for sale......................................................... (578) (8,105)
Prepaid and accrued income taxes................................................... -- 11,750
Accounts payable................................................................... 7,780 5,319
Deferred race event income......................................................... 345 (6,765)
Accrued expenses and other liabilities............................................. 3,233 1,565
Deferred income.................................................................... -- 4,928
Other assets and liabilities....................................................... (3,137) (892)
Net cash provided by operating activities....................................... 24,789 45,079
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt.................................................... (32,671) (184)
Issuance of long-term debt.............................................................. 72,500 78,000
Issuance of common stock to public...................................................... 78,354 --
Issuance of stock under employee stock purchase plan.................................... -- 90
Exercise of stock options............................................................... 465 --
Net cash provided by financing activities....................................... 118,648 77,906
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................... (69,102) (104,671)
Purchases of marketable equity securities and investments............................... (606) (412)
Proceeds from sales of marketable equity securities and investments..................... 1,507 656
Purchase of Bristol Motor Speedway...................................................... (27,176) --
Purchase of Oil-Chem Research Corp...................................................... (514) --
Increase in notes and accounts receivable............................................... -- (7,299)
Repayments from (loans to) related parties.............................................. 287 (614)
Net cash used in investing activities........................................... (93,966) (112,340)
NET INCREASE IN CASH AND CASH EQUIVALENTS................................................. 49,471 10,645
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................................... 10,132 22,252
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................................ $ 59,603 $ 32,897
</TABLE>
See notes to unaudited consolidated financial statements.
F-27
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of Speedway Motorsports,
Inc. for the fiscal year ended December 31, 1996 included in the Company's 1996
Annual Report on Form 10-K.
In management's opinion, these unaudited consolidated financial statements
contain all adjustments necessary for their fair presentation at interim
periods. All such adjustments are of a normal recurring nature.
The results of operations for interim periods are not necessarily
indicative of operating results that may be expected for the entire year due to
the seasonal aspect of event revenues.
The Company recognizes revenues and operating expenses for all events in
the calendar quarter in which the events are conducted except when a major
NASCAR racing event occurs at one of the Company's wholly-owned subsidiaries on
the last weekend of a calendar quarter ended March 31, June 30, or September 30
in which case the race event revenues and operating expenses are recognized
consistently in the immediately succeeding calendar quarter. The Company has
adopted this accounting policy to help ensure comparability between quarterly
financial statements.
A major NASCAR-sanctioned racing event occurred at Bristol Motor Speedway
on the weekend of March 29-31, 1996. In accordance with the Company's accounting
policy, the revenues and direct expenses of this racing event were recognized in
the second quarter of 1996. The last recognition date for the first quarter of
calendar year 1996 was March 28, 1996. No major NASCAR racing events were held
at wholly-owned subsidiaries on the last weekend of the calendar quarters ended
June 30, 1997, March 31, 1997, or June 30, 1996. As such, the three and six
months ended June 30, 1997 and 1996 reporting periods are comparable.
DEFERRED INCOME -- Deferred income includes Texas Motor Speedway (TMS)
Preferred Seat License (PSL) fee deposits of $8,402,000 and $13,206,000, net of
expenses of $843,000 and $970,000, at December 31, 1996 and June 30, 1997,
respectively. See Note 2 to the December 31, 1996 Consolidated Financial
Statements for discussion of terms and conditions of the PSL's. 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 speedway facility upon its
opening. Amortization income recognized in the three months ended June 30, 1997
was $133,000.
PREOPERATING EXPENSE OF NEW FACILITY -- Preoperating expenses consist of
non-recurring and non-event related costs to develop, organize and open the
Company's new superspeedway facility, Texas Motor Speedway (TMS), which hosted
its first racing event on April 6, 1997.
IMPACT OF NEW ACCOUNTING STANDARDS -- In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share". SFAS No. 128 specifies the computation,
presentation and disclosure requirements for earnings per share and is effective
for interim and annual periods ending after December 17, 1997. Under SFAS No.
128, the Company will compute and disclose both basic and diluted earnings per
share. Its adoption is not expected to significantly affect the Company's
computation, presentation and disclosure under current accounting standards.
RECLASSIFICATION -- Certain accounts in 1996 were reclassified to conform
to current year presentation.
2. DESCRIPTION OF BUSINESS
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 (CMS), Sears Point Raceway (SPR), Texas Motor
Speedway, Inc. (TMS), Oil-Chem Research Corp. and subsidiary (ORC), Speedway
Funding Corp. and Sonoma Funding Corp. (collectively, the Company).
F-28
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
AMS owns and operates a 1.5-mile oval, asphalt speedway 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 Grand National race and two
Automobile Racing Club of America (ARCA) races are also held annually, each
preceding a Winston Cup event. All of these events are sanctioned by NASCAR or
ARCA. AMS has constructed 46 condominiums over-looking the Atlanta speedway and
is in the process of selling the ten 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 530 acres in Bristol, Tennessee. BMS currently sponsors two major
NASCAR Winston Cup events annually. Additionally, two Busch Grand National races
are held annually, each preceding a Winston Cup event. On January 22, 1996, the
Company acquired 100% of the outstanding capital stock of BMS for $27,176,000,
including direct acquisition costs of $146,000 (see Note 9).
CMS owns and operates a 1.5-mile quad-oval, asphalt speedway located in
Concord, North Carolina. CMS stages three major NASCAR Winston Cup events
annually, two in May and one in October. Additionally, two Busch Grand National
and two ARCA races are held annually, each preceding a Winston Cup event. In
1997, CMS hosted an International Race of Champions (IROC) race and an Indy
Racing League (IRL) racing event. All of these events are sanctioned by NASCAR,
IROC, 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, CMS has constructed 52 condominiums overlooking the main
speedway, all of which have been sold.
CMS 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.
SPR, located on approximately 800 acres in Sonoma, California, owns and
operates a 2.52-mile, twelve-turn road course, a one-quarter mile dragstrip, and
a 157,000 square foot industrial park. SPR currently sponsors one major
NASCAR-sanctioned Winston Cup racing event annually. Additional events held
annually include a NASCAR-sanctioned Craftsman Truck Series, a NHRA Winston Drag
Racing Series, as well as American Motorcycle Association and Sports Car Club of
America (SCCA) racing events. The racetrack is also rented throughout the year
by various organizations, including the SCCA, major automobile manufacturers,
and other car clubs. On November 18, 1996, the Company acquired certain assets
and the operations of Sears Point Raceway (see Notes 6 and 9).
TMS, located on 950 acres in Fort Worth, Texas, is a 1.5-mile, lighted,
banked, asphalt quad-oval superspeedway. TMS construction was substantially
complete at March 31, 1997 with TMS hosting its first major NASCAR Winston Cup
race on April 6, 1997 preceded by a Busch Grand National race (see Note 5). In
June 1997, TMS also hosted a NASCAR-sanctioned Craftsman Truck Series event, an
IRL racing event, and two music concerts. Management is actively pursuing the
scheduling of additional motorsports racing and other events at TMS. Other
events will be announced as they are scheduled. In July 1996, TMS began
construction of 76 condominiums above turn-two overlooking the speedway, 70 of
which have been contracted for sale.
600 Racing, Inc., a wholly-owned subsidiary of CMS, developed, operates and
is the official sanctioning body of the Legends 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.
ORC produces an environmentally friendly motor oil additive that the
Company intends to promote in conjunction with its speedways. On April 16, 1996,
the Company acquired 100% of the outstanding capital stock of ORC for $4,459,000
in Company stock and cash.
The Company's Chairman and CEO purchased approximately 24% of the
outstanding common stock of North Carolina Motor Speedway, Inc. (NCMS) in 1995
(see Note 11). The Chairman has offered to sell this stock
F-29
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
to the Company at his cost. The Company has declined to purchase the shares to
date but may elect to do so in the future.
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.
3. CAPITAL STRUCTURE, PUBLIC OFFERING OF COMMON STOCK AND PER SHARE DATA
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK -- On April 29, 1997, the
Company's Board of Directors and stockholders approved an increase in the
authorized common stock of SMI from 100,000,000 to 200,000,000 shares.
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.
This stock split became effective March 15, 1996 in the form of a 100% common
stock dividend paid to stockholders of record on February 26, 1996. All shares
and per share information in the accompanying consolidated financial statements
take into account this stock split.
PUBLIC OFFERING OF COMMON STOCK -- The Company completed an 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.
PER SHARE DATA -- For the three and six month periods ended June 30, 1997,
per share amounts reflect the 42,080,000 and 42,093,000 weighted average shares
outstanding, including 774,000 and 788,000 common share equivalents arising from
stock options, during each respective period. For the three and six month
periods ended June 30, 1996, per share amounts reflect the 42,106,000 and
40,490,000 weighted average shares outstanding, including 874,000 common share
equivalents arising from stock options, during each respective period.
Fully diluted earnings per share reflect the potential conversion of the
subordinated convertible debentures offered in October 1996 (see Note 6) as if
fully converted on January 1, 1996, and the related interest expense on such
debt not recorded in 1997 or 1996.
4. INVENTORIES
Inventories as of December 31, 1996 and June 30, 1997 consisted of the
following components (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
Souvenirs.................................................................... $2,359 $3,952
Finished vehicles, parts and accessories..................................... 3,753 4,099
Food and other............................................................... 106 155
Total...................................................................... $6,218 $8,206
</TABLE>
5. PROPERTY AND EQUIPMENT -- CONSTRUCTION IN PROGRESS
TEXAS MOTOR SPEEDWAY -- In 1995, the Company began constructing TMS, a
1.5-mile, banked, asphalt quad-oval superspeedway, on a 950 acre site in Fort
Worth, Texas. Construction was substantially complete at March 31, 1997 with TMS
hosting its first major NASCAR Winston Cup race on April 6, 1997.
CONSTRUCTION IN PROGRESS -- At June 30, 1997, the Company has various
construction projects underway to increase and improve grandstand seating
capacity, suites, facilities for fan amenities, and make various other site
improvements at AMS, BMS, CMS and SPR. In addition, AMS is converting its
speedway to a quad-oval configuration and changing the start-finish line
location in conjunction with the other improvements.
F-30
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The estimated aggregate cost of capital expenditures in 1997, inclusive of
TMS, will approximate $148,000,000.
6. LONG-TERM DEBT
BANK CREDIT FACILITY (SEE NOTE 12) -- In March 1996, the Company obtained
from NationsBank, N.A. (Carolinas) an unsecured, long-term working capital and
letter of credit facility (the "Credit Facility") with an overall borrowing
limit of $110 million and a sub-limit of $7 million for standby letters of
credit. At June 30, 1997, the Company has a total of $100 million in outstanding
borrowings under the Credit Facility. As further described in Note 12, this
Credit Facility was replaced and retired on August 4, 1997. The Credit Facility
was previously scheduled to mature in 1999.
CONVERTIBLE SUBORDINATED DEBENTURES -- In October 1996, the Company issued
5 3/4% convertible subordinated debentures in the aggregate principal amount of
$74 million. The debentures are unsecured, mature on September 30, 2003, are
convertible into Common Stock at the holder's option after November 30, 1996 at
$31.11 per share until maturity, and are redeemable at the Company's option
after September 29, 2000. In conversion, 2,378,565 shares of common stock would
be issuable (see Note 3). Interest payments are due semi-annually on March 31
and September 30. See Note 7 to the December 31, 1996 Consolidated Financial
Statements for discussion of additional terms and conditions of the debentures.
CAPITAL LEASE OBLIGATION AND PURCHASE OPTION (SEARS POINT RACEWAY) -- In
connection with the SPR asset acquisition by SMI on November 18, 1996, the
Company executed a 14 year capital lease with the seller for all of the real
property of the SPR complex. SMI has the option to purchase the real property
for $38.1 million during a six-month option period commencing November 1, 1999,
subject to acceleration at the election of the seller after March 31, 1997 and
through December 31, 1999 (the Purchase Option). SMI paid $3.5 million for the
Purchase Option and $3.0 million as a lease security deposit, and loaned the
seller approximately $13.45 million under a 4% promissory note receivable in
connection with the acquisition, with such amounts to be credited against the
purchase price of the real property upon exercise of the Purchase Option. In
management's opinion, it is probable that the Purchase Option will be exercised.
Because a legal right of offset exists under the lease obligation and note
receivable agreements, and because it is probable offset will occur upon
exercise of the Purchase Option, the note receivable of $13.45 million has been
netted against the capital lease obligation in the accompanying consolidated
balance sheets. See Note 7 to the December 31, 1996 Consolidated Financial
Statements for discussion of additional terms and conditions of the capital
lease obligation and Purchase Option.
7. INCOME TAXES
On September 9, 1993, the Internal Revenue Service (IRS) asserted that AMS,
as the successor in interest to BND, Inc. (BND), is liable for additional income
taxes, penalties and interest. The total assessment for taxes, penalties and
interest (net of tax benefit for deductibility of interest) through June 30,
1997 is approximately $7,700,000. This deficiency allegedly relates to BND's
income tax returns for the years ended November 30, 1988 and October 31, 1990.
The IRS alleges that, during the acquisition of AMS by the Company's Chairman
and Chief Executive Officer in October 1990, BND's merger into Atlanta
International Raceway, Inc., the predecessor of AMS (AIR), resulted in a taxable
gain to BND. Moreover, this taxable gain allegedly eliminates a net operating
loss carryback to the tax return filed for the year ended November 30, 1988. On
November 30, 1993, AMS filed a protest contesting the assessment with the
appeals division of the IRS; as of this date, no resolution of this matter has
been obtained. However, the Company anticipates resolution of this matter during
1997. Management intends to continue contesting the allegations of a deficiency
and has not provided for this contingency in the accompanying consolidated
financial statements. There can be no assurance, however, that the ultimate
resolution of this proceeding will not have a material adverse effect on the
Company's future results of operations, financial condition or cash flows.
F-31
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
8. RELATED PARTY TRANSACTIONS
Notes receivable at June 30, 1997 and December 31, 1996 include a note
receivable of $722,000 and $697,000, 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 before June 30, 1998, the balance has been classified as a noncurrent
asset in the accompanying consolidated balance sheets.
Notes receivable also include a note receivable from the Company's Chairman
and Chief Executive Officer for $1,720,000 at June 30, 1997 and $1,131,000 at
December 31, 1996. 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.
Amounts payable to affiliated company of approximately $2,603,000 at June
30, 1997 and December 31, 1996 represents acquisition and other expenses paid on
behalf of AMS by Sonic Financial Corporation in prior years. Of such amounts,
approximately $1.8 million bears interest at 3.83% per annum. The remainder of
the amount bears interest at 1% over prime. The entire account balance is
classified as long-term based on expected repayment dates.
9. BRISTOL MOTOR SPEEDWAY AND SEARS POINT RACEWAY ACQUISITIONS
As further described in Notes 1 and 17 of the December 31, 1996
Consolidated Financial Statements, the Company acquired Bristol Motor Speedway
on January 22, 1996 and Sears Point Raceway on November 18, 1996. The
acquisitions have been accounted for using the purchase method, and the results
of their operations after the acquisition dates are included in the Company's
consolidated statements of income. The purchase price has been allocated to the
assets and liabilities acquired at their appraised or estimated fair values at
acquisition date. In the near future, the Company plans to obtain an independent
appraisal of the fair value of other SPR net assets acquired, including
identifiable intangibles, if any. Based on current information, the Company's
management does not expect the final allocation of the SPR purchase price to
materially differ from that used in the accompanying consolidated balance
sheets.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the transactions had occurred as of
January 1, 1996 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 acquisitions been made on that date, nor are they necessarily indicative
of results which may occur in the future.
<TABLE>
<CAPTION>
(PRO FORMA)
THREE MONTHS ENDED JUNE 30,
1996 1997
<S> <C> <C>
Total revenues............................................ $46,506,000 $104,141,000
Net income................................................ 14,065,000 29,517,000
Net income per share...................................... $ 0.33 $ 0.70
</TABLE>
<TABLE>
<CAPTION>
(PRO FORMA)
SIX MONTHS ENDED JUNE 30,
1996 1997
<S> <C> <C>
Total revenues............................................ $58,370,000 $119,594,000
Net income................................................ 13,952,000 29,254,000
Net income per share...................................... $ 0.34 $ 0.69
</TABLE>
F-32
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
10. EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1997, the Company's Board of Directors adopted the SMI
Employee Stock Purchase Plan to provide employees the opportunity to acquire
stock ownership. An aggregate total of 200,000 shares of common stock have been
reserved for purchase under the new 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 options 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.
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 will expire at
the end of each calendar year.
11. COMMITMENT
NORTH CAROLINA MOTOR SPEEDWAY -- The Company submitted a merger proposal in
April 1997 to the Board of Directors of North Carolina Motor Speedway, Inc.
(NCMS). The merger proposal contemplates the purchase of all outstanding NCMS
capital stock for an aggregate of approximately $72 million in cash or SMI
common stock at the election of each NCMS stockholder. On July 7, 1997, the
Company's merger proposal was recommended by a Special Committee of the NCMS
Board of Directors for approval by the NCMS board. On August 5, 1997, the NCMS
Board of Directors, however, rejected the Company's proposal. Subsequently,
Bruton Smith, the Company's Chairman and Chief Executive Officer, filed a civil
complaint against the directors of NCMS in his individual capacity as a NCMS
shareholder (see Note 2) alleging, among other things, breach of director
duties.
12. SUBSEQUENT EVENTS
SENIOR SUBORDINATED NOTES -- On August 4, 1997, the Company completed a
private placement of 8 1/2% senior subordinated notes (the Notes) in the
aggregate principal amount of $125,000,000. The 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 commencing
February 15, 1998. The Notes are subordinated to all present and future senior
secured indebtedness of the Company, including the 1997 Credit Facility
described below, and are guaranteed by the Company's existing and future
subsidiaries other than Oil-Chem. 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. Net proceeds after commissions and discounts from the
private placement of the Notes were $121,548,000 which were used to retire and
repay then outstanding borrowings under the 1996 Credit Facility (see Note 6),
fund construction costs and for working capital needs of the Company.
The Indenture governing the 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 governing the Notes and 1997 Credit Facility agreements contain cross
default provisions.
BANK CREDIT FACILITY REPLACEMENT -- On August 4, 1997, the Company obtained
from NationsBank a long-term, unsecured, senior revolving credit facility (the
1997 Credit Facility) with an overall borrowing limit of $175,000,000 and a
sub-limit of $10,000,000 for standby letters of credit. The 1997 Credit Facility
agreement replaces the former Credit Facility (see Note 6), which was repaid and
retired with proceeds from the Senior Notes.
F-33
<PAGE>
SPEEDWAY MOTORSPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Interest under the 1997 Credit Facility will be based, at the Company's
option, upon (i) LIBOR plus .5% to 1.125% or (ii) the greater of NationsBank's
prime rate or the Federal fund rate plus .5%. The margin applicable to LIBOR
borrowings will be adjusted periodically based upon certain ratios of funded
debt to earnings before interest, taxes, depreciation and amortization (EBITDA).
The 1997 Credit Facility will mature in August 2002 and is guaranteed by the
Company's subsidiaries. Although the 1997 Credit Facility is unsecured, the
Company has agreed not to pledge its assets to any third party. In addition,
among other items, the Company must meet certain financial covenants, including
specified levels of net worth and ratios of (i) debt to capitalization, (ii)
debt to EBITDA, and (iii) earnings before interest and taxes (EBIT) to interest
expense. The 1997 Credit Facility also contains certain limitations on cash
expenditures to acquire additional motor speedways without the consent of the
lenders, and limits the Company's consolidated capital expenditures to amounts
not to exceed $125 million annually and $300 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,
guaranties, asset sales, investments, cash dividends to shareholders,
distributions and redemptions.
F-34
<PAGE>
No dealer, salesperson or other person is authorized in connection with any
offering made hereby to give any information or to make any representation not
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or by the Initial Purchasers. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
offered hereby, nor does it constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby to any person in any
jurisdiction in which it is unlawful to make such an offer or solicitation to
such person. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstance create any implication that the information
contained herein is correct as of any date subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 11
The Exchange Offer............................. 16
Use of Proceeds................................ 22
Capitalization................................. 23
Selected Financial Data........................ 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 27
National Association for Stock Car Auto Racing,
Inc. (NASCAR)................................ 37
Business....................................... 41
Management..................................... 48
Certain Transactions........................... 50
Description of Notes........................... 51
Description of Certain Indebtedness............ 74
Plan of Distribution........................... 75
Legal Matters.................................. 75
Independent Auditors........................... 75
Incorporation of Certain Information by
Reference.................................... 75
Index to Consolidated Financial Statements..... F-1
</TABLE>
(Speedway Motorsports, Inc. logo appears here)
Offer to exchange all outstanding
8 1/2% Senior Subordinated Notes Due 2007
($125,000,000 Principal Amount)
for
8 1/2% Senior Subordinated Notes Due 2007
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:
First Trust National Association
180 East Fifth Street
Suite 200
St. Paul, Minnesota 55101
Attn: Kathe Barrett
BY HAND OR OVERNIGHT COURIER:
First Trust National Association
180 East Fifth Street
Suite 200
St. Paul, Minnesota 55101
Attn: Kathe Barrett
BY FACSIMILE:
(612) 244-0711 (MN)
Confirm by Telephone (612) 244-0719 (MN)
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight courier, or registered or certified mail)
, 1997
<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(A). EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1, File No. 33-87740 (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
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
4.1 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "Indenture").
4.2 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the Indenture).
4.3 Registration Rights Agreement dated as of August 4, 1997 among the Company and the Initial
Purchasers.
**5.1 Opinion of Parker, Poe, Adams & Bernstein L.L.P. regarding the legality of the securities being
registered.
*10.1 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).
*10.2 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).
*10.3 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).
*10.4 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).
*10.5 Documentary Letter of Credit issued by NationsBank of North Carolina, N.A. for the account of
Charlotte Motor Speedway, Inc. in favor of Yamaha Motor Co., Ltd., Japan in the amount of
$1,600,000 dated as of September 19, 1994 (incorporated by reference to Exhibit 10.41 to the Form
S-1).
*10.6 Sales Agreement by and between Yamaha Motor Co. Ltd. and Charlotte Motor Speedway, Inc. dated as
of August 1, 1994 (incorporated by reference to Exhibit 10.42 to the Form S-1).
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin R.
Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and H.A.
"Humpy" Wheeler (incorporated by reference to Exhibit 10.44 to the Form S-1).
*10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to
the Form S-1).
*10.10 Speedway Motorsports Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.3 to
the Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995 Form
10-K").
*10.11 Amended and Restated Agreement by and among Charlotte Motor Speedway, Inc., Sonic Financial
Corporation, Town and Country Ford, Inc., O. Bruton Smith, SMDA Properties LLC and Chartown, dated
February 10, 1995 (incorporated by reference to Exhibit 10.50 to the Form S-1).
*10.12 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 the Form S-1).
*10.13 Purchase Agreement by and among the Company and Calvin Carl Combs, Linda Fox Combs, Dennis J.
Combs, Ned D. Combs, and Judy C. Benfield (incorporated by reference to Exhibit 10.57 to the
Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 1995).
*10.14 Stock Purchase Agreement dated January 22, 1996 between the Company and shareholders of National
Raceways, Inc. (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the
Company filed as of February 5, 1996 (the "BMS Form 8-K")).
*10.15 Promissory Note dated January 22, 1996 by the Company and Speedway Funding Corp. in favor of
NationsBank, N.A. (incorporated by reference to Exhibit 99.2 to the BMS Form 8-K).
*10.16 Guaranty Agreement dated January 22, 1996 among National Raceways, Inc., Charlotte Motor Speedway,
Inc., Atlanta Motor Speedway, Inc., 600 Racing, Inc. and NationsBank, N.A. (incorporated by
reference to Exhibit 99.3 to the BMS Form 8-K).
*10.17 Non-Negotiable Promissory Note date April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the 1995 Form 10-K).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*10.18 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")).
*10.19 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).
*10.20 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).
*10.21 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).
*10.22 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")).
*10.23 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).
*10.24 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).
*10.25 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).
*10.26 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union
Indenture).
*10.27 Registration Rights Agreement dated as of September 26, 1996 among the Company, Wheat, First
Securities, Inc, Montgomery Securities and J.C. Bradford & Co. (incorporated by reference to
Exhibit 4.3 to the November 1996 Form S-3).
*10.28 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")).
*10.29 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).
*10.31 Speedway Motorsports, Inc. Employee Stock Purchase Plan amended and restated as of July 1, 1996
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No.
333-17687) of the Company).
10.32 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.
10.33 Promissory Note dated June 30, 1997 among the Company and Speedway Funding Corp., as borrowers,
and NationsBank, N.A. as lender.
10.34 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.
10.35 Purchase Agreement dated August 4, 1997 among the Company and the Initial Purchasers.
10.36 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.
*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 (incorporated by reference to Exhibit 21.1 to the 1996 Form 10-K).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
23.1 Consent of Deloitte & Touche LLP
**23.2 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1).
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.
99.1 Form of Letter of Transmittal regarding Exchange Offer.
99.2 Notice of Guaranteed Delivery.
</TABLE>
* Filed previously.
** To be furnished by amendment.
ITEM 21(B). SCHEDULES.
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
<S> <C> <C>
II Valuation and Qualifying Accounts
</TABLE>
Note: All other schedules are omitted because they are not applicable or not
required.
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 September 8, 1997.
SPEEDWAY MOTORSPORTS, INC.
By: /s/ WILLIAM R. BROOKS
WILLIAM R. BROOKS
VICE PRESIDENT, TREASURER,
CHIEF FINANCIAL OFFICER AND
DIRECTOR
POWER OF ATTORNEY
We, the undersigned directors and officers of Speedway Motorsports, Inc.,
do hereby constitute and appoint each of Messrs. O. Bruton Smith, H.A. Wheeler
and William R. Brooks, each with full power of substitution, our true and lawful
attorney-in-fact and agent to do any and all acts and things in our names and in
our behalf in our capacities stated below, which acts and things any of them may
deem necessary or advisable to enable Speedway Motorsports, Inc. to comply with
the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but not limited to, power and
authority to sign for any or all of us in our names, in the capacities stated
below, any and all amendments (including post-effective amendments) hereto; and
we do hereby ratify and confirm all that they shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ O. BRUTON SMITH Chief Executive Officer September 8, 1997
O. BRUTON SMITH (principal executive
officer) and Chairman
/s/ H.A. WHEELER President, Chief Operating September 8, 1997
H.A. WHEELER Officer and Director
/s/ WILLIAM R. BROOKS Vice President, Treasurer, September 8, 1997
WILLIAM R. BROOKS Chief Financial Officer
(principal financial and
accounting officer) and
Director
/s/ EDWIN R. CLARK Executive Vice President and September 8, 1997
EDWIN R. CLARK Director
Director September , 1997
WILLIAM P. BENTON
/s/ MARK M. GAMBILL Director September 8, 1997
MARK M. GAMBILL
</TABLE>
II-5
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULE
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION PAGE
<S> <C> <C>
II Valuation and Qualifying Accounts................................................................ S-2
</TABLE>
Note: All other schedules are omitted because they are not applicable or not
required.
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES BALANCE AT
BEGINNING OF TO END OF
PERIOD EXPENSE DEDUCTIONS PERIOD
<S> <C> <C> <C> <C>
1) Reserve for bad debts
December 31, 1994............................................. $233 $ 12 $ (62)(1) $183
December 31, 1995............................................. 183 30 (67)(1) 146
December 31, 1996............................................. 146 97 (82)(1) 161
2) Unrealized loss on marketable equity securities
December 31, 1994............................................. 284 -- (249)(2) 35
December 31, 1995............................................. 35 -- 57(2) 92
December 31, 1996............................................. 92 -- 90(3) 182
</TABLE>
(1) Represents actual write-offs of specific accounts receivable.
(2) Represents recovery of previously unrealized losses on marketable equity
securities.
(3) Represents an increase in unrealized losses on marketable equity securities.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1, File No. 33-87740 (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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
4.1 Indenture dated as of August 4, 1997 between the Company and First Trust National Association, as
Trustee (the "Indenture").
4.2 Form of 8 1/2% Senior Subordinated Notes Due 2007 (included in the Indenture).
4.3 Registration Rights Agreement dated as of August 4, 1997 among the Company and the Initial
Purchasers.
**5.1 Opinion of Parker, Poe, Adams & Bernstein L.L.P. regarding the legality of the securities being
registered.
*10.1 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).
*10.2 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).
*10.3 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).
*10.4 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).
*10.5 Documentary Letter of Credit issued by NationsBank of North Carolina, N.A. for the account of
Charlotte Motor Speedway, Inc. in favor of Yamaha Motor Co., Ltd., Japan in the amount of
$1,600,000 dated as of September 19, 1994 (incorporated by reference to Exhibit 10.41 to the Form
S-1).
*10.6 Sales Agreement by and between Yamaha Motor Co. Ltd. and Charlotte Motor Speedway, Inc. dated as
of August 1, 1994 (incorporated by reference to Exhibit 10.42 to the Form S-1).
*10.7 Deferred Compensation Plan and Agreement by and between Atlanta Motor Speedway, Inc. and Edwin R.
Clark, dated as of January 22, 1993 (incorporated by reference to Exhibit 10.43 to the Form S-1).
*10.8 Deferred Compensation Plan and Agreement by and between Charlotte Motor Speedway, Inc. and H.A.
"Humpy" Wheeler (incorporated by reference to Exhibit 10.44 to the Form S-1).
*10.9 Speedway Motorsports, Inc. 1994 Stock Option Plan (incorporated by reference to Exhibit 10.45 to
the Form S-1).
*10.10 Speedway Motorsports Inc. Formula Stock Option Plan (incorporated by reference to Exhibit 10.3 to
the Annual Report on Form 10-K of the Company for the year ended December 31, 1995 (the "1995 Form
10-K").
*10.11 Amended and Restated Agreement by and among Charlotte Motor Speedway, Inc., Sonic Financial
Corporation, Town and Country Ford, Inc., O. Bruton Smith, SMDA Properties LLC and Chartown, dated
February 10, 1995 (incorporated by reference to Exhibit 10.50 to the Form S-1).
*10.12 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 the Form S-1).
*10.13 Purchase Agreement by and among the Company and Calvin Carl Combs, Linda Fox Combs, Dennis J.
Combs, Ned D. Combs, and Judy C. Benfield (incorporated by reference to Exhibit 10.57 to the
Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 1995).
*10.14 Stock Purchase Agreement dated January 22, 1996 between the Company and shareholders of National
Raceways, Inc. (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the
Company filed as of February 5, 1996 (the "BMS Form 8-K")).
*10.15 Promissory Note dated January 22, 1996 by the Company and Speedway Funding Corp. in favor of
NationsBank, N.A. (incorporated by reference to Exhibit 99.2 to the BMS Form 8-K).
*10.16 Guaranty Agreement dated January 22, 1996 among National Raceways, Inc., Charlotte Motor Speedway,
Inc., Atlanta Motor Speedway, Inc., 600 Racing, Inc. and NationsBank, N.A. (incorporated by
reference to Exhibit 99.3 to the BMS Form 8-K).
*10.17 Non-Negotiable Promissory Note date April 24, 1995 by O. Bruton Smith in favor of the Company
(incorporated by reference to Exhibit 10.20 to the 1995 Form 10-K).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*10.18 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")).
*10.19 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).
*10.20 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).
*10.21 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).
*10.22 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")).
*10.23 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).
*10.24 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).
*10.25 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).
*10.26 Form of 5 3/4% Convertible Subordinated Debenture due 2003 (included in the First Union
Indenture).
*10.27 Registration Rights Agreement dated as of September 26, 1996 among the Company, Wheat, First
Securities, Inc, Montgomery Securities and J.C. Bradford & Co. (incorporated by reference to
Exhibit 4.3 to the November 1996 Form S-3).
*10.28 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")).
*10.29 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).
*10.31 Speedway Motorsports, Inc. Employee Stock Purchase Plan amended and restated as of July 1, 1996
(incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No.
333-17687) of the Company).
10.32 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.
10.33 Promissory Note dated June 30, 1997 among the Company and Speedway Funding Corp., as borrowers,
and NationsBank, N.A. as lender.
10.34 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.
10.35 Purchase Agreement dated August 4, 1997 among the Company and the Initial Purchasers.
10.36 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.
*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 (incorporated by reference to Exhibit 21.1 to the 1996 Form 10-K).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
23.1 Consent of Deloitte & Touche LLP
**23.2 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1).
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.
99.1 Form of Letter of Transmittal regarding Exchange Offer.
99.2 Notice of Guaranteed Delivery.
</TABLE>
* Filed previously.
** To be furnished by amendment.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SPEEDWAY MOTORSPORTS, INC.
Speedway Motorsports, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. That the Shareholders and the Board of Directors of the Corporation have
given their written consent or affirmative vote for the adoption of resolutions
setting forth a proposed amendment to the Corporation's Certificate of
Incorporation (the "Amendment"). The resolution setting forth the Amendment is
as follows:
RESOLVED, that the Corporation's Certificate of Incorporation be amended by
deleting Section 4.01 in its entirety and replacing it with the following:
Section 4.01. AUTHORIZED CAPITAL STOCK. The aggregate number of shares
of capital stock which the Corporation shall have authority to issue is Two
Hundred and Three Million (203,000,000) shares, of which Two Hundred Million
(200,000,000) shares shall be common stock, par value $.01 per share (the
"Common Stock"), and Three Million (3,000,000) shares shall be preferred stock,
par value $.10 per share (the "Preferred Stock").
2. That the Amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware, as amended.
IN WITNESS WHEREOF, Speedway Motorsports, Inc. has caused this Certificate
to be signed by William R. Brooks, its Vice President and Marylaurel E. Wilks,
its Secretary, as of the 1st day of August 1997.
/s/ William R. Brooks, VP
--------------------------------
William R. Brooks, Vice President
ATTEST:
/s/ Marylaurel E. Wilks
- -----------------------
Marylaurel E. Wilks
Exhibit 4.1
- --------------------------------------------------------------------------------
SPEEDWAY MOTORSPORTS, INC.
$125,000,000
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
-----------------------
INDENTURE
DATED AS OF AUGUST 4, 1997
----------------------
FIRST TRUST NATIONAL ASSOCIATION,
AS TRUSTEE
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
Reconciliation and tie between the Trust Indenture Act of 1939, as amended, and
the Indenture, dated as of August 4, 1997.
TRUST
INDENTURE
ACT INDENTURE
SECTION SECTION
ss.310(a)(1) ..............................................7.10
(a)(2) ..............................................7.10
(a)(3) ..............................................N.A.
(a)(4) ..............................................N.A.
(a)(5) ..............................................7.10
(b) ..............................................7.08; 7.10
(c) ..............................................N.A.
ss.311(a) ..............................................7.11
(b) ..............................................7.11
(c) ..............................................N.A.
ss.312(a) ..............................................2.05
(b) ..............................................12.03
(c) ..............................................12.03
ss.313(a) ..............................................7.06
(b) ..............................................7.06
(c) ..............................................7.06
(d) ..............................................7.06
ss.314(a) ..............................................4.03
(b) ..............................................N.A.
(c)(1) ..............................................12.04
(c)(2) ..............................................12.04
(c)(3) ..............................................N.A.
(d) ..............................................N.A.
(e) ..............................................12.05
(f) ..............................................12.14
ss.315(a) ..............................................7.01(b)
(b) ..............................................7.05
(c) ..............................................7.01(a)
(d) ..............................................7.01(c)
(e) ..............................................6.11
ss.316(a) ..............................................2.08
(a)(1)(A) ..............................................6.05
(a)(1)(B) ..............................................6.04
(a)(2) ..............................................N.A.
(b) ..............................................6.07
(c) ..............................................N.A.
ss.317(a)(1) ..............................................6.03; 6.08
(a)(2) ..............................................6.09
(b) ..............................................2.04
ss.318(a) ..............................................12.01
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...................................... 1
Section 1.01. Definitions....................................................... 1
Section 1.02. Incorporation by Reference of Trust Indenture Act................. 15
Section 1.03. Rules of Construction............................................. 15
ARTICLE II THE NOTES...................................................................... 16
Section 2.01. Form and Dating................................................... 16
Section 2.02. Execution and Authentication...................................... 16
Section 2.03. Registrar and Paying Agent........................................ 17
Section 2.04. Paying Agent to Hold Money in Trust............................... 17
Section 2.05. Holder Lists...................................................... 18
Section 2.06. Transfer and Exchange............................................. 18
Section 2.07. Replacement Notes................................................. 24
Section 2.08. Outstanding Notes................................................. 24
Section 2.09. Treasury Notes.................................................... 25
Section 2.10. Temporary Notes................................................... 25
Section 2.11. Cancellation...................................................... 25
Section 2.12. Defaulted Interest................................................ 25
ARTICLE III REDEMPTION AND PREPAYMENT..................................................... 26
Section 3.01. Notices to Trustee................................................ 26
Section 3.02. Selection of Notes to Be Redeemed................................. 26
Section 3.03. Notice of Redemption.............................................. 26
Section 3.04. Effect of Notice of Redemption.................................... 27
Section 3.05. Deposit of Redemption Price....................................... 27
Section 3.06. Notes Redeemed in Part............................................ 28
Section 3.07. Optional Redemption............................................... 28
Section 3.08. Mandatory Redemption.............................................. 28
ARTICLE IV COVENANTS...................................................................... 28
Section 4.01. Payment of Notes.................................................. 28
Section 4.02. Maintenance of Office or Agency................................... 29
Section 4.03. Reports........................................................... 29
Section 4.04. Compliance Certificate............................................ 30
Section 4.05. Taxes............................................................. 31
Section 4.06. Stay, Extension and Usury Laws.................................... 31
Section 4.07. Restricted Payments............................................... 31
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.... 33
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock........ 34
Section 4.10. Asset Sales....................................................... 35
Section 4.11. Transactions with Affiliates...................................... 39
Section 4.12. Liens............................................................. 39
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<PAGE>
Section 4.13. Guarantees of Certain Indebtedness................................ 40
Section 4.14. Corporate Existence............................................... 40
Section 4.15. Offer to Repurchase Upon Change of Control........................ 40
Section 4.16. Limitation on Layering............................................ 41
Section 4.17. Sale and Leaseback Transactions................................... 41
Section 4.18. Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Subsidiaries............................................. 42
Section 4.19. Payments for Consent.............................................. 42
Section 4.20. Future Guarantors................................................. 42
Section 4.21. Investment Company Act............................................ 42
ARTICLE V SUCCESSORS...................................................................... 43
Section 5.01. Merger, Consolidation or Sale of Assets........................... 43
Section 5.02. Successor Corporation Substituted................................. 43
ARTICLE VI DEFAULTS AND REMEDIES.......................................................... 44
Section 6.01. Events of Default................................................. 44
Section 6.02. Acceleration...................................................... 45
Section 6.03. Other Remedies.................................................... 46
Section 6.04. Waiver of Past Defaults........................................... 47
Section 6.05. Control by Majority............................................... 47
Section 6.06. Limitation on Suits............................................... 47
Section 6.07. Rights of Holders of Notes to Receive Payment..................... 48
Section 6.08. Collection Suit by Trustee........................................ 48
Section 6.09. Trustee May File Proofs of Claim.................................. 48
Section 6.10. Priorities........................................................ 49
Section 6.11. Undertaking for Costs............................................. 49
Section 6.12. Restoration of Rights and Remedies................................ 49
Section 6.13. Rights and Remedies Cumulative.................................... 49
Section 6.14. Delay or Omission Not Waiver...................................... 50
ARTICLE VII TRUSTEE....................................................................... 50
Section 7.01. Duties of Trustee................................................. 50
Section 7.02. Rights of Trustee................................................. 51
Section 7.03. Individual Rights of Trustee...................................... 52
Section 7.04. Trustee's Disclaimer.............................................. 52
Section 7.05. Notice of Defaults................................................ 52
Section 7.06. Reports by Trustee to Holders of the Notes........................ 53
Section 7.07. Compensation and Indemnity........................................ 53
Section 7.08. Replacement of Trustee............................................ 54
Section 7.09. Successor Trustee by Merger, etc.................................. 55
Section 7.10. Eligibility; Disqualification..................................... 55
Section 7.11. Preferential Collection of Claims Against Company................. 55
ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE..................................... 56
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.......... 56
Section 8.02. Legal Defeasance and Discharge.................................... 56
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<PAGE>
Section 8.03. Covenant Defeasance............................................... 56
Section 8.04. Conditions to Legal or Covenant Defeasance........................ 57
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions................................. 58
Section 8.06. Repayment to Company.............................................. 59
Section 8.07. Reinstatement..................................................... 59
ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER .............................................. 59
Section 9.01. Without Consent of Holders of Notes............................... 59
Section 9.02. With Consent of Holders of Notes.................................. 60
Section 9.03. Compliance with Trust Indenture Act............................... 62
Section 9.04. Revocation and Effect of Consents................................. 62
Section 9.05. Notation on or Exchange of Notes.................................. 62
Section 9.06. Trustee to Sign Amendments, etc................................... 62
ARTICLE X SUBORDINATION................................................................... 63
Section 10.01. Agreement to Subordinate......................................... 63
Section 10.02. Liquidation; Dissolution; Bankruptcy............................. 63
Section 10.03. Default on Designated Senior Indebtedness........................ 63
Section 10.04. Acceleration of Notes............................................ 64
Section 10.05. When Distribution Must Be Paid Over.............................. 64
Section 10.06. Notice by Company................................................ 65
Section 10.07. Subrogation...................................................... 65
Section 10.08. Relative Rights.................................................. 65
Section 10.09. Subordination May Not Be Impaired by Company..................... 66
Section 10.10. Distribution or Notice to Representative......................... 66
Section 10.11. Rights of Trustee and Paying Agent............................... 66
Section 10.12. Authorization to Effect Subordination............................ 66
Section 10.13. Amendments....................................................... 67
ARTICLE XI SUBSIDIARY GUARANTEES.......................................................... 67
Section 11.01. Subsidiary Guarantees............................................ 67
Section 11.02. Execution and Delivery of Subsidiary Guarantee................... 68
Section 11.03. Guarantors May Consolidate or Merger on Certain Terms............ 68
Section 11.04. Releases of Subsidiary Guarantees................................ 69
Section 11.05. Trustee to Include Paying Agent.................................. 70
Section 11.06. Subordination of Subsidiary Guarantees........................... 70
Section 11.07. Unrestricted Subsidiary.......................................... 70
Section 11.08. Limits on Subsidiary Guarantees.................................. 71
ARTICLE XII MISCELLANEOUS................................................................. 71
Section 12.01. Trust Indenture Act Controls..................................... 71
Section 12.02. Notices.......................................................... 71
Section 12.03. Communication by Holders of Notes with Other Holders of
Notes................................................................... 72
Section 12.04. Certificate and Opinion as to Conditions Precedent............... 72
Section 12.05. Statements Required in Certificate or Opinion.................... 73
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<PAGE>
Section 12.06. Rules by Trustee and Agents...................................... 73
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders............................................................ 73
Section 12.08. Governing Law.................................................... 73
Section 12.09. No Adverse Interpretation of Other Agreements.................... 74
Section 12.10. Successors....................................................... 74
Section 12.11. Severability..................................................... 74
Section 12.12. Counterpart Originals............................................ 74
Section 12.13. Table of Contents, Headings, etc................................. 74
Section 12.14. Further Instruments and Acts..................................... 74
</TABLE>
LIST OF EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B TRANSFER CERTIFICATE
- iv -
<PAGE>
INDENTURE
THIS INDENTURE is dated as of August 4, 1997 (this "Indenture"), by and
among SPEEDWAY MOTORSPORTS, INC., a Delaware corporation (the "Company"), the
corporations listed on the signature pages hereto (each, a "Guarantor" and
collectively, the "Guarantors") and FIRST TRUST NATIONAL ASSOCIATION, as trustee
(the "Trustee").
RECITALS
The Company has duly authorized the creation and issue of its 8 1/2%
Senior Subordinated Notes Due 2007 (the "Initial Notes") of substantially the
tenor and amount hereinafter set forth, and to provide therefor and for, if and
when issued in exchange for the Initial Notes pursuant to this Indenture and the
Registration Rights Agreement (as defined herein), the Company's 8 1/2% Senior
Subordinated Notes Due 2007 (the "Exchange Notes," and together with the Initial
Notes, the "Notes"), the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Notes, when executed by the Company
and authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company and this Indenture a valid
instrument of the Company, in accordance with their respective terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the purchase of the Initial Notes by the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Indebtedness" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person that was not
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person, and in either case for purposes of this Indenture, shall be deemed to be
Incurred by such specified Person at the time such other Person is merged with
or into or becomes a Subsidiary of such specified Person, or at the time such
asset is acquired by such specified Person, as the case may be.
"Additional Notes" means up to $75.0 million in aggregate principal
amount of additional Notes having identical terms and conditions to the Notes
initially issued hereunder that may be issued, subject to the restrictions
contained in the Credit Agreement and under Section 4.09 hereof. For purposes of
this Indenture, any Additional Notes shall be part of the same issue of
-1-
<PAGE>
Notes initially issued hereunder, and the Holders of any such Additional Notes
shall vote on all matters with the Holders of the Notes initially issued
hereunder.
"Affiliate" of any specified Person means (i) any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director or
executive officer of (a) such specified Person or (b) any Person described in
the preceding clause (i). For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Affiliate Transaction" has the meaning set forth in Section 4.11
hereof.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of (x) a sale and
leaseback, (y) the sale or other transfer of Equity Interests in or assets of
the Company's Unrestricted Subsidiary or (z) a Like Kind Exchange) other than
sales of inventory in the ordinary course of business consistent with past
practices; PROVIDED, that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company, its Subsidiaries and the
Unrestricted Subsidiary taken as a whole will be governed by Section 4.15 and/or
Sections 5.01 and 5.02 hereof and shall not be deemed to be an "Asset Sale," and
(ii) the issue or sale by the Company or any of its Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $500,000 or (b) for net proceeds in
excess of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by
the Company to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.07
hereof will not be deemed to be an "Asset Sale."
"Asset Sale Offer" has the meaning set forth in Section 4.10 hereof.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors as now or hereinafter constituted.
2
<PAGE>
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of such Board of
Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interest, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and Eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the 1997
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition.
"Certificated Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A and that do not include the information called for
by footnotes 1 and 3 thereof.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of (A) the Company and its Subsidiaries taken as
a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than O. Bruton Smith or his Related Parties or Sonic
Financial Corporation or any of their respective Affiliates or (B) Sonic
Financial Corporation to any "person" (as defined above) other than O. Bruton
Smith or his Related Parties or any of their respective Affiliates, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company or
Sonic Financial Corporation, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that (A) any "person" (as defined above), other than O. Bruton Smith or his
Related Parties or Sonic Financial Corporation or any of their respective
Affiliates, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the Voting Stock of the Company or (B) any "person" (as defined
above), other than O. Bruton
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Smith or his Related Parties or any of their respective Affiliates, becomes the
beneficial owner, directly or indirectly, of more than 50% of the Voting Stock
of Sonic Financial Corporation, (iv) the first day on which a majority of the
members of the Board of Directors of the Company or Sonic Financial Corporation
are not Continuing Directors or (v) a Repurchase Event occurs under the
Convertible Note Indenture.
"Change of Control Offer" has the meaning set forth in Section 4.15
hereof.
"Change of Control Payment" has the meaning set forth in Section 4.15
hereof.
"Change of Control Payment Date" has the meaning set forth in Section
4.15 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" means Speedway Motorsports, Inc., a Delaware corporation.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income minus (v) non-cash items of such Person and its Subsidiaries increasing
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such
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Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED, that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income of, or any
dividends or other distributions from, the Unrestricted Subsidiary, to the
extent otherwise included, shall be excluded, until distributed in cash to the
Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, with respect to any Person as of any date
of determination, any member of the Board of Directors of such Person who (i)
was a member of such Board of Directors on the date of this Indenture or (ii)
was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board of Directors at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company
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"Convertible Note Indenture" means that certain Indenture dated as of
September 1, 1996, between the Company and First Union National Bank of North
Carolina, as trustee, governing the Company's 5 3/4% Convertible Subordinated
Debentures Due 2003.
"Covenant Defeasance" has the meaning set forth in Section 8.03 hereof.
"Credit Agreement" means that certain Credit Agreement dated as of
August 4, 1997, by and among the Company, as borrower, and the lenders named
therein, including NationsBank, N.A., as agent for the lenders and a lender, and
First Union National Bank, as co-agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, extended,
replaced or refinanced from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequester or similar official under any Bankruptcy Law.
"Default" means any event that is, or with the passage of time or the
giving of notice, or both, would be an Event of Default.
"Depository" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) so long as Senior
Indebtedness is outstanding under the Credit Agreement, all Senior Indebtedness
outstanding under the Credit Agreement and (ii) thereafter, any other Senior
Indebtedness permitted under this Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Company as "Designated
Senior Indebtedness."
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"DTC" has the meaning set forth in Section 2.03 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning set forth in Section 6.01 hereof.
"Excess Proceeds" has the meaning set forth in Section 4.10(b) hereof.
"Exchange Notes" has the meaning set forth in the Recitals.
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"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Exchange Notes for
Initial Notes.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Indebtedness, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Subsidiaries
or secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not such guarantee or Lien is called upon) and (iv) the product of
(a) all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred stock of such Person,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the
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Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 3 to the form of
the Note attached hereto as Exhibit A.
"Government Securities" means: (i) securities that are (a) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof; and (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any Government Security which is specified in clause (i) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal or interest on any Government Security
which is so specified and held; PROVIDED, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Security or the specific payment of principal or
interest of the Government Security evidenced by such depositary receipt.
"Guarantee" or "guarantee" (unless the context requires otherwise)
means a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner (including, without limitation, letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Indebtedness. The term
"guarantee" used as a verb shall have a correlative meaning.
"Guarantor" means (i) each of the Company's Subsidiaries which becomes
a guarantor of the Notes pursuant to Article XI and (ii) each of the Company's
Subsidiaries executing a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of this Indenture; PROVIDED, that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Subsidiary Guarantee is released in accordance
with the terms hereof.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor,
(i) the guarantee of such Guarantor of the Company's Obligations under the
Credit Agreement and (ii) any other Indebtedness permitted to be incurred by
such Guarantor under the terms of this Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Guarantee of such Guarantor.
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Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include (u) any Indebtedness of such Guarantor
representing a guarantee of Indebtedness of the Company or any other Guarantor
which is subordinate or junior to, or PARI PASSU with, the Notes or the
Subsidiary Guarantee of such other Guarantor, as the case may be, (v) any
Indebtedness that is expressly subordinate or junior in right of payment to any
other Indebtedness of such Guarantor, (w) any liability for federal, state,
local or other taxes owed or owing by such Guarantor, (x) any Indebtedness of
such Guarantor to any of its Subsidiaries or other Affiliates, (y) any trade
payables or (z) that portion of any Indebtedness that is incurred in violation
of this Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates and the value of foreign currencies purchased by the Company
or any of its Subsidiaries in the ordinary course of business.
"Holder" means a Person in whose name one of the Notes is registered.
"incur" has the meaning set forth in Section 4.09 hereof.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent" means, with respect to the Company and its Subsidiaries,
any person who (i) is in fact independent, (ii) does not directly or indirectly
have any material financial interest in the Company or any of its Subsidiaries,
or in any Affiliate of the Company or any of its Subsidiaries (other than as a
result of holding securities of the Company) and (iii) is not an officer,
employee, promoter, underwriter, trustee, partner or person performing similar
functions for the Company or any of its Subsidiaries.
"Initial Notes" has the meaning set forth in the Recitals.
"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),
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<PAGE>
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
PROVIDED, that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"Legal Defeasance" has the meaning set forth in Section 8.02 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Like Kind Exchange" means the exchange pursuant to Section 1031 of the
Code of (i) any real property (other than any speedway that is owned on or
acquired after the date of this Indenture by the Company or any Subsidiary) used
or to be used in connection with the business of the Company or (ii) any other
real property to be used in connection with the business of the Company.
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds (or in the case of any
Asset Sale involving the Unrestricted Subsidiary, the amount of such aggregate
cash proceeds that equals the aggregate amount of all Restricted Investments in
the Unrestricted Subsidiary that have not been repaid prior to the date of such
Asset Sale) received by the Company or any of its Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and
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investment banking fees and sales commissions), any relocation expenses incurred
as a result thereof, taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP. Notwithstanding the
foregoing, in the event the Company or any of its Subsidiaries engages in a Like
Kind Exchange, Net Proceeds shall not include any cash proceeds with respect to
such Like Kind Exchange that are reinvested in or used to purchase pursuant to
Section 1031 of the Code like kind real property used or to be used in the
business of the Company.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the
Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against the Unrestricted Subsidiary) would permit (upon
notice or lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Note" or "Notes" have the meaning set forth in the Recitals.
"Note Custodian" means the Trustee, as custodian with respect to the
Global Notes, or any successor entity thereto.
"Obligations" means any principal, interest, premium, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer Amount" has the meaning set forth in Section 4.10(c) hereof.
"Offer Period" has the meaning set forth in Section 4.10(c) hereof.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company or the
Trustee.
"Paying Agent" has the meaning set forth in Section 2.03 hereof.
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"Payment Blockage Notice" has the meaning set forth in Section 10.03
hereof.
"Permitted Investments" means: (i) any Investment in the Company or in
a Wholly Owned Subsidiary of the Company; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (y) such Person becomes a
Wholly Owned Subsidiary of the Company or (z) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Subsidiary of the Company; and (iv) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof.
"Permitted Liens" means: (i) Liens on assets of the Company securing
Senior Indebtedness and Liens on assets of a Guarantor securing Guarantor Senior
Indebtedness of such Guarantor; PROVIDED, that such Senior Indebtedness or
Guarantor Senior Indebtedness, as the case may be, was permitted by the terms of
this Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, PROVIDED that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens relating to judgments to
the extent permitted under this Indenture; and (vii) Liens existing on the date
of this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; PROVIDED, that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date no earlier than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Subsidiary which is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or agency
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or any political subdivision thereof (including any subdivision or ongoing
business of any such entity or substantially all of the assets of any such
entity, subdivision or business).
"Purchase Date" has the meaning set forth in Section 4.10(c) hereof.
"Registrar" has the meaning set forth in Section 2.03 hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 4, 1997, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"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.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer or employee to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning set forth in Section 4.07 hereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) Indebtedness under the Credit Agreement
(including interest in respect thereof accruing after the commencement of any
bankruptcy or similar proceeding to the extent that such interest is allowable
as a bankruptcy claim in such proceeding) and (ii) any other Indebtedness
permitted to be incurred by the Company under the terms of this Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Notes. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (v) any Indebtedness that is expressly subordinate
or junior in right of payment to any other Indebtedness of the Company, (w) any
liability for federal, state, local or other taxes owed or owing by the Company,
(x) any Indebtedness of the Company to any of its Subsidiaries, the Unrestricted
Subsidiary or other Affiliates, (y) any trade payables or (z) that portion of
Indebtedness that is incurred in violation of this Indenture.
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"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any payment of interest on or
principal of any Indebtedness, the date on which such payment was scheduled to
be made in the documentation governing such Indebtedness without regard to the
occurrence of any subsequent event or contingency.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership of which (a) the sole general partner or the
managing general partner is such Person or a Subsidiary of such Person or (b)
the only general partners are such Person or of one or more Subsidiaries of such
Person (or any combination thereof). Notwithstanding the foregoing, the
Unrestricted Subsidiary shall not, while designated as an unrestricted
subsidiary under Section 11.07 hereof, be a Subsidiary of the Company for any
purposes of this Indenture.
"Subsidiary Guarantee" means, individually and collectively, the
guarantees given by the Guarantors pursuant to Article XI hereof, including a
notation in the Notes substantially in the form included in Exhibit A.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06(g) hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means Oil-Chem Research Corp. and its
Subsidiaries taken as a whole.
"Voting Stock" means, with respect to any Person as of any date, the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date
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and the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
Notwithstanding the foregoing, the Unrestricted Subsidiary shall not, while
designated as an unrestricted subsidiary under Section 11.07 hereof, be included
in the definition of Wholly Owned Subsidiary for any purposes of this Indenture.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon
the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular;
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(e) provisions apply to successive events and
transactions; and
(f) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE II
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the certificate of authentication of the Trustee thereon
shall be substantially in the form included in Exhibit A hereto, which is
incorporated in and expressly made a part of this Indenture. The Subsidiary
Guarantees shall be substantially in the form included in Exhibit A hereto, the
terms of which are incorporated in and made part of this Indenture. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 3
thereto). Notes issued in certificated form shall be substantially in the form
of Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 3 thereto). Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and each shall provide that it
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon and that the aggregate amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4
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of the Notes. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Sections 2.07 and 9.01(f)
hereof. The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company or any Guarantor in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money received from the
Company or a Subsidiary. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company or a Guarantor, the Trustee shall serve as
Paying Agent for the Notes.
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SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall, or shall cause the Registrar to, furnish
to the Trustee at least seven Business Days before each interest payment date,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes and the Company and the Guarantors shall
otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented by a Holder to the Registrar with a
request:
(i) to register the transfer of the Certificated
Notes; or
(ii) to exchange such Certificated Notes for an
equal principal amount of Certificated Notes of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; PROVIDED,
HOWEVER, that the Certificated Notes presented or surrendered for
register of transfer or exchange:
(A) shall be duly endorsed or accompanied by
a written instruction of transfer in form
satisfactory to the Registrar duly executed by such
Holder or by his attorney, duly authorized in
writing; and
(B) in the case of a Certificated Note that
is a Transfer Restricted Security, such request shall
be accompanied by the following additional
information and documents, as applicable:
(1) if such Transfer Restricted
Security is being delivered to the Registrar
by a Holder for registration in the name of
such Holder, without transfer, a
certification to that effect from such
Holder (in substantially the form of Exhibit
B hereto); or
(2) if such Transfer Restricted
Security is being transferred to a
"qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the
Securities Act or pursuant to an exemption
from registration in accordance with Rule
144 or Rule 904 under the Securities Act or
pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from such
Holder (in substantially the form of Exhibit
B hereto); or
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(3) if such Transfer Restricted
Security is being transferred in reliance on
another exemption from the registration
requirements of the Securities Act, a
certification to that effect from such
Holder (in substantially the form of Exhibit
B hereto) and an Opinion of Counsel from
such Holder or the transferee reasonably
acceptable to the Company and to the
Registrar to the effect that such transfer
is in compliance with the Securities Act.
(b) Transfer of a Certificated Note for a Beneficial Interest
in a Global Note. A Certificated Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a
Certificated Note, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together
with:
(i) if such Certificated Note is a Transfer
Restricted Security, a certification from the Holder thereof
(in substantially the form of Exhibit B hereto) to the effect
that such Certificated Note is being transferred by such
Holder to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act; and
(ii) whether or not such Certificated Note is a
Transfer Restricted Security, written instructions from the
Holder thereof directing the Trustee to make, or to direct the
Note Custodian to make, an endorsement on the Global Note to
reflect an increase in the aggregate principal amount of the
Notes represented by the Global Note,
in which case the Trustee shall cancel such Certificated Note in
accordance with Section 2.11 hereof and cause, or direct the Note
Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Note Custodian, the
aggregate principal amount of Notes represented by the Global Note to
be increased accordingly. If no Global Notes are then outstanding, the
Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate a
new Global Note in the appropriate principal amount; PROVIDED, HOWEVER,
that if a Global Note was outstanding and all beneficial interests
thereunder were exchanged for a Certificated Note or Certificated
Notes, then the Company shall not have any obligation to issue, and the
Trustee shall not have any obligation to authenticate, a new Global
Note under this Section 2.06(b).
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture and
the procedures of the Depository therefor, which shall include
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act.
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(d) Transfer of a Beneficial Interest in a Global Note
for a Certificated Note.
(i) Any Person having a beneficial interest in a
Global Note may upon request exchange such beneficial interest
for a Certificated Note. Upon receipt by the Trustee of
written instructions or such other form of instructions as is
customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest
in a Global Note, and, in the case of a Transfer Restricted
Security, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the
Depository as being the beneficial owner, a
certification to that effect from such Person (in
substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B hereto) and an
Opinion of Counsel from the transferee or transferor
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act,
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the
Depository and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Company shall execute and,
upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate and
deliver to the transferee a Certificated Note in the
appropriate principal amount.
(ii) Certificated Notes issued in exchange for a
beneficial interest in a Global Note pursuant to this Section
2.06(d) shall be registered in such names and in such
authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such Certificated Notes to the Persons in whose names
such Notes are so registered.
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(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global
Note may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the
Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such
successor Depository.
(f) Authentication of Certificated Notes in Absence of
Depository. If at any time:
(i) the Depository for the Notes notifies the Company
that the Depository is unwilling or unable to continue as
Depository for the Global Notes and a successor Depository for
the Global Notes is not appointed by the Company within 90
days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of
Certificated Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of
an authentication order in accordance with Section 2.02 hereof,
authenticate and deliver, Certificated Notes in an aggregate principal
amount equal to the principal amount of the Global Notes in exchange
for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs
(ii) and (iii), each certificate evidencing Global Notes and
Certificated Notes (and all Notes issued in exchange therefor
or substitution thereof) shall bear legends in substantially
the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE
144A UNDER THE SECURITIES ACT. THE HOLDER OF THE NOTE
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER
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THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE."
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Note) pursuant to Rule 144
under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Registrar
shall permit the Holder thereof to exchange such
Transfer Restricted Security for a Certificated Note
that does not bear the first legend set forth in (i)
above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
first legend set forth in (i) above, but shall
continue to be subject to the provisions of Section
2.06(c) hereof; PROVIDED, HOWEVER, that with respect
to any request for an exchange of a Transfer
Restricted Security that is represented by a Global
Note for a Certificated Note that does not bear the
first legend set forth in (i) above, which request is
made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144 (such
certification to be substantially in the form of
Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Exchange Offer, the Company shall issue
and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate
Exchange Notes in exchange for Initial Notes accepted for
exchange in the Exchange Offer, which Exchange Notes shall not
bear the legend set forth in (i) above, and the Registrar
shall rescind any restriction on the transfer of such Notes,
in each case unless the Holder of such Initial Notes is either
(A) a broker-dealer, (B) a Person participating in the
distribution of the Initial Notes or (C) a Person who is an
affiliate (as defined in Rule 144A) of the Company.
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(h) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in Global Notes have been exchanged
for Certificated Notes, redeemed, repurchased or cancelled, all Global
Notes shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged
for Certificated Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global
Note, by the Trustee or the Note Custodian, at the direction of the
Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Certificated Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental
charge payable upon exchange or transfer pursuant to Sections
3.07, 4.10, 4.15 and 9.05 hereto).
(iii) The Registrar shall not be required to register
the transfer of or exchange any Note selected for redemption
in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
(iv) All Certificated Notes and Global Notes issued
upon any registration of transfer or exchange of Certificated
Notes or Global Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Certificated Notes or
Global Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or
to exchange Notes during a period beginning at the
opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02
hereof and ending at the close of business on the day
of selection; or
(B) to register the transfer of or to
exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note
being redeemed in part; or
(C) to register the transfer of or to
exchange a Note between a record date and the next
succeeding interest payment date.
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(vi) Prior to due presentment for the registration of
a transfer of any Note, the Trustee, any Agent and the Company
may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose
of receiving payment of, principal of and interest on such
Notes, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Certificated
Notes and Global Notes in accordance with the provisions of
Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, such Note ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, the Note ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Trustee knows are so owned shall
be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee (and no one else) shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, the
Company shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof, and such defaulted interest
shall cease to be payable to the Persons who were Holders on the relevant
regular record date. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date; PROVIDED, that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
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ARTICLE III
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, the Company shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
PRO RATA basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or integral multiples thereof;
PROVIDED, that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at its registered
address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
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(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
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SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes
pursuant to this Section 3.07 prior to August 15, 2002. Thereafter, the
Company shall have the option to redeem the Notes, in whole or in part,
at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during
the 12-month period beginning on August 15 of the years indicated
below:
YEAR PERCENTAGE
2002........................................104.250%
2003........................................102.830%
2004........................................101.420%
2005 and thereafter.........................100.000%
(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
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The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful. The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company also from time to time may designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and from time to time may rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall
furnish to the Trustee and to all Holders within 15 days after it is or
would have been required to file such with the SEC (i) all quarterly
and annual financial information that would be required to be contained
in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the SEC, at any time after
the Company files a registration statement with respect to the Exchange
Offer or a Shelf Registration Statement (as defined in the Registration
Rights Agreement), the Company shall file a copy of all such
information and reports with the SEC for public availability (unless
the SEC will not accept such filing) and shall promptly make such
information available to all securities analysts and prospective
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investors who request it in writing. The Company and the Guarantors
shall at all times comply with TIA ss. 314(a). Notwithstanding anything
to the contrary set forth in this Section 4.03, the Trustee shall have
no duty to review the reports required to be provided by this Section
4.03 for purposes of determining compliance with any provisions of this
Indenture.
(b) For so long as any Notes remain outstanding, the Company
and the Guarantors shall furnish to all Holders and prospective
purchasers of the Notes designated by the Holders of Notes, promptly
upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of
the signing Officers with a view to determining whether the Company has
kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has
kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company is taking or proposes to
take with respect thereto) and that to the best of his or her knowledge
no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to
Section 4.03(a) above shall be accompanied by a written statement of
the Company's independent public accountants (who shall be a firm of
established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has
come to their attention that would lead them to believe that the
Company has violated any provisions of Article IV or Article V hereof
or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants
shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon the Company or any
Officer becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action
the Company is taking or proposes to take with respect thereto.
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SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies,
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Equity Interests of the Company or any
of its Subsidiaries (including, without limitation, any payment in connection
with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Equity Interests of
the Company or any of its Subsidiaries in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company, dividends or distributions payable to the Company or any
Subsidiary of the Company or dividends or distributions made by a Subsidiary of
the Company to all holders of its Common Stock on a PRO RATA basis); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company, any Subsidiary of the Company, the Unrestricted Subsidiary or
any direct or indirect parent of the Company (other than any such Equity
Interests owned by the Company or any Subsidiary of the Company); (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes (other than
the Notes), except at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving PRO FORMA effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 of this Indenture; and
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(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Subsidiaries
after the date of this Indenture (excluding Restricted Payments
permitted by clauses (v), (w) and (x) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period)
commencing April 1, 1997 to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds and the
fair market value, as determined in good faith by the Board of
Directors of the Company, of marketable securities received by the
Company from the issue or sale since the date of this Indenture of
Equity Interests of the Company or of debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company or the Unrestricted Subsidiary and other than Disqualified
Stock or debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that
was made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) the amount resulting from designation of the
Unrestricted Subsidiary as a Subsidiary or the Unrestricted Subsidiary
ceasing to be an unrestricted subsidiary for purposes of this Indenture
(such amount to be valued as provided in the second succeeding
paragraph) not to exceed the amount of Investments previously made by
the Company or any Subsidiary in the Unrestricted Subsidiary and which
was, while the Unrestricted Subsidiary was treated as an unrestricted
subsidiary for purposes of this Indenture, treated as a Restricted
Payment under this Indenture.
The foregoing provisions will not prohibit: (u) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (v) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company or
the Unrestricted Subsidiary) of other Equity Interests of the Company (other
than any Disqualified Stock); PROVIDED, that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (w) the defeasance, redemption or repurchase of PARI PASSU or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale (other
than to a Subsidiary of the Company or the Unrestricted Subsidiary) of Equity
Interests of the Company (other than Disqualified Stock); PROVIDED, that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (x) the making of any Restricted Investments
after the date of this Indenture not exceeding in the aggregate $25.0 million;
and (y) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company or any Subsidiary of the Company held by
any member of the Company's (or any of its Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement;
PROVIDED, that (A) the aggregate price paid for all such repurchased,
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redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in
any 12-month period plus the aggregate cash proceeds received by the Company
during such 12-month period from any reissuance of Equity Interests by the
Company to members of management of the Company and its Subsidiaries, and (B) no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.
In connection with the designation of the Unrestricted Subsidiary as a
Subsidiary or the Unrestricted Subsidiary ceasing to be an unrestricted
subsidiary for purposes of this Indenture, all outstanding Investments
previously made by the Company or any Subsidiary in the Unrestricted Subsidiary
will be deemed to constitute Investments in an amount equal to the greater of
(x) the net book value of such Investments at the time of such designation or
the Unrestricted Subsidiary ceasing to be an unrestricted subsidiary for
purposes of this Indenture and (y) the fair market value of such Investments at
the time of such designation or the Unrestricted Subsidiary ceasing to be an
unrestricted subsidiary for purposes of this Indenture.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) applicable law,
(b) this Indenture, (c) the Credit Agreement as in effect on the date of this
Indenture (and thereafter only to the extent such encumbrances or restrictions
are no more restrictive than those in effect under the Credit Agreement as in
effect on the date of this Indenture), (d) Existing Indebtedness, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (f) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, or (h)
Permitted Refinancing
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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.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness) and
that the Company will not issue any Disqualified Stock and will not permit any
of its Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER,
that (x) the Company may incur Indebtedness (including Acquired Indebtedness) or
issue shares of Disqualified Stock and (y) a Guarantor may incur Acquired
Indebtedness, in each case if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1.0 prior to and including December 31, 1998 and 2.25 to 1.0 after
January 1, 1999, determined on a PRO FORMA basis (including a PRO FORMA
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Indebtedness under the
Credit Agreement (and guarantees thereof by the Guarantors) in an
aggregate principal amount at any time outstanding (with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Subsidiaries thereunder) not
to exceed $175.0 million less the aggregate amount of all Net Proceeds
of Asset Sales applied to permanently reduce the commitments with
respect to such Indebtedness pursuant to Section 4.10 hereof;
(ii) the incurrence by the Company of Indebtedness represented
by the Notes, excluding any Additional Notes, and the incurrence by the
Guarantors of Indebtedness represented by the Subsidiary Guarantees;
(iii) the incurrence by the Company or any of its Subsidiaries
of Indebtedness represented by Capital Lease Obligations (whether or
not incurred pursuant to sale and leaseback transactions), mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary, in an aggregate principal
amount not to exceed $10.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Existing Indebtedness or Indebtedness that was
permitted by this Indenture to be incurred (other than any such
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Indebtedness incurred pursuant to clause (i), (iii), (v), (vi), (vii),
(viii), (ix) or (x) of this paragraph);
(v) the incurrence by the Company or any of its Wholly Owned
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Subsidiaries; PROVIDED, HOWEVER, that (i)
if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinate to the payment in full of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Subsidiary and (B) any
sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Subsidiary shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the
Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations that
are incurred for the purpose of fixing or hedging interest rate risk
with respect to Indebtedness that is permitted by the terms of this
Indenture to be incurred;
(vii) the incurrence by the Company of Hedging Obligations
under currency exchange agreements; PROVIDED, that such agreements were
entered into in the ordinary course of business;
(viii) the incurrence of Indebtedness of a Guarantor
represented by guarantees of Indebtedness of the Company that has been
incurred in accordance with the terms of this Indenture;
(ix) Indebtedness for letters of credit relating to workers'
compensation claims and self-insurance or similar requirements in the
ordinary course of business; and
(x) the incurrence by the Company of Indebtedness (in addition
to Indebtedness permitted by any other clause of this paragraph) in an
aggregate principal amount (or accreted value, as applicable) at any
time outstanding not to exceed $15.0 million.
SECTION 4.10. ASSET SALES.
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Subsidiary, as the case may be) receives consideration at the time
of such Asset Sale at least equal to the fair market value (evidenced
by a resolution of the Board of Directors of the Company, set forth in
an Officers' Certificate delivered to the Trustee, or by an independent
appraisal by an accounting, appraisal or investment banking firm of
national standing) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Subsidiary is in the form of
cash or Cash Equivalents; PROVIDED, HOWEVER, that (x) clause (ii) of
this paragraph shall not apply to any Asset Sale involving the
Company's Unrestricted Subsidiary and (y) this paragraph shall not
apply to any Like Kind Exchange.
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(b) Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply such Net Proceeds, at its option,
(i) to permanently reduce Senior Indebtedness (and correspondingly
reduce commitments with respect thereto in the case of any reduction of
borrowings under the Credit Agreement), (ii) to the acquisition of a
controlling interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case,
in the same or a similar line of business as the Company was engaged in
on the date of this Indenture or (iii) to reimburse the Company or its
Subsidiaries for expenditures made, and costs incurred, to repair,
rebuild, replace or restore property subject to loss, damage or taking
to the extent that the Net Proceeds consist of insurance proceeds
received on account of such loss, damage or taking. Pending the final
application of any such Net Proceeds, the Company may temporarily
reduce Senior Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first
sentence of this clause (b) will be deemed to constitute "Excess
Proceeds." Within in five days of when the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall make an Asset Sale
Offer to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
purchase, in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes to be purchased on a PRO RATA basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
Notwithstanding the foregoing, the Company and its
Subsidiaries will be permitted to consummate one or more Asset Sales
with respect to assets or properties with an aggregate fair market
value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) not in excess of
$7.5 million with respect to all such Asset Sales made subsequent to
the date of this Indenture without complying with the provisions of
clause (a) of this Section 4.10 or of the immediately preceding
paragraph.
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company as an entirety to a
Person in a transaction permitted under Section 5.01 hereof, the
successor corporation shall be deemed to have sold the properties and
assets of the Company not so transferred for purposes of this covenant
and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its
Subsidiaries deemed to be sold shall be deemed to be Net Proceeds for
purposes of this covenant.
If at any time any non-cash consideration received by the
Company in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such
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conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Proceeds thereof shall be applied in accordance
with this covenant.
(c) In the event that, pursuant to Section 4.10(b) hereof, the
Company shall be required to commence an offer to all Holders to
purchase Notes (an "Asset Sale Offer"), the Company shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer
Period"). No later than five Business Days after the termination of the
Offer Period (the "Purchase Date"), the Company shall purchase the
principal amount of Notes required to be purchased pursuant to Section
4.10(b) hereof (the "Offer Amount") or, if less than the Offer Amount
has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made. If the Purchase Date is on or
after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the
Person in whose name a Note is registered at the close of business on
such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of
the Holders, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(i) that the Asset Sale Offer is being made pursuant
to this Section 4.10 and the length of time the Asset Sale
Offer shall remain open;
(ii) the Offer Amount, the purchase price and the
Purchase Date;
(iii) that any Note not tendered or accepted for
payment shall continue to accrue interest;
(iv) that, unless the Company defaults in making such
payment, any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Purchase
Date;
(v) that Holders electing to have a Note purchased
pursuant to an Asset Sale Offer may only elect to have all of
such Note purchased and may not elect to have only a portion
of such Note purchased;
(vi) that Holders electing to have a Note purchased
pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depository,
if appointed by the
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Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(vii) that Holders shall be entitled to withdraw
their election if the Company, the depository or the Paying
Agent, as the case may be, receives, not later than the
expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have such Note purchased;
(viii) that, if the aggregate principal amount of
Notes surrendered by Holders exceeds the Offer Amount, the
Company shall select the Notes to be purchased on a PRO RATA
basis (with such adjustments as may be deemed appropriate by
the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(ix) that Holders whose Notes were purchased only in
part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered (or
transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a PRO RATA basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has
been tendered, all Notes tendered, and shall deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of
this Section 4.10. The Company, the Depository or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such
Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Note, and the Trustee, upon written request from
the Company shall authenticate and mail or deliver such new Note to
such Holder, in a principal amount equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 4.10, any
purchase pursuant to this Section 4.10 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
(d) The Company will comply with the requirements of Section
14(e) of, and Rule 14e-1, under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes
pursuant to an Asset Sale Offer.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person, (ii) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $2.5 million, the Company delivers to the Trustee a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company or, if there are
no such disinterested directors, by a majority of the members of the Board of
Directors of the Company and (iii) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, the Company delivers to the Trustee an opinion as to
the fairness to the Holders of Notes of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; PROVIDED, that (w) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors of the Company or the payment of fees
and indemnities of directors of the Company and its Subsidiaries in the ordinary
course of business and consistent with the past practices of the Company or such
Subsidiary, (x) loans or advances to employees in the ordinary course of
business, (y) transactions between or among the Company and/or its Wholly Owned
Subsidiaries and (z) Restricted Payments (other than Restricted Investments)
that are permitted by the provisions of Section 4.07 hereof, in each case, shall
not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens, unless all payments due under this Indenture
and the Notes are secured on an equal and ratable basis with the Indebtedness so
secured until such time as such Indebtedness is no longer secured by a Lien;
PROVIDED, that if such Indebtedness is by its terms expressly subordinated to
the Notes or any Subsidiary Guarantee, the Lien securing such Indebtedness shall
be subordinate and junior to the Lien securing the Notes and the Subsidiary
Guarantees with the same relative priority as such subordinate or junior
Indebtedness shall have with respect to the Notes and the Subsidiary Guarantees.
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SECTION 4.13. GUARANTEES OF CERTAIN INDEBTEDNESS.
The Company will not permit any of its Subsidiaries that is not a
Guarantor to incur, guarantee or secure through the granting of Liens the
payment of any Senior Indebtedness, and the Company will not, and will not
permit any of its Subsidiaries to, pledge any intercompany notes representing
obligations of any of its Subsidiaries, to secure the payment of any Senior
Indebtedness, in each case unless such Subsidiary, the Company and the Trustee
execute and deliver a supplemental indenture to this Indenture evidencing such
Subsidiary's Subsidiary Guarantee (providing for the unconditional guarantee by
such Subsidiary, on a senior subordinated basis, of the Notes).
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article V hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (a) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (b) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon (the "Change of Control Payment")
to the date of purchase (the "Change of Control Payment Date"). Within
15 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes
pursuant to the procedures required by this Indenture and described in
such notice. The Change of Control Payment Date shall be a Business Day
not less than 30 days nor more than 60 days after such notice is
mailed. The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of
Control.
(b) On the Change of Control Payment Date, the Company will,
to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered
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and (iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; PROVIDED, that
each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. Prior to complying with the provisions of
this Section 4.15, but in any event within 90 days following a Change
of Control, the Company will either repay all outstanding Senior
Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by this Section 4.15. The Company will
publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
(c) The Company will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements of this Section 4.15 applicable to a
Change of Control Offer made by the Company and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. LIMITATION ON LAYERING.
Notwithstanding the provisions of Section 4.09 hereof, (a) the Company
shall not incur any Indebtedness that is subordinate or junior in right of
payment to any Indebtedness of the Company and senior in any respect in right of
payment to the Notes, and (b) no Guarantor shall incur any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of such Guarantor
and senior in any respect in right of payment to the Subsidiary Guarantee of
such Guarantor.
SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; PROVIDED, that the Company or one
of its Subsidiaries may enter into a sale and leaseback transaction if (a) the
Company or such Subsidiary could have (i) incurred Indebtedness in an amount
equal to the Attributable Indebtedness relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof and (ii) incurred a Lien to secure such
Indebtedness pursuant to Section 4.12, (b) the gross cash proceeds of such sale
and leaseback transaction are at least equal to the fair market value (as
determined in good faith by the Board of Directors of the Company and set forth
in an Officers' Certificate delivered to the Trustee) of the property that is
the subject of such sale and leaseback transaction and (c) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, Section 4.10
hereof.
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SECTION 4.18. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
The Company (a) will not, and will not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Subsidiary of the Company), unless (i)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (ii) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 and (b) will not permit any Wholly Owned Subsidiary
of the Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Wholly Owned Subsidiary of the Company.
SECTION 4.19. PAYMENTS FOR CONSENT.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.20. FUTURE GUARANTORS.
The Company and each Guarantor shall cause each domestic Subsidiary of
the Company or such Guarantor, as the case may be, that, after the date of this
Indenture, becomes a Subsidiary to execute and deliver (a) an indenture
supplemental to this Indenture and thereby become a Guarantor that shall be
bound by the Subsidiary Guarantee of the Notes in the form set forth in this
Indenture (without such Guarantor being required to execute and deliver the
Subsidiary Guarantee endorsed on the Notes) and (b) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such Person and constitutes the legal, valid, binding and enforceable obligation
of such Person (subject to such customary exceptions concerning fraudulent
conveyance laws, creditors' rights and equitable principles as may be acceptable
to the Trustee in its discretion).
SECTION 4.21. INVESTMENT COMPANY ACT.
The Company shall not, and shall not permit any of its Subsidiaries to,
become an investment company subject to registration under the Investment
Company Act of 1940, as amended.
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ARTICLE V
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless: (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Company with or into a Wholly Owned Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving PRO FORMA effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company, other than for purposes of
calculating Consolidated Net Income in connection with Section 4.07), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
PROVIDED, HOWEVER, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
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ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(a) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes (whether
or not prohibited by the subordination provisions of this Indenture);
(b) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by Article X
of this Indenture);
(c) failure by the Company to comply with the provisions
described under Section 4.10 or 4.15;
(d) failure by the Company to comply with Section 4.07 or 4.09
hereof and the continuance of such failure for a period of 30 days
after notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding;
(e) failure by the Company for 60 days after notice is given
to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding to comply with any of the Company's other covenants or
other agreements in this Indenture or the Notes;
(f) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default
(i) is caused by a failure to pay principal of such Indebtedness at its
Stated Maturity (after the expiration of any applicable grace period)
or (ii) results in the acceleration of such Indebtedness prior to its
maturity and, in each case, the principal amount of which Indebtedness,
together with the principal amount of any other such Indebtedness
described in clauses (i) and (ii) above, aggregates $5.0 million or
more;
(g) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against the Company or any of its Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days; PROVIDED, that the
aggregate of all such undischarged judgments exceeds $5.0 million (net
of amounts covered by insurance);
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(h) the Company or any of its Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a "Significant
Subsidiary" pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian
of it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit
of its creditors, or
(v) generally is not paying its debts as they
become due;
(i) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any of
its Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any of
its Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a "Significant Subsidiary"; or
(iii) orders the liquidation of the Company or any of
its Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(j) the Subsidiary Guarantee of any Guarantor is held in
judicial proceedings to be unenforceable or invalid or ceases for any
reason to be in full force and effect (other than in accordance with
the terms of this Indenture) or any Guarantor or any Person acting on
behalf of any Guarantor denies or disaffirms such Guarantor's
obligations under its Subsidiary Guarantee (other than by reason of a
release of such Guarantor from its Subsidiary Guarantee in accordance
with the terms of this Indenture).
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary) occurs and is
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continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately. Upon any such declaration, the Notes shall become due and
payable immediately; PROVIDED, HOWEVER, that if any Senior Indebtedness is
outstanding under the Credit Agreement, upon a declaration of acceleration, the
Notes shall be payable upon earlier of (a) the day which is five Business Days
after the provision to the Company and the agent under the Credit Agreement of
written notice of such declaration and (b) the date of acceleration of any
Indebtedness under the Credit Agreement. Notwithstanding the foregoing, if an
Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs
with respect to the Company, any Significant Subsidiary or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary,
all outstanding Notes shall be due and payable immediately without further
action, notice or declaration on the part of the Trustee or any Holder. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to Section
3.07 hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the Notes. If an
Event of Default occurs prior to August 15, 2002, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
August 15, 2002, upon the acceleration of the Notes an additional premium shall
also become and be immediately due and payable to the extent permitted by law in
an amount, for each of the years beginning on August 15 of years, set forth
below:
YEAR PERCENTAGE
1997 111.330%
1998 109.920%
1999 108.500%
2000 107.080%
2001 105.670%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not
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impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under this Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes (including in connection
with an offer to purchase); PROVIDED, HOWEVER, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it; PROVIDED, HOWEVER, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture which the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or
that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
aggregate principal amount of the then outstanding Notes do not give
the Trustee a direction inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall be absolute and unconditional and shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company or any Guarantor for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article VI, it shall
pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
SECOND: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal,
premium and Liquidated Damages, if any and interest, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
aggregate principal amount of the then outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder of Notes has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in Section 7.07 hereof, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and
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in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.14. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article VI or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in its
exercise as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the
Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
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(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it is proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers
under this Indenture at the request of any Holders, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory
to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) The Trustee shall not be deemed to have knowledge of any
Default or Event of Default unless (i) the Trustee or a Responsible
Officer shall have actual knowledge of a Default or an Event of
Default, (ii) the Trustee or a Responsible Officer shall have received
notice of a Default or an Event of Default in accordance with the
provisions of this Indenture or (iii) a Default or an Event of Default
occurred or is occurring pursuant to Sections 4.01 or 6.01 hereof.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by
the proper Person. Except as provided in Section 7.01(b), the Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, the
Trustee may require an Officers' Certificate or an Opinion of Counsel
or both. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and
in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture; PROVIDED,
that the Trustee's conduct does not constitute willful misconduct or
negligence.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company or Guarantor
shall be sufficient if signed by an Officer of the Company or such
Guarantor.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order, demand or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that might be incurred by
it in compliance with such request, order, demand or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee; PROVIDED, HOWEVER, in the event that the Trustee acquires any
conflicting interest, the Trustee must (a) eliminate such conflict within 90
days, (b) if a registration statement with respect to the Notes is effective,
apply to the SEC for permission to continue as Trustee or (c) resign as Trustee.
Any Agent may do the same with like rights and duties. The Trustee is also
subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after May 15 of each year commencing with the year 1998,
and for so long as Notes remain outstanding, the Trustee shall mail to the
Holders of the Notes a brief report dated as of such reporting date that
complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has
occurred within the 12 months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee
shall also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder (except to
the extent such failure prejudices the Company). The Company shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel, and the Company shall pay the reasonable fees and expenses of
one such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in aggregate principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the
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Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee; PROVIDED, all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee; PROVIDED, that such corporation shall be otherwise qualified and
eligible under this Article VII and under the TIA, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case any Notes shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the Notes
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes. In the event that any Notes shall not have been
authenticated by such predecessor Trustee, any such successor Trustee may
authenticate and deliver such Notes, in either its own name or that of its
predecessor Trustee, with the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus (with its affiliates) of
at least $50 million as set forth in its most recent published annual report of
condition.
If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 7.10, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. None
of the Company or any of its Affiliates shall serve as Trustee hereunder. If at
any time the Trustee shall cease to be eligible to serve as Trustee hereunder
pursuant to the provisions of this Section 7.10, it shall resign immediately in
the manner and with the effect specified in this Article VII.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due; (b) the Company's obligations with
respect to such Notes under Article II and Section 4.02 hereof; (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith; and (d) this Article VIII. Subject to
compliance with this Article VIII, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 4.20 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant
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or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.01 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.01
hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(g) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee, in trust, for the benefit of the Holders,
cash in United States dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages,
if any, and interest on the outstanding Notes on the Stated Maturity or
on the applicable redemption date, as the case may be, and the Company
must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (ii) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article VIII concurrently with such incurrence) or
insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time
in the period ending on the 91st day after the date of deposit;
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(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit
or on the day after the last day of the applicable preference period
under Bankruptcy Law following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or any Subsidiary Guarantor with the intent of
defeating, hindering, delaying or defrauding any creditors of the
Company, any Guarantor of the Company or others; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
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SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment to the Company, may at the expense of the Company
cause to be published once, in the New York Times and The Wall Street Journal
(national edition), notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(c) to provide for the assumption of the Company's or
Guarantor's obligations to the Holders of the Notes in the case of a
merger or consolidation in accordance with this Indenture;
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(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Notes;
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA; or
(f) to provide for the issuance of Additional Notes pursuant
to this Indenture to the extent permitted under the restrictions
contained in the Credit Agreement and described under Section 4.09
hereof.
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, this Indenture
(including Sections 4.10 and 4.15 hereof), the Notes and the Subsidiary
Guarantees may be amended or supplemented with the consent of the Holders of at
least a majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes).
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors
in the execution of such amended or supplemental Indenture unless such amended
or supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture. It shall not be necessary for the consent of the Holders
of Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
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After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Trustee and the Holders of Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture, the Notes or the Subsidiary Guarantees.
However, without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the
redemption or repurchase of the Notes (other than with respect to
Sections 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of, premium, if any, or interest on
the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by Section 4.10 or 4.15 hereof);
(h) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture, except in accordance with
the terms of this Indenture; or
(i) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
In addition, any amendment to the provisions of Article X of this
Indenture or the related definitions will require the consent of the Holders of
at least 75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of Holders of Notes.
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Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Subsidiary
Guarantees or the Notes shall be set forth in an amended or supplemental
Indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article IX if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
and each Subsidiary Guarantor may not sign an amendment or supplemental
Indenture until each of their respective Boards of Directors approves it. In
executing any amended or supplemental indenture, the Trustee shall be entitled
to receive and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is authorized or permitted
by this Indenture.
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ARTICLE X
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Note is subordinated in right of payment, to
the extent and in the manner provided in this Article X, to the prior payment in
full of all Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(a) holders of Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due in respect of such
Senior Indebtedness (including, in the case of Senior Indebtedness
under the Credit Agreement, interest after the commencement of any such
proceeding at the rate specified in the Credit Agreement) before
Holders of Notes shall be entitled to receive any payment with respect
to the Notes (except that Holders may receive (i) Equity Interests or
debt securities that are subordinated to at least the same extent as
the Notes to (A) Senior Indebtedness and (B) any securities issued in
exchange for Senior Indebtedness and (ii) payments and other
distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
(b) until all Obligations with respect to Senior Indebtedness
(as provided in subsection (a) above) are paid in full, any
distribution to which Holders would be entitled but for this Article X
shall be made to holders of Senior Indebtedness (except that Holders
may receive (i) Equity Interests or debt securities that are
subordinated to at least the same extent as the Notes to (A) Senior
Indebtedness and (B) any securities issued in exchange for Senior
Indebtedness and (ii) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof), as their
interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) Equity Interests or debt securities that are subordinated to at least
the same extent as the Notes to (A) Senior Indebtedness and (B) any securities
issued in exchange for Senior Indebtedness and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Indebtedness have been paid in full if:
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(a) a default in the payment of any principal of or other
Obligations with respect to Designated Senior Indebtedness occurs and
is continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior
Indebtedness; or
(b) a default, other than a payment default under clause (a)
above, on Designated Senior Indebtedness occurs and is continuing that
then permits holders of the Designated Senior Indebtedness as to which
such default relates to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a
Representative with respect to such Designated Senior Debt. If the
Trustee receives any such Payment Blockage Notice, no subsequent
Payment Blockage Notice shall be effective for purposes of this Section
unless and until (i) at least 360 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii)
all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been waived for a period of not less than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in clause (b) of the
preceding paragraph, 179 days pass after notice is received if the
maturity of such Designated Senior Indebtedness has not been
accelerated,
if this Article X otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Indebtedness as their interests may appear or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms,
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after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article X, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
X, except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article X, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article X.
SECTION 10.07. SUBROGATION.
After all Senior Indebtedness is paid in full and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness PARI PASSU with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Indebtedness. A distribution made under this Article X to
holders of Senior Indebtedness that otherwise would have been made to Holders is
not, as between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article X defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(b) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(c) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders.
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If the Company fails because of this Article X to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article X, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
X.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article X or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article X. Only the Company, the
Representative of Designated Senior Indebtedness or a Representative may give
the notice. Nothing in this Article X shall impair the claims of, or payments
to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article X, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in
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Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, each of the Representative of Designated Senior Indebtedness and a
Representative, if any, are hereby authorized to file an appropriate claim for
and on behalf of the Holders of the Notes.
SECTION 10.13. AMENDMENTS.
The provisions of this Article X shall not be amended or modified
without the written consent of the holders of all Senior Indebtedness.
ARTICLE XI
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest on the
Notes will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. Failing payment when due of
any amount so guaranteed or any performance so guaranteed for whatever reason,
the Guarantors will be jointly and severally obligated to pay the same
immediately. The Guarantors hereby agree that their obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture. If any Holder or the Trustee is required by any court or otherwise to
return to the Company or Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or Guarantors,
any amount paid by either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that they shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article VI for
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the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article VI, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Subsidiary Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit A shall be endorsed by an officer
of such Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its President or one of its Vice Presidents and attested to by an Officer.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01, shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Subsidiary Guarantee.
If an officer or Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
SECTION 11.03. GUARANTORS MAY CONSOLIDATE OR MERGER ON CERTAIN TERMS.
(a) Except as set forth in Articles IV and V, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or
shall prevent any sale or conveyance of the property of a Guarantor as
an entirety or substantially as an entirety, to the Company.
(b) Except as set forth in Article IV, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation
or merger of a Guarantor with or into a corporation or corporations
other than the Company (whether or not affiliated with the Guarantor),
or successive consolidations or mergers in which a Guarantor or its
successor or successors shall be a party or parties, or shall prevent
any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to a corporation other than the Company
(whether or not affiliated with the Guarantor) authorized to acquire
and operate the same; PROVIDED, HOWEVER, that (i) each Guarantor hereby
covenants and agrees that, upon any such consolidation, merger, sale or
conveyance, the Subsidiary Guarantee endorsed on the Notes, and the due
and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by such Guarantor, shall
be expressly assumed (in the event that the
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Guarantor is not the surviving corporation in the merger) by
supplemental indenture reasonably satisfactory in form to the Trustee,
executed and delivered to the Trustee, by the corporation formed by
such consolidation, or into which the Guarantor shall have been merged,
or by the corporation which shall have acquired such property and (ii)
immediately after giving effect to such transaction, no Default or
Event of Default would exist. In case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the Subsidiary
Guarantee endorsed upon the Notes and the due and punctual performance
of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to
and be substituted for the Guarantor with the same effect as if it had
been named herein as a Guarantor. Such successor corporation thereupon
may cause to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the Trustee.
All the Subsidiary Guarantees so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
SECTION 11.04. RELEASES OF SUBSIDIARY GUARANTEES.
Concurrently with any sale of assets (including, if applicable, all of
the capital stock of any Guarantor), any Liens in favor of the Trustee in the
assets sold thereby shall be released; PROVIDED, that in the event of an Asset
Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. If the assets sold in
such sale or other disposition include all or substantially all of the assets of
any Guarantor or all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of a Guarantor)
shall be released and relieved of its obligations under its Subsidiary Guarantee
or Section 11.03, hereof, as the case may be; PROVIDED, that in the event of an
Asset Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations under its
Subsidiary Guarantee.
Upon the release by all holders of Senior Indebtedness and Guarantor
Senior Indebtedness of all guarantees issued by a Guarantor relating to such
Senior Indebtedness and Guarantor Senior Indebtedness and all Liens on the
property and assets of such Guarantor relating to Senior Indebtedness and
Guarantor Senior Indebtedness, then such Guarantor shall be released and
relieved of any obligations under its Subsidiary Guarantee. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that all holders of Senior Indebtedness and Guarantor Senior
Indebtedness have released all
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guarantees issued by a Guarantor and all Liens on the property and assets of
such Guarantor relating to such Senior Indebtedness and Guarantor Senior
Indebtedness, the Trustee shall execute any documents reasonably required in
order to evidence the release of such Guarantor from its obligations under its
Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee pursuant to either of the preceding paragraphs of this Section 11.04
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article XI.
SECTION 11.05. TRUSTEE TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XI, shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named, in this Article XI, in place of the Trustee.
SECTION 11.06. SUBORDINATION OF SUBSIDIARY GUARANTEES.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article XI shall be junior and subordinated to the Guarantor
Senior Indebtedness of such Guarantor on the same basis as the Notes are junior
and subordinated to Senior Indebtedness. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may receive
and/or retain payments in respect of the Notes pursuant to this Indenture,
including Article X hereof.
SECTION 11.07. UNRESTRICTED SUBSIDIARY.
The Board of Directors of the Company may at any time designate the
Unrestricted Subsidiary to be a Subsidiary; PROVIDED, that such designation
shall be deemed to be an incurrence of Indebtedness by a Subsidiary of the
Company of any outstanding Indebtedness of the Unrestricted Subsidiary and such
designation shall only be permitted if (a) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a PRO FORMA basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (b) no
Default or Event of Default would be in existence following such designation. In
addition, the Unrestricted Subsidiary shall continue to be an unrestricted
subsidiary for purposes of this Indenture only if it: (i) has no Indebtedness
other than Non-Recourse Debt; (ii) is a Person with respect to which neither the
Company nor any of its Subsidiaries has any direct or indirect obligation (A) to
subscribe for additional Equity Interests or (B) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (iii) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or any
of its Subsidiaries. If, at any time, the Unrestricted Subsidiary fails to meet
the requirements described in the preceding sentence, the Unrestricted
Subsidiary shall thereafter cease to be an unrestricted subsidiary for purposes
of this Indenture and any Indebtedness of the Unrestricted Subsidiary shall be
deemed to be
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incurred by a Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under Section 4.09
hereof, the Company shall be in default of such covenant). In the event the
Unrestricted Subsidiary is designated as a Subsidiary or ceases to be an
unrestricted subsidiary for purposes of this Indenture, the Company shall cause
the Unrestricted Subsidiary to execute and deliver to the Trustee a supplemental
indenture pursuant to which the Unrestricted Subsidiary will become a Guarantor.
SECTION 11.08. LIMITS ON SUBSIDIARY GUARANTEES.
Notwithstanding anything to the contrary in this Article XI, the
aggregate amount of the Obligations guaranteed under this Indenture by any
Guarantor shall be reduced to the extent necessary to prevent the Subsidiary
Guarantee of such Guarantor from violating or becoming voidable under any law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control. If any
provision of this Indenture modifies or excludes any provision of the TIA that
may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, a Guarantor or the Trustee
to the others is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or a Guarantor:
Speedway Motorsports, Inc.
Highway 29 North
Post Office Box 600
Concord, NC 28026-0600
Telecopier No.: (704) 532-3312
Attention: Mr. William R. Brooks
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If to the Trustee:
First Trust National Association
180 East Fifth Street
Suite 200
St. Paul, MN 55101
Telecopier No.: (612) 244-0711
Attention: Kathe Barrett
The Company, a Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company and/or any Guarantor to
the Trustee to take any action or refrain from taking any action under this
Indenture, the Company and/or such Guarantor, as the case may be, shall furnish
to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
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(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions; PROVIDED, that no such rule shall
conflict with the terms of this Indenture or the TIA.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
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SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture, the Notes or the Subsidiary Guarantees.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture, the
Subsidiary Guarantees and the Notes shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, the Subsidiary Guarantees or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
SECTION 12.14. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, the Company and the Guarantors will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purposes of
this Indenture.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
Attest: SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Chief Financial Officer and Vice
President
GUARANTORS:
Attest: ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: SPR ACQUISITION CORPORATION,
a California corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Secretary William R. Brooks
Vice President
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Attest: TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: 600 RACING, INC.,
a North Carolina corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: SONOMA FUNDING CORPORATION,
a California corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Secretary William R. Brooks
Vice President
Attest: SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
Attest: INEX CORP.,
a North Carolina corporation
/s/ Randall A. Storey By: /s/ William R. Brooks
Assistant Secretary William R. Brooks
Vice President
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Attest: SPEEDWAY FUNDING CORP.,
a Delaware corporation
/s/ David L. Lindley By: /s/ Victoria L. Garrett
Secretary Name: Victoria L. Garrett
Title: Vice President
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TRUSTEE:
FIRST TRUST NATIONAL ASSOCIATION
By: /s/ K. Barrett
Kathe Barrett
Trust Officer
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STATE OF NORTH CAROLINA )
)
COUNTY OF MECKLENBURG )
On the 4th day of August, 1997, before me personally came William R.
Brooks, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President and Chief Financial Officer of Speedway Motorsports, Inc.,
one of the corporations described in and which executed the foregoing
instrument, and that he signed his name thereto by like authority.
/s/ Judy L. S. Ballard
Notary Public
State of North Carolina
My commission expires September 4, 2000
[Seal]
STATE OF NORTH CAROLINA )
)
COUNTY OF MECKLENBURG )
On the 4th day of August, 1997, before me personally came William R.
Brooks, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of each of Atlanta Motor Speedway, Inc., Bristol Motor
Speedway, Inc., Charlotte Motor Speedway, Inc., SPR Acquisition Corporation,
Texas Motor Speedway, Inc., 600 Racing, Inc., Sonoma Funding Corporation,
Speedway Consulting & Design, Inc., The Speedway Club, Inc. and INEX Corp., each
of which corporations is described in and which executed the foregoing
instrument as one of the Guarantors, (other than Speedway Funding Corp.), and
that he signed his name thereto by like authority.
/s/ Judy L. S. Ballard
Notary Public
State of North Carolina
My commission expires September 4, 2000
[Seal]
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STATE OF DELAWARE )
-----------------
COUNTY OF NEW CASTLE )
On the day of 30th day of July, 1997, before me personally came
Victoria L. Garrett, to me known, who, being by me duly sworn, did depose and
say that he is the Vice President of Speedway Funding Corp., one of the
corporations described in and which executed the foregoing instrument, and that
he signed his name thereto by like authority.
/s/ Janette H. Gordon
Notary Public
State of Delaware
My commission expires 5-3-2001
[Seal]
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STATE OF NORTH CAROLINA )
)
COUNTY OF MECKLENBURG )
On the 4th day of August, 1997, before me personally came Kathe
Barrett, to me known, who, being by me duly sworn, did depose and say that she
is a trust officer of First Trust National Association, one of the parties
described in and which executed the foregoing instrument, and that she signed
her name thereto by like authority.
/s/ Judy L. S. Ballard
Notary Public
State of North Carolina
My commission expires September 4, 2000
[Seal]
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EXHIBIT A
CUSIP NUMBER 847788AD8
(Face of Note)
SPEEDWAY MOTORSPORTS, INC.
8 1/2% [INITIAL] [EXCHANGE] SENIOR SUBORDINATED NOTES DUE 2007
No.__________ $____________
SPEEDWAY MOTORSPORTS, INC., a Delaware corporation, for value received,
hereby promises to pay to
or registered assigns, the principal sum of
$_____________________ on August 15, 2007.
Interest Payment Dates: February 15, and August 15
Record Dates: January 31, and July 31
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
<PAGE>
IN WITNESS WHEREOF, Speedway Motorsports, Inc. has caused this Note to
be duly executed by its duly authorized officer this _____ day of
________________, _____.
SPEEDWAY MOTORSPORTS, INC.
By:
Name:
Title:
Attest:
Secretary
Dated: ____________________, ______
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
FIRST TRUST NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the
Notes referred to in the Indenture.
By:____________________________
Name:
Title:
A-2
<PAGE>
(Back of Note)
SPEEDWAY MOTORSPORTS, INC.
8 1/2% [INITIAL] [EXCHANGE] SENIOR SUBORDINATED NOTES DUE 2007
[Unless and until it is exchanged in whole or in part for Notes in
certificated form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository, by a nominee of the Depository to the
Depository or another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor Depository.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the
issuer or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
may be requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1
[THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF
THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)
(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION
- --------
1This paragraph should be included only if the Note is issued in Global Form.
A-3
<PAGE>
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.]2
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Speedway Motorsports, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture, being herein
called the ("Company"), promises to pay interest on the principal amount of this
Note at 8 1/2% per annum from August 4, 1997 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on February 15 and August 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each, an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; PROVIDED, that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that
the first Interest Payment Date shall be February 15, 1998. The Company shall
pay, to the extent lawful, interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the January 31 or
July 31 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, interest and
Liquidated Damages at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin
- --------
2 This paragraph should be included only if the Note is a Transfer
Restricted Security.
A-4
<PAGE>
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, First Trust National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity; PROVIDED that if the Company or such Subsidiary is acting as Paying
Agent, the Company or such Affiliate shall segregate all funds held by it as
Paying Agent and hold them in trust for the benefit of the Holders or the
Trustee.
4. Indenture. The Company issued the Notes under an Indenture dated as
of August 4, 1997 (the "Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Notes are unsecured obligations of the Company limited to $125.0
million in aggregate principal amount.
The summary of the terms of this Note contained herein does not purport
to be complete and is qualified by reference to the Indenture. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture shall
control.
The Indenture restricts, among other things, the Company's ability to
incur additional indebtedness and issue preferred stock, pay dividends or make
certain other restricted payments, incur liens to secure PARI PASSU or
subordinated indebtedness, engage in any sale and leaseback transaction, sell
stock of Subsidiaries, incur indebtedness that is subordinate in right of
payment to any Senior Indebtedness and senior in right of payment to the Notes,
apply net proceeds from certain asset sales, merge or consolidate with any other
person, sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company or enter into certain
transactions with affiliates.
5. Optional Redemption.
The Company shall not have the option to redeem the Notes prior to
August 15, 2002. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning on August 15
of the years indicated below:
YEAR PERCENTAGE
2002...........................................104.250%
2003...........................................102.830%
2004...........................................101.420%
2005 and thereafter............................100.000%
A-5
<PAGE>
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon a Change of Control, each Holder of Notes will have
the right to require the Company to make an offer (a "Change of Control
Offer") to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of each Holder's Notes at a purchase price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (in
either case, the "Change of Control Payment"). Within 15 days following
any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute the Change
of Control and offering to repurchase Notes pursuant to the procedures
governing the Change of Control Offer as required by the Indenture and
described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sale,
within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall commence an offer to
all Holders of Notes (an "Asset Sale Offer") pursuant to Section 4.10
of the Indenture to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest, if any, thereon to the date fixed for the closing
of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a PRO RATA basis. Holders of Notes that are
the subject of an offer to purchase will receive an Asset Sale Offer
from the Company prior to any related purchase date and may elect to
have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" attached to this Note.
8. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date, interest ceases to accrue on Notes or portions
thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required
A-6
<PAGE>
by law or permitted by the Indenture. The Company need not exchange or register
the transfer of any Note or portion of a Note selected for redemption, except
for the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in aggregate principal amount of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes. Without
the consent of any Holder of a Note, the Indenture or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's, or any Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act or to
provide for the issuance of Additional Notes pursuant to the Indenture to the
extent permitted under the restrictions contained in the Credit Agreement and in
the Indenture.
12. Defaults and Remedies. The Events of Default provided by the
Indenture include, without limitation:
(a) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes (whether
or not prohibited by the subordination provisions of the Indenture);
(b) default in payment when due of the principal of or premium, if any,
on the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (c) failure by the Company to comply with Section
4.10 or 4.15 of the Indenture; (d) failure by the Company to comply
with Section 4.07 or 4.09 of the Indenture and the continuance of such
failure for a period of 30 days after notice is given to the Company by
the Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amounts of the Notes then outstanding;
(e) failure by the Company for 60 days after notice is given to the
Company by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the Notes then
outstanding to comply with any of the Company's other covenants or
agreements in the Indenture or the Notes; (f) default under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether
such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, which default (i) is caused by a failure to pay
principal of such Indebtedness at its Stated Maturity (after the
expiration of any
A-7
<PAGE>
applicable grace period) or (ii) results in the acceleration of such
Indebtedness prior to its maturity and, in each case, the principal
amount of which Indebtedness, together with the principal amount of any
other such Indebtedness described in clauses (i) and (ii) above,
aggregates $5.0 million or more; (g) failure by the Company or any of
its Subsidiaries to pay final judgments aggregating in excess of $5.0
million (net of amounts covered by insurance), which judgments are not
paid, discharged or stayed for a period of 60 days; (h) certain events
of bankruptcy or insolvency with respect to the Company or any of its
Subsidiaries; (i) the Subsidiary Guarantee of any Guarantor is held in
judicial proceedings to be unenforceable or invalid or ceases for any
reason to be in full force and effect (other than in accordance with
the terms of the Indenture) or any Guarantor or any Person acting on
behalf of any Guarantor denies or disaffirms such Guarantor's
obligations under its Subsidiary Guarantee (other than by reason of a
release of such Guarantor from its Subsidiary Guarantee in accordance
with the terms of the Indenture). If any Event of Default (other than
an Event of Default specified in clause (h) above occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately; PROVIDED, HOWEVER, that if any
Senior Indebtedness is outstanding under the Credit Agreement, upon a
declaration of acceleration, the Notes shall be payable upon earlier of
(x) the day which is five Business Days after the provision to the
Company and the agent under the Credit Agreement of written notice of
such declaration and (y) the date of acceleration of any Indebtedness
under the Credit Agreement. Notwithstanding the foregoing, in the case
of an Event of Default specified in clause (h) of this paragraph 12
occurs with respect to the Company, any Significant Subsidiary or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in aggregate principal
amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders
of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in
their interest. The Holders of a majority in aggregate principal amount
of the Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest on, or the
principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture,
and the Company is required upon becoming aware of any Default or Event
of Default, to deliver to the Trustee a statement specifying such
Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the
A-8
<PAGE>
Company under the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder, by
accepting a Note, waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement dated as of August 4, 1997, among the Company and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Speedway Motorsports, Inc.
Highway 29 North
Post Office Box 600
Concord, NC 28026-0600
Attention: Secretary
19. Unclaimed Money. If money for the payment of principal, premium, if
any, or interest, or Liquidated Damages, if any, remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its request unless any abandoned property law designates another Person. After
any such payment, Holders entitled to the money must look only to the Company
and not to the Trustee for payment unless such abandoned property law designates
another Person.
20. Discharge and Defeasance. Subject to certain conditions, the
Company at any time may terminate some or all of the obligations of the Company
under the Notes and the Indenture if the Company irrevocably deposits in trust
with the Trustee cash or U.S. Government Obligations for the payment of
principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes to redemption or maturity, as the case may be.
A-9
<PAGE>
21. Reports. Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to the
Trustee and to the Holders of Notes within 15 days after it is or would have
been required to file such with the SEC (i) all quarterly and annual financial
information that is or would be required to be contained in a filing with the
SEC on Forms 10-Q and 10-K if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the SEC, at any time after the Company
files a registration statement with respect to the Exchange Offer or a Shelf
Registration Statement, the Company shall (i) file a copy of all such
information and reports with the SEC for public availability (unless the SEC
will not accept such a filing) and (ii) if the SEC will not accept such filing,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to securities analysts and
prospective inventors. In addition, for so long as any Notes remain outstanding,
the Company shall furnish to the Trustee, the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Company also
shall comply with the other provisions of TIA ss. 314(a).
22. Governing Law. THE INDENTURE AND THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SAID STATE.
A-10
<PAGE>
FORM OF NOTATION OF SECURITY
RELATING TO SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, (a) the due and punctual payment of the principal
of, premium, if any, and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on overdue
principal and premium, and, to the extent permitted by law, interest, and the
due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms of the Indenture and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. The obligations of the Guarantors
to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee
and the Indenture are expressly set forth in Article XI of the Indenture and
reference is hereby made to the Indenture for the precise terms of the
Subsidiary Guarantee. The Indebtedness evidenced by this Subsidiary Guarantee
is, to the extent and in the manner provided in the Indenture, subordinate and
subject in right of payment to the prior payment in full of all Guarantor Senior
Indebtedness (as defined in the Indenture), and this Subsidiary Guarantee is
issued subject to such provisions. Each Holder of a Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee, on behalf of such Holder, to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
PROVIDED, HOWEVER, that the Indebtedness evidenced by this Subsidiary Guarantee
shall cease to be so subordinated and subject in right of payment upon any
defeasance of this Note in accordance with the provisions of the Indenture.
A-11
<PAGE>
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.,
Attest: a Georgia corporation
By:
Secretary Name:
Title:
BRISTOL MOTOR SPEEDWAY, INC.,
Attest: a Tennessee corporation
By:
Secretary Name:
Title:
CHARLOTTE MOTOR SPEEDWAY, INC.,
Attest: a North Carolina corporation
By:
Secretary Name:
Title:
SPR ACQUISITION CORPORATION,
Attest: a California corporation
By:
Secretary Name:
Title:
TEXAS MOTOR SPEEDWAY, INC.,
Attest: a Texas corporation
By:
Secretary Name:
Title:
A-12
<PAGE>
600 RACING, INC.,
Attest: a North Carolina corporation
By:
Secretary Name:
Title:
SONOMA FUNDING CORPORATION,
Attest: a California corporation
By:
Secretary Name:
Title:
SPEEDWAY CONSULTING & DESIGN, INC.,
Attest: a North Carolina corporation
By:
Secretary Name:
Title:
THE SPEEDWAY CLUB, INC.,
Attest: a North Carolina corporation
By:
Secretary Name:
Title:
INEX, CORP.,
Attest: a North Carolina corporation
By:
Secretary Name:
Title:
A-13
<PAGE>
SPEEDWAY FUNDING CORP.,
Attest: a Delaware corporation
By:
Secretary Name:
Title:
A-14
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -----------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint Attorney to transfer this
Note on the Security Register, with full power of substitution.
Dated:
- ----------------------------------- -----------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular way, without alteration
or any change whatsoever.
A-15
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
( ) In connection with the Change of Control Offer made pursuant to Section
4.15 of the Indenture, the undersigned hereby elects to have
( ) the entire principal amount
( ) $ ($1,000 in principal amount or
---------------------
an integral multiple thereof) of this Note
repurchased by the Company. The undersigned hereby directs the Trustee
or Paying Agent to pay it or an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change
of Control Payment Date.
( ) In connection with the Asset Sale Offer made pursuant to Section 4.10
of the Indenture, the undersigned hereby elects to have
( ) the entire principal amount
$ ($1,000 in principal amount or an
( ) ---------------------
integral multiple thereof) of this Note
repurchased by the Company. The undersigned hereby directs the Trustee
or Paying Agent to pay it or an amount in cash
equal to 100% of the principal amount indicated in the preceding
sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:
- ----------------------------------- -----------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
A-16
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE3
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase this Global Note authorized officer
in Principal Amount in Principal Amount following such of Trustee or Note
Date of Exchange of this Global Note of this Global Note decrease (or increase) Custodian
- ---------------------- ----------------------- ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
3This should be included only if the Note is issued in Global Form.
A-17
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON
EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
RE: 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007 OF SPEEDWAY MOTORSPORTS, INC.
THIS CERTIFICATE RELATES TO $_____ PRINCIPAL AMOUNT OF NOTES HELD IN
* ________ BOOK-ENTRY OR *_______ DEFINITIVE FORM BY ________________
(THE "TRANSFEROR").
THE TRANSFEROR*:
( ) HAS REQUESTED THE TRUSTEE BY WRITTEN ORDER TO DELIVER IN EXCHANGE FOR
ITS BENEFICIAL INTEREST IN THE GLOBAL NOTE HELD BY THE DEPOSITORY A NOTE OR
NOTES IN DEFINITIVE, REGISTERED FORM OF AUTHORIZED DENOMINATIONS IN AN AGGREGATE
PRINCIPAL AMOUNT EQUAL TO ITS BENEFICIAL INTEREST IN SUCH GLOBAL NOTE (OR THE
PORTION THEREOF INDICATED ABOVE); OR
( ) HAS REQUESTED THE TRUSTEE BY WRITTEN ORDER TO EXCHANGE OR REGISTER
THE TRANSFER OF A NOTE OR NOTES.
IN CONNECTION WITH SUCH REQUEST AND IN RESPECT OF EACH SUCH NOTE, THE
TRANSFEROR DOES HEREBY CERTIFY THAT TRANSFEROR IS FAMILIAR WITH THE INDENTURE
RELATING TO THE ABOVE CAPTIONED NOTES AND AS PROVIDED IN SECTION 2.06 OF SUCH
INDENTURE, THE TRANSFER OF THIS NOTE DOES NOT REQUIRE REGISTRATION UNDER THE
SECURITIES ACT (AS DEFINED BELOW) BECAUSE:*
( ) SUCH NOTE IS BEING ACQUIRED FOR THE TRANSFEROR'S OWN ACCOUNT, WITHOUT
TRANSFER (IN SATISFACTION OF SECTION 2.06(A)(II)(A) OR SECTION 2.06(D)(I)(A) OF
THE INDENTURE).
( ) SUCH NOTE IS BEING TRANSFERRED TO A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT")) IN RELIANCE ON RULE 144A (IN SATISFACTION OF SECTION
2.06(A)(II)(B), SECTION 2.06(B)(I) OR SECTION 2.06(D)(I)(B) OF THE INDENTURE) OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT (IN SATISFACTION OF SECTION 2.06(A)(II)(B) OR SECTION
2.06(D)(I)(B) OF THE INDENTURE.)
- ---------------
*CHECK APPLICABLE BOX.
B-1
<PAGE>
( ) SUCH NOTE IS BEING TRANSFERRED IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT (IN SATISFACTION OF SECTION 2.06(A)(II)(B)(2) OR SECTION
2.06(D)(I)(B) OF THE INDENTURE).
( ) SUCH NOTE IS BEING TRANSFERRED IN RELIANCE ON AND IN COMPLIANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OTHER
THAN RULE 144A, 144 OR RULE 904 UNDER THE SECURITIES ACT. AN OPINION OF COUNSEL
TO THE EFFECT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE
SECURITIES ACT ACCOMPANIES THIS CERTIFICATE (IN SATISFACTION OF SECTION
2.06(A)(II)(B)(3) OR SECTION 2.06(D)(I)(C) OF THE INDENTURE).
[INSERT NAME OF TRANSFEROR]
BY:_____________________________________
DATE: ________________________
- -------------
*CHECK APPLICABLE BOX.
B-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
dated as of August 4, 1997
by and among
SPEEDWAY MOTORSPORTS, INC.,
as Company,
ATLANTA MOTOR SPEEDWAY, INC.,
BRISTOL MOTOR SPEEDWAY, INC.,
CHARLOTTE MOTOR SPEEDWAY, INC.,
SPR ACQUISITION CORPORATION, TEXAS MOTOR SPEEDWAY, INC.,
600 RACING, INC, SPEEDWAY FUNDING CORP.,
SONOMA FUNDING CORPORATION,
SPEEDWAY CONSULTING & DESIGN, INC.
THE SPEEDWAY CLUB, INC., AND
INEX CORP.
as Guarantors,
and
NATIONSBANC CAPITAL MARKETS, INC.,
WHEAT FIRST BUTCHER SINGER,
MONTGOMERY SECURITIES AND
J.C. BRADFORD & CO.,
as Initial Purchasers
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of August 4, 1997, by and among Speedway Motorsports, Inc., a
Delaware corporation (the "Company"), and each of the domestic subsidiaries of
the Company set forth on the signature pages hereto (each, a "Guarantor" and,
collectively, the "Guarantors"), and NationsBanc Capital Markets, Inc., Wheat
First Butcher Singer, Montgomery Securities and J.C. Bradford & Co. (each, an
"Initial Purchaser" and, collectively, the "Initial Purchasers"), each of whom
has agreed severally to purchase the Company's 8 1/2% Senior Subordinated Notes
due 2007 (the "Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement dated July
30, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Notes and the guarantees of the Guarantors (the "Guarantees" and
collectively with the Notes, the "Securities"), the Company and the Guarantors
(collectively, the "Issuers") have agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 7 of
the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used herein without definition shall have the
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized terms shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Advice: As defined in Section 6(c).
Agreement: As defined in the preamble hereof.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Company: As defined in the preamble hereof.
Consummate or Consummation: An Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Act of the Exchange Offer Registration
Statement relating to the New Securities to be issued in the Exchange Offer,
(ii) the maintenance of such Registration Statement continuously effective and
the keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof and (iii) the delivery by the
Issuers to the
<PAGE>
registrar under the Indenture of New Securities in the same aggregate principal
amount as the aggregate principal amount of Securities that were tendered by
Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Securities or the New
Securities, each Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Issuers under the Act of the
New Securities pursuant to a Registration Statement pursuant to which the
Issuers offer the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for New Securities in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Guarantees: As defined in the preamble hereof.
Guarantor or Guarantors: As defined in the preamble hereof.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture dated as of August 4, 1997, among the Issuers
and First Trust National Association, as trustee (the "Trustee"), pursuant to
which the Securities and New Securities are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Initial Purchaser or Initial Purchasers: As defined in the preamble
hereof.
Interest Payment Date: As defined in the Indenture, the Securities and
the New Securities.
Issuers: As defined in the preamble hereof.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
- 2 -
<PAGE>
New Securities: Debt securities of the Company and related guarantees
of the Guarantors identical in all material respects to the Securities and the
Guarantees, respectively (except that the transfer restrictions pertaining to
such Securities and Guarantees will be eliminated), to be issued under the
Indenture.
Notes: As defined in the preamble hereof.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Purchase Agreement: As defined in the preamble hereof.
Record Holder: With respect to any Damages Payment Date relating to the
Securities or the New Securities, each Person who is a Holder of Securities or
New Securities, as the case may be, on the record date with respect to the
Interest Payment Date on which such Damages Payment Date shall occur.
Registrar: As defined in the Indenture.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuers
relating to (a) an offering of New Securities pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Securities: As defined in the preamble hereof.
Shelf Filing Deadline: As defined in Section 4(a)(x) hereof.
Shelf Registration Statement: As defined in Section 4(a)(x) hereof.
TIA: The Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture.
Transfer Restricted Securities: Each Security, until the earliest to
occur of (a) the date on which such Security is exchanged by a person other than
a Broker-Dealer for a New Security in the Exchange Offer, (b) following the
exchange by a Broker-Dealer in the Exchange Offer of a Security for a New
Security, the date on which such New Security is sold to a purchaser who
receives from such Broker-Dealer on or prior to the date of such sale a copy
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of the Prospectus contained in the Exchange Offer Registration Statement, (c)
the date on which such Security has been effectively registered under the Act
and disposed of in accordance with a Shelf Registration Statement or (d) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER.
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Issuers shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 60 days after the Closing Date, a Registration Statement under the Act
relating to the New Securities and the Exchange Offer, (ii) use their best
efforts to cause such Registration Statement to become effective at the earliest
practicable time, but in no event later than 120 days after the Closing Date,
(iii) in connection with the foregoing, file (A) all pre-effective amendments to
such Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a post-effective
amendment to such Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings in connection with the registration and
qualification of the New Securities to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer and
(iv) upon the effectiveness of such Registration Statement, commence the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the New Securities to be offered in exchange for the Transfer
Restricted Securities and to permit resales of New Securities held by
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than New Securities shall be included in the Exchange
Offer Registration Statement. The Company shall use its best efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter.
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(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Securities that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Securities pursuant to the Exchange Offer; PROVIDED, HOWEVER, such Broker-Dealer
may be deemed to be an underwriter within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the New Securities received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Securities and New Securities held by any such
Broker-Dealer except to the extent required by the Commission.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended, as
required by the provisions of Section 6(c) below, to the extent necessary to
ensure that it is available for resales of the New Securities acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Issuers will be permitted to suspend use of the Prospectus included in the
Exchange Offer Registration Statement during periods of time and in
circumstances relating to pending corporate developments and public filings with
the Commission and similar events in which the use of the Prospectus for the
offer or sale of the Securities, in the reasonable opinion of the Issuers, may
give rise to claims of liability against the Issuers under applicable federal or
state securities law.
The Issuers shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION.
(a) Shelf Registration. If (i) the Issuers are not required to file an
Exchange Offer Registration Statement or permitted to Consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 business days of the Consummation of the
Exchange Offer (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that such
Holder may not resell the New Securities acquired by it in the Exchange Offer to
the public without delivering a prospectus and that the Prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available
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for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and
holds Securities acquired directly from the Company or one of its affiliates,
then the Issuers shall:
(x) use their best efforts to file a shelf registration
statement pursuant to Rule 415 under the Act, which may be an amendment
to the Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement") on or prior to the earliest to occur of
(1) the 45th day after the date on which the Company determines that it
is not required or permitted to file the Exchange Offer Registration
Statement, (2) the 45th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as
contemplated by clause (ii) above, or (3) the 120th day after the
Closing Date (such earliest date being the "Shelf Filing Deadline"),
which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities the Holders of which shall have provided
the information required pursuant to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
90th day after the obligation to file such Shelf Registration Statement
arises.
The Issuers shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and 6(c) hereof to the extent
necessary to ensure that it is available for resales of Securities by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least three years following the
Closing Date or such shorter period that will terminate when there are no
Transfer Restricted Securities outstanding. The Issuers will be permitted to
suspend use of the Prospectus included in the Shelf Registration Statement
during periods of time and in circumstances relating to pending corporate
developments and public filings with the Commission and similar events in which
the use of the Prospectus for the offer or sale of Securities, in the reasonable
opinion of the Issuers, may give rise to claims of liability against the Issuers
under applicable federal and state securities laws.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
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SECTION 5. LIQUIDATED DAMAGES.
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable (including as contemplated by the last sentence of the penultimate
paragraph of Section 3(c) hereof or the last sentence of Section 4(a) hereof)
for its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself immediately declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Issuers hereby jointly and
severally agree to pay liquidated damages ("Liquidated Damages") to each Holder
of Transfer Restricted Securities, with respect to the first 90-day period
immediately following the occurrence of such Registration Default, in an amount
equal to $.05 per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of the Liquidated Damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $.30 per week
per $1,000 principal amount of Transfer Restricted Securities. All accrued
Liquidated Damages shall be paid to Record Holders by the Company by wire
transfer of immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of Liquidated Damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Issuers set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Transfer Restricted
Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES.
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Issuers shall comply with all of the provisions of Section
6(c) below, shall use their best efforts to effect such exchange to permit the
sale of the Securities and the New Securities in accordance with the intended
method or methods of distribution thereof and shall comply with all of the
following provisions:
(i) If, in the reasonable opinion of counsel to the Company,
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Issuers hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Issuers to
Consummate an Exchange Offer for such Securities. The Issuers hereby
agree to pursue the issuance of such a decision to the Commission staff
level but shall not be
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<PAGE>
required to take commercially unreasonable action to effect a change of
Commission policy. The Issuers hereby agree, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver
to the Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Issuers, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
New Securities to be issued in the Exchange Offer and (C) it is
acquiring the New Securities in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Issuers' preparations for the Exchange Offer
(to meet Commission requirements with respect to the Exchange Offer or
otherwise). Each Holder, by its receipt of the Securities, acknowledges
and agrees that any Broker- Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the New Securities
to be acquired in the Exchange Offer (1) could not under Commission
policy as in effect on the date of this Agreement rely on the position
of the Commission enunciated in Morgan Stanley and Co., Inc. (available
June 5, 1991) and Exxon Capital Holdings Corporation (available May 13,
1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters (including any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such
a secondary resale transaction should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K if the resales are of New Securities obtained by such Holder in
exchange for Securities acquired by such Holder directly from the
Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Issuers shall provide a supplemental letter
to the Commission (A) stating that the Issuers are registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above and (B)
including a representation that neither the Company nor any Guarantor
has entered into any arrangement or understanding with any Person to
distribute the New Securities to be received in the Exchange Offer and
that, to the best of the Company's information and belief (subject to
information provided to the Issuers by the Holders), each Holder
participating in the Exchange Offer is acquiring the New Securities in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the New
Securities received in the Exchange Offer.
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<PAGE>
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuers shall comply with all the provisions of
Section 6(c) below and shall use their best efforts to effect such registration
to permit the sale of the Securities being sold in accordance with the intended
method or methods of distribution thereof, and pursuant thereto the Issuers will
as expeditiously as possible prepare and file with the Commission a Registration
Statement relating to the shelf registration on any appropriate form under the
Act, which form shall be available for the sale of the Securities in accordance
with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of the
Securities or New Securities by Broker-Dealers), the Issuers shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder,
financial statements of the Guarantors) for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Issuers shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective
and such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the
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Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Issuers shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review of such Holders and underwriter(s), if any, for a
period of at least three business days, and the Issuers will not file
any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including
all such documents incorporated by reference) to which a selling Holder
of Transfer Restricted Securities covered by such Registration
Statement or the underwriter(s), if any, shall reasonably object within
three business days after the receipt thereof;
(v) to the extent practicable, promptly prior to the filing of
any document that is to be incorporated by reference into a
Registration Statement or Prospectus, make available and, if requested,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Issuers' representatives available for
discussion of such document and other customary due diligence matters,
and include such information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if any, reasonably
may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), all
financial and other records, pertinent corporate documents and
properties of the Issuers and cause the Issuers' officers, directors
and employees to supply all information reasonably requested by any
such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior
to its effectiveness;
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<PAGE>
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being
paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Issuers are notified of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(viii) use their best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies, if not rated, and so requested by the
Holders of a majority in aggregate principal amount of the Securities
and New Securities covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Issuers
hereby consent to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be reasonably requested by any Initial
Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Issuers shall:
(A) furnish to each Initial Purchaser, each selling
Holder and each underwriter, if any, in such substance and
scope as they may reasonably request and as are customarily
made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange
Offer and, if applicable, the effectiveness of the Shelf
Registration Statement:
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(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed by (y) the President or any
Vice President and (z) a principal financial or
accounting officer of the Company confirming, as of
the date thereof, the matters set forth in paragraphs
(b), (c) and (d) of Section 7 of the Purchase
Agreement and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Issuers, covering
the matters set forth in paragraph (g) of Section 7
of the Purchase Agreement and such other matter as
such parties may reasonably request, and in any event
including a statement to the effect that such counsel
has participated in conferences with officers and
other representatives of the Issuers, representatives
of the independent public accountants for the
Issuers, the Initial Purchasers' representatives and
the Initial Purchasers' counsel in connection with
the preparation of such Registration Statement and
the related Prospectus and have considered the
matters required to be stated therein and the
statements contained therein, and although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements, on the
basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to
believe that the applicable Registration Statement,
at the time such Registration Statement or any
post-effective amendment thereto became effective,
and, in the case of the Prospectus included in the
Exchange Offer Registration Statement, as of the date
of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, or that the
Prospectus contained in such Registration Statement
as of its date and, in the case of the opinion dated
the date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading. In
connection with the foregoing, such counsel may state
further that such counsel assumes no responsibility
for, and has not independently verified, the
accuracy, completeness or fairness of exhibits, the
financial statements, notes and schedules and other
financial and statistical data included in any
Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated as of
the date of Consummation of the Exchange Offer or the
date of effectiveness of the Shelf Registration
Statement, as the case may be, from the Issuers'
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters by underwriters in
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connection with primary underwritten offerings, and
affirming the matters set forth in the comfort
letters delivered pursuant to Section 7(l) of the
Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, the indemnification
provisions and procedures of Section 8 hereof with respect to
all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Issuers pursuant to this clause
(xi), if any.
If at any time the Issuers become aware that the
representations and warranties of the Issuers contemplated in clause
(A)(1) above cease to be true and correct, the Issuers shall so advise
the Initial Purchasers and the underwriter(s), if any, and each selling
Holder promptly and, if requested by such Persons, shall confirm such
advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s) may reasonably request and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; PROVIDED, HOWEVER, that
neither the Company nor any of the Guarantors shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Securities
covered by the Shelf Registration Statement, New Securities having an
aggregate principal amount equal to the aggregate principal amount of
Securities surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such New Securities to be
registered in the name of such Holder or in the name of the
purchaser(s) of such Securities or New Securities, as the case may be;
in return, the Securities held by such Holder shall be surrendered to
the Company for cancellation;
(xiv) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
- 13 -
<PAGE>
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities, if any,
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with The Depository Trust Company;
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any qualified independent
underwriter) that is required to be retained in accordance with the
rules and regulations of the NASD, and use its reasonable best efforts
to cause such Registration Statement to become effective and approved
by such governmental agencies or authorities as may be necessary to
enable the Holders selling Transfer Restricted Securities to Consummate
the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing
at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement, and, in connection therewith, cooperate
with the Trustee and the Holders of the Securities and New Securities
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use their best efforts to cause the Trustee to execute
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
- 14 -
<PAGE>
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Issuers' expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES.
(a) All expenses incident to the Issuers' performance of or compliance
with this Agreement will be borne by the Company or the respective Guarantor,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any qualified independent underwriter and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the New Securities to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v) all application
and filing fees in connection with listing the Securities and New Securities on
a national securities exchange or automated quotation system; and (vi) all fees
and disbursements of independent certified public accountants of the Issuers
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Issuers will bear their internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by any Issuer.
- 15 -
<PAGE>
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuers will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Fennebresque, Clark, Swindell & Hay or such other counsel as may be chosen by
the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION.
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless (i) each Holder and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a controlling person) and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Holder or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Holder"), to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including without limitation and as soon as reasonably practicable,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Holder) directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by any of the
Holders expressly for use therein. This indemnity agreement will be in addition
to any liability that the Issuers otherwise may have.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Issuers, such Indemnified Holder shall promptly notify the Issuers in
writing (PROVIDED, that the failure to give such notice (i) will not relieve the
Issuers from liability under paragraph (a) above unless and only to the extent
it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
paragraph (a) above). Such Indemnified Holder shall have the right to employ its
own counsel in any such action and the fees and expenses of such counsel shall
be paid, as soon as reasonably practicable after they are incurred, by the
Issuers (regardless of whether it is ultimately determined that an Indemnified
Holder is not entitled to indemnification hereunder). The Issuers
- 16 -
<PAGE>
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for the Indemnified Holders, which
firm shall be designated by the Holders. The Issuers shall be liable for any
settlement of any such action or proceeding effected with the Issuers' prior
written consent, which consent shall not be withheld unreasonably, and the
Issuers agree to indemnify and hold harmless any Indemnified Holder from and
against any loss, claim, damage, liability or expense by reason of any
settlement of any action effected with the written consent of the Issuers. The
Issuers shall not, without the prior written consent of each Indemnified Holder,
settle or compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Holder from all liability arising out of such action, claim,
litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Issuers, and their respective
directors, officers, and any person controlling (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Issuers, and the respective
officers, directors, partners, employees, representatives and agents of each
such person, to the same extent as the foregoing indemnity from the Issuers to
each of the Indemnified Holders, but only with respect to claims and actions
based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against any of the Issuers or their directors or
officers or any such controlling person and in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Issuers, and the Issuers or their directors
or officers or such controlling person shall have the rights and duties given to
each Holder by the second paragraph of Section 8(a). In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of the Transfer
Restricted Securities giving rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Holders on the other hand from the sale by the
Company of the Securities or if such allocation is not permitted by applicable
law, the relative fault of the Issuers, on the one hand, and of the Indemnified
Holders, on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of the Issuers,
on the one hand, and of the Indemnified Holder, on the other hand, shall be
determined by reference to, among other things,
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<PAGE>
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 8(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Issuers and each Holder of Transfer Restricted Securities agree
that it would not be just and equitable if contribution pursuant to this Section
8(c) were determined by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, in no case
shall any Initial Purchaser or any Holder of any Security or New Security be
responsible, in the aggregate, for any amount in excess of the purchase discount
or commission applicable to such Security, or in the case of a New Security,
applicable to the Security that was exchangeable into such New Security, nor
shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the securities purchased by
such underwriter under the Registration Statement that resulted in such damages.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute pursuant to this Section 8(c) are several in proportion to the
respective principal amount of Securities held by each of the Holders hereunder
and not joint.
SECTION 9. RULE 144A.
The Issuers hereby agree with each Holder, for so long as any Transfer
Restricted Securities remain outstanding as Transfer Restricted Securities, to
make available to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney,
- 18 -
<PAGE>
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS.
(a) Remedies. Each of the Issuers agrees that monetary damages
(including the Liquidated Damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Each of the Issuers will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Neither the Company
nor any of the Guarantors is subject to or bound by any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuers' securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Securities or New Securities. Each of the
Issuers will not take any action, or permit any change to occur, with respect to
the Securities or New Securities that would materially and adversely affect the
ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given, unless the Issuers have obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose Securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
- 19 -
<PAGE>
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture and to each of the Initial Purchasers;
(ii) if to the Initial Purchasers, initially at the respective
address of such Initial Purchasers set forth in the Purchase Agreement;
and
(iii) if to the Issuers, initially at the Company's address
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; PROVIDED, HOWEVER, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and only to the extent such successor or assign
acquired Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
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<PAGE>
(k) Securities Held by the Issuers. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities or New
Securities is required hereunder, Securities or New Securities, as applicable,
held by the Issuers or their Affiliates (other than subsequent Holders of
Securities or New Securities if such subsequent Holders are deemed to be
Affiliates solely by reason of their holdings of such Securities or New
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
(l) Entire Agreement. This Agreement (together with the Purchase
Agreement, the Indenture and the other documents referenced therein) is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein (or therein) with respect to the registration rights
granted by the Issuers with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
[The remainder of this page is intentionally blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President and Chief Financial Officer
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
SPR ACQUISITION CORPORATION,
a California corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
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<PAGE>
TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
600 RACING, INC.,
a North Carolina corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
SPEEDWAY FUNDING CORP.,
a Delaware corporation
By: /s/ Victoria L. Garrett
-------------------------------
Victoria L. Garrett
Vice President
SONOMA FUNDING CORPORATION,
a California corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
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<PAGE>
INEX CORP.,
a North Carolina corporation
By: /s/ William R. Brooks
-------------------------------
William R. Brooks
Vice President
- 24 -
<PAGE>
INITIAL PURCHASERS:
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Gary R. Wolfe
---------------------------
Gary R. Wolfe
Director
WHEAT FIRST BUTCHER SINGER
By: /s/ R. Walter Jones, IV
---------------------------
R. Walter Jones, IV
Managing Director
MONTGOMERY SECURITIES
By: /s/ Bernard Notus
---------------------------
Bernard Notus
Managing Director
J.C. BRADFORD & CO.
By: /s/ David A. Jones
---------------------------
David A. Jones
Partner
- 25 -
<PAGE>
SECOND AMENDMENT TO
CREDIT AGREEMENT
This Second Amendment to Credit Agreement (this "Amendment") is entered
into as of June 30, 1997 among SPEEDWAY MOTORSPORTS, INC., a Delaware
corporation ("Speedway Motorsports"), SPEEDWAY FUNDING CORP., a Delaware
corporation ("Speedway Funding" - each a "Borrower" and collectively the
"Borrowers"), certain of Speedway Motorsports' Subsidiaries and related parties
(individually a "Guarantor" and collectively the "Guarantors"), NATIONSBANK,
N.A., as Agent, and the Lenders party to the Credit Agreement (as defined
below). All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement.
RECITALS
1. The Borrowers, the Guarantors, the Agent and the Lenders entered
into that certain Credit Agreement dated as of March 7, 1996, as amended as of
September 24, 1996 (as amended, modified or supplemented from time to time, the
"Credit Agreement").
2. The Borrowers have requested, and the Lenders have agreed, to amend
certain terms of the Credit Agreement as set forth below.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
A. Amendments. Section 8.1 of the Credit Agreement is amended as
follows:
1. The word "or" at the end of Section 8.1(g) is deleted in its
entirety;
2. The period at the end of Section 8.1(h) is deleted and replaced
with a semicolon and the word "or"; and
3. A new Section 8.1(i) is added to read as follows:
"(i) Indebtedness of the Borrowers to NationsBank, N.A. pursuant
to a promissory note dated as of June 30, 1997 in the original
principal amount of $30,000,000."
B. Representations and Warranties. The Borrowers hereby represent and
warrant to the Agent and the Lenders that (a) no Default or Event of Default
exists under the Credit Agreement or any of the other Credit Documents; (b) all
of the provisions of the Credit Documents, except as
<PAGE>
amended hereby, are in full force and effect; (c) no liens securing borrowed
money indebtedness have been placed on either of the Borrower's assets; and (d)
since March 31, 1997, no Material Adverse Effect has occurred in the business,
financial or other conditions of the Borrowers.
C. Acknowledgment of Guarantors. The Guarantors acknowledge and consent
to all of the terms and conditions of this Amendment and agree that this
Amendment and all documents executed in connection herewith do not operate to
reduce or discharge the Guarantors' obligations under the Credit Agreement.
D. Effect of Amendment. Except as expressly modified and amended in
this Amendment, all of the terms, provisions and conditions of the Credit
Agreement are and shall remain in full force and effect and are incorporated
herein by reference. The Credit Agreement and any and all other documents
heretofore, now or hereafter executed and delivered pursuant to the terms of the
Credit Agreement are hereby amended so that any reference to the Credit
Agreement shall mean a reference to the Credit Agreement as amended hereby.
E. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
F. Entirety. This Amendment and the other Credit Documents embody the
entire agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. These Credit
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
of the parties. There are no oral agreements between the parties.
G. Governing Law. This Amendment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of North Carolina.
<PAGE>
The parties below have executed this Amendment as of the day and year
first above written.
BORROWERS:
SPEEDWAY MOTORSPORTS, INC., a Delaware
corporation
By: /s/ William R. Brooks
Title: Chief Financial Officer and
Vice President
SPEEDWAY FUNDING CORP., a Delaware
corporation
By: /s/ David J. Lindley
Title: Secretary
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC., a Georgia
corporation
By: /s/ William R. Brooks
Title: Vice President
CHARLOTTE MOTOR SPEEDWAY, INC., a North
Carolina corporation
By: /s/ William R. Brooks
Title: Vice President
[SIGNATURES CONTINUE]
<PAGE>
TEXAS MOTOR SPEEDWAY, INC., a Texas
corporation
By: /s/ William R. Brooks
Title: Vice President
600 RACING, INC., a North
Carolina corporation
By: /s/ William R. Brooks
Title: Vice President
BRISTOL MOTOR SPEEDWAY, INC., a Tennessee
corporation
By: /s/ William R. Brooks
Title: Vice President
SPR ACQUISITION CORPORATION,
a California corporation
By: /s/ William R. Brooks
Title: Vice President
LENDERS:
BANK ONE, TEXAS, N.A.
By: /s/ [illegible]
Title: Vice President
[SIGNATURES CONTINUE]
<PAGE>
FIRST AMERICAN NATIONAL BANK
By: /s/ H. Hope Stewart
Title: A.V.P.
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ William [illegible]
Title: S.V.P.
FLEET NATIONAL BANK
By: /s/ [illegible]
Title: S.V.P.
NATIONSBANK, N.A.
By: /s/ James E. Nash, Jr.
Title: Senior Vice President
SOUTHTRUST BANK
By: /s/ Mark R. [illegible]
Title: Group Vice President
[SIGNATURES CONTINUE]
AGENT:
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NATIONSBANK, N.A.
By: /s/ James E. Nash, Jr.
Title: Senior Vice President
PROMISSORY NOTE
$30,000,000 June 30, 1997
Charlotte, North Carolina
SPEEDWAY MOTORSPORTS, INC., a Delaware corporation ("Speedway
Motorsports"), and SPEEDWAY FUNDING CORP., a Delaware corporation ("Speedway
Funding") (each a "Borrower" and collectively the "Borrowers") hereby jointly
and severally promise to pay to the order of NATIONSBANK, N.A., a national
banking association (including successors and assigns, the "Bank"), in lawful
money of the United States of America, at its office indicated above or such
other office as the Bank may specify, the principal sum of up to THIRTY MILLION
DOLLARS ($30,000,000), together with interest thereon at the rate and on the
terms provided herein.
Definitions. As used herein:
"Applicable Percentage" shall have the meaning set forth in
the Existing Credit Agreement.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Bank shall have determined (which determination shall be
conclusive absent manifest error) that it is unable after due inquiry
to ascertain the Federal Funds Rate for any reason, including the
inability or failure of the Bank to obtain sufficient quotations in
accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in U.S. dollar deposits in
London, England and New York, New York.
"Commitment Period" means the period from and including the
date of this Note to but excluding the earlier of (i) the Termination
Date, or (ii) the date on which the
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commitments hereunder shall have been terminated in accordance with the
provisions hereof.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Interbank Offered Rate
Eurodollar Rate = ---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency Liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency Liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Existing Credit Agreement" means that Credit Agreement dated
as of March 7, 1996, as amended as of September 24, 1996 and as of the
date hereof among the Borrowers, the Guarantors and Lenders identified
therein and NationsBank, N.A., as Agent, as amended and modified from
the date hereof.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Bank on such day
on such transactions as determined by the Bank.
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"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Interest Payment Date" means (i) as to any Base Rate Loan the
last day of each June, September, December and March, the date of
repayment of principal of such Loan and the Termination Date and (ii)
as to any Eurodollar Loan, the last day of each Interest Period for
such Loan and the Termination Date. If an Interest Payment Date falls
on a date which is not a Business Day, such Interest Payment Date shall
be deemed to be the next succeeding Business Day, except that in the
case of Eurodollar Loans where the next succeeding Business Day falls
in the next succeeding calendar month, then on the next preceding
Business Day.
"Interest Period" means, (i) as to Eurodollar Loans, a period
of one, two or three months' duration, as the Borrowers may elect,
commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals); provided, however, (A) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that in the case of Eurodollar Loans where the next succeeding
Business Day falls in the next succeeding calendar month, then on the
next preceding Business Day), (B) no Interest Period shall extend
beyond the Termination Date, and (C) in the case of Eurodollar Loans,
where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
day of such calendar month and (ii) as to Prime Rate Loans, a period of
one month.
"Loan" or "Loans" means the revolving credit loans made under
this Note.
"Prime Rate" means the per annum rate of interest established
from time to time by the Bank at its principal office in Charlotte,
North Carolina as its Prime Rate with each change in the Prime Rate
being effective on the date such change is publicly announced as
effective (it being understood and agreed that the Prime Rate is a
reference rate used by the Bank in determining interest rates on
certain loans and is not intended to be the lowest rate of interest
charged on any extension of credit by the Bank to any debtor).
"Prime Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Prime Rate.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Termination Date" means September 30, 1997.
Commitment. Subject to the terms and conditions hereof, the Bank agrees
to make Loans to the Borrowers upon request during the Commitment Period in an
aggregate principal amount
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up to the amount of this Note (the "Committed Amount") shown above. Amounts
repaid hereunder may, subject to the terms and conditions set forth herein, be
reborrowed.
Termination Date. This Note shall be due and payable in full, including
all principal and accrued interest evidenced hereby, on the Termination Date.
Interest Rate. The unpaid principal balance of this Note shall bear
interest at a per annum rate (computed on the basis of actual number of days
elapsed over a year of 360 days) equal (i) for such periods as Loans shall be
comprised of Base Rate Loans, the sum of the Base Rate plus the Applicable
Percentage or (ii) for such periods as Loans shall be comprised of Eurodollar
Loans, the Eurodollar Rate plus the Applicable Percentage. Accrued interest
shall be paid on each Interest Payment Date and on the Termination Date.
Advances. To select the interest rate applicable to an advance
hereunder (or an extension or conversion of an existing advance), the Borrowers
shall give the Bank prior notice not later than 11:00 a.m. (Charlotte, North
Carolina time) on the Business Day prior to the date of the requested borrowing
in the case of Base Rate Loans, and on the third Business Day prior to the date
of the requested borrowing in the case of Eurodollar Loans. Each such request
for borrowing shall be irrevocable and shall specify (A) that a Loan is
requested, (B) the date of the requested borrowing (which shall be a Business
Day), (C) the aggregate principal amount to be borrowed and (D) whether the
borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested, the Interest
Period(s) therefor. If any such notice shall fail to specify (I) an applicable
Interest Period in the case of a Eurodollar Loan, then such notice shall be
deemed to be a request for an Interest Period of one month, or (II) the type of
Loan requested, then such notice shall be deemed to be a request for a Base Rate
Loan hereunder. The notice shall specify the aggregate amount of the proposed
borrowing which shall be in a minimum aggregate amount of $1,000,000 and
integral multiples of $100,000 in excess thereof (or the remaining amount of the
Committed Amount), the date of the proposed borrowing, extension, or conversion,
as applicable (which shall be a Business Day), the Interest Period with respect
thereto. No more than six Eurodollar Rate Loans in the aggregate shall be in
effect on this Note at any one time.
Extension and Conversion. The Borrowers shall have the option on any
Business Day, to extend existing Loans into a subsequent permissible Interest
Period or to convert Loans into Loans of another type; provided, however, that
(i) Eurodollar Loans may be converted into Base Rate Loans only on the last day
of the Interest Period applicable thereto, (ii) Eurodollar Loans may be
extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no
Event of Default is in existence on the date of extension or conversion, (iii)
Loans extended as, or converted into, Eurodollar Loans shall be subject to the
terms of the definition of "Interest Period" and shall be in such minimum
amounts as provided herein, and (iv) any request for extension or conversion of
a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed
to be a request or an Interest Period of one month. Each such extension or
conversion shall be effected by the Borrowers by giving a notice of
extension/conversion (or telephone notice promptly confirmed in writing) to the
Bank prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day
of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan
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and on the third Business Day prior to, in the case of the extension of a
Eurodollar Loan as, or conversion of a Base Rate Loan into a Eurodollar Loan,
the date of the proposed extension or conversion, specifying the date of the
proposed extension or conversion, the Loans to be so extended or converted, the
types of Loans into which such Loans are to be converted and, if appropriate,
the applicable Interest Periods with respect thereto. In the event the Borrowers
fail to request extension or conversion of any Eurodollar Loan in accordance
with this Section, or any such conversion or extension is not permitted or
required by this Section, then such Loan shall be automatically converted into a
Base Rate Loan at the end of the Interest Period applicable thereto. The Bank
shall give each Lender notice as promptly as practicable of any such proposed
extension or conversion affecting any Loan.
Default Rate. During such period if an Event of Default shall exist,
the unpaid principal balance of this Note, and to the extent permitted by
applicable law, accrued but unpaid interest, shall bear interest, payable on
demand, at a per annum rate 2% in excess of the rate which would otherwise be
applicable.
Conditions to Advances. The obligation of the Bank to make any advance
under this Note shall be subject to the following conditions:
(a) the representations and warranties set forth herein are
true and correct in all material respects as of the date of such
advance; and
(b) no Event of Default shall exist as of the date of such
advance.
Each request for, and acceptance of, an advance under this Note shall be deemed
to constitute a representation and warranty by the Borrowers that the conditions
set forth above are satisfied.
Prepayments. The Borrowers shall have the right to prepay Loans in
whole or in part from time to time without premium or penalty; provided,
however, that (i) Eurodollar Loans may only be prepaid on three Business Days'
prior written notice to the Bank specifying the applicable Loans to be prepaid,
(ii) any prepayment of Eurodollar Loans will be subject to any breakage costs
set forth herein; and (iii) each such partial prepayment of Loans shall be in a
minimum principal amount of $1,000,000 and integral multiples of $100,000 in
excess thereof. Subject to the foregoing terms, amounts prepaid hereunder shall
be applied as the Borrowers may elect; provided, that if the Borrowers fail to
specify a voluntary prepayment then such prepayment shall be applied first to
Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period
maturities. Such voluntary prepayments shall not reduce the Committed Amount.
Breakage Costs. The Borrowers shall reimburse the Bank on demand for
any loss incurred or to be incurred by it in the reemployment of the funds
released by any payment of any Eurodollar Loan on any date prior to the last day
of the Interest Period applicable to such Eurodollar Loan. Such loss shall be
the difference as reasonably determined by the Bank between the amount that
would have been realized by the Bank for the remainder of the Interest Period
for such Eurodollar Loan based on the interest rate applicable thereto hereunder
and any lesser amount that would be realized by the Lender in reemploying the
funds received in connection with
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such prepayment by making a loan of the same type in the principal amount
prepaid during the period from the date of prepayment to the last day of such
Interest Period. The Bank will use its best efforts to reemploy the funds as
soon as possible.
Unavailability of Interest Rate. If the Bank shall have determined
(which determination shall be conclusive and binding upon the Borrowers) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate, the Bank
shall give telecopy or telephonic notice thereof to the Borrowers as soon as
practicable thereafter, and the unpaid principal balance of this Note shall bear
interest at a per annum rate equal to the Prime Rate until the condition or
circumstances giving rise thereto no longer exist.
Capital Adequacy. If the Bank has determined, after the date hereof,
that the adoption or the becoming effective of, or any change in, or any change
by any Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof in the interpretation or
administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by the Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on the Bank's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which the Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration the Bank's policies with respect to capital adequacy), then,
upon notice from the Bank to the Borrowers, the Borrowers shall be obligated to
pay to the Bank such additional amount or amounts as will compensate the Bank
for such reduction. Each determination by the Bank of amounts owing under this
Section shall, absent manifest error, be conclusive and binding on the parties
hereto; provided, however, that such determinations are made on a reasonable
basis.
Guaranty. The Borrowers will cause all guarantors of the Existing
Credit Agreement to give a guaranty relating to this Note.
Incorporation of Representations, Warranties and Covenants. The
Borrowers hereby (i) reaffirm to the Bank that the representations and
warranties (the "Incorporated Representations") set forth in Section 6 of the
Existing Credit Agreement are true and correct in all material respects and are
hereby made with the same effect. Further, the Affirmative and Negative
Covenants (the "Incorporated Covenants") set out in Sections 7 and 8 of the
Existing Credit Agreement are hereby incorporated by reference and shall run in
favor of the Bank hereunder, and the undersigned Borrowers hereby agree to be
bound by the terms thereof, as if set forth fully herein.
Use of Proceeds. Proceeds of advances hereunder may be used for general
corporate and working capital purposes.
Events of Default. Each of the following shall constitute an event of
default hereunder (each an "Event of Default"): (a) the failure by the Borrowers
to make payment of principal, interest, fees or other amounts owing hereunder
when due, (b) any representation or warranty
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made by the Borrowers herein or in connection herewith shall prove to be false
or incorrect in any material respect, (c) failure to observe or comply with any
other covenant or provision contained herein and such failure shall continue for
30 days, (d) the filing of an action in bankruptcy or insolvency by any
Borrower, (e) the filing of an action in bankruptcy or insolvency against any
Borrower and the continuance of such action undismissed, unstayed and in effect
for 60 days from the date of filing, and (f) the occurrence of an event of
default under the Existing Credit Agreement.
Remedies. The Bank may at any time after the occurrence of an Event of
Default, terminate the commitments hereunder and declare all amounts owing under
this Note to be immediately due and payable without presentment, demand, protest
or notice of any kind, all of which are waived by the Borrowers; provided that
upon the occurrence of any event of bankruptcy or insolvency described in
clauses (d) or (e) under Events of Default, the commitments hereunder shall be
immediately terminated and all amounts owing under this Note shall be
immediately due and payable without notice or other action by the Bank.
Attorneys' Fees and Costs of Collection. In the event payment of
amounts evidenced by this Note is not made at any stated or accelerated
maturity, the undersigned Borrowers agree to pay, in addition to principal and
interest, all costs of collection, including reasonable attorneys' fees.
Usury. Notwithstanding anything contained herein, if for any reason the
effective interest payable hereunder shall exceed the maximum lawful amount, the
amount in excess of the maximum lawful amounts shall be applied to payment of
principal or returned to the Borrowers, at their election.
Notices. Notices hereunder shall be deemed given and be effective (i)
when delivered, (ii) when transmitted via telecopy to the number set out below,
(iii) the day following the day on which delivered to a reputable national
overnight air courier service, or (iv) the third business day following the day
on which sent by certified or registered mail, postage prepaid, in each case to
the respective parties at the address set forth below, or at such other address
as may be specified by notice to the other parties:
if to the Borrowers: Speedway Motorsports, Inc.
P.O. Box 18747
Charlotte, North Carolina 28218
Attn: Chief Financial Officer
Phone: (704) 532-3306
Fax: (704) 532-3312
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Speedway Funding Corp.
900 North Market Street, Suite 200
Wilmington, Delaware 19801
Attn: Vice President
Phone: (302) 421-7352
Fax: (302) 421-7378
if to the Bank: NationsBank, N.A.
NationsBank Corporate Center
NC1-007-08-08
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Sports Finance Group
Phone: (704) 386-5474
Fax: (704) 386-1270
No Waiver. No delay or omission by the Bank in exercising any right
hereunder shall operate as a waiver of any rights hereunder, nor shall any
delay, omission or waiver on any particular occasion be deemed a bar to or
waiver of the same or any other right on a future occasion. The Borrowers assent
to one or more extensions or postponements of the time of payment or any other
indulgences and to the addition or release of any other parties or persons
primarily or secondarily liable hereunder or relating hereto.
Assignment. The Bank and any subsequent holder of this Note may, from
time to time, sell or offer to sell the Loans, or interests therein, to one or
more assignees or participants and is hereby authorized to disseminate any
information it now has or hereafter obtains pertaining to the Loans, including,
without limitation, any security for this Note and credit or other information
on Borrowers, any of their principals and any guarantor of this Note, to any
assignee or participant or prospective assignee or prospective participant, the
Bank's affiliates, including NationsBanc Capital Markets, Inc., any regulatory
body having jurisdiction over the Bank and to any other parties as necessary or
appropriate in the Bank's reasonable judgment. Borrowers shall execute,
acknowledge and deliver any and all instruments reasonably requested by the Bank
in connection therewith and to the extent, if any, specified in any such
assignment or participation, such companies, assignee(s) or participant(s) shall
have the rights and benefits with respect to this Note as such person(s) would
have if such person(s) were the Bank hereunder.
Counterparts. This Note may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument.
Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of North Carolina. The Borrowers hereby
consent to the jurisdiction of federal and state courts located in Mecklenburg
County, North Carolina.
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IN WITNESS WHEREOF, the undersigned Borrowers have caused this Note to
be executed as of the date first above written.
SPEEDWAY MOTORSPORTS, INC.
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Secretary Title: Chief Financial Officer and
Vice President
(Corporate Seal)
SPEEDWAY FUNDING CORP.
ATTEST:
By: David L. Lindley By: /s/ Victoria L. Garrett
Title: Secretary Title: Vice President
(Corporate Seal)
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of June 30, 1997 (the "Guaranty"), is
given by
ATLANTA MOTOR SPEEDWAY, INC., a Georgia corporation, CHARLOTTE MOTOR
SPEEDWAY, INC., a North Carolina corporation, TEXAS MOTOR SPEEDWAY, INC., a
Texas corporation, 600 RACING, INC., a North Carolina corporation, BRISTOL MOTOR
SPEEDWAY, INC., a Tennessee corporation, and SPR ACQUISITION CORPORATION, a
California corporation (each a "Guarantor" and collectively the "Guarantors");
and extended to
NATIONSBANK, N.A., a national banking association (the "Bank") for the
benefit of
SPEEDWAY MOTORSPORTS, INC., a Delaware corporation, and SPEEDWAY
FUNDING CORP., a Delaware corporation (each a "Borrower" and collectively the
"Borrowers").
RECITALS:
1. The Bank has agreed to make loans to the Borrowers pursuant to the
terms of a promissory note of the Borrowers dated as of the date hereof in the
original principal amount of $30,000,000 (the "Note").
2. The Guarantors are subsidiaries of the Borrowers or related parties
of the Borrowers.
3. Without this Guaranty the Bank would be unwilling to make the loans
to the Borrowers evidenced by the Note.
4. Because of the direct benefit to the Guarantors from the loans to
the Borrowers, the Guarantors agree to guarantee the payment to the Bank of the
obligations of the Borrowers as set forth herein.
NOW, THEREFORE, in consideration of the Bank making the loan to the
Borrowers:
1. Guaranty of Payment. The Guarantors hereby unconditionally and
jointly and severally guarantee to the Bank the payment, when due, by
acceleration or otherwise, of the Indebtedness strictly in accordance with the
terms of such Indebtedness. For the purposes hereof, the term "Indebtedness"
means any and all indebtedness of the Borrowers to the Bank, including without
limitation all principal, interest and fees evidenced by the Note plus any and
all other indebtedness of the Borrowers to the Bank, howsoever evidenced,
whether existing now or arising hereafter, as such Indebtedness may be modified,
extended or renewed from time to time.
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This guaranty of the Guarantors as set forth in this section is a guaranty of
payment and not of collection.
2. Release of Collateral, Parties Liable, etc. The Guarantors agree
that the whole or any part of the security now or hereafter held for the
Indebtedness may be exchanged, compromised, or surrendered from time to time;
that the Bank shall have no obligation to protect, perfect, secure or insure any
such security interests, liens or encumbrances now or hereafter held for the
Indebtedness or the properties subject thereto; that the time or place of
payment of the Indebtedness may be changed or extended, in whole or in part, to
a time certain or otherwise, and may be renewed or accelerated, in whole or in
part; that the Borrowers may be granted indulgences generally; that any of the
provisions of the Note or any other documents executed in connection with this
transaction, may be modified, amended or waived; that any party liable for the
payment thereof may be granted indulgences or released; and that any deposit
balance for the credit of the Borrowers or any other party liable for the
payment of the Indebtedness or liable upon any security therefor may be
released, in whole or in part, at, before and/or after the stated, extended or
accelerated maturity of the Indebtedness, all without notice to or further
assent by the Guarantors, who shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
3. Waiver of Rights. Each of the Guarantors expressly waives: (a)
notice of acceptance of this Guaranty by the Bank and of all extensions of
credit to the Borrowers by the Bank; (b) presentment and demand for payment of
any of the Indebtedness; (c) protest and notice of dishonor or of default to
such Guarantor or to any other party with respect to the Indebtedness or with
respect to any security therefor; (d) notice of the Bank obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, liens,
or the encumbrances now or hereafter securing the Indebtedness, or the Bank's
subordinating, compromising, discharging or releasing such security interests,
liens or encumbrances; (e) all other notices to which such Guarantor might
otherwise be entitled; (f) demand for payment under this Guaranty; and (g) any
right to assert against the Bank, as a defense, counterclaim, set-off, or
cross-claim any defense (legal or equitable), set-off, counterclaim or claim
which such Guarantor may now or hereafter have against the Bank or the
Borrowers, but such waiver shall not prevent such Guarantor from asserting
against the Bank in a separate action, any claim, action, cause of action, or
demand that such Guarantor might have, whether or not arising out of this
Guaranty.
4. Primary Liability of Guarantors. The Guarantors agree that this
Guaranty may be enforced by the Bank without the necessity at any time of
resorting to or exhausting any other security or collateral and without the
necessity at any time of having recourse to the Note or any collateral now or
hereafter securing the Indebtedness or otherwise, and the Guarantors hereby
waive the right to require the Bank to proceed against the Borrowers or any
other person (including a co-guarantor) or to require the Bank to pursue any
other remedy or enforce any other right. Without limiting the generality of the
foregoing, each of the Guarantors hereby specifically waives the benefits of
N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive. Each of the Guarantors
further agrees that such Guarantor shall have no right of subrogation,
reimbursement or indemnity whatsoever, nor any right of recourse to security for
the debts and obligations of the Borrowers to the Bank so long as the Note
remains outstanding. The Guarantors further agree
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that nothing contained herein shall prevent the Bank from suing on the Note or
foreclosing its security interest in or lien on any collateral now or hereafter
securing the Indebtedness or from exercising any other rights available to it
under the Note, or any other instrument of security if neither the Borrowers nor
the Guarantors timely perform the obligations of the Borrowers thereunder, and
the exercise of any of the aforesaid rights and the completion of any
foreclosure proceedings shall not constitute a discharge of any of the
Guarantors' obligations hereunder; it being the purpose and intent of the
Guarantors that the Guarantors' obligations hereunder shall be absolute, joint
and several and unconditional under any and all circumstances. Neither the
Guarantor's obligations under this Guaranty nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation of the
liability of the Borrowers or by reason of either Borrower's bankruptcy or
insolvency. The Guarantors acknowledge that the term "Indebtedness" as used
herein includes any payments made by either of the Borrowers to the Bank and
subsequently recovered by either of the Borrowers or a trustee for either of the
Borrowers pursuant to either of the Borrower's bankruptcy or insolvency.
5. Attorneys' Fees and Costs of Collection. If at any time or times
hereafter the Bank employs counsel to pursue collection, to intervene, to sue
for enforcement of the terms hereof or of the Note, or to file a petition,
complaint, answer, motion or other pleading in any suit or proceeding relating
to this Guaranty, the Note, then in such event, all of the reasonable attorneys'
fees relating thereto shall be an additional liability of the Guarantors to the
Bank, payable on demand.
6. Security Interests and Setoff. As security for the Guarantors'
obligations hereunder, each of the Guarantors agrees that (a) in the event such
Guarantor fails to pay its obligations hereunder when due and payable under this
Guaranty, any of the Guarantor's assets of any kind, nature or description
(including, without limitation, deposit accounts) in the possession, control or
custody of the Bank, may, without notice to such Guarantor, be reduced to cash
or the like and applied by the Bank in reduction or payment of such Guarantor's
obligations hereunder; (b) all security interests, liens and encumbrances
heretofore, now and at any time or times hereafter granted by such Guarantor to
the Bank shall also secure such Guarantor's obligations hereunder; and (c) the
Bank shall have the right, immediately and without further action by it, to set
off against the Indebtedness all money owed by the Bank in any capacity to such
Guarantor, whether or not due, and the Bank shall be deemed to have made a
charge against any such money immediately upon the occurrence of such obligation
becoming due even though such charge is made or entered on the books of the Bank
subsequent thereto.
7. Term of Guaranty; Warranties. This Guaranty shall continue in full
force and effect until the Indebtedness is fully paid, performed and discharged.
This Guaranty covers the Indebtedness whether presently outstanding or arising
subsequent to the date hereof including all amounts advanced by the Bank in
stages or installments. Notwithstanding the foregoing, this Guaranty shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Indebtedness is rescinded or must
otherwise be restored or returned by the Bank upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of either of the Borrowers, or upon
or as a result of the appointment of a receiver,
-3-
<PAGE>
intervenor or conservator of, or trustee or similar officer for, either of the
Borrowers or any substantial part of its property, or otherwise, all as though
such payments had not been made. Each of the Guarantors warrants and represents
to the Bank (i) that this Guaranty is binding upon and enforceable against such
Guarantor, in accordance with its terms, (ii) that the execution and delivery of
this Guaranty do not violate or constitute a breach of any agreement to which
such Guarantor is a party or of any applicable laws, (iii) except as previously
disclosed to the Bank, that there is no litigation, claim, action or proceeding
pending, or, to the best knowledge of such Guarantor, threatened against such
Guarantor which would materially adversely affect the financial condition of
such Guarantor or its ability to fulfill its obligations hereunder and (iv) that
such Guarantor will furnish financial statements to the Bank annually. This
Guaranty is binding on and enforceable against the Guarantors and their
successors and assigns.
8. Further Representations and Warranties. Each of the Guarantors
further represents to the Bank that such Guarantor has knowledge of the
Borrowers' financial condition and affairs and represents and agrees that it
will keep so informed while this Guaranty is in force. Such Guarantor agrees
that the Bank will have no obligation to investigate the financial condition or
affairs of either of the Borrowers for the benefit of such Guarantor nor to
advise such Guarantor of any fact respecting, or any change in, the financial
condition or affairs of either of the Borrowers which might come to the
knowledge of the Bank at any time, whether or not the Bank knows or believes or
has reason to know or believe that any such fact or change is unknown to such
Guarantor or might (or does) materially increase the risk of such Guarantor as
guarantor or might (or would) affect the willingness of such Guarantor to
continue as guarantor with respect to the Indebtedness.
9. Additional Liability of Guarantors. If either of the Guarantors is
or becomes liable for any indebtedness owing by the Borrowers to the Bank by
endorsement or otherwise than under this Guaranty, such liability shall not be
in any manner impaired or reduced hereby but shall have all and the same force
and effect it would have had if this Guaranty had not existed and such
Guarantor's liability hereunder shall not be in any manner impaired or reduced
thereby.
10. Cumulative Rights. All rights of the Bank hereunder or otherwise
arising under any documents executed in connection with or as security for the
Indebtedness are separate and cumulative and may be pursued separately,
successively or concurrently, or not pursued, without affecting or limiting any
other right of the Bank and without affecting or impairing the liability of the
Guarantors.
11. Usury. Notwithstanding any other provisions herein contained, no
provision of this Guaranty shall require or permit the collection from the
Guarantors of interest in excess of the maximum rate or amount that the
Guarantors may be required or permitted to pay pursuant to any applicable law.
In the event any such interest is collected, it shall be applied in reduction of
the Guarantors' obligations hereunder, and the remainder of such excess
collected shall be returned to the Guarantors once such obligations have been
fully satisfied.
12. Multiple Counterparts; Pronouns, Captions; Severability. This
Guaranty may be executed in multiple counterparts, each of which shall
be deemed an original but all of which shall
-4-
<PAGE>
constitute but one and the same document. The pronouns used in this instrument
shall be construed as masculine, feminine or neuter as the occasion may require.
Captions are for reference only and in no way limit the terms of the Guaranty.
Invalidation of any one or more of the provisions of this Guaranty shall in no
way affect any of the other provisions hereof, which shall remain in full force
and effect.
13. Bank Assigns. This Guaranty is intended for and shall inure to the
benefit of the Bank and each and every person who shall from time to time be or
become the owner or holder of any of the Indebtedness, and each and every
reference herein to "Bank" shall include and refer to each and every successor
or assignee of the Bank at any time holding or owning any part of or interest in
any part of the Indebtedness. This Guaranty shall be transferable and negotiable
with the same force and effect, and to the same extent, that the Indebtedness is
transferable and negotiable, it being understood and stipulated that upon
assignment or transfer by the Bank of any of the Indebtedness the legal holder
or owner of said Indebtedness (or a part thereof or interest therein thus
transferred or assigned by the Bank) shall (except as otherwise stipulated by
the Bank in its Assignment) have and may exercise all of the rights granted to
the Bank under this Guaranty to the extent of that part of or interest in the
Indebtedness thus assigned or transferred to said person. The Guarantors
expressly waive notice of transfer or assignment of the Indebtedness, or any
part thereof, or of the rights of the Bank hereunder. Failure to give notice
will not affect the liabilities of the Guarantors hereunder.
14. Application of Payments. The Bank may apply any payments received
by it from any source against that portion of the Indebtedness (principal,
interest, court costs, attorneys' fees or other) in such priority and fashion as
it may deem appropriate.
15. Notices. Any notice shall be conclusively deemed to have been
received by either party hereto and be effective on the day on which delivered
to such party at the address set forth below or such other address as such party
shall specify to the other party in writing, or if sent prepaid by certified or
registered mail on the third day after the day on which mailed, addressed to
such party at such address:
a. if to the Guarantors:
c/o Speedway Motorsports, Inc.
P.O. Box 18747
Charlotte, North Carolina 28218
Attn: Chief Financial Officer
b. if to the Bank:
NationsBank, N.A.
NationsBank Corporate Center
NC1-007-08-08
100 N. Tryon Street
Charlotte, North Carolina 28255
-5-
<PAGE>
Attn: Sports Finance Group
This section shall not be construed in any way to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantors in any situation or for any reason.
16. Assignment. The Bank, and any subsequent holder of the Note, may,
from time to time, sell or offer to sell the Loan or interests in the Loan to
one or more assignees or participants and may disclose and disseminate to any
such assignee or participant or prospective assignee or participant, the Bank's
affiliates, including NationsBanc Capital Markets, Inc. and NationsBanc Mortgage
Capital Corporation, any regulatory body having jurisdiction over the Bank and
to any other parties as necessary or appropriate in the Bank's reasonable
judgment, any information the Bank now has or hereafter obtains pertaining to
the Indebtedness, the Borrower, this Guaranty, or the Guarantors, including,
without limitation, information regarding any security for the Indebtedness or
for this Guaranty, credit or other information relating to the Guarantors, the
Borrowers, any of the Guarantor's or Borrower's principals and/or any other
party liable, directly or indirectly, for any part of the Indebtedness. The
Guarantors hereby authorize the Bank to disclose and disseminate such
information to such parties. The Guarantors shall execute, acknowledge and
deliver any and all instruments reasonable requested by the Bank in connection
therewith and to the extent, if any, specified in any such assignment or
participation, such companies, assignees or participants shall have the rights
and benefits with respect to the Note and this Guaranty (including this
paragraph) as such persons would have if such persons were the Bank hereunder.
17. Governing Law. This Guaranty shall be deemed to be a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws and judicial decisions of the State of North Carolina. The Guarantors and
the Bank agree that any dispute arising out of this Guaranty shall be subject to
the jurisdiction of both the state and federal courts in North Carolina. For
that purpose, each of the Guarantors hereby submits to the jurisdiction of the
state and federal courts of North Carolina. Each of the Guarantors further
agrees to accept service of process out of any of the beforementioned courts in
any such dispute by registered or certified mail addressed to such Guarantor.
-6-
<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty Agreement
to be duly executed under seal as of the date first above written.
ATLANTA MOTOR SPEEDWAY, INC., a
Georgia corporation
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Sec. Title: VP
(Corporate Seal)
CHARLOTTE MOTOR SPEEDWAY, INC.
a North Carolina corporation
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Sec. Title: VP
(Corporate Seal)
TEXAS MOTOR SPEEDWAY, INC., a Texas
corporation
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Sec. Title: VP
(Corporate Seal)
-7-
<PAGE>
600 RACING, INC., a North Carolina
corporation
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Sec. Title: V.P.
(Corporate Seal)
BRISTOL MOTOR SPEEDWAY, INC., a
Tennessee corporation
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Sec. Title: V.P.
(Corporate Seal)
SPR ACQUISITION CORPORATION,
a California corporation
ATTEST:
By: /s/ Randall A. Storey By: /s/ William R. Brooks
Title: Asst. Sec. Title: V.P.
(Corporate Seal)
-8-
Exhibit 10.35
SPEEDWAY MOTORSPORTS, INC.
$125,000,000
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
July 30, 1997
NationsBanc Capital Markets, Inc.
Wheat First Butcher Singer
Montgomery Securities
J.C. Bradford & Co.
c/o NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street, NC1-007-07-01
Charlotte, North Carolina 28255
Ladies and Gentlemen:
Speedway Motorsports, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchasers") $125,000,000
principal amount of its 8 1/2% Senior Subordinated Notes due 2007 (the "Notes").
The Notes will be fully and unconditionally guaranteed (the "Guarantees" and
collectively with the Notes, the "Securities"), jointly and severally, on a
senior subordinated basis by each existing and future domestic subsidiary (other
than Oil-Chem Research Corp. and its subsidiaries) of the Company (the
"Guarantors" and collectively with the Company, the "Issuers"). The Securities
are to be issued under an indenture (the "Indenture") to be dated as of August
4, 1997, among the Issuers and First Trust National Association, as trustee (the
"Trustee").
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Issuers
that the Initial Purchasers will offer and sell the Securities purchased by them
hereunder in accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated July 10, 1997 (the "Preliminary
Memorandum"), and a final offering memorandum dated July 30, 1997 (the "Final
Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets
forth certain information concerning the Issuers and the Securities. The Issuers
hereby confirm that they have authorized the use of the Preliminary Memorandum
and the Final Memorandum, and any amendment or supplement thereto, in connection
with the offer and sale of the Securities by the Initial Purchasers. Unless
stated to the contrary, all references herein to the Final Memorandum are to the
Final Memorandum at the time of execution and delivery (the "Execution Time") of
this Purchase Agreement (the "Agreement") and are not meant to include any
amendment or supplement, or any information incorporated by reference therein,
subsequent to the Execution Time.
<PAGE>
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of the Registration Rights Agreement, substantially
in the form attached hereto as Exhibit A (the "Registration Rights Agreement"),
pursuant to which the Issuers will agree to use their best efforts (i) to
commence an offer to exchange the Securities for debt securities of the Company
and guarantees of the Guarantors (collectively, the "Exchange Securities")
identical in all material respects to the Notes and the Guarantees, respectively
(except that the transfer restrictions pertaining to such Notes and Guarantees
will be eliminated), that have been registered under the Securities Act, or (ii)
to cause a shelf registration statement to become effective under the Securities
Act and to remain effective for the period designated in such Registration
Rights Agreement.
1. REPRESENTATIONS AND WARRANTIES. The Issuers jointly and severally
represent and warrant to each Initial Purchaser as follows:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not, and at the Closing Date (as
defined below) will not (and any amendment or supplement thereto, at
the date thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Issuers make no representation or warranty as to the
information contained in or omitted from the Preliminary Memorandum or
the Final Memorandum, or any amendment or supplement thereto, in
reliance upon and in conformity with information furnished in writing
to the Issuers by or on behalf of the Initial Purchasers relating to
the Initial Purchasers specifically for inclusion therein.
(b) Neither the Issuers, nor any of their "Affiliates" (as
defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on their behalf has, directly
or indirectly, made offers or sales of any security, or solicited
offers to buy any security (as defined in the Securities Act), under
circumstances that would require the registration of the Securities
under the Securities Act. Neither the Issuers, nor any of their
Affiliates, nor any person acting on their behalf has engaged in any
form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the Securities
(other than press releases issued by the Issuers pursuant to Rule 135c
under the Securities Act). The Securities satisfy the eligibility
requirements of Rule 144A(d)(3). The Company is subject to Section 13
of the Exchange Act. The Issuers have been advised by the National
Association of Securities Dealers, Inc. Private Offerings, Resales and
Trading through the Automated Linkages Market ("PORTAL") that the
Securities have been designated PORTAL eligible securities in
accordance with the rules and regulations of the National Association
of Securities Dealers, Inc.
(c) None of the Issuers or any of their respective subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the
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<PAGE>
"Investment Company Act"), without taking account of any exemption
arising out of the number of holders of any Issuer's or its respective
subsidiaries' securities.
(d) Assuming that the representations, warranties, agreements
and covenants of the Initial Purchasers contained in Section 3 hereof
are true, correct and complete, (i) neither registration under the
Securities Act of the Securities nor qualification of the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), is required in connection with the offer and sale of the
Securities to the Initial Purchasers in the manner contemplated by the
Final Memorandum or this Agreement, and (ii) neither registration under
the Securities Act of the Securities nor qualification of the Indenture
under the Trust Indenture Act is required in connection with the
initial resales of the Securities by the Initial Purchasers on the
terms and in the manner set forth in the Final Memorandum.
(e) Since the respective dates as of which information is
given in the Preliminary Memorandum and the Final Memorandum, except as
otherwise stated therein or in any supplement or amendment thereto or
information incorporated by reference therein, (i) there has been no
material adverse change in the condition (financial or otherwise),
earnings, affairs or business prospects of the Company and its
subsidiaries considered as a whole, whether or not arising in the
ordinary course of business, and (ii) there have been no material
transactions entered into by the Company or any Guarantor
(collectively, a "Material Adverse Change").
(f) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Preliminary Memorandum and the Final Memorandum. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases properties or
in which the conduct of its business requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not, singly or in the aggregate, reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), earnings, affairs or business prospects of the Company and
its subsidiaries considered as a whole (a "Material Adverse Effect").
(g) Each of the Guarantors has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and conduct its
business as described in the Preliminary Memorandum and the Final
Memorandum and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which it owns
or leases properties or in which the conduct of its business requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(h) The authorized and outstanding capital stock of the Company at
March 31, 1997 was as set forth under the caption "Capitalization" in the
Preliminary Memorandum
- 3 -
<PAGE>
and the Final Memorandum. All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. All of the issued and outstanding
capital stock of each Guarantor has been duly authorized and validly
issued and is fully paid and nonassessable, and, except as described in
the Preliminary Memorandum and the Final Memorandum, all such capital
stock of each Guarantor is owned by the Company, directly or through
subsidiaries, free and clear of any mortgage, pledge, lien,
encumbrance, claim or equity. The Guarantors are all of the
subsidiaries of the Company whose capital stock is owned, directly or
through subsidiaries, by the Company (other than Oil-Chem Research
Corp., an Illinois corporation, and its wholly-owned subsidiaries
(collectively, "Oil-Chem")).
(i) This Agreement has been duly authorized, executed and
delivered by each of the Issuers and constitutes the valid and binding
agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except that (i) enforcement
thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and
(ii) the enforceability of any indemnification or contribution
provisions thereof may be limited under applicable securities laws or
the public policies underlying such laws.
(j) The Notes have been duly authorized by the Company, and,
when executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Initial Purchasers
in accordance with this Agreement, will constitute the valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms and will be entitled to the benefits of the
Indenture, except that (i) enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(k) The Guarantees endorsed on the Notes have been duly
authorized by each of the Guarantors and, when the Notes are executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance
with this Agreement, the Guarantees will constitute the valid and
binding obligation of each of the Guarantors enforceable against each
of the Guarantors in accordance with their terms and will be entitled
to the benefits of the Indenture, except that (i) enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (ii) the
enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
- 4 -
<PAGE>
(l) The Indenture has been duly authorized, executed and
delivered by each of the Issuers and (assuming the due execution and
delivery thereof by the Trustee) is a legally valid and binding
agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except that (i) enforcement
thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and
(ii) the enforceability of any indemnification or contribution
provisions thereof may be limited under applicable securities laws or
the public policies underlying such laws.
(m) The Exchange Securities have been duly authorized, and,
when duly executed, authenticated, issued and delivered, will be
validly issued and outstanding, and will constitute the valid and
binding obligations of each of the Issuers, entitled to the benefits of
the Indenture and enforceable against each of the Issuers in accordance
with their terms, except that (i) enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(n) The Registration Rights Agreement has been duly authorized
by each of the Issuers, and, when duly executed and delivered by each
of the Issuers (assuming the due execution and delivery by each of the
Initial Purchasers), will constitute a valid and binding agreement of
each of the Issuers, enforceable against each of the Issuers in
accordance with its terms, except that (i) enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (ii) the
enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(o) On the Closing Date, the "1997 Credit Facility" (as
defined in the Final Memorandum under the caption "Description of Notes
- Certain Definitions"): (i) shall have been duly authorized, executed
and delivered by each of the Issuers (to the extent each is a party
thereto) and will constitute the valid and binding agreement of each of
the Issuers, enforceable against each of the Issuers in accordance with
its terms, except that (A) enforcement thereof may be subject to (1)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (2) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (B) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws;
and (ii) shall be in full force and effect. On the Closing Date, no
event of default or event
- 5 -
<PAGE>
which, with the giving of notice or passage of time or both, would
constitute an event of default under the 1997 Credit Facility shall
have occurred, all conditions to the extension of credit thereunder
shall have been satisfied and written notice of any waivers related
thereto shall have been given to the Initial Purchasers.
(p) The execution, delivery and performance of this Agreement,
the Indenture, the Registration Rights Agreement and the 1997 Credit
Facility (and all other agreements and instruments contemplated
thereby) by each of the Issuers (to the extent each is a party
thereto), and the consummation of the transactions contemplated hereby
and thereby and the issuance and sale of the Securities and Exchange
Securities by the Issuers will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument to which either the Company
or any of the Guarantors is a party or by which the Company or any of
the Guarantors is bound or to which any of the properties or assets of
the Company or any of the Guarantors are subject, nor will such actions
result in any violation of (A) the provisions of the charter or by-laws
of the Company or any of the Guarantors or (B) any statute to which the
Company or any of the Guarantors may be subject or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of the Guarantors or any of their
properties or assets (except to the extent any such conflict, breach,
violation or default singly or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect).
(q) Except for such consents, approvals, authorizations,
registrations or qualifications as may be required under applicable
state securities and Blue Sky laws in connection with the purchase and
distribution of the Securities by the Initial Purchasers or as set
forth in the Registration Rights Agreement, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement, the Indenture, the
Registration Rights Agreement and the 1997 Credit Facility by the
Issuers, the consummation of the transactions contemplated hereby and
thereby, and the issuance and sale of the Securities and Exchange
Securities by the Issuers. The execution and delivery of this
Agreement, the Securities, the Indenture, the Registration Rights
Agreement and the 1997 Credit Facility will not involve any prohibited
transaction within the meaning of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, or Section 4975 of
the Internal Revenue Code of 1986, as amended.
(r) Neither the Company nor any of the Guarantors is in breach
or violation of any of the terms or provisions of any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of the Guarantors is a party
or by which the Company or any of the Guarantors is bound or to which
any of the properties or assets of the Company or any of its
subsidiaries are subject, nor is the Company or any of the Guarantors
in violation of the provisions of its respective charter or by-laws or
any material statute or any material judgment, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company, any of the Guarantors or any of their
properties or assets.
- 6 -
<PAGE>
(s) This Agreement, the Securities, the Indenture, the
Registration Rights Agreement and the 1997 Credit Facility conform in
all material respects to the descriptions thereof contained in the
Final Memorandum, and such descriptions are accurate in all material
respects.
(t) Except as set forth in (i) the Registration Rights
Agreement and (ii) the Registration Rights Agreement dated April 16,
1996 entered into in connection with the acquisition of Oil-Chem, there
are no contracts, agreements or understandings between the Company or
any of the Guarantors and any person granting such person the right to
require the Company or any of the Guarantors to file a registration
statement under the Securities Act with respect to any securities owned
or to be owned by such person or to require the Company or any of the
Guarantors to include such securities with any securities being
registered pursuant to any registration statement filed by the Company
or any of the Guarantors under the Securities Act.
(u) Except as set forth in the Preliminary Memorandum and the
Final Memorandum or in any supplement or amendment thereto or
information incorporated by reference therein, there is no action, suit
or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending or, to the knowledge of the Issuers,
threatened against or affecting the Company or any of the Guarantors,
which could reasonably be expected to result in a Material Adverse
Change or, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the offering
of the Securities.
(v) Each of the Company and the Guarantors has good and
indefeasible title in fee simple to all real property and good and
indefeasible title to all personal property owned by it and necessary
in the conduct of the business of the Company or such Guarantor in each
case free and clear of all liens, encumbrances and defects, except (i)
such as are referred to in the Final Memorandum or (ii) such as do not
materially adversely affect the value of such property to the Company
or such Guarantor, and do not interfere with the use made and proposed
to be made of such property by the Company or such Guarantor to an
extent that such interference would, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All leases to
which any of the Company or the Guarantors is a party are valid and
binding, no default has occurred or is continuing thereunder which
could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the offering
of the Securities, and the Issuers enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as
lessee, except with respect to such factors as would not have a
Material Adverse Effect. Each of the Company and the Guarantors
possesses all material certificates, authorizations or permits issued
by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct the business now operated by each of them.
Neither the Company nor any of the Guarantors has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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<PAGE>
(w) Deloitte and Touche LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants within the meaning of the Securities Act
and the rules and regulations thereunder. The audited and unaudited
consolidated financial statements included in the Preliminary
Memorandum and the Final Memorandum present fairly in all material
respects the financial position of the Company and its subsidiaries, on
a consolidated basis, as at the dates indicated and the results of
their operations and the changes in their consolidated financial
position for the periods specified, and such financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved,
except as indicated therein. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance
with management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(x) Neither the Company nor any of the Guarantors is now or,
after giving effect to the issuance of the Securities and the
application of the proceeds therefrom, will be (i) insolvent, (ii) left
with unreasonably small capital with which to engage in its anticipated
businesses or (iii) incurring debts beyond its ability to pay such
debts as they become due.
(y) Each of the Company and the Guarantors owns or otherwise
possesses, or can acquire on reasonable terms, the right to use all
material patents, trademarks, service marks, trade names and
copyrights, all applications and registrations for each of the
foregoing, and all other material proprietary rights and confidential
information necessary to the conduct of its respective businesses as
currently conducted. Except as otherwise disclosed in the Final
Memorandum, neither the Company nor any of the Guarantors has received
any notice or is otherwise aware of any infringement of or conflict
with the rights of any third party with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a
Material Adverse Effect.
(z) Except as otherwise disclosed in the Final Memorandum,
each of the Company and the Guarantors is (i) in compliance with any
and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its respective businesses and (iii) is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
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<PAGE>
(aa) Except as described in the Final Memorandum, no labor
problem or disturbance with the employees of the Company or any of the
Guarantors exists or, to the knowledge of the Issuers, is threatened
which, singly or in the aggregate, would reasonably be expected to have
a Material Adverse Effect.
(ab) Each of the Company and the Guarantors is insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which it is engaged. Neither the Company nor any of the
Guarantors has been refused any insurance coverage sought or applied
for. Neither the Company nor any of the Guarantors has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(ac) Neither the Company nor any of the Guarantors, nor, to
any Issuers' knowledge, any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of the
Guarantors, has used any corporate funds during the last five years for
any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, made any unlawful payment to
any foreign or domestic government official or employee from corporate
funds, violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977 or made any bribe, payoff, influence
payment, kickback or other unlawful payment.
(ad) Neither the Company nor any of the Guarantors has taken,
and none of them will take, any action that would cause this Agreement
or the issuance or sale of the Securities and Exchange Securities to
violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System or analogous foreign laws and regulations.
(ae) The documents incorporated by reference in the
Preliminary Memorandum and the Final Memorandum as of the dates they
were filed with the Securities and Exchange Commission (the "SEC") were
responsive in all material respects to the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the SEC thereunder. No Issuer is a party
to any contract or agreement that would be required to be filed with
the SEC as an exhibit to a registration statement on Form S-1 pursuant
to entries (2), (4) and (10) of the Exhibit Table of Item 601 of
Regulation S-K under the Securities Act, except those which have been
previously filed with the SEC and those agreements constituting the
1997 Credit Facility.
(af) No Issuer is a "public utility" or a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(ag) Assuming that Oil-Chem is a Guarantor for purposes of
this Section 1(ah) only, the representations and warranties set forth
in Section 1(g), (h), (r), (t), (u), (v), (x), (y), (z), (aa), (ab),
(ac) and (ad) hereof are true and correct with respect to Oil-Chem.
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<PAGE>
(ah) As of the respective dates of the Preliminary Memorandum
and the Final Memorandum, (i) neither Dallas Ft. Worth Motor Speedway,
Inc., a Texas corporation, nor Dallas Motor Speedway, Inc., a Texas
corporation (collectively, the "Texas Entities"), is a Subsidiary (as
such term is defined in the Final Memorandum under the caption
"Description of Notes - Certain Definitions") of the Company or any of
the Guarantors and (ii) none of the Texas Entities (A) has any capital
stock outstanding, (B) has any assets or liabilities, (C) has any
directors or officers or (D) is involved in any business whatsoever.
2. PURCHASE AND SALE. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Issuers agree to sell to the Initial Purchasers, and each of the
Initial Purchasers, severally but not jointly, agrees to purchase the aggregate
principal amount of Securities set forth opposite its name as shown in Schedule
1 hereto, at a purchase price equal to 97.478% of such principal amount thereof.
The Issuers shall not be obligated to deliver any of the
Securities to be delivered, except upon payment for all the Securities to be
purchased as provided herein.
3. SALE AND RESALE OF THE SECURITIES BY THE INITIAL
PURCHASERS. Each of the Initial Purchasers, severally and not jointly,
acknowledges that the Securities have not been registered under the Securities
Act and represents and warrants to the Issuers that it will offer the Securities
to be purchased hereunder for resale only upon the terms and conditions set
forth in this Agreement and in the Final Memorandum. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to, and agrees
with, the Issuers that such Initial Purchaser (i) will not solicit offers for,
or offer or sell, the Securities by means of any form of general solicitation or
general advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (ii) will solicit offers for the Securities only from, and will offer,
sell or deliver the Securities, as part of its initial offering, only to the
following persons: (A) persons in the United States whom such Initial Purchaser
reasonably believes to be qualified institutional buyers ("Qualified
Institutional Buyers"), as defined in Rule 144A under the Securities Act, as
such rule may be amended from time to time ("Rule 144A"), or, if any such person
is buying for one or more institutional accounts for which such person is acting
as fiduciary or agent, only when such person has represented to such Initial
Purchaser that each such account is a Qualified Institutional Buyer, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A; and (B) persons who are institutional accredited investors as defined
in Rule 501(a)(1), (2), (3) or (7) under Regulation D that, prior to their
purchase of the Securities, executes and delivers a letter containing certain
representations and agreements in the form attached as Annex A to the Final
Memorandum, and in each case, in transactions under Rule 144A or Regulation D in
private sales exempt from registration under the Securities Act.
4. DELIVERY OF AND PAYMENT FOR THE NOTES. Delivery of and
payment (via wire transfer) for the Securities shall be made at the offices of
Fennebresque, Clark, Swindell & Hay, NationsBank Corporate Center, 100 North
Tryon Street, Suite 2900, Charlotte, North Carolina 28202-4011, at 9:00 A.M.,
New York City time, on August 4, 1997 or at such other date (not later than
August 11, 1997) as shall be determined by agreement between the Initial
Purchasers and the Company (such date and time are sometimes referred to as the
"Closing Date"). On the
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<PAGE>
Closing Date, the Issuers shall deliver or cause to be delivered the Securities
to the Initial Purchasers for the account of the Initial Purchasers against
payment to or upon the order of the Company of the purchase price by wire
transfer of immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of the Initial Purchasers hereunder. Upon delivery,
the Securities shall be in definitive fully registered form and registered in
the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), or
such other name or names and in such denominations as the Initial Purchasers
shall request in writing not less than one business day prior to the Closing
Date. For the purpose of expediting the checking and packaging of the
Securities, the Issuers shall make the Securities available for inspection by
the Initial Purchasers at the offices of Fennebresque, Clark, Swindell & Hay,
NationsBank Corporate Center, 100 North Tryon Street, Suite 2900, Charlotte,
North Carolina 28202-4011, not later than 2:00 P.M., New York City time, on the
business day prior to the Closing Date.
5. FURTHER AGREEMENTS OF THE ISSUERS. The Issuers jointly and
severally agree with each Initial Purchaser as follows:
(a) The Issuers will furnish to the Initial
Purchasers, without charge, as many copies of the Preliminary
Memorandum and the Final Memorandum and any supplements and amendments
thereto as they may reasonably request.
(b) Prior to making any amendment or supplement to
the Final Memorandum, the Issuers shall furnish a copy thereof to the
Initial Purchasers and counsel to the Initial Purchasers and will not
effect any such amendment or supplement to which the Initial Purchasers
shall reasonably object by notice to the Company after a reasonable
period to review.
(c) If, at any time prior to completion of the
distribution of the Securities by the Initial Purchasers, any event
shall occur or condition exist as a result of which it is necessary, in
the opinion of counsel for the Initial Purchasers or counsel for the
Issuers, to amend or supplement the Final Memorandum in order that the
Final Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances
existing at the time it is delivered to a purchaser, or if it is
necessary to amend or supplement the Final Memorandum to comply with
applicable law, the Issuers will promptly prepare such amendment or
supplement as may be necessary to correct such untrue statement or
omission or so that the Final Memorandum, as so amended or
supplemented, will comply with applicable law and furnish to the
Initial Purchasers such number of copies of such amendment or
supplement as they may reasonably request.
(d) So long as any Securities are outstanding and are
"Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which the Issuers are not
subject to Section 13 or 15(d) of the Exchange Act, the Issuers will
furnish to holders of the Securities and prospective purchasers of
Securities designated by such holders, upon request of such holders or
such prospective purchasers, the information, if any, required to be
delivered pursuant to Rule 144A(d)(4)
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<PAGE>
under the Securities Act. Such information, at the date of its
provision by the Company to such holders or prospective purchasers,
will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
This covenant is intended to be for the benefit of the holders and the
prospective purchasers designated by such holders from time to time of
such Restricted Securities.
(e) So long as the Securities and Exchange Securities
are outstanding, the Issuers will furnish to the Initial Purchasers
copies of any annual reports, quarterly reports and current reports
filed with the SEC on Forms 10-K, 10-Q and 8-K, or such other similar
forms as may be designated by the SEC, and such other documents,
reports and information as shall be furnished by the Issuers to the
Trustee or to the holders of the Securities and Exchange Securities
pursuant to the Indenture.
(f) The Issuers will cooperate with the Initial
Purchasers and their counsel to ensure offers and sales of the
Securities comply with applicable securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers reasonably designate and to
continue such compliance in effect so long as reasonably required for
the distribution of the Securities. The Issuers will promptly advise
the Initial Purchasers of the receipt by the Issuers of any
notification with respect to any noncompliance in any jurisdiction or
the initiation or threatening of any proceeding for such purpose. The
Issuers will also cooperate with the Initial Purchasers and their
counsel in the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial
Purchasers reasonably request. Notwithstanding the foregoing, the
Issuers shall not be obligated to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified or to file a general
consent to service of process or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not
otherwise subject.
(g) The Issuers will use their best efforts (i) to
permit the Securities to be designated PORTAL securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. relating to trading in the PORTAL market and
(ii) to permit the Securities to be eligible for clearance and
settlement through DTC.
(h) The Issuers will not, and will cause their
Affiliates not to, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) in a transaction that could be integrated with the sale
of the Securities in a manner which would require the registration of
the Securities under the Securities Act.
(i) Except following the effectiveness of any
Registration Statement (as defined in the Registration Rights
Agreement) and except for such offers as may be made as a result of, or
subsequent to, filing such Registration Statement or amendments thereto
prior to the effectiveness thereof, the Issuers will not, and will
cause their Affiliates not to, solicit any offer to buy or offer to
sell the Securities by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
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<PAGE>
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(j) The Company will apply the net proceeds from the
sale of the Securities as set forth in the Final Memorandum under the
caption "Use of Proceeds."
(k) The Issuers will take such steps as shall be
necessary to ensure that neither the Company nor any of its
subsidiaries shall become (i) an "investment company" within the
meaning of the Investment Company Act or (ii) a "holding company" or a
"subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(l) The Issuers will not, and will cause their
Affiliates not to, take any actions which would require the
registration under the Securities Act of the Securities (other than
pursuant to the Registration Rights Agreement).
(m) Prior to the consummation of the Exchange Offer
(as defined in the Final Memorandum) or the effectiveness of an
applicable shelf registration statement if, in the reasonable judgment
of the Initial Purchasers, the Initial Purchasers or any of their
Affiliates are required to deliver an offering memorandum in connection
with sales of, or market-making activities with respect to, the
Securities, (A) the Issuers will periodically amend or supplement the
Final Memorandum so that the information contained in the Final
Memorandum complies with the requirements of Rule 144A of the
Securities Act, (B) the Issuers will amend or supplement the Final
Memorandum when necessary to reflect any material changes in the
information provided therein so that the Final Memorandum will not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
light of the circumstances existing as of the date the Final Memorandum
is so delivered, not misleading and (C) the Issuers will provide the
Initial Purchasers with copies of each such amended or supplemented
Final Memorandum as the Initial Purchasers may reasonably request. The
Issuers hereby expressly acknowledge that the indemnification and
contribution provisions of Section 8 hereof are specifically applicable
and relate to each offering memorandum, registration statement,
prospectus, amendment or supplement referred to in this Section 5(m).
(n) The Issuers will not, until 120 days following
the Closing Date, without the prior written consent of the Initial
Purchasers, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce an offering of, any securities
issued or guaranteed by any of the Issuers (other than the Securities,
the Exchange Securities or other securities issued pursuant to employee
stock option plans, employee stock purchase plans, warrants or options,
if any, outstanding on the date hereof which have been disclosed in the
Final Memorandum).
(o) The Issuers will use their best efforts to do all
things necessary to satisfy the closing conditions set forth in Section
7 hereof.
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<PAGE>
6. EXPENSES. The Issuers jointly and severally (without
duplication with respect to the provisions of the Registration Rights Agreement)
agree to pay (a) the costs incident to the authorization, issuance, sale and
delivery of the Securities and Exchange Securities and any issue or stamp taxes
payable in connection therewith, (b) the costs incident to the preparation and
printing of the Preliminary Memorandum, the Final Memorandum and any amendments,
supplements and exhibits thereto, (c) the costs of distributing the Preliminary
Memorandum, the Final Memorandum and any amendments or supplements thereto, (d)
the fees and expenses of notice filings with respect to the Securities and
Exchange Securities under applicable securities laws of the several
jurisdictions as provided in Section 5(f) and, if necessary, of preparing a Blue
Sky Memorandum (including related fees and expenses of counsel to the Initial
Purchasers), (e) the cost of printing the Securities and the Exchange
Securities, (f) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of any counsel for the Trustee in
connection with the Indenture and the Securities and Exchange Securities, (g)
any fees paid to rating agencies in connection with the rating of the Securities
and Exchange Securities, (h) the costs and expenses of DTC and its nominee,
including its book-entry system, (i) all expenses and listing fees incurred in
connection with the application for quotation of the Securities on the PORTAL
market and (j) all other costs and expenses incident to the performance of the
obligations of the Issuers under this Agreement.
7. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Issuers contained herein at the Execution Time and the Closing Date, to the
accuracy of the statements of the Issuers made in any certificates pursuant to
the provisions hereof, to the performance by the Issuers of their obligations
hereunder and to the following additional conditions:
(a) The Initial Purchasers shall not have discovered
and disclosed to the Company on or prior to the Closing Date that the
Final Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the
Initial Purchasers, is material or omits to state a fact which, in the
opinion of such counsel, is material and is necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The Final Memorandum shall have been printed and
copies distributed to the Initial Purchasers as soon as practicable but
in no event later than on the second business day following the date of
this Agreement or at such later date and time as to which the Initial
Purchasers may agree, and no stop order suspending the qualification or
exemption from qualification of the Securities in any jurisdiction
referred to in Section 5(f) shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(c) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issued by
any governmental agency which would, as of the Closing Date, singly or
in the aggregate, reasonably be expected to have a Material Adverse
Effect; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the knowledge of the Company,
threatened against, the Company or any of the Guarantors before any
court or arbitrator or any governmental
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<PAGE>
body, agency or official that, singly or in the aggregate, if adversely
determined, would reasonably be expected to result in a Material
Adverse Effect; and no stop order shall have been issued by the SEC or
any governmental agency of any jurisdiction referred to in Section 5(f)
preventing the use of the Final Memorandum, or any amendment or
supplement thereto, which would reasonably be expected to have a
Material Adverse Effect.
(d) Since the dates as of which information is given
in the Final Memorandum and other than as set forth in the Final
Memorandum, (i) there shall not have been any Material Adverse Change,
or any development that is reasonably likely to result in a Material
Adverse Change, or any material change in the long-term debt, or
material increase in the short-term debt, from that set forth in the
Final Memorandum, (ii) no dividend or distribution of any kind shall
have been declared, paid or made by the Company on any class of its
capital stock and (iii) the Company and its subsidiaries shall not have
incurred any liabilities or obligations, direct or contingent, that are
material, individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, and that are required to be disclosed
on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest
balance sheet or notes thereto included in the Final Memorandum.
(e) The Initial Purchasers shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by
(i) Mr. William R. Brooks, Vice President, Treasurer and Chief
Financial Officer, and (ii) Ms. Marylaurel E. Wilks, Secretary and
Corporate Counsel, confirming that (A) such officers have participated
in conferences with other officers and representatives of the Issuers,
representatives of the independent public accountants of the Issuers
and representatives of counsel to the Issuers at which the contents of
the Final Memorandum and related matters were discussed and (B) the
matters set forth in paragraphs (b), (c) and (d) of this Section 7 are
true and correct as of the Closing Date.
(f) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the
Securities and Exchange Securities, the Indenture, the Registration
Rights Agreement, the Final Memorandum, the 1997 Credit Facility and
all other legal matters relating to this Agreement and the transactions
contemplated hereby and thereby shall be satisfactory in all material
respects to counsel for the Initial Purchasers, and the Issuers shall
have furnished to such counsel all documents and information that they
may reasonably request to enable them to pass upon such matters.
(g) Parker, Poe, Adams & Bernstein L.L.P., counsel
for the Issuers, shall have furnished to the Initial Purchasers its
written opinion, addressed to each of the Initial Purchasers and dated
the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, to the effect that:
(i) Each of the Company and the Guarantors
has been duly incorporated, is validly existing as a
corporation and is in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and the
Guarantors
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<PAGE>
is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction with respect to
which, to such counsel's knowledge, it owns property,
maintains business or has employees, except where a failure to
so qualify would not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect;
(ii) Assuming the accuracy of the Initial
Purchasers' representations and warranties set forth in
Section 3 of this Agreement, the offer, issuance, sale and
delivery of the Securities to the Initial Purchasers, and the
initial reoffer, resale and delivery of the Securities by the
Initial Purchasers, as contemplated by this Agreement and the
Final Memorandum, do not require registration under the
Securities Act, or qualification of the Indenture under the
Trust Indenture Act, it being understood that no opinion is
expressed as to any subsequent resale of Securities or any
resale of Securities by any person other than the Initial
Purchasers;
(iii) Each of the Issuers has the corporate
power and authority to execute and deliver, and to consummate
the transactions provided for in, this Agreement; and each of
the Issuers has the corporate power and authority to issue,
sell and deliver the Securities as contemplated by this
Agreement;
(iv) The execution and delivery of this
Agreement have been duly authorized by all requisite corporate
action of each Issuer, and this Agreement has been duly
executed and delivered by each Issuer;
(v) The execution and delivery of the
Indenture have been duly authorized by all requisite corporate
action of each Issuer, and the Indenture has been duly
executed and delivered by each Issuer. Assuming due
authorization, execution and delivery by the Trustee, the
Indenture is a valid and binding agreement of each Issuer,
enforceable against each Issuer in accordance with its terms,
except that enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law);
(vi) The issuance, execution and delivery of
the Securities have been duly authorized by all requisite
corporate action of each of the Issuers, and the Notes have
been duly executed and delivered by the Company and the
Guarantees have been duly executed and delivered by the
Guarantors. Assuming due authentication by the Trustee, the
Notes and the Guarantees are valid and binding obligations of
the Company and the Guarantors, respectively, entitled to the
benefits of the Indenture, enforceable against the Company and
the Guarantors in accordance with their respective terms,
except that enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or
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<PAGE>
affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(vii) The execution and delivery of the
Exchange Securities have been duly authorized by all requisite
corporate action of each of the Issuers, and, when duly
executed and delivered by the Company and the Guarantors and
duly authenticated by the Trustee, the Exchange Securities
will be valid and binding obligations of the Company and the
Guarantors, entitled to the benefits of the Indenture,
enforceable against the Company and the Guarantors in
accordance with their respective terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(viii) The execution and delivery of the
Registration Rights Agreement have been duly authorized by all
requisite corporate action of each of the Issuers, and the
Registration Rights Agreement has been duly executed and
delivered by the Issuers. Assuming due authorization,
execution and delivery by the Initial Purchasers, the
Registration Rights Agreement is a valid and binding agreement
of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except that (A)
enforcement thereof may be subject to (1) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (B) the
enforceability of any indemnification or contribution
provisions thereof may be limited under applicable securities
laws or the public policies underlying such laws;
(ix) The execution and delivery of the 1997
Credit Facility have been duly authorized by all requisite
corporate action of each of the Issuers (to the extent each is
a party thereto), and the 1997 Credit Facility has been duly
executed and delivered by each of the Issuers (to the extent
each is a party thereto). Assuming the due authorization,
execution and delivery by the other parties thereto, the 1997
Credit Facility is a valid and binding agreement of each of
the Issuers (to the extent each is a party thereto),
enforceable against each of the Issuers (to the extent each is
a party thereto) in accordance with its terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(x) The authorized and outstanding capital
stock of the Company at March 31, 1997 was as set forth under
the caption "Capitalization" in the Preliminary Memorandum and
the Final Memorandum. All of the outstanding
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shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable;
(xi) All of the capital stock of the
Guarantors is owned of record by the Company or a Guarantor.
All of the outstanding shares of capital stock of the
Guarantors have been duly authorized and validly issued, are
fully paid and nonassessable and except as disclosed in the
Final Memorandum, to the best knowledge of such counsel, all
such shares are owned by the Company or a Guarantor free and
clear of any security interests, liens, pledges or
encumbrances;
(xii) The execution and delivery by the
Issuers of this Agreement, the Indenture, the Registration
Rights Agreement and the 1997 Credit Facility, the
consummation by the Issuers of the transactions provided for
herein and therein and by the Final Memorandum, and the
issuance and sale of the Securities and Exchange Securities by
the Issuers will not (A) result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any material agreement or instrument of the Company or
any of the Guarantors or (B) result in any violation of the
provisions of the charter or bylaws of the Company or any of
the Guarantors, or any applicable law, rule or regulation with
respect to the Company or any of the Guarantors or any rule or
regulation or order of any court or governmental agency having
jurisdiction over the Company or any of the Guarantors, except
for such violations that would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Except for such consents, approvals or authorizations
of, or registrations or qualifications with, governmental
authorities as may be required under the Securities Act and
the rules and regulations thereunder or applicable state
securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Initial Purchasers
and as set forth in the Registration Rights Agreement, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or
body, is required in connection with the execution and
delivery by the Issuers of this Agreement, the Indenture, the
Registration Rights Agreement or the 1997 Credit Facility, the
consummation by the Issuers of the transactions provided for
herein and therein and the issuance and sale of the Securities
and Exchange Securities by the Issuers. The execution and
delivery of this Agreement, the Securities, the Indenture, the
Registration Rights Agreement and the 1997 Credit Facility
will not involve any prohibited transaction within the meaning
of Section 406 of the Employee Retirement Income Security Act
of 1974, as amended, or Section 4975 of the Internal Revenue
Code of 1986, as amended;
(xiii) This Agreement, the Indenture, the
Securities, the Registration Rights Agreement and the 1997
Credit Facility conform in all material respects to the
descriptions thereof contained in the Final Memorandum and
such descriptions are accurate in all material respects;
(xiv) To the best knowledge of such counsel,
the statements made in the Final Memorandum under the headings
"Risk Factors - Fraudulent Conveyance Statutes" and "- Legal
Proceedings" and "Management's Discussion
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<PAGE>
and Analysis of Financial Condition and Results of Operations
- Liquidity and Capital Resources - Legal Proceedings" and "-
Environmental Matters", to the extent they constitute
summaries of material statutes, regulatory or legal and
governmental proceedings, are fair summaries of such statutes,
regulations and proceedings;
(xv) To the best knowledge of such counsel,
there are no pending or threatened legal or governmental
proceedings to which any Issuer is a party that would be
required under the Securities Act to be described in a
registration statement or a prospectus delivered at the time
of the confirmation of the sale of an offering of securities
registered under the Securities Act which are not described in
the Final Memorandum, or, to such counsel's best knowledge,
which seek to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to
the Initial Purchasers;
(xvi) Neither the Company nor any of its
subsidiaries is (A) subject to registration and regulation as
an "investment company" within the meaning of the Investment
Company Act, or (B) a "holding company" or a "subsidiary
company" or, to the best knowledge of such counsel after due
inquiry, an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as
amended;
(xvii) The documents incorporated by
reference in the Preliminary Memorandum and the Final
Memorandum (except for the financial statements and other
financial or statistical data included therein or omitted
therefrom and to the extent that any statement in any such
document is modified or superseded in a subsequently filed
document or in the Final Memorandum) as of the dates they were
filed with the SEC appear on their face to have been
appropriately responsive in all material respects to the
requirements of the Exchange Act and the rules and regulations
of the SEC thereunder.
(xviii) Assuming the Securities are issued
and delivered pursuant to this Agreement and the Final
Memorandum, such Securities will not be of the same class
(within the meaning of Rule 144A(d)(3) under the Securities
Act) as securities of any of the Issuers that are listed on a
national securities exchange registered under Section 6 of the
Exchange Act or quoted on an automated inter-dealer quotation
system; and
(xix) Assuming the Initial Purchasers
purchase the Securities in accordance with Rule 144A under the
Securities Act, neither the issuance or sale of the Securities
nor the application by the Company of the net proceeds thereof
as set forth in the Final Memorandum will violate Regulation
G, T, U or X of the Board of Governors of the Federal Reserve
System.
In addition, such counsel shall also state that such counsel
has participated in conferences with officers, in-house counsel and
representatives of the Issuers, representatives of the independent
public accountants for the Issuers and the Initial
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Purchasers at which the contents of the Final Memorandum and related
matters were discussed, and no facts have come to the attention of such
counsel that lead such counsel to believe that the Final Memorandum, as
of its date or as of the Closing Date, contained or contains an untrue
statement of a material fact or omitted or omits to state any material
fact necessary to make the statements therein, in light of the
circumstances under which there were made, not misleading (it being
understood that such counsel need express no belief or opinion with
respect to the financial statements and other financial and statistical
data included therein).
In rendering such opinion, such counsel may state that such
opinion is limited to the laws of the State of North Carolina, the
State of New York, the General Corporation Law of the State of Delaware
and the federal law of the United States of America. In rendering such
opinion, such counsel shall be entitled to rely, as to certain matters
of fact, on information contained in certificates and reports of public
officials; provided, that such counsel believe that they and the
Initial Purchasers are justified in relying upon such certificates and
reports of public officials.
(h) The Initial Purchasers shall have received on the
Closing Date an opinion of Fennebresque, Clark, Swindell & Hay, counsel
for the Initial Purchasers, dated the Closing Date and addressed to the
Initial Purchasers, in form and substance reasonably satisfactory to
the Initial Purchasers.
(i) The Issuers and the Trustee shall have entered
into the Indenture, and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(j) The Issuers and the Initial Purchasers shall have
entered into the Registration Rights Agreement, and the Initial
Purchasers shall have received counterparts, conformed as executed,
thereof.
(k) The Issuers (to the extent each of them is a
party thereto) shall have entered into the 1997 Credit Facility (the
form and substance of which shall be reasonably acceptable to the
Initial Purchasers), and the Initial Purchasers shall have received
copies of executed counterparts or copies, conformed as executed,
thereof and of all other documents and agreements entered into in
connection therewith. There shall exist at and as of the Closing Date
no conditions that would constitute a default (or an event that with
notice or the lapse of time, or both, would constitute a default) under
the 1997 Credit Facility. On the Closing Date, all conditions to
closing under the 1997 Credit Facility shall have been satisfied, and
the Company shall have unused borrowing capacity of up to $175,000,000
under the 1997 Credit Facility. On the Closing Date, the 1997 Credit
Facility shall be in full force and effect and shall not have been
modified.
(l) At the Execution Time and at the Closing Date,
Deloitte & Touche LLP shall have furnished to the Initial Purchasers a
letter or letters, dated the Execution Time and the Closing Date,
respectively, in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers, confirming that they
are independent accountants within the meaning of the Securities Act
and the Exchange Act and the
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<PAGE>
applicable rules and regulations thereunder and Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public
Accountants and otherwise satisfactory in form and substance to the
Initial Purchasers and their counsel.
(m) (i) Neither the Company nor any of its
subsidiaries shall have sustained since the date of the latest audited
financial statements included in the Final Memorandum losses or
interferences with their businesses, taken as a whole, from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Final Memorandum or (ii) since such date, there shall not have been any
change in the capital stock (other than an increase in the Company's
authorized common stock, par value $.01 per share ("Common Stock"),
from 100,000,000 shares of Common Stock to 200,000,000 shares of Common
Stock effective April 29, 1997) or long-term debt of the Company or any
of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company or its subsidiaries, taken as a whole, otherwise than as
set forth or contemplated in the Final Memorandum, the effect of which,
in any such case described in clause (i) or (ii), is, in the reasonable
judgment of the Initial Purchasers, so material and adverse as to make
it impracticable or inadvisable to proceed with the offering or the
delivery of the Securities being delivered on the Closing Date on the
terms and in the manner contemplated herein and in the Final
Memorandum.
(n) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any of the following: (i)
trading (A) in the Company's Common Stock, (B) in securities generally
on the New York Stock Exchange, (C) in securities generally on The
NASDAQ Stock Market's National Market or (D) in the over-the-counter
market shall have been suspended or materially limited, or minimum
prices shall have been established on such exchange by the SEC, or by
such exchange or by any other regulatory body or governmental authority
having jurisdiction; (ii) a banking moratorium shall have been declared
by federal or state authorities; (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States; or
(iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of the Initial
Purchasers, impracticable or inadvisable to proceed with the offering
or delivery of the Securities being delivered on the Closing Date on
the terms and in the manner contemplated herein and in the Final
Memorandum.
(o) Fennebresque, Clark, Swindell & Hay shall have
been furnished with such documents, in addition to those set forth
above, as they may reasonably require (i) for the purpose of enabling
them to review or pass upon the matters referred to in this Section 7
and (ii) in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
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<PAGE>
(p) Subsequent to the Execution Time, there shall not
have been any decrease in the rating of any of the Company's debt
securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the
Securities Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.
(q) Prior to the Closing Date, the Issuers shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Issuers, jointly and severally, agree to
indemnify and hold harmless each Initial Purchaser, the directors,
officers, employees and agents of each Initial Purchaser and each
person who controls (within the meaning of either the Securities Act or
the Exchange Act) any Initial Purchaser against any and all losses,
claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Preliminary Memorandum, the Final Memorandum or any information
provided by the Issuers to any holder or prospective purchaser of Notes
pursuant to Section 5(e), or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agree to
reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them (except that only one
counsel's fees and expenses shall be covered) in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Issuers will not be liable in any
such case to any Initial Purchaser to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Memorandum or the Final Memorandum, or
in any amendment thereof or supplement thereto, in reliance upon and in
conformity with written information relating to the Initial Purchasers
furnished to the Issuers by or on behalf of such Initial Purchaser
specifically for inclusion therein; provided further, that with respect
to any such untrue statement or omission made in the Preliminary
Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of an Initial Purchaser from whom the
person asserting any such losses, claims, damages, liabilities,
judgments, actions or expenses purchased Securities, or any controlling
person of such Initial Purchaser, if a copy of the Final Memorandum or
supplement or amendment thereto was sent or given by or on behalf of
such Initial
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<PAGE>
Purchaser to such person at or prior to the written confirmation of the
sale of Securities to such person and the Final Memorandum or
supplement or amendment thereto would have cured the defect giving rise
to such losses, claims, damages, liabilities, judgments, actions or
expenses, unless such failure to deliver the Final Memorandum was a
result of noncompliance by the Issuers with Section 5(c) hereof. This
indemnity agreement will be in addition to any liability which the
Issuers may otherwise have. Each of the Issuers acknowledges and agrees
that the statements set forth in the last paragraph of the cover page
and under the heading "Plan of Distribution" in the Preliminary
Memorandum and the Final Memorandum constitute the only information
relating to the Initial Purchasers and furnished in writing by or on
behalf of the Initial Purchasers for inclusion in the Preliminary
Memorandum or the Final Memorandum (or any amendment or supplement
thereto).
(b) Each Initial Purchaser, severally and not
jointly, agrees to indemnify and hold harmless the Issuers, their
directors, officers, and each person who controls (within the meaning
of either the Securities Act or the Exchange Act) the Issuers, to the
same extent as the foregoing indemnity from the Issuers to each Initial
Purchaser, but only with reference to written information relating to
such Initial Purchaser furnished to the Issuers by or on behalf of such
Initial Purchaser specifically for inclusion in the Preliminary
Memorandum or the Final Memorandum (or in any amendment or supplement
thereto). This indemnity agreement will be in addition to any liability
which any Initial Purchaser may otherwise have. Each of the Issuers
acknowledges that the statements set forth in the last paragraph of the
cover page and under the heading "Plan of Distribution" in the
Preliminary Memorandum and the Final Memorandum constitute the only
information furnished in writing by or on behalf of the Initial
Purchasers for inclusion in the Preliminary Memorandum or the Final
Memorandum (or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof, but the
failure so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a) or (b) above
unless and except to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for
which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses
of such separate
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<PAGE>
counsel (provided that the indemnifying party shall be liable for the
cost of only one such separate counsel for the indemnified parties) if
(A) the use of counsel chosen by the indemnifying party to represent
the indemnified party would, in the opinion of legal counsel to the
indemnified party, present such counsel with a conflict of interest,
(B) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party
and the indemnified party shall have been informed in writing by legal
counsel that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, (C) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of the institution of such action or (D) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in
paragraph (a) or (b) of this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party for any reason, the
Issuers and the Initial Purchasers agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Issuers and one or
more of the Initial Purchasers may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Issuers
and by the Initial Purchasers from the offering of the Securities;
provided, however, that in no case shall any Initial Purchaser (except
as may be provided in any agreement among the Initial Purchasers
relating to the offering of the Securities) be responsible for any
amount in excess of the purchase discount or commission applicable to
the Securities purchased by such Initial Purchaser hereunder. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Issuers and the Initial Purchasers
shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Issuers
and of the Initial Purchasers in connection with the statements or
omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Issuers shall be
deemed to be equal to the total net proceeds from the offering (before
deducting expenses), and benefits received by the Initial Purchasers
shall be deemed to be equal to the total purchase discounts and
commissions received by the Initial Purchasers from the Issuers in
connection with the purchase of the Securities hereunder. Relative
fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Issuers or
the Initial Purchasers. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if contribution were determined
by pro rata allocation or any other method of allocation which does not
take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of
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<PAGE>
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who
controls an Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee
and agent of an Initial Purchaser shall have the same rights to
contribution as such Initial Purchaser, and each person who controls
the Issuers within the meaning of either the Securities Act or the
Exchange Act and each partner, officer and director of the Issuers
shall have the same rights to contribution as the Issuers, subject in
each case to the applicable terms and conditions of this paragraph (d).
9. DEFAULT BY AN INITIAL PURCHASER. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names in Schedule 1 hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agrees but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth in Schedule 1 hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such non-defaulting Initial Purchasers do not purchase
all the Securities, this Agreement will terminate without liability to any
non-defaulting Initial Purchaser or the Issuers. In the event of a default by an
Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as NationsBanc Capital
Markets, Inc. shall determine in order that the required changes in the Final
Memorandum or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Initial Purchaser of
its liability, if any, to the Issuers or any non-defaulting Initial Purchaser
for damages occasioned by its default hereunder.
10. TERMINATION. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers by notice given to and
received by the Company prior to delivery of and payment for the Securities if,
prior to that time, any of the events described in Sections 7(m) or 7(n) shall
have occurred or if the Initial Purchasers shall decline to purchase the
Securities for any reason permitted under this Agreement.
11. REIMBURSEMENT OF INITIAL PURCHASERS'S EXPENSES. If (a) the
Issuers shall fail to tender the Securities for delivery to the Initial
Purchasers otherwise than for any reason permitted under this Agreement or (b)
the Initial Purchasers shall decline to purchase the Securities for any reason
permitted under this Agreement, the Issuers shall, jointly and severally,
reimburse the Initial Purchasers for the reasonable fees and expenses of their
counsel and for such other out-of-pocket expenses as shall have been incurred by
them in connection with this Agreement and the proposed purchase of the
Securities, and upon demand the Issuers, jointly and severally, shall pay the
full amount thereof to the Initial Purchasers.
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<PAGE>
12. NOTICES. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered
or sent by mail, telex or facsimile transmission to NationsBanc Capital
Markets, Inc., 100 North Tryon Street, 20th Floor, Charlotte, North
Carolina 28255, Attention: Victor Warnement, Esq. (Fax: 704-386-6453),
with a copy (which shall not constitute notice) to Fennebresque, Clark,
Swindell & Hay, NationsBank Corporate Center, 100 North Tryon Street,
Suite 2900, Charlotte, North Carolina 28202-4011, Attention: Joseph A.
Adams, Esq. (Fax: 704-347- 3838);
(b) if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set
forth in the Final Memorandum, Attention: Marylaurel E. Wilks, Esq.
(Fax: 704-455-2547), with a copy (which shall not constitute notice) to
Parker, Poe, Adams & Bernstein L.L.P., 2500 Charlotte Plaza, 201 South
College Street, Charlotte, North Carolina 28244, Attention: Gary C.
Ivey, Esq. (Fax: 704-334-4706).
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Issuers shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the Initial
Purchasers.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Issuers and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Issuers
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control an Initial Purchaser within the meaning
of Section 15 of the Securities Act and (b) the indemnity agreement of the
Initial Purchasers contained in Section 8(b) of this Agreement shall be deemed
to be for the benefit of directors of the Issuers, officers of the Issuers and
any person controlling any of the Issuers within the meaning of Section 15 of
the Securities Act. Nothing in this Agreement is intended or shall be construed
to give any person, other than the persons referred to in this Section 13, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein. No purchaser of any of the Securities from
any Initial Purchaser shall be deemed a successor or assign merely by reason of
such purchase.
14. SURVIVAL. The respective indemnities, representations,
warranties, covenants and agreements of the Issuers and the Initial Purchasers
contained in this Agreement or made by or of behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.
15. DEFINITION OF "BUSINESS DAY." For purposes of this
Agreement, "business day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York,
New York or The City of Charlotte, North Carolina are authorized or obligated by
law, executive order or regulation to close.
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<PAGE>
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
[Signature page follows]
- 27 -
<PAGE>
If the foregoing correctly sets forth the agreement among the
Issuers and the Initial Purchasers, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
COMPANY:
SPEEDWAY MOTORSPORTS, INC.,
a Delaware corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC.,
a Georgia corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
BRISTOL MOTOR SPEEDWAY, INC.,
a Tennessee corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
CHARLOTTE MOTOR SPEEDWAY, INC.,
a North Carolina corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
- 28 -
<PAGE>
SPR ACQUISITION CORPORATION,
a California corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
TEXAS MOTOR SPEEDWAY, INC.,
a Texas corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
600 RACING, INC.,
a North Carolina corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
SPEEDWAY FUNDING CORP.,
a Delaware corporation
By: /s/ Victoria L. Garrett
Name: Victoria L. Garrett
Title: Vice President
SONOMA FUNDING CORPORATION,
a California corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
- 29 -
<PAGE>
SPEEDWAY CONSULTING & DESIGN, INC.,
a North Carolina corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
THE SPEEDWAY CLUB, INC.,
a North Carolina corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
INEX, CORP.,
a North Carolina corporation
By: /s/ William R. Brooks, VP
Name: William R. Brooks
Title: VP
- 30 -
<PAGE>
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:
INITIAL PURCHASERS:
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Wayne K. Mueller
Name: Wayne K. Mueller
Title: Managing Director
WHEAT FIRST BUTCHER SINGER
By: /s/ R. Walter Jones, IV
Name: R. Walter Jones, IV
Title: Managing Director
MONTGOMERY SECURITIES
By: /s/ Richard A. Smith
Name: Richard A. Smith
Title: Managing Director
J.C. BRADFORD & CO.
By: /s/ David Allen Jones
Name: David Allen Jones
Title: Partner
- 31 -
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
among
SPEEDWAY MOTORSPORTS, INC.,
SPEEDWAY FUNDING CORP.,
as Borrowers,
CERTAIN SUBSIDIARIES AND RELATED PARTIES
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO,
NATIONSBANK, N.A.,
as Agent
AND
FIRST UNION NATIONAL BANK,
as Co-Agent
DATED AS OF AUGUST 4, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1 DEFINITIONS ...........................................................................................2
1.1 Definitions. ....................................................................................2
1.2 Computation of Time Periods.........................................................................21
1.3 Accounting Terms. ..................................................................................22
SECTION 2 CREDIT FACILITY ......................................................................................22
2.1 Revolving Loans. ...................................................................................22
2.2 Letter of Credit Subfacility........................................................................24
2.3 Swingline Loan Subfacility..........................................................................29
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES........................................................31
3.1 Default Rate. ...................................................................................31
3.2 Extension and Conversion............................................................................31
3.3 Prepayments. ...................................................................................32
3.4 Termination and Reduction of Revolving Commitments..................................................33
3.5 Fees................................................................................................33
3.6 Capital Adequacy....................................................................................34
3.7 Inability To Determine Interest Rate................................................................35
3.8 Illegality..........................................................................................35
3.9 Requirements of Law.................................................................................36
3.10 Taxes..............................................................................................37
3.11 Indemnity..........................................................................................39
3.12 Pro Rata Treatment.................................................................................40
3.13 Sharing of Payments................................................................................40
3.14 Place and Manner of Payments.......................................................................41
SECTION 4 GUARANTY..............................................................................................42
4.1 The Guaranty........................................................................................42
4.2 Obligations Unconditional...........................................................................42
4.3 Reinstatement.......................................................................................43
4.4 Certain Additional Waivers..........................................................................44
4.5 Remedies............................................................................................44
4.6 Continuing Guarantee................................................................................44
SECTION 5 CONDITIONS............................................................................................44
5.1 Closing Conditions..................................................................................44
5.2 Conditions to all Extensions of Credit..............................................................46
SECTION 6 REPRESENTATIONS AND WARRANTIES........................................................................47
6.1 Financial Condition.................................................................................47
6.2 No Change...........................................................................................47
6.3 Organization; Existence; Compliance with Law........................................................48
6.4 Power; Authorization; Enforceable Obligations.......................................................48
i
<PAGE>
6.5 No Legal Bar........................................................................................48
6.6 No Material Litigation..............................................................................49
6.7 No Default..........................................................................................49
6.8 Ownership of Property; Liens........................................................................49
6.9 Intellectual Property...............................................................................49
6.10 No Burdensome Restrictions.........................................................................50
6.11 Taxes..............................................................................................50
6.12 ERISA..............................................................................................50
6.13 Governmental Regulations, Etc......................................................................51
6.14 Subsidiaries.......................................................................................52
6.15 Purpose of Loans...................................................................................52
6.16 Environmental Matters..............................................................................52
6.17 Solvency...........................................................................................53
6.18 No Untrue Statement................................................................................53
SECTION 7 AFFIRMATIVE COVENANTS.................................................................................54
7.1 Information Covenants...............................................................................54
7.2 Preservation of Existence and Franchises............................................................56
7.3 Books and Records...................................................................................57
7.4 Compliance with Law.................................................................................57
7.5 Payment of Taxes and Other Indebtedness.............................................................57
7.6 Insurance...........................................................................................57
7.7 Maintenance of Property.............................................................................57
7.8 Performance of Obligations..........................................................................58
7.9 Use of Proceeds.....................................................................................58
7.10 Audits/Inspections.................................................................................58
7.11 Financial Covenants................................................................................58
7.12 Additional Credit Parties..........................................................................59
7.13 Ownership of Subsidiaries..........................................................................59
SECTION 8 NEGATIVE COVENANTS....................................................................................59
8.1 Indebtedness........................................................................................59
8.2 Liens...............................................................................................60
8.3 Nature of Business..................................................................................60
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc..............................................60
8.5 Advances, Investments, Loans, etc...................................................................61
8.6 Restricted Payments.................................................................................61
8.7 Prepayments of Indebtedness, etc....................................................................61
8.8 Subordinated Debt...................................................................................62
8.9 Transactions with Affiliates........................................................................62
8.10 Fiscal Year........................................................................................62
8.11 Limitation on Restrictions on Dividends and Other Distributions, etc...............................62
8.12 Issuance and Sale of Subsidiary Stock..............................................................63
8.13 Sale Leasebacks....................................................................................63
8.14 Capital Expenditures...............................................................................63
ii
<PAGE>
8.15 No Further Negative Pledges........................................................................63
8.16 Restrictions.......................................................................................64
SECTION 9 EVENTS OF DEFAULT.....................................................................................64
9.1 Events of Default...................................................................................64
9.2 Acceleration; Remedies..............................................................................66
SECTION 10 AGENCY PROVISIONS....................................................................................67
10.1 Appointment........................................................................................67
10.2 Delegation of Duties...............................................................................68
10.3 Exculpatory Provisions.............................................................................68
10.4 Reliance on Communications.........................................................................68
10.5 Notice of Default..................................................................................69
10.6 Non-Reliance on Agent and Other Lenders............................................................69
10.7 Indemnification....................................................................................70
10.8 Agent in its Individual Capacity...................................................................70
10.9 Successor Agent....................................................................................70
SECTION 11 MISCELLANEOUS........................................................................................71
11.1 Notices............................................................................................71
11.2 Right of Set-Off...................................................................................72
11.3 Benefit of Agreement...............................................................................73
11.4 No Waiver; Remedies Cumulative.....................................................................74
11.5 Payment of Expenses, etc...........................................................................74
11.6 Amendments, Waivers and Consents...................................................................75
11.7 Counterparts.......................................................................................76
11.8 Headings...........................................................................................76
11.9 Survival of Indemnification........................................................................76
11.10 Governing Law; Submission to Jurisdiction; Venue..................................................76
11.11 Severability......................................................................................77
11.12 Entirety..........................................................................................77
11.13 Survival of Representations and Warranties........................................................77
11.14 Binding Effect; Termination.......................................................................77
11.15 Borrowers' Obligations Joint and Several..........................................................77
iii
<PAGE>
SCHEDULES
Schedule 1.1A Pre-Closing Financial Information
Schedule 1.1B Existing Letters of Credit
Schedule 1.1C Investments
Schedule 1.1D Existing Liens
Schedule 2.1(a) Lenders, Committed Amounts and Commitment Percentages
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.3(e) Form of Swingline Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(e) Form of Opinion
Schedule 6.2(a) General Disclosure Schedule
Schedule 6.4 Required Consents, Authorizations, Notices
and Filings
Schedule 6.6 Litigation
Schedule 6.9 Intellectual Property
Schedule 6.11 Taxes
Schedule 6.14 Subsidiaries
Schedule 6.16 Phase I Environmental Site Assessments
Schedule 7.1(c) Form of Officer's Compliance Certificate
Schedule 7.12 Form of Joinder Agreement
Schedule 8.1 Existing Indebtedness
Schedule 11.3(b) Form of Assignment and Acceptance
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Credit Agreement") is
entered into as of August 4, 1997 among SPEEDWAY MOTORSPORTS, INC., a Delaware
corporation ("Speedway Motorsports"), SPEEDWAY FUNDING CORP., a Delaware
corporation ("Speedway Funding") (each a "Borrower", and collectively the
"Borrowers"), certain subsidiaries and related parties identified on the
signature pages hereto and such other subsidiaries and related parties as may
from time to time become a party hereto (the "Guarantors"), the several lenders
identified on the signature page hereto and such other lenders as may from time
to time become a party hereto (the "Lenders"), NATIONSBANK, N.A., as agent for
the Lenders (in such capacity, the "Agent") and FIRST UNION NATIONAL BANK, as
co-agent for the Lenders.
WHEREAS, the Borrowers, the Guarantors, the lenders party thereto and
NationsBank, N.A., as Agent are currently parties to that certain $110,000,000
Credit Agreement dated as of March 7, 1996 (as amended or modified from time to
time, the "Prior Credit Agreement");
WHEREAS, the Borrowers and NationsBank, N.A. are currently parties to
that certain $30,000,000 Promissory Note dated as of June 30, 1997 (the "Interim
Note");
WHEREAS, the Borrowers and Guarantors have requested that the Lenders
provide an amended and restated $175,000,000 credit facility to replace and
refinance the credit facility provided pursuant to the Prior Credit Agreement
and the Interim Note for the purposes of (i) refinancing existing indebtedness
of the Borrowers, (ii) financing seasonal working capital needs of Speedway
Motorsports and its Subsidiaries, (iii) financing letter of credit needs of
Speedway Motorsports and its Subsidiaries, (iv) financing general corporate
needs of Speedway Motorsports and its Subsidiaries including capital
expenditures, (v) financing permitted investments and (vi) financing the
acquisition of additional motor speedways and related businesses; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available on the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date by execution of a Joinder Agreement.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5%) or more of the equity
interest in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Agent" shall have the meaning assigned to such term in the
heading hereof.
"Agent's Fee Letter" means the letter from the Agent to the
Borrowers dated July 2, 1997;
"Agent's Fees" shall have the meaning assigned to such term in
Section 3.5(c).
"Applicable Percentage" means
for purposes of calculating the applicable interest rate for
any day for any Loan, the applicable Standby Letter of Credit Fee for
any day for purposes of Section 3.5 (b) or the applicable Trade Letter
of Credit Fee for any day for purposes of Section 3.5 (b) or the
applicable Commitment Fee for any day for purposes of Section 3.5(a) or
the appropriate applicable percentage set forth below corresponding to
the Consolidated Total Debt Ratio in effect as of the most recent
Calculation Date:
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pricing Consolidated Total Applicable Applicable Applicable Applicable Applicable
Level Debt Ratio Percentage Percentage Percentage for Percentage Percentage for
for for Base Standby Letter for Trade Commitment
Eurodollar Rate Loans of Credit Fee Letter of Fee
Loans Credit Fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I Less than 2.50 to 0.50% 0% 0.50% 0.125% 0.15%
1.00
- --------------------------------------------------------------------------------------------------------------------------
II Less than 3.00 to 0.625% 0% 0.625% 0.125% 0.175%
1.00 but greater than
or equal to 2.50 to
1.00
- --------------------------------------------------------------------------------------------------------------------------
III Less than 3.50 to 0.875% 0% 0.875% 0.125% 0.225%
1.00 but greater than
or equal to 3.00 to
1.00
- --------------------------------------------------------------------------------------------------------------------------
IV Greater than or equal 1.125% 0% 1.125% 0.125% 0.25%
to 3.50 to 1.00
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Determination of the appropriate Applicable Percentages shall be made
as of each Calculation Date. The Consolidated Total Debt Ratio in
effect as of a Calculation Date shall establish the Applicable
Percentages for the Loans, the Standby Letter of Credit Fee, the Trade
Letter of Credit Fee and the Commitment Fee that shall be effective as
of the date designated by the Agent as the Applicable Percentage Change
Date. The Agent shall determine the Applicable Percentages as of each
Calculation Date and shall promptly notify the Borrowers and the
Lenders of the Applicable Percentages so determined and of the
Applicable Percentage Change Date. Such determinations by the Agent of
the Applicable Percentages shall be conclusive absent demonstrable
error. The initial Applicable Percentage[s] shall be based on Pricing
Level III until the first Applicable Percentage Change Date occurring
after the Closing Date.
"Applicable Percentage Change Date" means, with respect to any
Calculation Date, a date designated by the Agent that is not more than
five (5) Business Days after receipt by the Agent of the Required
Financial Information for such Calculation Date.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on
-3-
<PAGE>
such day. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is
unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms hereof, the Base
Rate shall be determined without regard to clause (a) of the first
sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate due to a change
in the Prime Rate or the Federal Funds Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds
Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrowers" means the Persons identified as such in the
heading hereof, together with any successors and permitted assigns.
"Borrowers' Obligations" means, without duplication, all of
the obligations of either of the Borrowers to the Lenders and the
Agent, whenever arising, under this Credit Agreement, the Notes or any
of the other Credit Documents and all obligations owing from either of
the Borrowers to any Lender, or any Affiliate of a Lender, arising
under any Hedge Agreements relating to the Obligations hereunder.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in Dollar deposits in
London, England and New York, New York.
"Calculation Date" means the last day of each fiscal quarter
of the Borrowers.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Cash Consideration" means cash paid to or for the account of
a seller for the acquisitions permitted by Section 8.4(c) plus (i) any
notes given to such seller having a maturity date shorter than the
Termination Date and (ii) any Funded Indebtedness assumed in the
transaction.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) Dollar denominated time deposits and certificates of
deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper
-4-
<PAGE>
rating from S&P is at least A-1 or the equivalent thereof or from
Moody's is at least P-1 or the equivalent thereof (any such bank being
an "Approved Lender"), in each case with maturities of not more than
270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Lender (or by the
parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation whose senior unsecured
indebtedness for borrowed money is rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better
by Moody's and maturing within six months of the date of acquisition,
(d) repurchase agreements with a bank or trust company (including any
of the Lenders) or recognized securities dealer having capital and
surplus in excess of $500,000,000 for direct obligations issued by or
fully guaranteed by the United States of America or any agency or
instrumentality thereof in which the Borrowers shall have a perfected
first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at
least 100% of the amount of the repurchase obligations, (e) obligations
of any state of the United States or any political subdivision thereof,
the interest with respect to which is exempt from federal income
taxation under Section 103 of the Code, having a long term rating of at
least Aa-3 or AA- by Moody's or S&P, respectively, and maturing within
three years from the date of acquisition thereof, (f) Investments in
municipal or corporate auction preferred stock (i) rated AAA (or the
equivalent thereof) or better by S&P or Aaa (or the equivalent thereof)
or better by Moody's and (ii) with dividends that reset at least once
every 365 days and (g) Investments, classified in accordance with GAAP
as current assets, in money market investment programs registered under
the Investment Company Act of 1940, as amended, which are administered
by reputable financial institutions having capital of at least
$100,000,000 and the portfolios of which are limited to Investments of
the character described in the foregoing subdivisions (a) through (f).
"Change of Control" means the occurrence of any of the
following events: any Person or two or more Persons (acting as a
"group" within the meaning of Section 13(d)(3) of the Exchange Act),
excluding Persons who are on the Closing Date executive officers or
directors of Speedway Motorsports or Permitted Transferees, shall have
acquired beneficial ownership, directly or indirectly, of, or shall
have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or
their acquisition of, control over, Voting Stock of either of the
Borrowers (or other securities convertible into such Voting Stock)
representing more than 25% of the combined voting power of all Voting
Stock of such Borrower and shall have filed or shall have become
required to file, a Schedule 13D with the SEC disclosing that it is the
intention of such Person or group to acquire control of either of the
Borrowers. As used herein, "beneficial ownership" shall have the
meaning provided in Rule 13d-3 of the SEC under the Exchange Act. A
Change of Control shall also occur if a majority of the Board of
Directors of either of the Borrowers existing on the Closing Date
changes.
"Closing Date" means the date hereof.
-5-
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time.
References to sections of the Code shall be construed also to refer to
any successor sections.
"Commitment" means the LOC Commitment, the Revolving
Commitment, and the Swingline Commitment.
"Commitment Fee" shall have the meaning given such term in
Section 3.5(a).
"Commitment Percentage" mean the Revolving Commitment
Percentage.
"Consolidated Capital Charges Coverage Ratio" means, as of any
Calculation Date, the ratio of (i) Consolidated EBIT for the
four-quarter period ended as of such Calculation Date, to (ii)
Consolidated Interest Expense plus dividends paid on preferred stock
for the four-quarter period ended as of such Calculation Date.
"Consolidated Capital Expenditures" means, for any period, all
capital expenditures of Speedway Motorsports and its Subsidiaries on a
consolidated basis for such period, as determined in accordance with
GAAP.
"Consolidated Total Debt Ratio" means, as of any Calculation
Date, the ratio of (i) Funded Indebtedness of Speedway Motorsports and
its Subsidiaries on a consolidated basis as of such Calculation Date,
to (ii) Consolidated EBITDA for the four-quarter period ended as of
such Calculation Date.
"Consolidated EBIT" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (A) Consolidated Interest Expense and (B) total federal,
state, local and foreign income, value added and similar taxes all as
determined in accordance with GAAP; provided, however, that
Consolidated EBIT for any fiscal quarter (or portion thereof) ended
prior to the Closing Date shall be the amount indicated for such fiscal
quarter on Schedule 1.1A.
-6-
<PAGE>
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (A) Consolidated Interest Expense, (B) total federal,
state, local and foreign income, value added and similar taxes and (C)
depreciation and amortization expense, all as determined in accordance
with GAAP; provided, however, that Consolidated EBITDA for any fiscal
quarter (or portion thereof) ended prior to the Closing Date shall be
the amount indicated for such fiscal quarter on Schedule 1.1A.
"Consolidated Interest Expense" means, for any period, gross
interest expense (both expensed and capitalized) of Speedway
Motorsports and its Subsidiaries on a consolidated basis for such
period, as determined in accordance with GAAP.
"Consolidated Leverage Ratio" means, as of any Calculation
Date, the ratio of (i) Funded Indebtedness of Speedway Motorsports and
its Subsidiaries on a consolidated basis as of such Calculation Date,
to (ii) the sum of (x) Funded Indebtedness of Speedway Motorsports and
its Subsidiaries on a consolidated basis as of such Calculation Date
and (y) Consolidated Net Worth as of such Calculation Date.
"Consolidated Net Income" means, for any period, the gross
revenues from operations of Speedway Motorsports and its Subsidiaries
(including payments received by Speedway Motorsports and its
Subsidiaries of interest income) less all operating and non-operating
expenses of Speedway Motorsports and its Subsidiaries including taxes
on income, all determined in accordance with GAAP; but excluding as
income: (i) net gains on the sale, conversion or other disposition of
capital assets, (ii) net gains on the acquisition, retirement, sale or
other disposition of capital stock and other securities issued by
Speedway Motorsports and its Subsidiaries, (iii) net gains on the
collection of proceeds of life insurance policies, (iv) any write-up of
any asset, and (v) any other gain or loss of an extraordinary nature as
determined in accordance with GAAP.
"Consolidated Net Worth" means, as of any date, total
shareholders' equity of Speedway Motorsports and its Subsidiaries less
preferred stock redeemable at the holder's discretion and preferred
stock having a first call of fifteen years or less all on a
consolidated basis as of such date, as determined in accordance with
GAAP.
"Controlled Group" means (i) the controlled group of
corporations as defined in Section 414(b) of the Code and the
applicable regulations thereunder, or (ii) the group of trades or
businesses under common control as defined in Section 414(c) of the
Code and the applicable regulations thereunder, of which Speedway
Motorsports or any of its Subsidiaries is a member.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, each Joinder Agreement, the Hedge Agreements, the
Agent's Fee Letter and all other related agreements and documents
issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
"Credit Party" means any of the Borrowers and the Guarantors.
"Default" means any event, act or condition which, with notice
or lapse of time, or both, would constitute an Event of Default.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
-7-
<PAGE>
"Effective Date" means the date hereof provided that the
conditions set forth in Section 5.1 shall have been fulfilled (or
waived in the sole discretion of the Lenders).
"Eligible Assignees" means (i) any Lender or any Affiliate or
Subsidiary of a Lender and (ii) any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D of the
SEC) having total assets in excess of $300,000,000 and which is
reasonably acceptable to the Agent and the Borrowers.
"Environmental Claim" means any investigation, written notice,
violation, written demand, written allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding, or written claim whether administrative, judicial, or
private in nature from activities or events taking place during or
prior to the Borrower's or any of its Subsidiaries' ownership or
operation of any real property and arising (a) pursuant to, or in
connection with, an actual or alleged violation of, any Environmental
Law, (b) in connection with any Hazardous Material, (c) from any
assessment, abatement, removal, remedial, corrective, or other response
action required by an Environmental Law or other order of a
Governmental Authority or (d) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or the
environment.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Transaction" means any issuance by Speedway
Motorsports or any of its Subsidiaries (other than in connection with
acquisitions permitted by Section 8.4(c)) of (i) shares of its capital
stock, (ii) any shares of its capital stock pursuant to the exercise of
options or warrants or (iii) any shares of its capital stock pursuant
to the conversion of any debt securities to equity; excluding, however,
any shares at any time issued or issuable to any key employees,
directors, consultants and other individuals providing services to
Speedway Motorsports or any of its Subsidiaries pursuant to the 1994
Stock Option Plan of Speedway Motorsports or any other "employee
benefit plan" within the meaning of Rule 405 promulgated by the SEC
under the Securities Act of 1933, as amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
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"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with any Credit Party
within the meaning of Section 4001(a)(14) of ERISA, or is a member of a
group which includes Speedway Motorsports or any of its Subsidiaries
and which is treated as a single employer under Sections 414(b), (c),
(m), or (o) of the Code.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency Liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency Liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor thereto.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if no such rate is so
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published on such next succeeding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Agent on such day
on such transactions as determined by the Agent.
"Fees" means all fees payable pursuant to Section 3.5.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (i) all Indebtedness of such Person for borrowed
money (including all Indebtedness evidenced by the Senior Notes), (ii)
all purchase money Indebtedness of such Person, including without
limitation the principal portion of all obligations of such Person
under Capital Leases, (iii) all Guaranty Obligations of such Person
with respect to Funded Indebtedness of another Person, (iv) the maximum
available amount of all letters of credit or acceptances issued or
created for the account of such Person, (v) all Funded Indebtedness of
another Person secured by a Lien on any Property of such Person,
whether or not such Funded Indebtedness has been assumed and (vi)
preferred stock redeemable at the holder's discretion or preferred
stock having a first call of fifteen years or less. The Funded
Indebtedness of any Person (x) shall include the Funded Indebtedness of
any partnership or joint venture in which such Person is a general
partner or a joint venturer and (y) shall not include any Intercompany
Indebtedness of such Person.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3 hereof.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of those Persons identified as a
"Guarantor" on the signature pages hereto, and each Additional Credit
Party which may hereafter execute a Joinder Agreement, together with
their successors and permitted assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
Property constituting security therefor, (ii) to advance or provide
funds or credit support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any
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limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger)
of the Indebtedness in respect of which such Guaranty Obligation is
made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Hedge Agreements" mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements designed to hedge against fluctuations in interest rates or
foreign exchange rates.
"Indebtedness" of any Person means (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (iv) all obligations,
including without limitation intercompany items, of such Person issued
or assumed as the deferred purchase price of Property or services
purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence
thereof) which under GAAP would appear as liabilities on a balance
sheet of such Person, (v) all obligations of such Person under
take-or-pay or similar arrangements or under commodity futures
contracts, (vi) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (vii)
all Guaranty Obligations of such Person, (viii) the principal portion
of all obligations of such Person under Capital Leases, (ix) all
obligations of such Person in respect of Hedge Agreements and (x) the
maximum amount of all letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed).
The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venturer in which such Person is a general partner
or joint venturer.
"Indenture" means that certain Indenture dated as of August 4,
1997 among Speedway Motorsports as issuer, the Guarantors and First
Trust National Association, as trustee, as the same may be modified,
supplemented or amended from time to time.
"Interbank Offered Rate" means, with respect to any Eurodollar
Loan for the Interest Period applicable thereto, the average (rounded
upward to the nearest one-sixteenth (1/16) of one percent) per annum
rate of interest determined by the office of the Agent (each such
determination to be conclusive and binding) as of two Business Days
prior to the first day of such Interest Period, as the effective rate
at which deposits in
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immediately available funds in Dollars are being, have been, or would
be offered or quoted by the Agent to major banks in the applicable
interbank market for Eurodollar deposits at any time during the
Business Day which is the second Business Day immediately preceding
the first day of such Interest Period, for a term comparable to such
Interest Period and in the amount of the requested Eurodollar Loan. If
no such offers or quotes are generally available for such amount, then
the Agent shall be entitled to determine the Eurodollar Rate by
estimating in its reasonable judgment the per annum rate (as described
above) that would be applicable if such quote or offers were generally
available.
"Intercompany Indebtedness" means any Indebtedness of a Credit
Party which (i) is owing to any other Credit Party and (ii) by its
terms is specifically subordinated in right of payment to the prior
payment of the obligations of the Credit Parties under this Credit
Agreement and the other Credit Documents on terms and conditions
reasonably satisfactory to the Required Lenders.
"Interest Payment Date" means (i) as to any Base Rate Loan the
last day of each March, June, September and December, the date of
repayment of principal of such Loan and the Termination Date, (ii) as
to Swingline Loans, such dates as to which the Swingline Lender may
agree and (iii) as to any Eurodollar Loan, the last day of each
Interest Period for such Loan and the Termination Date, and in addition
where the applicable Interest Period is more than three months, then
also on the date three months from the beginning of the Interest
Period, and each three months thereafter. If an Interest Payment Date
falls on a date which is not a Business Day, such Interest Payment Date
shall be deemed to be the next succeeding Business Day, except that in
the case of Eurodollar Loans where the next succeeding Business Day
falls in the next succeeding calendar month, then on the next preceding
Business Day.
"Interest Period" means, (i) as to Eurodollar Loans, a period
of one, two, three or six months' duration, as the Borrowers may elect,
commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals) and (ii) as to any Swingline
Loan, a period of such duration, not to exceed 30 days, as the
applicable Borrower may request and the Swingline Lender may agree in
accordance with the provisions of Section 2.3(b)(i), commencing in each
case, on the date of borrowing; provided, however, (A) if any Interest
Period would end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day (except
that in the case of Eurodollar Loans where the next succeeding Business
Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (B) no Interest Period shall extend beyond the
Termination Date, and (C) in the case of Eurodollar Loans, where an
Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month in which the Interest Period is
to end, such Interest Period shall end on the last day of such calendar
month.
"Investment", in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or
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<PAGE>
other securities of such Person, any capital contribution to such
Person or any other investment in such Person, including, without
limitation, any Guaranty Obligation incurred for the benefit of such
Person.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.5(b)(iii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 7.12 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.12.
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and each Person which may become a
Lender by way of assignment in accordance with the terms hereof,
together with their successors and permitted assigns.
"Letter of Credit" means (i) any letter of credit issued by
the Issuing Lender for the account of the Borrowers in accordance with
the terms of Section 2.2 and (ii) existing letters of credit issued by
the Issuing Lender for the account of any Credit Party and set forth on
Schedule 1.1B.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing or any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, any
lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and the Swingline
Loans.
"LOC Commitment" means the commitment of the Issuing Lender to
issue, and to honor payment obligations under, Letters of Credit
hereunder and with respect to each Lender, the commitment of each
Lender to purchase participation interests in the Letters of Credit up
to such Lender's Revolving Commitment Percentage of LOC Committed
Amount as specified in Schedule 2.1(a), as such amount may be reduced
in accordance with the provisions hereof.
"LOC Committed Amount" shall have the meaning assigned to such
term in Section 2.2.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents
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<PAGE>
(whether general in application or applicable only to such Letter of
Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for
such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
outstanding under Letters of Credit honored by the Issuing Lender but
not theretofore reimbursed.
"Material Adverse Change" means a material adverse change in
(i) the condition (financial or otherwise), operations, assets or
liabilities of Speedway Motorsports and its Subsidiaries taken as a
whole, (ii) the ability of the Credit Parties taken as a whole to
perform any material obligation under the Credit Documents or (iii) the
material rights and remedies of the Lenders under the Credit Documents.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, assets or
liabilities of Speedway Motorsports and its Subsidiaries taken as a
whole, (ii) the ability of the Credit Parties taken as a whole to
perform any material obligation under the Credit Documents or (iii) the
material rights and remedies of the Lenders under the Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Credit Party
or any ERISA Affiliate and at least one employer other than a Credit
Party or any ERISA Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
"Net Proceeds" means proceeds received by Speedway Motorsports
or any of its Subsidiaries from time to time in connection with any
Equity Transaction, net of the actual costs and taxes incurred by such
Person in connection with and attributable to such Equity Transaction.
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<PAGE>
"Note" or "Notes" means any Revolving Note and/or Swingline
Note.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Schedule 3.2 as
required by Section 3.2.
"Obligations" means, collectively, the Loans and the LOC
Obligations.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Participation Interest" means the purchase by a Lender of a
participation in Letters of Credit as provided in Section 2.2(c) and in
Swingline Loans as provided in Section 2.3(b)(iii) and in Loans as
provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made by any Credit Party in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(iii) Investments consisting of stock, obligations, securities or other
property received by any Credit Party in settlement of accounts
receivable (created in the ordinary course of business) from insolvent
obligors; (iv) Investments existing as of the Closing Date and set
forth in Schedule 1.1C; (v) Guaranty Obligations permitted by Section
8.1, (vi) acquisitions permitted by Section 8.4(c); (vii) loans to
directors, officers, employees, agents, customers or suppliers that do
not exceed an aggregate principal amount of $500,000 at any one time
outstanding for Speedway Motorsports and all of its Subsidiaries taken
together; (viii) Investments received as consideration in connection
with or arising by virtue of any merger, consolidation, sale or other
transfer of assets permitted under Section 8.4; and (ix) Intercompany
Indebtedness; (x) capital stock or other securities of any Person which
is traded on the New York Stock Exchange, the American Stock Exchange,
the London Stock Exchange, the Paris Bourse or NASDAQ, provided the
aggregate basis at any one time in such Investments does not exceed
$2,500,000 and such investments have not been purchased on margin; and
(xi) loans or advances to Persons to the extent necessary to enable
them to pay taxes, fees and other expenses as and when required to
maintain liquor licenses provided such loans or advances (A) are
customary in Speedway Motorsports' business and (B) the aggregate
principal amount outstanding at any one time of such loans or advances
does not exceed $2,000,000.
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<PAGE>
"Permitted Liens" means:
(i) Liens in favor of the Agent on behalf
of the Lenders;
(ii) Liens (other than Liens created or
imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, materialmen and
suppliers and other Liens imposed by law or pursuant to
customary reservations or retentions of title arising in the
ordinary course of business, provided that such Liens secure
only amounts not yet due and payable or, if due and payable,
are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP
have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss
on account thereof);
(iv) Liens (other than Liens created or
imposed under ERISA) incurred or deposits made by the Credit
Parties in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders,
statutory obligations, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money);
(v) Liens arising in connection with
attachments or judgments (including judgment or appeal bonds),
provided that the judgments secured shall, within 60 days
after the entry thereof, be discharged within 30 days or the
execution thereof be stayed pending appeal and be discharged
within 30 days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vii) Liens on Property securing purchase
money Indebtedness (including Capital Leases) to the extent
permitted under Section 8.1(c), provided that any such Lien
attaches to such Property concurrently with or within 90 days
after the acquisition thereof;
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<PAGE>
(viii) normal and customary rights of
setoff upon deposits of cash in
favor of banks or other depository
institutions;
(ix) Liens existing as of the Closing
Date and set forth on Schedule
1.1D; and
(x) Liens arising under leases
permitted hereunder (other than
Capital Leases).
"Permitted Transferee" means (i) either of the Borrowers, (ii)
Sonic Financial Corporation or any successor thereof (provided at least
51% of the Voting Stock of Sonic Financial Corporation is owned by O.
Bruton Smith, Family Members (as hereinafter defined) or another
Permitted Transferee), (iii) O. Bruton Smith or the spouse or any
lineal descendant of O. Bruton Smith and/or any parent of any such
holder (collectively, the "Family Members"), (iv) the trustee of a
trust (including a voting trust) for the benefit of such holder and/or
Family Members, (v) a corporation in respect of which such holder
and/or Family Members hold beneficial ownership of all shares of
capital stock of such corporation, (vi) a partnership in respect of
which such holder and/or Family Members hold beneficial ownership of
all partnership shares of or interests in such partnership, (vii) a
limited liability company in respect of which such holder and/or Family
Members hold beneficial ownership of all memberships in or interests of
such company, (viii) the estate of such holder and/or Family Members or
(ix) any other holder of capital stock of Speedway Motorsports who or
which becomes a holder in accordance with clause (iii), (iv), (v),
(vi), (vii) or (viii) hereof; provided, however, that none of the
foregoing will be deemed a Permitted Transferee if the transfer results
in the failure of Speedway Motorsports to meet the criteria for listing
on the New York Stock Exchange.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Credit Party or any of its Subsidiaries or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Prime Rate" means the per annum rate of interest established
from time to time by the Agent at its principal office in Charlotte,
North Carolina as its Prime Rate with each change in the Prime Rate
being effective on the date such change is publicly announced as
effective (it being understood and agreed that the Prime Rate is a
reference rate used by NationsBank in determining interest rates on
certain loans and is not intended to be the lowest rate of interest
charged on any extension of credit by NationsBank to any debtor).
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"Pro Forma Basis" means, with respect to any transaction, that
such transaction shall be deemed to have occurred as of the first day
of the four fiscal-quarter period ending as of the most recent
Calculation Date preceding the date of such transaction with respect to
which the Agent has received the Required Financial Information. As
used herein, "transaction" shall include, but not be limited to, (i)
any corporate merger or consolidation as referred to in Section 8.4(a),
(ii) any sale or other disposition of assets as referred to in Section
8.4(b) or (iii) any acquisition of capital stock or securities or any
purchase, lease or other acquisition of Property as referred to in
Section 8.4(c).
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Regulation D, G, T, U, or X" means Regulation D, G, T, U or
X, respectively, of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a
portion thereof.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
post-event notice requirement is waived under subsections .13, .14,
.18, .19 or .20 of PBGC Reg. ss.2615.
"Required Financial Information" means, with respect to the
applicable Calculation Date, (i) the financial statements of Speedway
Motorsports required to be delivered pursuant to Section 7.1 for the
fiscal period or quarter ending as of such Calculation Date, and (ii)
the certificate of the chief financial officer, chief executive officer
or president of Speedway Motorsports required by Section 7.1 to be
delivered with the financial statements described in clause (i) above.
"Required Lenders" means, at any time, Lenders which are then
in compliance with their obligations hereunder (as determined by the
Agent) and holding in the aggregate more than fifty percent (50%) of
the Commitments, or (ii) if the Commitments have been terminated,
Lenders having more than fifty percent (50%) of the aggregate principal
amount of the Obligations outstanding (taking into account in each case
Participation Interests or obligation to participate therein).
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or to
which any of its material property is subject.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of any Credit Party, now or hereafter outstanding,
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(ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Speedway Motorsports or any of its
Subsidiaries, now or hereafter outstanding, (iii) any payment made to
retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of
Speedway Motorsports or any of its Subsidiaries or (iv) any payment or
prepayment of principal of, premium, if any, or interest on,
redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Intercompany Indebtedness.
"Revolving Commitment" means the commitment of each Lender to
make Revolving Loans in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage
multiplied by the Revolving Committed Amount (as such Revolving
Committed Amount may be reduced from time to time pursuant to Section
3.4).
"Revolving Commitment Percentage" means, for any Lender, the
percentage identified as its Revolving Commitment as specified in
Schedule 2.1(a).
"Revolving Committed Amount" means, collectively, the
aggregate amount of all the Revolving Commitments as referenced in
Section 2.1(a) and individually, the amount of each Lender's Commitment
as specified in Schedule 2.1(a).
"Revolving Loans" shall have the meaning assigned to such term in
Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrowers in favor of each of the Lenders evidencing the
Revolving Loans in substantially the form attached as Schedule 2.1(e),
individually or collectively, as appropriate as such promissory notes
may be amended, modified, supplemented, extended, renewed or replaced
from time to time.
"SEC" means the Securities and Exchange Commission or any
agency or instrumentality of the United States of America succeeding to
the powers and duties thereof.
"Senior Notes" means the senior subordinated notes due 2007 of
Speedway Motorsports in the aggregate original principal amount of
$125,000,000 issued pursuant to the Indenture.
"Scheduled Funded Indebtedness Payments" means, as of any
Calculation Date, the scheduled payments of principal on Funded
Indebtedness for Speedway Motorsports and its Subsidiaries on a
consolidated basis for the twelve month period ending on such
Calculation Date.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
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"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged or is to engage, (iv) the
fair value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (v) the present fair saleable value of
the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Speedway Funding" shall have the meaning assigned to such
term in the heading hereof.
"Speedway Motorsports" shall have the meaning assigned to
such term in the heading hereof.
"Standby Letter of Credit Fee" shall have the meaning
assigned to such term in Section 3.5(b)(i).
"Subordinated Debt" means the Indebtedness evidenced by the
Indenture or by the guarantees thereof.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50%
equity interest at any time.
"Swingline Commitment" means the commitment of the Swingline
Lender to make Swingline Loans in an aggregate principal amount at any
time outstanding up to the Swingline Committed Amount and the
commitment of the Lenders to purchase
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participation interests in the Swingline Loans up to their respective
Revolving Commitment Percentage of the Swingline Committed Amount as
provided in Section 2.3(b)(iii), as such amounts may be reduced from
time to time in accordance with the provisions hereof.
"Swingline Committed Amount" shall have the meaning assigned
to such term in Section 2.3(a).
"Swingline Lender" means the Agent.
"Swingline Loan" shall have the meaning assigned to such term
in Section 2.3(a).
"Swingline Note" means the promissory note of the Borrower in
favor of the Swingline Lender in the original principal amount of
$10,000,000, as such promissory note may be amended, modified, restated
or replaced from time to time.
"Termination Date" means July 31, 2002.
"Termination Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; or (vi) the complete or partial withdrawal of any
Credit Party of its Subsidiaries or any ERISA Affiliate from a
Multiemployer Plan.
"Trade Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(ii).
"Voting Stock" means, with respect to any Person, capital
stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
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1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1
hereof (or, prior to the delivery of the first financial statements pursuant to
Section 7.1 hereof, consistent with the financial statements as at March 31,
1997); provided, however, if (a) Speedway Motorsports shall object in writing to
determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) the Agent or the Required Lenders shall so object in
writing within 30 days after delivery of such financial statements, then such
calculations shall be made on a basis consistent with the most recent financial
statements delivered by Speedway Motorsports to the Lenders as to which no such
objection shall have been made.
SECTION 2
CREDIT FACILITY
2.1 Revolving Loans.
(a) Revolving Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make revolving credit
loans ("Revolving Loans") to the Borrowers from time to time from the
Closing Date until the Termination Date, or such earlier date as the
Revolving Commitments shall have been terminated as provided herein for
the purposes hereinafter set forth; provided, however, that the sum of
the aggregate principal amount of outstanding Revolving Loans shall not
exceed the Revolving Committed Amount and; provided, further, (i) with
regard to each Lender individually, such Lender's share of outstanding
Loans shall not exceed such Lender's Revolving Commitment Percentage of
the Revolving Committed Amount, (ii) with regard to the Lenders
collectively, the aggregate principal amount of outstanding Obligations
shall not exceed ONE HUNDRED SEVENTY-FIVE MILLION DOLLARS
($175,000,000) (as such aggregate maximum amount may be reduced from
time to time as provided in Section 3.4, the "Revolving Committed
Amount") and (iii) with regard to the Lenders collectively, the
aggregate principal amount of the Obligations shall not exceed the
Revolving Committed Amount. Revolving Loans may consist of Base Rate
Loans or Eurodollar Loans, or a combination thereof, as the Borrowers
may request, and may be repaid and reborrowed in accordance with the
provisions hereof; provided, however, that no more than six Eurodollar
Loans shall be outstanding hereunder at any time. For
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purposes hereof, Eurodollar Loans with different Interest Periods
shall be considered as separate Eurodollar Loans, even if they begin
on the same date and have the same duration, although borrowings,
extensions and conversions may, in accordance with the provisions
hereof, be combined at the end of existing Interest Periods to
constitute a new Eurodollar Loan with a single Interest Period.
Revolving Loans hereunder may be repaid and reborrowed in accordance
with the provisions hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrowers shall
request a Revolving Loan borrowing by written notice (or
telephone notice promptly confirmed in writing) to the Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on
the Business Day prior to the date of the requested borrowing
in the case of Base Rate Loans, and on the third Business Day
prior to the date of the requested borrowing in the case of
Eurodollar Loans. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Revolving Loan is
requested, (B) the date of the requested borrowing (which
shall be a Business Day), (C) the aggregate principal amount
to be borrowed and (D) whether the borrowing shall be
comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested,
the Interest Period(s) therefor. If any such Notice of
Borrowing shall fail to specify (I) an applicable Interest
Period in the case of a Eurodollar Loan, then such notice
shall be deemed to be a request for an Interest Period of one
month, or (II) the type of Revolving Loan requested, then such
notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Agent shall give notice to each Lender before
5:00 p.m. (Charlotte, North Carolina time) on the day of
receipt of each Notice of Borrowing specifying the contents
thereof and each such Lender's share of any borrowing to be
made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan
borrowing shall be in a minimum aggregate amount of $1,000,000
and integral multiples of $100,000 in excess thereof (or the
remaining amount of the Commitment, if less).
(iii) Advances. Each Lender will make its
Commitment Percentage of each Revolving Loan borrowing
available to the Agent for the account of the Borrowers at the
office of the Agent specified in Schedule 2.1(a), or at such
other office as the Agent may designate in writing, by 12:00
P.M. (Charlotte, North Carolina time) on the date specified in
the applicable Notice of Borrowing in Dollars and in funds
immediately available to the Agent. Such borrowing will then
be made available to the Borrowers by the Agent by crediting
the account of the Borrowers on the books of such office with
the aggregate of the amounts made available to the Agent by
the Lenders and in like funds as received by the Agent.
(c) Repayment. The principal amount of all Revolving
Loans shall be due and payable in full on the
Termination Date.
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(d) Interest. Subject to the provisions of Section 3.1,
Revolving Loans shall bear interest as follows:
(i) Base Rate Loans. During such
periods as Revolving Loans shall be
comprised of Base Rate Loans, the
sum of the Base Rate plus the
Applicable Percentage;
(ii) Eurodollar Loans. During such
periods as Revolving Loans shall be
comprised of Eurodollar Loans, the
Eurodollar Rate plus the Applicable
Percentage.
Interest on Revolving Loans shall be payable in arrears on each
Interest Payment Date.
(e) Revolving Notes. The Revolving Loans made by each
Lender shall be evidenced by a duly executed
promissory note of the Borrowers to each Lender in
substantially the form of Schedule 2.1(e).
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, the Issuing Lender agrees from time to
time to issue such Letters of Credit from the Closing Date until the
Termination Date as the Borrowers may request for their own account or
for the account of another Credit Party as provided herein, and the
Issuing Lender shall issue such Letters of Credit in a form acceptable
to the Issuing Lender; provided, however, that (i) the LOC Obligations
shall not at any time exceed TEN MILLION DOLLARS ($10,000,000) (the
"LOC Committed Amount") and (ii) the sum of the aggregate principal
amount of the Obligations shall not at any time exceed the aggregate
Committed Amount. No Letter of Credit shall (x) have an original expiry
date more than two years from the date of issuance; provided, however,
so long as no Event of Default has occurred and is continuing and
subject to the other terms and conditions to the issuance of Letters of
Credit, such Letters of Credit may provide that the expiry dates of
Letters of Credit shall be extended annually on each anniversary date
of their date of issuance for an additional period not to exceed one
year unless the Agent has given not less than sixty (60) days prior
notice of its intent not to renew or (y) as originally issued or as
extended, have an expiry date extending beyond the Termination Date.
Each Letter of Credit shall comply with the related LOC Documents. The
issuance and expiry date of each Letter of Credit shall be a Business
Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by the Borrowers to the Issuing
Lender at least three (3) Business Days prior to the requested date of
issuance. The Issuing Lender will, at least quarterly and more
frequently upon reasonable request, disseminate to each of the Lenders
a detailed report specifying the Letters of Credit which are then
issued and outstanding and any activity with respect thereto which may
have occurred since the date of the prior report,
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and including therein, among other things, the beneficiary, the face
amount, expiry date as well as any payment or expirations which may
have occurred.
(c) Participation. Each Lender, upon issuance of a Letter of
Credit in accordance with the terms hereof, shall be deemed to have
purchased without recourse a participation from the applicable Issuing
Lender in such Letter of Credit and the obligations arising thereunder
and the related LOC Documents in each case in an amount equal to its
pro rata share of the obligations under such Letter of Credit (based on
the respective Commitment Percentages of the Lenders) and shall
absolutely, unconditionally and irrevocably be obligated to pay to the
Issuing Lender its pro rata share (based upon the Revolving Commitment
Percentage of such Lender) of any unreimbursed drawing under such
Letter of Credit. Without limiting the scope and nature of each
Lender's participation in any Letter of Credit, to the extent that the
Issuing Lender has not been reimbursed for any drawing as required
hereunder or under any such Letter of Credit, each such Lender shall
pay to the Issuing Lender its pro rata share of such unreimbursed
drawing in same day funds pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Issuing
Lender shall be absolute and unconditional and shall not be affected by
the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of the Borrowers to reimburse the
Issuing Lender under any Letter of Credit, together with interest as
hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the
Borrowers. Unless the Borrowers shall immediately notify the Issuing
Lender that the Borrowers intend to otherwise reimburse the Issuing
Lender for such drawing, the Borrowers shall be deemed to have
requested that the Lenders make a Revolving Loan in the amount of the
drawing as provided in subsection (e) hereof on the related Letter of
Credit, the proceeds of which will be used to satisfy the related
reimbursement obligations. The Borrowers promise to reimburse the
Issuing Lender on the day of drawing under any Letter of Credit (either
with the proceeds of a Revolving Loan obtained hereunder or otherwise)
in same day funds. If the Borrowers shall fail to reimburse the Issuing
Lender as provided hereinabove, the unreimbursed amount of such drawing
shall bear interest at a per annum rate equal to the Base Rate plus the
sum of (i) the Applicable Percentage for Base Rate Loans in effect from
time to time and (ii) two percent (2%). The Borrowers' reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of setoff, counterclaim or
defense to payment the Borrowers may claim or have against the Issuing
Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit
drawn upon or any other Person, including without limitation any
defense based on any failure of the Borrowers or any other Credit Party
to receive consideration or the legality, validity, regularity or
unenforceability of the Letter of Credit; provided, however, that the
Borrowers are not deemed to have waived such rights by payment. The
Issuing Lender will promptly notify the other Lenders of the amount of
any unreimbursed drawing and each Lender shall promptly pay to the
Agent for the account of the Issuing Lender, in dollars and in
immediately available funds, the amount of such Lender's pro rata share
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(based upon the Revolving Commitment Percentage of such Lender) of
such unreimbursed drawing. Such payment shall be made on the day such
notice is received by such Lender from the Issuing Lender if such
notice is received at or before 2:00 P.M. (Charlotte, North Carolina
time), and otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next
succeeding the day such notice is received. If such Lender does not
pay such amount to the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Agent for the account of the
Issuing Lender interest on the unpaid amount during the period from
the date such payment was due until such Lender pays such amount to
the Issuing Lender in full at a rate per annum equal to, if paid
within two (2) Business Days of the date of drawing, the Federal Funds
Rate and thereafter at a rate equal to the Base Rate. Each Lender's
obligation to make such payment to the Issuing Lender, and the right
of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever
and without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations of the Borrowers hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a
Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such
Lender, acquire a participation in an amount equal to such payment
(excluding the portion of such payment constituting interest owing to
the Issuing Lender) in the related unreimbursed drawing portion of the
LOC Obligation and in the interest thereon and in the related LOC
Documents.
(e) Repayment with Revolving Loans. On any day on which the
Borrowers shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of Credit,
the Agent shall give notice to the Lenders that a Revolving Loan
advance has been requested or deemed requested by the Borrowers to be
made in connection with a drawing under a Letter of Credit, in which
case a Revolving Loan comprised solely of Base Rate Loans shall be
immediately made to the Borrower by all Lenders (notwithstanding any
termination of the Commitments pursuant to Section 9.2) pro rata based
on the respective Revolving Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments
pursuant to Section 9.2) and the proceeds thereof shall be paid
directly to the Issuing Lender for application to the respective LOC
Obligations. Each such Lender hereby irrevocably agrees to make its pro
rata share of each such Revolving Loan immediately upon any such
request or deemed request in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (i) the amount of
such borrowing may not comply with the minimum amount for advances of
Revolving Loans otherwise required hereunder, (ii) whether any
conditions specified in Section 5.2 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) failure for any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (v) whether the date of such borrowing is
a date on which Revolving Loans are otherwise permitted to be made
hereunder or (vi) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such
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borrowing; provided, however, in no event shall a Lender be required
to make an advance in excess of such Lender's Committed Amount. In the
event that any Revolving Loan cannot for any reason be made on the
date otherwise required above (including, without limitation, as a
result of the commencement of a proceeding under the Bankruptcy Code
with respect to either of the Borrowers or any other Credit Party),
then each such Lender hereby agrees that it shall, upon written notice
of the unavailability of Revolving Loans and request for
participation, purchase (as of the date such borrowing would otherwise
have occurred, but adjusted for any payments received from the
Borrowers on or after such date and prior to such purchase) from the
Issuing Lender such participation in the outstanding LOC Obligations
as shall be necessary to cause each such Lender to share in such LOC
Obligations ratably (based upon the respective Revolving Commitment
Percentages of the Lenders (determined before giving effect to any
termination of the Commitments pursuant to Section 9.2)), provided
that at the time any purchase of participation pursuant to this
sentence is actually made, the purchasing Lender shall be required to
pay to the Issuing Lender, to the extent not paid to the Issuing
Lender by the Borrowers in accordance with the terms of subsection (d)
hereof, interest on the amount of its unfunded Participation Interest
purchased for each day from and including the day upon which such
purchase should otherwise have occurred to but excluding the date of
payment for such participation, at the rate equal to, if paid within
two (2) Business Days of the date of the Revolving Loan advance, the
Federal Funds Rate, and thereafter at a rate equal to the Base Rate.
(f) Designation of other Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a) hereof, a Letter
of Credit issued hereunder may contain a statement to the effect that
such Letter of Credit is issued for the account of a Credit Party,
provided that notwithstanding such statement, the Borrowers shall be
the actual account party for all purposes of this Credit Agreement for
such Letter of Credit and such statement shall not affect the
Borrowers' reimbursement obligations hereunder with respect to such
Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any
Letter of Credit shall, for purposes hereof, be
treated in all respects the same as the issuance of
a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations
under this Section 2.2, the Borrowers hereby agree to protect,
indemnify, pay and save the Issuing Lender
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harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) that the Issuing Lender
may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or (B)
the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority (all such acts or
omissions being herein called "Government Acts").
(ii) As among the Borrowers and the Issuing
Lender, the Borrowers shall assume all risks of the acts,
omissions or misuse of any Letter of Credit by the beneficiary
thereof. The Issuing Lender shall not be responsible: (A) for
the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter
of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (D) for any loss
or delay in the transmission or otherwise of any document
required in order to make a drawing under a Letter of Credit
or of the proceeds thereof; and (E) for any consequences
arising from causes beyond the control of the Issuing Lender,
including, without limitation, any Government Acts. None of
the above shall affect, impair, or prevent the vesting of the
Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not
in limitation of the specific provisions hereinabove set
forth, any action taken or omitted by the Issuing Lender,
under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith, shall
not put such Issuing Lender under any resulting liability to
the Borrowers or any other Credit Party. It is the intention
of the parties that this Credit Agreement shall be construed
and applied to protect and indemnify the Issuing Lender
against any and all risks involved in the issuance of the
Letters of Credit, all of which risks are hereby assumed by
the Borrowers (on behalf of themselves and each of the other
Credit Parties), including, without limitation, any and all
Government Acts. The Issuing Lender shall not, in any way, be
liable for any failure by the Issuing Lender or anyone else to
pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the
Issuing Lender.
(iv) Nothing in this subsection (i) is
intended to limit the reimbursement obligations of the
Borrowers contained in subsection (d) above. The obligations
of the Borrowers under this subsection (i) shall survive the
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termination of this Credit Agreement. No act or omissions of
any current or prior beneficiary of a Letter of Credit shall
in any way affect or impair the rights of the Issuing Lender
to enforce any right, power or benefit under this Credit
Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (i), the Borrowers shall have no
obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender (A) arising solely
out of the gross negligence or willful misconduct of the
Issuing Lender, as determined by a court of competent
jurisdiction, or (B) caused by the Issuing Lender's failure to
pay under any Letter of Credit after presentation to it of a
request strictly complying with the terms and conditions of
such Letter of Credit, as determined by a court of competent
jurisdiction, except insofar as such payment is prohibited by
any law, regulation, court order or decree.
(j) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that (A) the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender, or (B) the Issuing Lender failed to pay under any
Letter of Credit after presentation to it of a request strictly
complying with the terms of such Letter of Credit, except insofar as
such payment is prohibited by any law, regulation, court order or
decree.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall control.
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions
set forth herein, the Swingline Lender, in its individual capacity,
agrees to make certain revolving credit loans to the Borrowers (each a
"Swingline Loan" and, collectively, the "Swingline Loans") at any time
and from time to time, during the period from the Closing Date until
the Termination Date for the purposes hereinafter set forth; provided,
however, (i) the aggregate amount of Swingline Loans outstanding at any
time shall not exceed TEN MILLION DOLLARS ($10,000,000) (the "Swingline
Committed Amount"), and (ii) the sum of the aggregate principal amount
of Obligations outstanding at any time shall not exceed the Revolving
Committed Amount. Swingline Loans hereunder shall be made
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as Base Rate Loans in accordance with the provisions of this Section
2.3, and may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. The Borrowers
shall request a Swingline Loan advance hereunder by written
notice (or telephone notice promptly confirmed in writing) to
the Swingline Lender not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Business Day of the requested
Swingline Loan advance. Each such notice shall be irrevocable
and shall specify (A) that a Swingline Loan advance is
requested, (B) the date of the requested Swingline Loan
advance (which shall be a Business Day), (C) the principal
amount of the Swingline Loan advance requested and (D) that
all of the conditions set forth in Section 5.2 are then
satisfied. Each Swingline Loan shall be made as a Base Rate
Loan and shall have such maturity date as the Swingline Lender
and the Borrowers shall agree upon receipt by the Swingline
Lender of any such notice from the Borrowers. The Swingline
Lender shall initiate the transfer of funds representing the
Swingline Loan advance to the Borrowers by 3:00 P.M.
(Charlotte, North Carolina time) on the Business Day of the
requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan
advance shall be in a minimum principal amount of $500,000
and in integral multiples of $100,000 in excess thereof.
(iii) Repayment of Swingline Loans. The
principal amount of all Swingline Loans shall be due and
payable on the earlier of (A) the end of the applicable
Interest Period or (B) the Termination Date. The Swingline
Lender may, at any time, in its sole discretion, by written
notice to the Borrowers, demand repayment of their Swingline
Loans by way of a Revolving Loan advance, in which case the
Borrowers shall be deemed to have requested a Revolving Loan
advance comprised solely of Base Rate Loans in the amount of
such Swingline Loans; provided, however, that any such demand
shall be deemed to have been given one Business Day prior to
the Termination Date and on the date of the occurrence of any
Event of Default described in Section 9.1 and upon
acceleration of the Indebtedness hereunder and the exercise of
remedies in accordance with the provisions of Section 9.2.
Each Lender, if so directed by the Agent in writing, hereby
irrevocably agrees to make its pro rata share of each such
Revolving Loan in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (I) the
amount of such borrowing may not comply with the minimum
amount for advances of Revolving Loans otherwise required
hereunder, (II) whether any conditions specified in Section
5.2 are then satisfied, (III) whether a Default or an Event of
Default then exists, (IV) failure of any such request or
deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (V) whether the date of such
borrowing is a date on which Revolving Loans are otherwise
permitted to be made hereunder or (VI) any
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termination of the Commitments relating thereto immediately
prior to or contemporaneously with or after such borrowing. In
the event that any Revolving Loan cannot for any reason be
made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to the Borrower or any
other Credit Party), then each Lender hereby agrees that it
shall upon written notice of the unavailability of a Revolving
Loan and request for participation purchase (as of the date
such borrowing would otherwise have occurred, but adjusted for
any payments received from the Borrower on or after such date
and prior to such purchase) from the Swingline Lender such
Participation Interests in the outstanding Swingline Loans as
shall be necessary to cause each such Lender to share in such
Swingline Loans ratably based upon its Revolving Commitment
Percentage (determined before giving effect to any termination
of the Commitments pursuant to Section 3.4), provided that all
interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the
respective Participation Interests are purchased.
(c) Interest on Swingline Loans. Subject to the provisions of
Section 3.1, each Swingline Loan shall bear interest at per annum rate
equal to the Base Rate. Interest on Swingline Loans shall be payable in
arrears on each applicable Interest Payment Date (or at such other
times as may be specified herein).
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
rate which would otherwise be applicable (or if no rate is applicable, whether
in respect of interest, fees or other amounts, then 2% greater than the Base
Rate).
3.2 Extension and Conversion.
The Borrowers shall have the option on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another type; provided, however, that (i) except as provided in
Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the
last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be
extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no
Default or Event of Default is in existence on the date of extension or
conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall
be subject to the terms of the definition of "Interest Period" set forth in
Section 1.1 and shall be in such minimum amounts as provided in,
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Section 2.1(b)(ii), (iv) no more than six separate Eurodollar Loans shall be
outstanding hereunder at any time and (v) any request for extension or
conversion of a Eurodollar Loan which shall fail to specify an Interest Period
shall be deemed to be a request or an Interest Period of one month. Each such
extension or conversion shall be effected by the Borrowers by giving a Notice of
Extension/Conversion (or telephone notice promptly confirmed in writing) to the
Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day
of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan and
on the third Business Day prior to, in the case of the extension of a Eurodollar
Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of
the proposed extension or conversion, specifying the date of the proposed
extension or conversion, the Loans to be so extended or converted, the types of
Loans into which such Loans are to be converted and, if appropriate, the
applicable Interest Periods with respect thereto. Each request for extension or
conversion shall constitute a representation and warranty by the Borrowers of
the matters specified in subsections (ii), (iii), (iv) and (v) of Section
5.2(a). In the event the Borrowers fail to request extension or conversion of
any Eurodollar Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then such Loan shall be
automatically converted into a Base Rate Loan at the end of the Interest Period
applicable thereto. The Agent shall give each Lender notice as promptly as
practicable of any such proposed extension or conversion affecting any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrowers shall have the right
to prepay Revolving Loans in whole or in part from time to time without
premium or penalty; provided, however, that (i) Eurodollar Loans may
only be prepaid on three Business Days' prior written notice to the
Agent specifying the applicable Loans to be prepaid, (ii) any
prepayment of Eurodollar Loans will be subject to Section 3.11; and
(iii) each such partial prepayment of Revolving Loans shall be in a
minimum principal amount of $1,000,000 and integral multiples of
$100,000 in excess thereof. Subject to the foregoing terms, amounts
prepaid hereunder shall be applied as the Borrowers may elect;
provided, that if the Borrowers fail to specify a voluntary prepayment
then such prepayment shall be applied first to Base Rate Loans and then
to Eurodollar Loans in direct order of Interest Period maturities. Such
voluntary prepayments shall not reduce the Revolving Committed Amount.
(b) Mandatory Prepayments.
(i) Overadvance. If at any time (i) the
aggregate principal amount of the Obligations exceeds the
Revolving Committed Amount, (ii) the aggregate amount of LOC
Obligations shall exceed the aggregate LOC Committed Amount,
or (iii) the aggregate amount of Swingline Loans shall exceed
the Swingline Committed Amount, the Borrowers jointly and
severally promise to prepay immediately upon demand the
outstanding principal balance on the Loans or provide cash
collateral in the manner and in an aggregate amount necessary
to eliminate such excess in respect of the LOC Obligations. In
the case of a
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mandatory prepayment required on account of subsection (ii) in
the foregoing sentence, the amount required to be paid shall
serve to temporarily reduce the Revolving Committed Amount
(for purposes of borrowing availability hereunder, but not for
purposes of computation of fees) by the amount of the payment
required until such time as the situation shall no longer
exist. Payments hereunder shall be applied first to the Loans
and then to a cash collateral account in respect of the LOC
Obligations.
(ii) Application. All prepayments made pursuant to this
Section 3.3(b) shall be subject to Section 3.11 and shall be applied
first to Swingline Loans, then to Base Rate Loans and then to
Eurodollars Loans in direct order of Interest Period maturities.
Prepayments under this Section 3.3(b)(ii) shall permanently reduce the
Revolving Committed Amount.
(c) Notice. The Borrowers will provide notice to the Agent of
any prepayment by 11:00 A.M. (Charlotte, North Carolina time) on the
date of prepayment. Amounts paid on the Loans under subsection (a) and
(b)(i) hereof may be reborrowed in accordance with the provisions
hereof.
3.4 Termination and Reduction of Revolving Commitments.
The Borrowers may from time to time permanently reduce or terminate the
aggregate Revolving Committed Amount in whole or in part (in minimum aggregate
amounts of $10,000,000 (or, if less, the full remaining amount of the Revolving
Committed Amount)) upon five Business Days' prior written notice from the
Borrowers to the Agent; provided, however, no such termination or reduction
shall be made which would reduce the Revolving Committed Amount to an amount
less than the aggregate principal amount of Revolving Loans outstanding. The
Commitments of the Lenders shall automatically terminate on the Termination
Date. The Agent shall promptly notify each of the Lenders of receipt by the
Agent of any notice from the Borrowers pursuant to this Section 3.4.
3.5 Fees.
(a) Commitment Fee. In consideration of the Revolving
Commitments hereunder, the Borrowers agree to pay the Agent for the
ratable benefit of the Lenders a commitment fee (the "Commitment Fee")
equal to the Applicable Percentage per annum on the average daily
unused amount of the Revolving Committed Amount for the applicable
period. For the purposes hereof Swingline Loans shall not be considered
usage under the Revolving Commitments. The Commitment Fee shall be
payable (i) quarterly in arrears on the Interest Payment Date following
the last day of each calendar quarter for the immediately preceding
quarter (or portion thereof) beginning with the first such date to
occur after the Closing Date and (ii) on the Termination Date.
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(b) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee.
In consideration of the issuance of standby Letters of Credit
hereunder, the Borrowers jointly and severally promise to pay
to the Agent for the ratable benefit of the Lenders a fee (the
"Standby Letter of Credit Fee") on the average daily maximum
amount available to be drawn under each such standby Letter of
Credit computed at a per annum rate for each day from the date
of issuance to the date of expiration equal to the Applicable
Percentage for Standby Letter of Credit Fee. The Standby
Letter of Credit Fee will be payable quarterly in arrears on
the 15th day of each January, April, July and October for the
immediately preceding fiscal quarter (or a portion thereof).
(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrowers jointly and severally promise to pay
to the Agent for the ratable benefit of the Lenders a fee (the
"Trade Letter of Credit Fee") equal to the Applicable
Percentage for trade Letter of Credit Fee on the amount of
each drawing under any such trade Letter of Credit. The Trade
Letter of Credit Fee will be payable on each date of drawing
under a trade Letter of Credit.
(iii) Issuing Lender Fees. In addition to
the Standby Letter of Credit Fee payable pursuant to clause
(i) above and the Trade Letter of Credit Fee payable pursuant
to clause (ii) above, the Borrowers jointly and severally
promise to pay, to the Issuing Lender for its own account
without sharing by the other Lenders the letter of credit
fronting and negotiation fees agreed to by the Borrowers and
the Issuing Lender from time to time and the customary charges
from time to time of the Issuing Lender with respect to the
issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letters of Credit
(collectively, the "Issuing Lender Fees").
(c) Administrative Fees. The Borrowers jointly and severally
promise to pay to the Agent, for its own account and for the account of
NationsBanc Capital Markets, Inc., as applicable, the annual
administrative fee, structuring fee and other fees referred to in the
Agent's Fee Letter (collectively, the "Agent's Fees").
(d) Upfront Fees. The Borrowers jointly and severally promise
to pay to the Agent for the benefit of the Lenders in immediately
available funds on or before the Closing Date an upfront fee (the
"Upfront Fee") as outlined in the letter from the Agent to the Lenders
dated July 30, 1997.
3.6 Capital Adequacy.
If, after the date hereof, any Lender has determined that the adoption
or the becoming effective of after the Closing Date, or any change in after the
Closing Date, or any change after
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the Closing Date by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof in the
interpretation or administration of, any applicable law, rule or regulation
regarding capital adequacy, or compliance by such Lender with any request or
directive after the Closing Date regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital or assets as a consequence of its commitments or obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, effectiveness, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy), then, upon 10 days'
notice, including calculations of the amount due, from such Lender to the
Borrowers, the Borrowers shall be jointly and severally obligated to pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction. Each determination by any such Lender of amounts owing under this
Section shall, absent manifest error, be conclusive and binding on the parties
hereto.
3.7 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrowers) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrowers and the Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as Base Rate Loans and (y) any Loans
that were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Loans shall be converted to or continued as Base Rate
Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Base Rate Loans to Eurodollar Loans.
3.8 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrowers
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Base Rate Loans to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days or the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the
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Borrowers shall jointly and severally pay to such Lender such amounts, if any,
as may be required pursuant to Section 3.11.
3.9 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit or any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for Non-Excluded Taxes covered by Section 3.10 (including Non-Excluded
Taxes imposed solely by reason of any failure of such Lender to comply
with its obligations under Section 3.10(b)) and changes in taxes
measured by or imposed upon the overall net income, or franchise tax
(imposed in lieu of such net income tax), of such Lender or its
applicable lending office, branch, or any affiliate thereof); or
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever); and the result of any of the foregoing
is to increase the cost to such Lender, by an amount which such Lender
deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof;
then, in any such case, upon notice to the Borrowers from such
Lender, through the Agent, in accordance herewith, the Borrowers shall
be jointly and severally obligated to pay promptly to such Lender, upon
its demand, any additional amounts necessary to compensate such Lender
for such increased cost or reduced amount receivable, provided that, in
any such case, the Borrowers may elect to convert the Eurodollar Loans
made by such Lender hereunder to Base Rate Loans by giving the Agent at
least one Business Day's notice of such election, in which case the
Borrowers shall be jointly and severally obligated to pay promptly to
such Lender, upon demand, without duplication, such amounts, if any, as
may be required pursuant to Section 3.11. If any Lender becomes
entitled to claim any additional amounts pursuant to this subsection,
it shall provide prompt notice thereof to the Borrowers through the
Agent, certifying (x) that one of the events described in this
paragraph (a) has occurred and describing in reasonable detail the
nature of such event, (y) as to the increased cost or reduced amount
resulting from such
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event and (z) as to the additional amount demanded by such Lender and a
reasonably detailed explanation of the calculation thereof. Such a
certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender, through the Agent, to the
Borrowers shall be conclusive and binding on the parties hereto in the
absence of manifest error. This covenant shall survive the termination
of this Credit Agreement and the payment of the Loans and all other
amounts payable hereunder.
3.10 Taxes.
(a) Except as provided below in this subsection, all payments
made by any Borrower under this Credit Agreement shall be made free and
clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any court, or
governmental body, agency or other official, excluding taxes measured
by or imposed upon the overall net income of any Lender or its
applicable lending office, or any branch or affiliate thereof, and all
franchise taxes, branch taxes, taxes on doing business or taxes on the
overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed in
lieu of net income taxes, imposed: (i) by the jurisdiction under the
laws of which such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement. If any such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Lender hereunder, (A) the amounts so
payable to the Agent or such Lender shall be increased to the extent
necessary to yield to the Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Credit
Agreement, provided, however, that a Borrower shall be entitled to
deduct and withhold any Non-Excluded Taxes and shall not be required to
increase any such amounts payable to any Lender that is not organized
under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of
this subsection whenever any Non-Excluded Taxes are payable by such
Borrower, and (B) as promptly as possible thereafter such Borrower
shall send to the Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official
receipt received by such Borrower showing payment thereof. If a
Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, such Borrower
shall indemnify the Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Agent or any
Lender as a result of any such failure. The
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agreements in this subsection shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(X) (i) on or before the date of any payment by the Borrowers
under this Credit Agreement to such Lender, deliver to the
Borrowers and the Agent (A) two (2) duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, certifying
that it is entitled to receive payments under this Credit
Agreement without deduction or withholding of any United
States federal income taxes and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the
case may be, certifying that it is entitled to an exemption
from United States backup withholding tax;
(ii) deliver to the Borrowers and the Agent two (2) further
copies of any such form or certification on or before the
date that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to
the Borrowers; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested
by the Borrowers or the Agent; or
(Y) in the case of any such Lender that is
not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, (i) represent to the Borrowers (for the benefit of the
Borrowers and the Agent) that it is not a bank within the
meaning of Section 881(c)(3)(A) of the Code, (ii) agree to
furnish to the Borrowers on or before the date of any payment
by any Borrower, with a copy to the Agent two (2) accurate and
complete original signed copies of Internal Revenue Service
Form W-8, or successor applicable form certifying to such
Lender's legal entitlement at the date of such certificate to
an exemption from U.S. withholding tax under the provisions of
Section 881(c) of the Code with respect to payments to be made
under this Credit Agreement (and to deliver to the Borrowers
and the Agent two (2) further copies of such form on or before
the date it expires or becomes obsolete and after the
occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrowers or
the Agent for filing and completing such forms), and (iii)
agree, to the extent legally entitled to do so, upon
reasonable request by the Borrowers, to provide to the
Borrowers (for the benefit of the Borrowers and the Agent)
such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an exemption
from withholding with respect to payments under this Credit
Agreement;
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unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender
from duly completing and delivering any such form with respect to it
and such Lender so advises the Borrowers and the Agent. Each Person
that shall become a Lender or a participant of a Lender pursuant to
subsection 11.3 shall, upon the effectiveness of the related transfer,
be required to provide all of the forms, certifications and statements
required pursuant to this subsection, provided that in the case of a
participant of a Lender the obligations of such participant of a Lender
pursuant to this subsection (b) shall be determined as if the
participant of a Lender were a Lender except that such participant of a
Lender shall furnish all such required forms, certifications and
statements to the Lender from which the related participation shall
have been purchased.
3.11 Indemnity.
The Borrowers jointly and severally promise to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by any Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrowers have given a notice requesting the same in accordance with the
provisions of this Credit Agreement, (b) default by any Borrower in making any
prepayment of a Eurodollar Loan after the Borrowers have given a notice thereof
in accordance with the provisions of this Credit Agreement or (c) the making of
a prepayment of Eurodollar Loans on a day which is not the last day of an
Interest Period with respect thereto. Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Loans provided for herein (excluding,
however, the Applicable Percentage included therein, if any) over (ii) the
amount of interest (as reasonably determined by such Lender and confirmed in
writing to the Borrower) which would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank Eurodollar market. This covenant shall survive the termination of
this Credit Agreement and the payment of the Loans and all other amounts payable
hereunder.
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3.12 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or prepayment of principal
of any Loan (other than Swingline Loans) or reimbursement obligations
arising from drawings under Letters of Credit, each payment of interest
on the Loans or reimbursement obligations arising from drawings under
Letters of Credit, each payment of the Commitment Fee, each payment of
the Standby Letter of Credit Fee, each payment of the Trade Letter of
Credit Fee, each reduction of the Revolving Committed Amount and each
conversion or extension of any Loan (other than Swingline Loans), shall
be allocated pro rata among the Lenders in accordance with the
respective principal amounts of their outstanding Loans and
Participation Interests.
(b) Advances. Unless the Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not
make the amount that would constitute its ratable share of such
borrowing available to the Agent, the Agent may assume that such Lender
is making such amount available to the Agent, and the Agent may, in
reliance upon such assumption, make available to the applicable
Borrower a corresponding amount. If such amount is not made available
to the Agent by such Lender within the time period specified therefor
hereunder, such Lender shall pay to the Agent, on demand, such amount
with interest thereon at a rate equal to the Federal Funds Rate for the
period until such Lender makes such amount immediately available to the
Agent. A certificate of the Agent submitted to any Lender with respect
to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such amount is not made available to the
Agent by such Lender within two Business Days of the date of the
related borrowing, (i) the Agent shall notify the Borrower of the
failure of such Lender to make such amount available to the Agent and
the Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to Base Rate Loans hereunder,
on demand, from the Borrower and (ii) then the Borrower may, without
waiving any rights it may have against such Lender, borrow a like
amount on an unsecured basis from any commercial bank for a period
ending on the date upon which such Lender does in fact make such
borrowing available, provided that at the time such borrowing is made
and at all times while such amount is outstanding the Borrower would be
permitted to borrow such amount pursuant to Section 2.1 of this Credit
Agreement.
3.13 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit
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Agreement, such Lender shall promptly notify the Agent thereof and purchase from
the other Lenders a participation in such Loans, LOC Obligations and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrowers agree that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Loan, LOC Obligations or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.13 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.13 to share in the benefits of any recovery on such secured claim.
3.14 Place and Manner of Payments.
Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in dollars in immediately available funds,
without offset, deduction, counterclaim or withholding of any kind, at its
offices at the Agent's office specified in Schedule 2.1(a) not later than 2:00
P.M. (Charlotte, North Carolina time) on the date when due. Payments received
after such time shall be deemed to have been received on the next succeeding
Business Day. The Agent may (but shall not be obligated to) debit the amount of
any such payment which is not made by such time to any ordinary deposit account
of the Borrowers maintained with the Agent (with notice to the Borrowers). The
Borrowers shall, at the time any Borrower makes any payment under this Credit
Agreement, specify to the Agent the Loans, LOC Obligations, Fees, interest or
other amounts payable hereunder to which such payment is to be applied (and in
the event that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Agent shall distribute such payment to
the Lenders in such manner as the Agent may determine to be appropriate in
respect of obligations owing by the Borrowers hereunder, subject to the terms of
Section 3.12(a)). The Agent will distribute such payments to such Lenders, if
any such payment is received prior to 12:00 Noon (Charlotte, North Carolina
time) on a Business Day in like funds as received prior to the end of such
Business Day and otherwise the Agent will distribute such payment to such
Lenders on the next succeeding Business Day. Whenever any payment hereunder
shall be stated to be due on a day which is not a Business Day, the due date
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thereof shall be extended to the next succeeding Business Day (subject to
accrual of interest and Fees for the period of such extension), except that in
the case of Eurodollar Loans, if the extension would cause the payment to be
made in the next following calendar month, then such payment shall instead be
made on the next preceding Business Day. Except as expressly provided otherwise
herein, all computations of interest and fees shall be made on the basis of
actual number of days elapsed over a year of 360 days, except that computations
of interest on Base Rate Loans (unless the Base Rate is determined by reference
to the Federal Funds Rate) shall be calculated based on a year of 365 or 366
days, as appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
SECTION 4
GUARANTY
4.1 The Guaranty.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender and the Agent as hereinafter provided the prompt payment of the
Borrowers' Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise) strictly in accordance with
the terms thereof. The Guarantors hereby further agree that if any of the
Borrowers' Obligations are not paid in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise), the
Guarantors will, jointly and severally, promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Borrowers' Obligations, the same will be
promptly paid in full when due (whether at extended maturity, as a mandatory
prepayment, by acceleration or otherwise) in accordance with the terms of such
extension or renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, the obligations of each Guarantor hereunder
shall be limited to an aggregate amount equal to the largest amount that would
not render its Guaranty Obligations hereunder subject to avoidance under Section
548 of the Bankruptcy Code or any comparable provisions of any applicable state
law.
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents, or any
other agreement or instrument referred to therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Borrowers'
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Guarantors
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted
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by law, the occurrence of any one or more of the following shall not alter or
impair the liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time,
without notice to any Guarantor, the time for any performance
of or compliance with any of the Borrowers' Obligations shall
be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the
provisions of any of the Credit Documents or any other
agreement or instrument referred to therein shall be done or
omitted;
(iii) the maturity of any of the Borrowers'
Obligations shall be accelerated, or any of the Borrowers'
Obligations shall be modified, supplemented or amended in any
respect, or any right under any of the Credit Documents or any
other agreement or instrument referred to therein shall be
waived or any other guarantee of any of the Borrowers'
Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of,
the Agent or any Lender or Lenders as security for any of the
Borrowers' Obligations shall fail to attach or be perfected;
or
(v) any of the Borrowers' Obligations shall
be determined to be void or voidable (including, without
limitation, for the benefit of any creditor of any Guarantor)
or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents
or any other agreement or instrument referred to therein, or against any other
Person under any other guarantee of, or security for, any of the Borrowers'
Obligations.
4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Borrowers' Obligations is rescinded
or must be otherwise restored by any holder of any of the Borrowers'
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such
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payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.
26-7 through 26-9, inclusive. Each Guarantor further agrees that such Guarantor
shall have no right of recourse to security for the Borrowers' Obligations. Each
of the Guarantors further agrees that it shall have no right of subrogation,
reimbursement or indemnity, nor any right of recourse to security, if any, for
the Borrowers' Obligations so long as any amounts payable to the Agent or the
Lenders in respect of the Borrowers' Obligations shall remain outstanding or any
of the Commitments shall not have expired or been terminated.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Borrowers' Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing such Borrowers'
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Borrowers'
Obligations being deemed to have become automatically due and payable), such
Borrowers' Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 4.1.
4.6 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Borrowers' Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and
to fund the initial advance hereunder shall be subject to satisfaction of the
following conditions:
(a) The Agent shall have received original counterparts of
this Credit Agreement executed by each of the parties hereto;
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(b) The Agent shall have received an appropriate original Note
for each Lender, executed by each of the Borrowers;
(c) The Agent shall have received all documents it may
reasonably request relating to the existence and good standing of each
of the Credit Parties, the corporate or other necessary authority for
and the validity of the Credit Documents, and any other matters
relevant thereto, all in form and substance reasonably satisfactory to
the Agent;
(d) The Agent shall have received an incumbency certificate
for each of the Borrowers certified by a secretary or assistant
secretary to be true and correct as of the Effective Date.
(e) The Agent shall have received a certificate executed by
the chief financial officer of the Borrowers as of the Closing Date
stating that immediately after giving effect to this Credit Agreement
and the other Credit Documents, (i) no Default or Event of Default
exists and (ii) the representations and warranties set forth in Section
6 (other than the representation set forth in Section 6.17) are true
and correct in all material respects;
(f) The Agent shall have received a legal opinion of Parker,
Poe, Adams and Bernstein, LLP, counsel for the Credit Parties, dated as
of the Closing Date and substantially in the form of Schedule 5.1(e);
(g) The Lenders shall have received and approved the (i)
audited consolidated and company-prepared consolidating balance sheet
of Speedway Motorsports and its Subsidiaries as of December 31, 1996
together with related consolidated and consolidating statements of
income and cash flow and (ii) company-prepared consolidated and
consolidating balance sheet of Speedway Motorsports and its
Subsidiaries as of March 31, 1997 together with related consolidated
and consolidating statements of income and cash flow;
(h) The Lenders shall have received and approved the
Borrowers' projections for calendar years 1997 through 1999;
(i) No Material Adverse Change shall have occurred since the
financial statements as of December 31, 1996;
(j) The Agent shall have received copies of insurance policies
or certificates of insurance of the Credit Parties evidencing liability
and casualty insurance meeting the requirements of the Credit
Documents;
(k) Speedway Motorsports has completed the issuance of, and
received net proceeds from, the Senior Notes;
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(l) The Agent shall have received such other documents,
agreements or information which may be reasonably requested by the
Agent and/or the Required Lenders;
(m) The Agent shall have received for its own account and for
the accounts of the Lenders, all fees and expenses required by this
Credit Agreement or any other Credit Document to be paid on or before
the Closing Date; and
(n) Uniform Commercial Code searches for each of the Borrowers
made in the States of Delaware and North Carolina, as applicable,
showing no Liens with respect to their Property.
5.2 Conditions to all Extensions of Credit.
The obligations of each Lender to make, convert or extend any
Loan (including the initial Loans) and to issue or extend, or
participate in, a Letter of Credit are subject to satisfaction of the
following conditions in addition to satisfaction on the Closing Date
(and on the Closing Date only) of the conditions set forth in Section
5.1 and satisfaction on the Effective Date of the conditions set forth
in Section 5.2:
(i) The Borrowers shall have delivered, an
appropriate Notice of Borrowing, Notice of
Extension/Conversion or LOC Documents;
(ii) The representations and warranties set
forth in Section 6 shall be, subject to the limitations set
forth therein, true and correct in all material respects as of
such date (except for those which expressly relate to an
earlier date);
(iii) There shall not have been commenced
against the Borrowers or any Guarantor an involuntary case
under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs,
and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded;
(iv) No Default or Event of Default shall
exist and be continuing either prior to or after giving effect
thereto and
(v) There shall not have occurred any
Material Adverse Change since the extension of the last Loan;
and
(vi) Immediately after giving effect to the
making of such Loan (and the application of the proceeds
thereof) the sum of Loans outstanding shall not
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exceed the Revolving Committed Amount or Swingline Committed
Amount, as applicable.
The delivery of each Notice of Borrowing and each Notice of
Extension/Conversion shall constitute a representation and warranty by the
Borrowers of the correctness of the matters specified in subsections (ii),
(iii), (iv) and (v) and (vi) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
Each of the Credit Parties hereby represents to the Agent and each
Lender that:
6.1 Financial Condition.
The audited combined balance sheets, statements of income and
statements of cash flows of Speedway Motorsports for the year ended December 31,
1996 have heretofore been furnished to each Lender. Such financial statements
(including the notes thereto) (i) have been audited by Deloitte & Touche LLP,
(ii) have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (iii) present fairly (on the basis disclosed in
the footnotes to such financial statements) the combined financial condition,
results of operations and cash flows of Speedway Motorsports and its combined
Subsidiaries as of such date and for such periods. The unaudited interim balance
sheets of Speedway Motorsports and its consolidated Subsidiaries as at the end
of, and the related unaudited interim statements of income and of cash flows
for, the fiscal quarter ended March 31, 1997 have heretofore been furnished to
each Lender. Such interim financial statements, for each such quarterly period,
(i) have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (ii) present fairly (on the basis disclosed in
the footnotes to such financial statements) the combined financial condition,
results of operations and cash flows of Speedway Motorsports and its
consolidated Subsidiaries as of such date and for such periods. During the
period from March 31, 1997 to and including the Closing Date, there has been no
sale, transfer or other disposition by it or any of its Subsidiaries of any
material part of the business or property of Speedway Motorsports and its
consolidated Subsidiaries, taken as a whole, and no purchase or other
acquisition by any of them of any business or property (including any capital
stock of any other person) material in relation to the combined financial
condition of Speedway Motorsports and its consolidated Subsidiaries, taken as a
whole, in each case which is not reflected in the foregoing financial statements
or in the notes thereto or has not otherwise been disclosed in writing to the
Lenders on or prior to the Closing Date.
6.2 No Change.
Since December 31, 1996, (a) except as and to the extent disclosed on
Schedule 6.2(a), there has been no development or event relating to or affecting
any of the Credit Parties which has had or would be reasonably expected to have
a Material Adverse Effect and (b) except as
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permitted under this Credit Agreement, no dividends or other distributions have
been declared, paid or made upon the capital stock or other equity interest in
any Credit Party nor has any of the capital stock or other equity interest in
any Credit Party been redeemed, retired, purchased or otherwise acquired for
value by such Credit Party.
6.3 Organization; Existence; Compliance with Law.
Each of the Credit Parties (a) is duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its incorporation or
organization, (b) has the corporate or other necessary power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not be reasonably expected to have a Material Adverse Effect, and (d) is in
compliance with all material Requirements of Law.
6.4 Power; Authorization; Enforceable Obligations.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrowers, to borrow
hereunder, and each of the Borrowers has taken all necessary corporate or other
necessary action to authorize the borrowings on the terms and conditions of this
Credit Agreement, and to authorize the execution, delivery and performance of
the Credit Documents to which each is a party. No consent or authorization of,
filing with, notice to or other similar act by or in respect of, any
Governmental Authority or any other Person is required to be obtained or made by
or on behalf of any Credit Party in connection with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Person is a party, except for consents, authorizations, notices and filings
described in Schedule 6.4, all of which have been obtained or made or have the
status described in such Schedule 6.4. This Credit Agreement has been, and each
other Credit Document to which it is a party will be, duly executed and
delivered on behalf the Credit Parties. This Credit Agreement constitutes, and
each other Credit Document to which it is a party when executed and delivered
will constitute, a legal, valid and binding obligation of such Credit Party,
enforceable against each such Person in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.5 No Legal Bar.
Except as previously disclosed in writing to the Lenders on or prior to
the Closing Date, the execution, delivery and performance of the Credit
Documents by the Credit Parties, the borrowings hereunder and the use of the
proceeds of the borrowings hereunder (a) will not violate any Requirement of Law
or contractual obligation of any Credit Party in any respect that
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would reasonably be expected to have a Material Adverse Effect, (b) will not
result in, or require, the creation or imposition of any Lien on any of the
properties or revenues of any of the Credit Parties pursuant to any such
Requirement of Law or contractual obligation and (c) will not violate or
conflict with any provision of the articles of incorporation or by-laws of any
Credit Party.
6.6 No Material Litigation.
Except as disclosed on Schedule 6.6 hereof, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of the Credit Parties, threatened by
or against any of the Credit Parties or against their respective properties or
revenues which (a) relates to any of the Credit Documents or any of the
transactions contemplated hereby or thereby or (b) would be reasonably expected
to have a Material Adverse Effect.
6.7 No Default.
None of the Credit Parties is in default under or with respect to any
of their contractual obligations in any respect which would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
6.8 Ownership of Property; Liens.
Each of the Credit Parties has good record and marketable title in fee
simple to, or a valid leasehold interest in, all its material real property, and
good title to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien, except for Permitted
Liens.
6.9 Intellectual Property.
Each of the Credit Parties owns, or has the legal right to use, all
United States trademarks, tradenames, copyrights, technology, know-how and
processes necessary for each of them to conduct its business as currently
conducted (the "Intellectual Property") except for those the failure to own or
have such legal right to use would not be reasonably expected to have a Material
Adverse Effect. Except as provided on Schedule 6.9, no claim has been asserted
and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Credit Party know of any such claim, and the use of such
Intellectual Property by any Credit Party does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate would not
be reasonably expected to have a Material Adverse Effect.
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6.10 No Burdensome Restrictions.
Except as previously disclosed in writing to the Lenders on or prior to
the Closing Date, no Requirement of Law or contractual obligation of any Credit
Party would be reasonably expected to have a Material Adverse Effect.
6.11 Taxes.
Except as disclosed on Schedule 6.11 hereof, each of the Credit Parties
has filed or caused to be filed all United States federal income tax returns and
all other material tax returns which, to the knowledge of such Credit Party, are
required to be filed and has paid (a) all taxes shown to be due and payable on
said returns or (b) all taxes shown to be due and payable on any assessments of
which it has received notice made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a Material
Adverse Effect or (ii) taxes, fees or other charges the amount or validity of
which are currently being contested and with respect to which reserves in
conformity with GAAP have been provided on the books of such Credit Party, as
the case may be; and no tax Lien has been filed, and, to the knowledge of any of
the Credit Parties, no claim is being asserted, with respect to any such tax,
fee or other charge.
6.12 ERISA.
Except as would not result in a Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no Termination Event
has occurred, and, to the best of the Credit Parties' or any ERISA
Affiliate's knowledge, no event or condition has occurred or exists as
a result of which any Termination Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, has occurred with
respect to any Plan; (iii) each Plan has been maintained, operated, and
funded in compliance with its own terms and in material compliance with
the provisions of ERISA, the Code, and any other applicable federal or
state laws; and (iv) no lien in favor or the PBGC or a Plan has arisen
or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the Code, utilizing the actuarial assumptions used
to fund such Plans), whether or not vested, did not, as of the last
annual valuation date prior to the date on which this representation is
made or deemed made, exceed the current value of the assets of such
Plan allocable to such accrued liabilities.
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(c) Neither any of the Credit Parties nor any ERISA Affiliate
has incurred, or, to the best of the Credit Parties' knowledge, are
reasonably expected to incur, any withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. Neither any of the
Credit Parties nor any ERISA Affiliate has received any notification
that any Multiemployer Plan is in reorganization (within the meaning of
Section 4241 of ERISA), is insolvent (within the meaning of Section
4245 of ERISA), or has been terminated (within the meaning of Title IV
of ERISA), and no Multiemployer Plan is, to the best of the Credit
Parties' knowledge, reasonably expected to be in reorganization,
insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Credit Party or any ERISA Affiliate to any liability
under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which
any Credit Party or any ERISA Affiliate has agreed or is required to
indemnify any person against any such liability.
6.13 Governmental Regulations, Etc.
(a) No part of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation G or Regulation U, or
for the purpose of purchasing or carrying or trading in any securities.
If requested by any Lender or the Agent, the Borrowers will furnish to
the Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said
Regulation U. No indebtedness being reduced or retired out of the
proceeds of the Loans was or will be incurred for the purpose of
purchasing or carrying any margin stock within the meaning of
Regulation U or any "margin security" within the meaning of Regulation
T. "Margin stock" within the meaning of Regulation U does not
constitute more than 25% of the value of the consolidated assets of
Speedway Motorsports and its Subsidiaries. None of the transactions
contemplated by this Credit Agreement (including, without limitation,
the direct or indirect use of the proceeds of the Loans) will violate
or result in a violation of the Securities Act of 1933, as amended, or
the Exchange Act or regulations issued pursuant thereto, or Regulation
G, T, U or X.
(b) None of the Credit Parties is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act
or the Investment Company Act of 1940, each as amended. In addition,
none of the Credit Parties is (i) an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as
amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary" of a "holding
company", within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(c) No director, executive officer or principal shareholder of
any Credit Party is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms
"director", "executive officer" and "principal shareholder" (when used
with reference to any Lender) have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal
Reserve System.
(d) Each of the Credit Parties has obtained all material
licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its respective Property and to the
conduct of its business.
(e) Each of the Credit Parties is not in violation of any
applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or any other
jurisdiction, or of any agency thereof (including without limitation,
federal, state or local environmental laws and regulations, which
violation could reasonably be expected to have a Material Adverse
Effect.
(f) Each of the Credit Parties is current with all material
reports and documents, if any, required to be filed with any state or
federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and
regulations of such commissions.
6.14 Subsidiaries.
Schedule 6.14 sets forth all Subsidiaries of Speedway Motorsports at
the Closing Date, the jurisdiction of incorporation of each such Subsidiary and
the direct or indirect ownership interest of Speedway Motorsports therein.
6.15 Purpose of Loans.
The proceeds of the Loans hereunder shall be used solely (i) to
refinance existing indebtedness of the Borrowers, (ii) to finance seasonal
working capital needs of Speedway Motorsports and its Subsidiaries, (iii) to
finance letter of credit needs of Speedway Motorsports and its Subsidiaries,
(iv) to finance general corporate needs of Speedway Motorsports and its
Subsidiaries including capital expenditures, (v) to finance permitted
investments and (vi) to finance the acquisition of additional motor speedways
and related businesses. No proceeds of the Obligations shall be used by any
Subsidiary that is not a Guarantor.
6.16 Environmental Matters.
Except as set forth in Phase I Environmental Site Assessments
previously delivered to the Lenders and identified on Schedule 6.16:
(a) Each of the facilities and properties owned, leased or
operated by any Credit Party (the "Properties") and all businesses of
any Credit Party at the Properties (the "Businesses") are in compliance
with all applicable Environmental Laws, except where
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the failure to so comply would not have a Material Adverse Effect, and,
to the best knowledge of any Credit Party, there are no conditions
relating to the Businesses or Properties that could give rise to
liability under any applicable Environmental Laws, except where such
liability would not have a Material Adverse Effect.
(b) None of the Credit Parties has received any written notice
of, or inquiry from any Governmental Authority regarding, any currently
unresolved material violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties
or the Businesses, nor does any Credit Party have knowledge that any
such notice is being threatened.
(c) Materials of Environmental Concern have not been
transported or disposed of from the Properties, or generated, treated,
stored or disposed of at, on or under any of the Properties or any
other location, in each case by or on behalf of any Credit Party, or to
the knowledge of any Credit Party, by any other Person, in violation
of, or in a manner that would be reasonably likely to give rise to
liability under, any applicable Environmental Law, except where such
liability or the failure to so comply would not have a Material Adverse
Effect.
(d) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of any Credit Party, threatened,
under any Environmental Law to which any Credit Party is or, to the
knowledge of any Credit Party, will be named as a party, nor are there
any consent decrees or other decrees, consent orders, administrative
orders outstanding under any Environmental Law with respect to any
Credit Party, the Properties or the Businesses.
(e) To the knowledge of any Credit Party, there has been no
release or threat of release of Materials of Environmental Concern at
or from the Properties, related to the operations (including, without
limitation, disposal) of any Credit Party in connection with the
Properties or otherwise in connection with the Businesses, in violation
of or in a manner that would reasonably be expected to give rise to
liability under Environmental Laws, except where such violation or
liability would not have a Material Adverse Effect.
6.17 Solvency.
Speedway Motorsports on a consolidated basis is Solvent.
6.18 No Untrue Statement.
Neither (a) this Credit Agreement nor any other Credit Document or
certificate or document executed and delivered by or on behalf of either of the
Borrowers or any other Credit Party in accordance with or pursuant to any Credit
Document nor (b) any statement, representation, or warranty provided to the
Agent in connection with the negotiation or preparation of the Credit Documents
contains any misrepresentation or untrue statement of
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material fact or omits to state a material fact necessary, in light of the
circumstance under which it was made, in order to make any such warranty,
representation or statement contained therein not misleading;
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 Information Covenants.
The Borrowers will furnish, or cause to be furnished, to the Agent and
each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of
Speedway Motorsports and its Subsidiaries, a consolidated and
consolidating balance sheet and income statement of Speedway
Motorsports and its Subsidiaries, as of the end of such fiscal year,
together with related consolidated and consolidating statements of
operations and retained earnings and of cash flows for such fiscal
year, setting forth in comparative form consolidated and consolidating
figures for the preceding fiscal year, all such financial information
described above to be in reasonable form and detail and, as to the
consolidated statements only, audited by independent certified public
accountants of recognized national standing reasonably acceptable to
the Agent and whose opinion shall be unqualified.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter of
Speedway Motorsports and its Subsidiaries (other than the fourth fiscal
quarter, in which case 120 days after the end thereof) a consolidated
and consolidating balance sheet and income statement of Speedway
Motorsports and its Subsidiaries, as of the end of such fiscal quarter,
together with related consolidated and consolidating statements of
operations and retained earnings and of cash flows for such fiscal
quarter in each case setting forth in comparative form consolidated and
consolidating figures for the corresponding period of the preceding
fiscal year, all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the Agent, and
accompanied by a certificate of the chief executive officer, chief
financial officer or president of Speedway Motorsports to the effect
that such quarterly financial statements fairly present in all material
respects the financial condition of Speedway Motorsports and its
Subsidiaries and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments,
including without limitation the addition of footnotes.
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(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief executive officer, chief financial officer
or president of Speedway Motorsports substantially in the form of
Schedule 7.1(c), (i) demonstrating compliance with the financial
covenants contained in Section 7.11 by calculation thereof as of the
end of each such fiscal period and (ii) stating that no Default or
Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Borrowers propose to take with respect thereto.
(d) Annual Business Plan and Budgets. Not more than 60 days
after the end of each fiscal year of Speedway Motorsports, beginning
with the fiscal year ending December 31, 1997, an annual business plan
and budget of Speedway Motorsports containing, among other things, pro
forma financial statements for the next fiscal year, inclusive of
planned capital expenditures.
(e) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(f) Auditor's Reports. Promptly upon receipt thereof, a copy
of any other report or "management letter" submitted by independent
accountants to a Credit Party in connection with any annual, interim or
special audit of the books of a Credit Party.
(g) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the SEC, or any successor agency, and copies of all financial
statements, proxy statements, notices and reports as a Credit Party
shall send to its shareholders generally or to the holders of any issue
of Indebtedness owed by a Credit Party in their capacity as such
holders and (b) upon the request of the Agent, all reports and written
information to and from the United States Environmental Protection
Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(h) Notices. Upon a Credit Party obtaining knowledge thereof,
the Borrowers will give written notice to the Agent immediately of (a)
the occurrence of an event or condition consisting of a Default or
Event of Default, specifying the nature and existence thereof and what
action the Credit Parties propose to take with respect thereto, and (b)
the occurrence of any of the following with respect to a Credit Party
(i) the pendency or commencement of any litigation, arbitral or
governmental proceeding against such Credit Party which if adversely
determined is likely to have a Material Adverse Effect, (ii) the
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institution of any proceedings against the Credit Party with respect
to, or the receipt of written notice by such Person of potential
liability or responsibility for violation, or alleged violation of any
federal, state or local law, rule or regulation, including but not
limited to, Environmental Laws, the violation of which would likely
have a Material Adverse Effect or (iii) any notice or determination
concerning the imposition of any withdrawal liability by a
Multiemployer Plan against such Credit Party or any ERISA affiliate,
the determination that a Multiemployer Plan is, or is expected to be,
in reorganization within the meaning of Title IV of ERISA or the
termination of any Plan.
(i) ERISA. Upon any of the Credit Parties or any ERISA
Affiliate obtaining knowledge thereof, the Borrowers will give written
notice to the Agent promptly (and in any event within five business
days) of: (i) of any event or condition, including, but not limited to,
any Reportable Event, that constitutes, or might reasonably lead to, a
Termination Event; (ii) with respect to any Multiemployer Plan, the
receipt of notice as prescribed in ERISA or otherwise of any withdrawal
liability assessed against the Borrowers or any ERISA Affiliate, or of
a determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA); (iii) the
failure to make full payment on or before the due date (including
extensions) thereof of all amounts which any Credit Party or any ERISA
Affiliate is required to contribute to each Plan pursuant to its terms
and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto; or (iv) any change in the funding
status of any Plan that could have a Material Adverse Effect, together,
with a description of any such event or condition or a copy of any such
notice and a statement by the principal financial officer of Speedway
Motorsports briefly setting forth the details regarding such event,
condition, or notice, and the action, if any, which has been or is
being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the Borrowers shall furnish the
Agent and each of the Lenders with such additional information
concerning any Plan as may be reasonably requested, including, but not
limited to, copies of each annual report/return (Form 5500 series), as
well as all schedules and attachments thereto required to filed with
the Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
(j) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Credit Parties as the Agent or the
Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its existence, material rights, franchises and
authority.
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7.3 Books and Records.
Each of the Credit Parties will keep complete and accurate books and
records of its transactions in accordance with good accounting practices on the
basis of GAAP (including the establishment and maintenance of appropriate
reserves).
7.4 Compliance with Law.
Each of the Credit Parties will comply with all laws, rules,
regulations and orders, and all applicable restrictions imposed by all
Governmental Authorities, applicable to it and its property if noncompliance
with any such law, rule, regulation, order or restriction would have a Material
Adverse Effect.
7.5 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will pay and discharge (i) all taxes,
assessments and governmental charges or levies imposed upon it, or upon its
income or profits, or upon any of its properties, before they shall become
delinquent, (ii) all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, might give rise to a Lien upon any of its
properties, and (iii) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that a Credit Party
shall not be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) would give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) would have
a Material Adverse Effect.
7.6 Insurance.
Each of the Credit Parties will at all times maintain in full force and
effect insurance (including worker's compensation insurance, liability
insurance, casualty insurance, business interruption insurance and property
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice provided by nationally recognized, financially sound insurance
companies rated not less than A (or the equivalent thereof) by Best's Key Rating
Guide or S&P.
7.7 Maintenance of Property.
Each of the Credit Parties will maintain and preserve its properties
and equipment material to the conduct of its business in good repair, working
order and condition, normal wear and tear excepted, and will make, or cause to
be made, in such properties and equipment from time to time all repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto as may be needed or proper, to the extent and in the manner customary
for companies in similar businesses.
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7.8 Performance of Obligations.
Each of the Credit Parties will perform in all material respects all of
its obligations under the terms of all material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is a party
or by which it is bound.
7.9 Use of Proceeds.
The Borrowers will use the proceeds of the Loans solely for the
purposes set forth in Section 6.15.
7.10 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit
Party will permit representatives appointed by the Agent (and after the
occurrence of an Event of Default, representatives of any Lender), including,
without limitation, independent accountants, agents, attorneys, and appraisers
to visit and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of such Credit Policy.
7.11 Financial Covenants.
(a) Consolidated Net Worth. Consolidated Net Worth at each
Calculation Date shall be no less than the sum of $200,000,000,
increased on a cumulative basis as of the last day of each fiscal
quarter commencing with the last day of fiscal quarter September 30,
1997 by an amount equal to (i) 50% of Consolidated Net Income (provided
such Consolidated Net Income is greater than zero) for the fiscal
quarter then ended and (ii) 100% of Net Proceeds from an Equity
Transaction for the fiscal quarter then ended.
(b) Consolidated Leverage Ratio. The Consolidated Leverage
Ratio at each Calculation Date shall be no greater than (i) 0.625 to
1.0 through and including September 30, 1999 and (ii) 0.60 to 1.0 at
each Calculation Date thereafter.
(c) Consolidated Total Debt Ratio. The Consolidated Total Debt
Ratio at each Calculation Date shall be no greater than (i) 4.0 to 1.0
through and including September 30, 1999 and (ii) 3.75 to 1.0 at each
Calculation Date thereafter.
(d) Consolidated Capital Charges Coverage Ratio. The
Consolidated Capital Charges Coverage Ratio at each Calculation Date
shall be no less than (i) 2.0 to 1.0 through and including September
30, 1999 and (ii) 2.50 to 1.0 at each Calculation Date thereafter.
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7.12 Additional Credit Parties.
At the time any Person becomes a direct or indirect Subsidiary of a
Credit Party, the Borrowers shall so notify the Agent and shall cause such
Person to (a) execute a Joinder Agreement in substantially the same form as
Schedule 7.12 and (b) deliver such other documentation as the Agent may
reasonably request in connection with the foregoing, including, without
limitation, certified corporate resolutions and other corporate organizational
and authorizing documents of such Person and favorable opinions of counsel to
such Person (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to above), all
in form, content and scope reasonably satisfactory to the Agent.
7.13 Ownership of Subsidiaries.
Except to the extent otherwise provided in Section 8.4(c), Section 8.12
and with respect to North Wilkesboro Speedway, Inc. and North Carolina Motor
Speedway, Inc., Speedway Motorsports shall directly or indirectly, own at all
times 100% of the capital stock of each of its Subsidiaries.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 Indebtedness.
None of the Credit Parties will contract, create, incur, assume or
permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness of Speedway Motorsports and any of its
Subsidiaries existing as of the Closing Date and set forth in Schedule
8.1 and any refinancings thereof for the same or less amount;
(c) purchase money Indebtedness (including Capital Leases)
hereafter incurred by Speedway Motorsports and any of its Subsidiaries
to finance the purchase of fixed assets provided (i) such Indebtedness
when incurred shall not exceed the purchase price of the asset(s)
financed; and (ii) no such Indebtedness shall be refinanced for a
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principal amount in excess of the principal balance outstanding thereon
at the time of such refinancing;
(d) Indebtedness evidenced by, or any guaranty of, the Senior
Notes;
(e) Indebtedness in respect of Hedge Agreements entered into
with Lenders in an aggregate notional amount for all such agreements
not to exceed the Committed Amount;
(f) Intercompany Indebtedness; or
(g) Indebtedness assumed in any transaction permitted by
Section 8.4 hereof provided (i) such indebtedness when incurred shall
not exceed the purchase price of the asset(s) financed; and (ii) no
such Indebtedness shall be refinanced for a principal amount in excess
of the principal balance outstanding thereon at the time of such
refinancing.
8.2 Liens.
None of the Credit Parties will contract, create, incur, assume or
permit to exist any Lien with respect to any of its Property, except for
Permitted Liens and Liens securing Indebtedness permitted under Sections 8.1(c)
and (g) provided that such Liens relate solely to the specific Property being
acquired.
8.3 Nature of Business.
Neither Speedway Motorsports nor any of its Subsidiaries will
substantively alter the character or conduct of the business conducted by any
such Person as of the Closing Date.
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
None of the Credit Parties will:
(a) dissolve, liquidate or wind up its affairs, or enter into
any transaction of merger or consolidation; provided, however, that, so
long as no Default or Event of Default would be directly or indirectly
caused as a result thereof, (i) Speedway Motorsports may merge or
consolidate with any of its Subsidiaries provided Speedway Motorsports
is the surviving corporation or (ii) any Credit Party (other than
Speedway Motorsports) may merge or consolidate with any other Credit
Party (other than the Borrowers);
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(b) sell, lease, transfer or otherwise dispose of any Property
other than (i) the sale of inventory in the ordinary course of business
for fair consideration, (ii) the sale or disposition of machinery and
equipment no longer used or useful in the conduct of such Person's
business, (iii) subject to the terms of Section 8.9 and 8.13, other
sales and dispositions provided that (A) after giving effect to such
sale or other disposition, the aggregate book value of assets sold or
otherwise disposed of pursuant to this clause (iii) since the Closing
Date does not exceed $5,000,000 and (B) after giving effect on a Pro
Forma Basis to such sale or other disposition, no Default or Event of
Default would exist hereunder; or
(c) except as otherwise permitted by Section 8.4(a) or 8.5,
acquire all or any portion of the capital stock or securities of any
other Person or purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any substantial
part of the Property of any other Person provided, however, that, so
long as no Default or Event of Default would be caused as a result
thereof on an actual or Pro Forma Basis, then any Credit Party may (i)
acquire an interest in additional motor speedways, whether by merger,
stock purchase or asset purchase; provided, however, that the aggregate
Cash Consideration paid for such acquisitions in any fiscal year shall
not exceed 25% of the Consolidated Net Worth of Speedway Motorsports at
the immediately preceding fiscal year end, and (ii) consummate other
acquisitions consistent with the nature of the Borrowers' business,
whether by merger, stock purchase or asset purchase; provided, however,
that the Cash Consideration paid for such other acquisitions shall not
exceed $10,000,000 in the aggregate.
8.5 Advances, Investments, Loans, etc.
Except as permitted under Section 8.4(c), none of the Credit Parties
will make Investments in or to any Person other than to another Credit Party,
except for Permitted Investments.
8.6 Restricted Payments.
None of the Credit Parties will directly or indirectly declare, order,
make or set apart any sum for or pay any Restricted Payment, except (i) to make
dividends payable solely in the same class of capital stock of such Person, (ii)
to make dividends payable to any Credit Party and (iii) as permitted by Section
8.7.
8.7 Prepayments of Indebtedness, etc.
None of the Credit Parties will (i) after the issuance thereof, amend
or modify (or permit the amendment or modification of) any of the terms of any
Indebtedness (other than this Credit Agreement) if such amendment or
modification would add or change any terms in a manner adverse to the issuer of
such Indebtedness (unless the consent of the issuer of such Indebtedness has
been obtained) or to the Lenders, or shorten the final maturity or average life
to maturity or require any payment to be made sooner than originally scheduled
or increase the interest rate
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applicable thereto or change any subordination provision thereof, (ii)(A) if any
Default or Event of Default has occurred and is continuing or would be directly
or indirectly caused as a result thereof, make (or give any notice with respect
thereto) any voluntary or optional payment or prepayment or redemption or
acquisition for value of (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any other
Indebtedness, or (B) amend, modify or change its articles of incorporation (or
corporate charter or other similar organizational document) or bylaws (or other
similar document) where such change would have a Material Adverse Effect.
8.8 Subordinated Debt.
No Credit Party will (a) make or offer to make any principal payments
with respect to the Subordinated Debt, (b) redeem or offer to redeem any of the
Subordinated Debt, or (c) deposit any funds intended to discharge or defease any
or all of the Subordinated Debt. The Subordinated Debt may not be amended or
modified without the prior written consent of the Required Lenders in the event
such amendment or modification would add or change any terms, agreements,
covenants or conditions of the Subordinated Debt in a manner adverse to any
Lender, it being specifically understood and agreed that no amendment to Article
4 or Article 10 of the Indenture shall be made without the prior written consent
of the Required Lenders.
8.9 Transactions with Affiliates.
Except for Intercompany Indebtedness and Permitted Investments, none of
the Credit Parties will enter into or permit to exist any transaction or series
of transactions with any officer, director, shareholder, Subsidiary or Affiliate
of such Person other than (a) advances of working capital to any Credit Party,
(b) transfers of cash and assets to any Credit Parties, (c) transactions
permitted by Sections 8.4, 8.5 and Section 8.6, (d) normal reimbursement of
expenses of officers and directors, (e) other transactions for goods and
services not to exceed $100,000 at any one time and (f) except as otherwise
specifically limited in this Credit Agreement, other transactions which are
entered into in the ordinary course of such Person's business on terms and
conditions substantially as favorable to such Person as would be obtainable by
it in a comparable arms-length transactions with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate.
8.10 Fiscal Year.
None of the Credit Parties will change its fiscal year.
8.11 Limitation on Restrictions on Dividends and Other Distributions,
etc.
None of the Credit Parties will, directly or indirectly create or
otherwise cause, incur, assume, suffer or permit to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any such
Person to (a) pay dividends or make any other distribution
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on any of such Person's capital stock (other than in connection with a
transaction permitted by Section 8.4(c) hereof), (b) subject to subordination
provisions, pay any Indebtedness owed to the Borrowers or any other Credit
Party, (c) make loans or advances to any Credit Party (other than loans or
advances by Speedway Funding) or (d) transfer any of its Property to any other
Credit Party other than in the ordinary course of business.
8.12 Issuance and Sale of Subsidiary Stock.
None of the Credit Parties will, except to qualify directors where
required by applicable law, sell, transfer or otherwise dispose of, any shares
of capital stock of any of its Subsidiaries or permit any of its Subsidiaries to
issue, sell or otherwise dispose of, any shares of capital stock of any of its
Subsidiaries.
8.13 Sale Leasebacks.
None of the Credit Parties will, directly or indirectly, become or
remain liable as lessee or as guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any Property (whether
real or personal or mixed), whether now owned or hereafter acquired, (i) which
such Person has sold or transferred or is to sell or transfer to any other
Person or (ii) which such Person intends to use for substantially the same
purpose as any other Property which has been sold or is to be sold or
transferred by such Person to any other Person in connection with such lease.
The Credit Parties acknowledge that the Purchase Agreement between Texas Motor
Speedway, Inc. and FW Sports Authority, Inc. and the Lease Agreement between FW
Sports Authority, Inc., as lessor, and Texas Motor Speedway, Inc., as lessee,
while in form appearing to be a sale leaseback transaction, is not deemed to be
or treated as a sale leaseback per GAAP.
8.14 Capital Expenditures.
Consolidated Capital Expenditures (exclusive of acquisitions permitted
by Section 8.4(c) and any capital expenditures made in connection with pre-sold
condominium units) for the four quarter period ending June 30, 1998 and each
successive four quarter period thereafter shall not exceed $125,000,000. In no
event shall Consolidated Capital Expenditures (exclusive of acquisitions
permitted by Section 8.4(c) and any capital expenditures made in connection with
pre-sold condominium units) exceed $325,000,000 in the aggregate prior to the
Termination Date.
8.15 No Further Negative Pledges.
Except with respect to prohibitions against other encumbrances on
specific Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), and except as included
in the terms of any Indebtedness permitted by Section 8.1(g) hereof, none of the
Credit Parties will enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its properties or
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assets, whether now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some other obligation.
8.16 Restrictions.
No Credit Party will directly or indirectly cause to exist any
restriction on the ability of any Credit Party to (i) pay dividends or make any
other distributions to the Borrowers or their Subsidiaries or (ii) grant liens
to the Lenders.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any
principal of any of the Loans or of any reimbursement
obligations arising from drawings under Letters of Credit, or
(ii) default in the payment when due of any
interest on the Loans or on any reimbursement obligations
arising from drawings under Letters of Credit, or of any Fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 7.2, 7.9, 7.10, 7.11, 7.12 or 8.1 through 8.16,
inclusive, or
(ii) default in the due performance or
observance by it of any term, covenant or agreement (other
than those referred to in subsections (a), (b) or (c)(i)
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or this Section 9.1) contained in this Credit Agreement and
such default shall continue unremedied for a period of at
least 30 days after the earlier of a responsible officer of a
Credit Party becoming aware of such default or notice thereof
by the Agent; or
(d) Other Credit Documents.
(i) Any Credit Party shall default in the
due performance or observance of any term, covenant or
agreement in any of the other Credit Documents (subject to
applicable grace or cure periods) if any, or
(ii) any Credit Document shall fail to be in
full force and effect to give the Agent and/or the Lenders the
liens, rights, powers and privileges purported to be created
thereby; or
(e) Guaranties. The guaranty given by any Guarantor hereunder
(including any Additional Credit Party) or any provision thereof shall
cease to be in full force and effect, or any Guarantor (including any
Additional Credit Party) hereunder or any Person acting by or on behalf
of such Guarantor shall deny or disaffirm such Guarantor's obligations
under such guaranty; or
(f) Bankruptcy, etc. Any Credit Party shall commence a
voluntary case concerning itself under the Bankruptcy Code; or an
involuntary case is commenced against any Credit Party under the
Bankruptcy Code and the petition is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of all or substantially all of
the property of any Credit Party; or any Credit Party commences any
other proceeding under any reorganization, arrangement, adjustment of
the debt, relief of creditors, dissolution, insolvency or similar law
of any jurisdiction whether now or hereafter in effect relating to any
Credit Party; or there is commenced against any Credit Party any such
proceeding which remains undismissed for a period of 60 days; or any
Credit Party is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered
against any Credit Party; or any Credit Parties suffers appointment of
any custodian or the like for it or for any substantial part of its
property to continue unchanged or unstayed for a period of 60 days; or
any Credit Party makes a general assignment for the benefit of
creditors; or any corporate action is taken by any Credit Party for the
purpose of effecting any of the foregoing; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) in excess of $5,000,000 in the aggregate for all of the
Credit Parties taken as a whole, (i) any Credit Party shall (A) default
in any payment (beyond the applicable grace period with respect
thereto, if any) with respect to any such Indebtedness, or (B) default
in the observance or performance relating to such Indebtedness or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event or condition shall occur or
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condition exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such
Indebtedness (or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its stated
maturity; or (ii) any such Indebtedness shall be declared due and
payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against any Credit Party involving a liability of $5,000,000 or
more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage) and any
such judgments or decrees shall not have been vacated, discharged or
stayed or bonded pending appeal within 30 days from the entry thereof;
or
(i) ERISA. Any of the following events or conditions that
result in a Material Adverse Effect: (1) any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of any
Credit Party or any ERISA Affiliate in favor of the PBGC or a Plan; (2)
a Termination Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in
the termination of such Plan for purposes of Title IV of ERISA; (3) a
Termination Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the
Agent, likely to result in (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) any Credit Party or any ERISA
Affiliate incurring any liability in connection with a withdrawal from,
reorganization of (within the meaning of Section 4241 of ERISA), or
insolvency or (within the meaning of Section 4245 of ERISA) such Plan;
or (4) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject any Credit Party or any
ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which any Credit Party or any ERISA
Affiliate has agreed or is required to indemnify any Person against any
such liability; or
(j) Ownership. There shall occur a Change of Control.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Required Lenders (pursuant to the voting
procedures in Section 11.6), the Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Credit Parties take any of the
following actions without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Credit Parties, except as otherwise specifically
provided for herein:
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(i) Termination of Commitments. Declare the
Commitments terminated, whereupon the Commitments shall be
immediately terminated.
(ii) Acceleration. Declare the unpaid
principal of and any accrued interest in respect of all Loans,
the LOC Obligations (with accrued interest thereon) and any
and all other indebtedness or obligations of any and every
kind owing by the Borrowers to any of the Lenders hereunder to
be due whereupon the same shall be immediately due and payable
without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrowers. The
Agent may direct the Borrowers to pay to the Agent cash
collateral as security for the LOC Obligations for subsequent
drawings under then outstanding Letters of Credit in an amount
equal to the maximum amount which may be drawn under Letters
of Credit then outstanding, whereupon the same shall
immediately become due and payable.
(iii) Enforcement of Rights. Enforce any and
all rights and interests created and existing under the Credit
Documents and all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Lenders hereunder automatically
shall immediately become due and payable without the giving of any notice or
other action by the Agent.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity as Agent hereunder, the "Agent") of such
Lender to act as specified herein and the other Credit Documents, and each such
Lender hereby authorizes the Agent as the agent for such Lender, to take such
action on its behalf under the provisions of this Credit Agreement and the other
Credit Documents and to exercise such powers and perform such duties as are
expressly delegated by the terms hereof and of the other Credit Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein or in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and none of the Credit Parties shall have any rights
as a third party
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beneficiary of the provisions hereof. In performing its functions and duties
under this Credit Agreement and the other Credit Documents, the Agent shall act
solely as agent of the Lenders and does not assume and shall not be deemed to
have assumed any obligation or relationship of agency or trust with or for any
Credit Party.
10.2 Delegation of Duties.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any of the Credit Parties
contained herein or in any of the other Credit Documents or in any certificate,
report, document, financial statement or other written or oral statement
referred to or provided for in, or received by the Agent under or in connection
herewith or in connection with the other Credit Documents, or enforceability or
sufficiency therefor of any of the other Credit Documents, or for any failure of
any Credit Party to perform its obligations hereunder or thereunder. The Agent
shall not be responsible to any Lender for the effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Credit
Agreement, or any of the other Credit Documents or for any representations,
warranties, recitals or statements made herein or therein or made by the
Borrower or any Credit Party in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Lenders or by or on behalf of the Credit Parties to the Agent or any Lender
or be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans or of the
existence or possible existence of any Default or Event of Default or to inspect
the properties, books or records of the Credit Parties.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owner of its interests hereunder for all
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purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent in accordance with Section 11.3(b) hereof.
The Agent shall be fully justified in failing or refusing to take any action
under this Credit Agreement or under any of the other Credit Documents unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder or
under any of the other Credit Documents in accordance with a request of the
Required Lenders (or to the extent specifically provided in Section 11.6, all
the Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default (other than a payment Default)
hereunder unless the Agent has received notice from a Lender or a Credit Party
referring to the Credit Document, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent or any
of its respective affiliates hereinafter taken, including any review of the
affairs of any Credit Party shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrowers and the other Credit Parties and made its own decision to make its
Loans hereunder and enter into this Credit Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Credit Agreement, and to
make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrowers and the other Credit Parties.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Borrowers and the other Credit
Parties which may come into
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the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrowers and without limiting the obligation
of the Borrowers to do so), ratably according to their respective Commitments
(or if the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interests of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the payment of the Borrowers' Obligations) be imposed on,
incurred by or asserted against the Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated herein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Agent under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section shall
survive the repayment of the Loans and other obligations under the Credit
Documents and the termination of the Commitments hereunder.
10.8 Agent in its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Credit Party as though the
Agent were not Agent hereunder. With respect to the Loans made and all
Borrowers' Obligations owing to it, the Agent shall have the same rights and
powers under this Credit Agreement as any Lender and may exercise the same as
though they were not Agent, and the terms "Lender" and "Lenders" shall include
the Agent in its individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days' written notice to the
Lenders, and be removed with or without cause by the Required Lenders upon 30
days' written notice to the Agent; provided that prior to the occurrence of an
Event of Default, such successor Agent shall not be appointed without the
consent of the Borrowers, which consent shall not be unreasonably withheld. Upon
any such resignation or removal, the Required Lenders shall have the right to
appoint a successor Agent; provided that prior to the occurrence of an Event of
Default, such successor Agent shall not be appointed without the consent of the
Borrowers which consent shall not be unreasonably withheld. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the notice of
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resignation or notice of removal, as appropriate, then the retiring Agent shall
select a successor Agent provided such successor is a Lender hereunder or a
commercial bank organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$400,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as Agent,
as appropriate, under this Credit Agreement and the other Credit Documents and
the provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Credit
Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrowers and Guarantors and the Agent, set
forth below, and in the case of the Lenders, set forth on Schedule 2.1(a), or at
such other address as such party may specify by written notice to the other
parties hereto:
if to the Borrowers or the Guarantors:
Speedway Motorsports, Inc.
P.O. Box 18747
Charlotte, North Carolina 28218
Attn: Chief Financial Officer
Telephone: (704) 532-3306
Telecopy: (704) 532-3312
with copies to:
Speedway Motorsports, Inc.
P.O. Box 600
Concord, North Carolina 28026-0600
Attn: President
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Speedway Funding Corp.
900 N. Market Street
Suite 200
Wilmington, Delaware 19801
Attn: Victoria L. Garrett, Vice President
if to the Agent:
NationsBank, N.A.
Independence Center, 15th Floor
NC1-001-15-04
101 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Jeffrey L. Pugh
Telephone: (704) 386-9046
Telecopy: (704) 386-2329
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
NC1-007-08-08
100 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Sports Finance Group
Telephone: (704) 386-5474
Telecopy: (704) 386-1270
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender is authorized at any time and
from time to time, without presentment, demand, protest or other notice of any
kind (all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit Party against obligations and
liabilities of such Credit Party to such Lender hereunder, under the Notes, the
other Credit Documents or otherwise, irrespective of whether such Lender shall
have made any demand hereunder and although such obligations, liabilities or
claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon the occurrence of an Event of
Default even though such charge is made or entered on the books of such Lender
subsequent thereto. Each of the Credit Parties hereby agrees that any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section
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11.3(c) may exercise all rights of set-off with respect to its participation
interest as fully as if such Person were a Lender hereunder.
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that none of the Credit
Parties may assign and transfer any of its interests without prior
written consent of all the Lenders; provided further that the rights of
each Lender to transfer, assign or grant participations in its rights
and/or obligations hereunder shall be limited as set forth in this
Section 11.3, provided however that nothing herein shall prevent or
prohibit any Lender from (i) pledging its Loans hereunder to a Federal
Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or participation in
such Lender's Loans and/or Commitments hereunder to its parent company
and/or to any affiliate of such Lender which is at least 50% owned by
such Lender or its parent company.
(b) Assignments. Each Lender may assign all or a portion of
its rights and obligations hereunder pursuant to an assignment
agreement substantially in the form of Schedule 11.3(b) to one or more
Eligible Assignees, provided that any such assignment shall be in a
minimum aggregate amount of $10,000,000 of the Commitments and in
integral multiples of $1,000,000 above such amount, that such
assignment shall be of a constant, not varying, percentage of all of
the assigning Lender's rights and obligations under this Credit
Agreement. Any assignment hereunder shall be effective upon delivery to
the Agent of written notice of the assignment together with a transfer
fee of $3,500 (paid by the assignee) payable to the Agent for its own
account. The assigning Lender will give prompt notice to the Agent and
the Borrowers of any such assignment. Upon the effectiveness of any
such assignment (and after notice to the Borrowers as provided herein),
the assignee shall become a "Lender" for all purposes of this Credit
Agreement and the other Credit Documents and, to the extent of such
assignment, the assigning Lender shall be relieved of its obligations
hereunder to the extent of the Loans and Commitment components being
assigned. Along such lines, the Borrowers agree that, upon notice of
any such assignment and surrender of the appropriate Note or Notes,
they will promptly provide to the assigning Lender and to the assignee
separate promissory notes in the amount of their respective interests
substantially in the form of the original Note or Notes (but with
notation thereon that it is given in substitution for and replacement
of the original Note or Notes or any replacement notes thereof).
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under this Credit Agreement (such
selling Lender's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Lender hereunder,
(ii) no such participant shall have, or be granted, rights to approve
any amendment or waiver relating to this Credit Agreement or the other
Credit Documents except to the extent any
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such amendment or waiver would (A) reduce the principal of or rate of
interest on or Fees in respect of any Loans in which the participant is
participating, (B) postpone the date fixed for any payment of principal
(including extension of the Termination Date or the date of any
mandatory prepayment), interest or Fees in which the participant is
participating, or (C) release all or any substantial part of any
collateral or guaranties (except as expressly provided in the Credit
Documents) supporting any of the Loans or Commitments in which the
participant is participating, (iii) sub-participations by the
participant (except to an affiliate, parent company or affiliate of a
parent company of the participant) shall be prohibited and (iv) any
such participations shall be in a minimum aggregate amount of
$5,000,000 of the Commitments and in integral multiples of $1,000,000
in excess thereof. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or
the other Credit Documents (the participant's rights against the
selling Lender in respect of such participation to be those set forth
in the participation agreement with such Lender creating such
participation) and all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive
additional amounts under Sections 3.6, 3.9, 3.10 and 3.11 on the same
basis as if it were a Lender.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any of the Credit Parties shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies provided herein
are cumulative and not exclusive of any rights or remedies which the Agent or
any Lender would otherwise have. No notice to or demand on any Credit Part in
any case shall entitle the Borrowers or any other Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Agent or the Lenders to any other or further action
in any circumstances without notice or demand.
11.5 Payment of Expenses, etc.
The Borrowers jointly and severally agree to: (i) pay all reasonable
out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and of the Agent and the Lenders in
connection with enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, in connection
with any such
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enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders); (ii) pay and hold each of the Lenders
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iii) indemnify each Lender, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of any investigation, litigation or other proceeding (whether
or not any Lender is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of proceeds of any Loans
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document or any Environmental
Claim (except to the extent such claim arises from the gross negligence or
willful misconduct of any indemnified party), including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding, any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of gross negligence or willful misconduct on the part of the Person to be
indemnified).
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing signed by the Required Lenders, provided that no such amendment, change,
waiver, discharge or termination shall, without the consent of each Lender, (i)
extend the scheduled maturities (including the final maturity and any mandatory
scheduled prepayments) of any Loan, or any portion thereof, or reduce the rate
or extend the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) thereon or fees
hereunder or reduce the principal amount thereof, or increase the Commitments of
the Lenders over the amount thereof in effect (it being understood and agreed
that a waiver of any Default or Event of Default shall not constitute a change
in the terms of any Commitment of any Lender), (ii) release any Guarantor from
its guaranty obligations hereunder, (iii) amend, modify or waive any provision
of this Section or Section 3.5, 3.11, 3.12, 3.13, 3.14, 5.1, 5,2, 9.1(a), 11.2,
11.3, or 11.9, (iv) reduce any percentage specified in, or otherwise modify, the
definition of Required Lenders, (v) consent to the assignment or transfer by any
Borrower (or Guarantor) of any of its rights and obligations under (or in
respect of) this Credit Agreement or (vi) release all or any substantial part of
any collateral. No provision of Section 9 may be amended without the consent of
the Agent.
Notwithstanding the above, the right to deliver a Payment Blockage
Notice (as defined in the Indenture) shall reside solely with the Agent and the
Agent shall deliver such Payment Blockage Notice only upon the direction of the
Required Lenders.
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<PAGE>
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival of Indemnification.
All indemnities set forth herein, including, without limitation, in
Section 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the repayment of the Loans and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding
with respect to this Credit Agreement or any other Credit Document may
be brought in the courts of the State of North Carolina, in Mecklenburg
County, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each of the Credit Parties further
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to
it at the address set out notices pursuant to Section 11.1, such
service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Agent to serve process in any other
manner permitted by law or to commence legal proceedings or to
otherwise proceed against any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) hereof and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any
-76-
<PAGE>
such action or proceeding brought in any such court has been brought in
an inconvenient forum.
11.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 Survival of Representations and Warranties.
All representations and warranties made by the Credit Parties herein
shall survive delivery of the Notes and the making of the Loans hereunder.
11.14 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time
on or after the Closing Date when it shall have been executed by the
Borrowers, the Guarantors and the Agent, and the Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken
together, bear the signatures of each Lender, and thereafter this
Credit Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Guarantors, the Agent and each Lender and their
respective successors and assigns.
(b) The term of this Credit Agreement shall remain in effect
until no Loans or any other amounts payable hereunder or under any of
the other Credit Documents shall remain outstanding and until all of
the Commitments hereunder shall have expired or been terminated.
11.15 Borrowers' Obligations Joint and Several.
(a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by the
Lenders under this Credit Agreement, for the mutual benefit, directly and
indirectly, of each of the Borrowers and in consideration of the undertakings of
each of the Borrowers to accept joint and several liability for the obligations
of each of them.
-77-
<PAGE>
(b) Each of the Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrower with respect to the payment and
performance of all of the obligations of the Borrowers under the Credit
Documents (the "Credit Obligations"), it being the intention of the parties
hereto that all such Credit Obligations shall be the joint and several
obligations of each of the Borrowers without preferences or distinction among
them.
(c) If and to the extent that either of the Borrowers shall fail to
make any payment with respect to any of the Credit Obligations as and when due
or to perform any of the Credit Obligations in accordance with the terms
thereof, then in each such event, the other Borrower will make such payment with
respect to, or perform, such Credit Obligation.
(d) The obligations of each Borrower under the provisions of this
Section 11.15 constitute full recourse obligations of the Borrowers, enforceable
against the Borrowers to the full extent of their properties and assets,
irrespective of the validity, regularity or enforceability of this Credit
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided herein, each Borrower hereby
waives notice of acceptance of its joint and several liability, notice of any
Loan made under this Credit Agreement, notice of occurrence of any Event of
Default, or of any demand for any payment under this Credit Agreement, notice of
any action at any time taken or omitted by any Lender under or in respect of any
of the Credit Obligations, any requirement of diligence and, generally, all
demands, notices and other formalities of every kind in connection with this
Credit Agreement. Each Borrower hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the Credit
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by any Lender at any time or times in respect of
any default by either Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Credit Agreement, any and all other
indulgences whatsoever by any Lender in respect of any of the Credit
Obligations, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of the Credit Obligations or
the addition, substitution or release, in whole or in part, of any Borrower.
Without limiting the generality of the foregoing, each Borrower assents to any
other action or delay in acting or failure to act on the part of any Lender,
including, without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with the applicable laws or
regulations thereunder which might, but for the provisions of this Section
11.15, afford grounds for terminating, discharging or relieving such Borrower,
in whole or in part, from any of its obligations under this Section 11.15, it
being the intention of each Borrower that, so long as any of the Obligations
remain unsatisfied, the obligations of such Borrower under this Section 11.15
shall not be discharged except by performance and then only to the extent of
such performance. The Credit Obligations of each Borrower under this Section
11.15 shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding
with respect to either Borrower or any Lender. The joint and several liability
of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger,
-78-
<PAGE>
amalgamation or any other change whatsoever in the name, membership,
constitution or place of formation of either Borrower or any Lender.
(f) The provisions of this Section 11.15 are made for the benefit of
the Lenders and their respective successors and assigns, and may be enforced by
any such Person from time to time against either of the Borrowers as often as
occasion therefor may arise and without requirement on the part of any Lender
first to marshal any of its claims or to exercise any of its rights against
either of the other Borrowers or to exhaust any remedies available to it against
the other Borrower or to resort to any other source or means of obtaining
payment of any of the Obligations or to elect any other remedy. The provisions
of this Section 11.15 shall remain in effect until all the Obligations shall
have been paid in full or otherwise fully satisfied. If at any time, any
payment, or any part thereof, made in respect of any of the Credit Obligations,
is rescinded or must otherwise be restored or returned by any Lender upon the
insolvency, bankruptcy or reorganization of either of the Borrowers, or
otherwise, the provisions of this Section 11.15 will forthwith be reinstated in
effect, as though such payment had not been made.
(g) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the joint obligations of a
Borrower shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of each
Borrower hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the federal Bankruptcy Code).
-79-
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWERS:
SPEEDWAY MOTORSPORTS, INC., a Delaware
corporation
By /s/ William R. Brooks
Title VP
SPEEDWAY FUNDING CORP., a Delaware
corporation
By /s/ David J. Lindley
Title Secretary
GUARANTORS:
ATLANTA MOTOR SPEEDWAY, INC., a Georgia
corporation
By /s/ William R. Brooks
Title VP
CHARLOTTE MOTOR SPEEDWAY, INC., a North
Carolina corporation
By /s/ William R. Brooks
Title VP
[SIGNATURES CONTINUE]
<PAGE>
TEXAS MOTOR SPEEDWAY, INC., a Texas
corporation
By /s/ William R. Brooks
Title VP
600 RACING, INC., a North Carolina corporation
By /s/ William R. Brooks
Title VP
BRISTOL MOTOR SPEEDWAY, INC., a Tennessee
corporation
By /s/ William R. Brooks
Title VP
SPR ACQUISITION CORPORATION, a
California corporation
By /s/ William R. Brooks
Title VP
SONOMA FUNDING CORPORATION, a
California corporation
By /s/ William R. Brooks
Title VP
[SIGNATURES CONTINUE]
<PAGE>
THE SPEEDWAY CLUB, INC., a North
Carolina corporation
By /s/ William R. Brooks
Title VP
SPEEDWAY CONSULTING & DESIGN,
INC., a
North Carolina corporation
By /s/ William R. Brooks
Title VP
INEX CORP., a North Carolina corporation
By /s/ William R. Brooks
Title VP
[SIGNATURES CONTINUE]
<PAGE>
LENDERS:
SCOTIABANC INC.
By /s/ William E. Zarrett
Title Senior Relationship Manager
BANK ONE, TEXAS, N.A.
By /s/ [illegible]
Title Vice President
CREDIT LYONNAIS ATLANTA AGENCY
By /s/ David M. Cawrse
Title First Vice President & Manager
FIRST AMERICAN NATIONAL BANK
By /s/ H. Hope Stewart
Title A.V.P.
FIRST UNION NATIONAL BANK
By /s/ William [illegible]
Title Sr. Vice President
FLEET NATIONAL BANK
By /s/ [illegible]
Title SVP
[SIGNATURES CONTINUE]
<PAGE>
NATIONSBANK, N.A.
By /s/ James E. Nash, Jr.
Title Senior Vice President
SOUTHTRUST BANK
By /s/ Mark R. [illegible]
Title Group Vice President
THE SUMITOMO BANK, LIMITED
By /s/ E.B. Buchanan
Title Vice President
By /s/ Lauren P. Carrigan
Title Asst. Vice President
SUNTRUST BANK, ATLANTA
By /s/ Jarrette A. White, III
Title GVP/Group Manager
By /s/ Christopher H. Cotter
Title Banking Officer
UNION BANK OF CALIFORNIA N.A.
By /s/ Cary Moore
Title Vice President
[SIGNATURES CONTINUE]
AGENT:
NATIONSBANK, N.A.
By /s/ James E. Nash, Jr.
Title Senior Vice President
CO-AGENT:
FIRST UNION NATIONAL BANK
By /s/ William W. [illegible]
Title Sr. Vice President
<PAGE>
<PAGE>
EXHIBIT 12.1
STATEMENT REGARDING
COMPUTATION OF RATIOS
SPEEDWAY MOTORSPORTS, INC.
ACTUAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
ACTUAL RATIO OF EARNINGS TO FIXED
CHARGES
Income from continuing operations
before income taxes................ $11,099 $15,378 $18,525 $33,290 $43,057 $22,677 $49,730
Less: Equity in operations of equity
method investee.................... (233) (371) (185) 210
Adjusted income from continuing
operations before income taxes..... 11,099 15,378 18,525 33,057 42,686 22,492 49,940
Fixed charges:
Interest expense................... 4,527 4,520 4,282 917 693 566 1,482
Amortization of financing costs.... 161 99 101 24 -- 54 5
Income as defined.................... $15,787 $19,997 $22,908 $33,998 $43,379 $23,112 $51,427
Fixed charges:
Interest expense................... $ 4,527 $ 4,520 $ 4,282 $ 917 $ 693 $ 566 $ 1,482
Capitalized interest............... 2,834 546 3,515
Amortization of financing costs.... 161 99 101 24 239 54 306
Fixed charges........................ $ 4,688 $ 4,619 $ 4,383 $ 941 $ 3,766 $ 1,166 $ 5,303
Ratio of earnings to fixed charges... 3.37 4.33 5.23 36.13 11.52 19.82 9.70
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, PRO FORMA 1996
1996 ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
Income from continuing operations before income taxes................ $ 43,057 $ (126) $ 42,931
Less: Equity in operations of equity method investee................. (371) (371)
Adjusted income from continuing operations before income taxes....... 42,686 (126) 42,560
Fixed charges:
Interest expense................................................... 693 126 819
Amortization of financing costs.................................... -- -- --
Income as defined.................................................... $ 43,379 $ 0 $ 43,379
Fixed charges:
Interest expense................................................... $ 693 $ 126 $ 819
Capitalized interest............................................... 2,834 513 3,347
Amortization of financing costs.................................... 239 311 550
Fixed charges........................................................ $ 3,766 $ 950 $ 4,716
Actual Ratio of earnings to fixed charges............................ 11.52
Pro Forma Ratio of earnings to fixed charges......................... 9.20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
SIX MONTHS ENDED
ENDED JUNE 30,
JUNE 30, PRO FORMA 1996
1996 ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
Income from continuing operations before income taxes................... $22,677 $ (171) $22,506
Less: Equity in operations of equity method investee.................... (185) (185)
Adjusted income from continuing operations before income taxes.......... 22,492 (171) 22,321
Fixed charges:
Interest expense...................................................... 566 171 737
Amortization of financing costs....................................... 54 -- 54
Income as defined....................................................... $23,112 $ 0 $23,112
Fixed charges:
Interest expense...................................................... $ 566 $ 171 $ 737
Capitalized interest.................................................. 546 165 711
Amortization of financing costs....................................... 54 156 210
Fixed charges........................................................... $ 1,166 $ 492 $ 1,658
Actual Ratio of earnings to fixed charges............................... 19.82
Pro Forma Ratio of earnings to fixed charges............................ 13.94
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
SIX MONTHS ENDED
ENDED JUNE 30,
JUNE 30, PRO FORMA 1997
1997 ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
Income from continuing operations before income taxes................... $49,730 $ (119) $49,611
Less: Equity in operations of equity method investee.................... 210 210
Adjusted income from continuing operations before income taxes.......... 49,940 (119) 49,821
Fixed charges:
Interest expense...................................................... 1,482 119 1,601
Amortization of financing costs....................................... 5 -- 5
Income as defined....................................................... $51,427 $ 0 $51,427
Fixed charges:
Interest expense...................................................... $ 1,482 $ 119 $ 1,601
Capitalized interest.................................................. 3,515 283 3,798
Amortization of financing costs....................................... 306 156 462
Fixed charges........................................................... $ 5,303 $ 558 $ 5,861
Actual Ratio of earnings to fixed charges............................... 9.70
Pro Forma Ratio of earnings to fixed charges............................ 8.77
</TABLE>
(1) Pro forma ratio of earnings to fixed charges assumes that all bank debt
outstanding during 1996, and the six-month periods ended June 30, 1996 and
1997 was refinanced with the proceeds of the Old Notes. The effect of such
refinancing is an increase in fixed charges of $950,000, $492,000 and
$558,000 for 1996, and the six-month periods ended June 30, 1996 and 1997,
respectively. The pro forma ratio of earnings to fixed charges does not
reflect any income earned from the proceeds of the Prior Offering in excess
of the refinanced bank debt amounts.
<PAGE>
SPEEDWAY MOTORSPORTS, INC.
ACTUAL AND PRO FORMA RATIOS OF EBITDA TO INTEREST CHARGES
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
ACTUAL RATIO OF EBITDA TO INTEREST
CHARGES
Income from continuing operations
before
income taxes....................... $11,099 $15,378 $18,525 $33,290 $43,057 $22,677 $49,730
Interest expense................... 4,527 4,520 4,282 917 693 566 1,482
Depreciation and amortization...... 4,289 4,375 4,500 4,893 7,598 3,796 7,119
EBITDA............................... $19,915 $24,273 $27,307 $39,100 $51,348 $27,039 $58,331
Interest charges..................... $ 4,527 $ 4,520 $ 4,282 $ 917 $ 3,527 $ 1,112 $ 4,997
Ratio of EBITDA to interest
charges............................ 4.40 5.37 6.38 42.64 14.56 24.32 11.67
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, PRO FORMA 1996
1996 ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C>
PRO FORMA RATIO OF EBITDA TO INTEREST CHARGES
Income from continuing operations before income taxes................ $ 43,057 $ (126) $ 42,931
Interest expense................................................... 693 126 819
Depreciation and amortization...................................... 7,598 -- 7,598
EBITDA............................................................... $ 51,348 $ 0 $ 51,348
Interest charges..................................................... $ 3,527 $ 639 $ 4,166
Actual Ratio of EBITDA to interest charges........................... 14.56
Pro Forma Ratio of EBITDA to interest charges........................ 12.33
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
SIX MONTHS ENDED
ENDED JUNE 30,
JUNE 30, PRO FORMA 1996
1996 ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C>
PRO FORMA RATIO OF EBITDA TO INTEREST CHARGES
Income from continuing operations before income taxes.................... $ 22,677 $ (171) $ 22,506
Interest expense....................................................... 566 171 737
Depreciation and amortization.......................................... 3,796 -- 3,796
EBITDA................................................................... $ 27,039 $ 0 $ 27,039
Interest charges......................................................... $ 1,112 $ 336 $ 1,448
Actual Ratio of EBITDA to interest charges............................... 24.32
Pro Forma Ratio of EBITDA to interest charges............................ 18.67
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
SIX MONTHS ENDED
ENDED JUNE 30,
JUNE 30, PRO FORMA 1997
1997 ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C>
PRO FORMA RATIO OF EBITDA TO INTEREST CHARGES
Income from continuing operations before income taxes.................... $ 49,730 $ (119) $ 49,611
Interest expense....................................................... 1,482 119 1,601
Depreciation and amortization.......................................... 7,119 7,119
EBITDA................................................................... $ 58,331 $ 0 $ 58,331
Interest charges......................................................... $ 4,997 $ 402 $ 5,399
Actual Ratio of EBITDA to interest charges............................... 11.67
Pro Forma Ratio of EBITDA to interest charges............................ 10.80
</TABLE>
(1) Pro forma ratio of EBITDA to interest charges assumes that all bank debt
outstanding during 1996, and the six-month periods ended June 30, 1996 and
1997 was refinanced with the proceeds of the Old Notes. The effect of such
refinancing is an increase in interest charges of $639,000, $336,000 and
$402,000 for 1996, and the six-month periods ended June 30, 1996 and 1997,
respectively. The pro forma ratio of EBITDA to interest charges does not
reflect any income earned from the proceeds of the Prior Offering in excess
of the refinanced bank debt amounts.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Speedway Motorsports,
Inc. and Subsidiaries on Form S-4 of our report dated February 28, 1997,
appearing in the Prospectus, which is a part of this Registration Statement.
Our report expresses an unqualified opinion and includes an explanatory
paragraph relating to significant tax adjustments proposed by the Internal
Revenue Service for additional income taxes and penalties, plus interest, at
Atlanta Motor Speedway, Inc.
We also consent to the reference to us under the heading "Selected Financial
Data" and "Independent Auditors" in such Prospectus.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
September 5, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
SPEEDWAY MOTORSPORTS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 51-0363307
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Highway 29 North
P.O. Box 600
Concord, North Carolina 28026-0600
(Address of Principal Executive Offices) (Zip Code)
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. General Information Furnish the following information as to the
Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject. Comptroller of the Currency Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers. Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe
each such affiliation. None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which
the Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority is incorporated by reference to Registration
Number 333-34585.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 4th day of September,
1997.
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
Richard H. Prokosch
Trust Officer
/s/ Kathe M. Barrett
Kathe M Barrett
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SPEEDWAY MOTORSPORTS, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE ON SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 37,114
<SECURITIES> 2,152
<RECEIVABLES> 29,103
<ALLOWANCES> 0
<INVENTORY> 8,206
<CURRENT-ASSETS> 81,102
<PP&E> 386,797
<DEPRECIATION> 56,358
<TOTAL-ASSETS> 528,617
<CURRENT-LIABILITIES> 67,303
<BONDS> 0
0
0
<COMMON> 413
<OTHER-SE> 233,601
<TOTAL-LIABILITY-AND-EQUITY> 528,617
<SALES> 8,022
<TOTAL-REVENUES> 119,594
<CGS> 4,850
<TOTAL-COSTS> 69,504
<OTHER-EXPENSES> (22)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 382
<INCOME-PRETAX> 49,730
<INCOME-TAX> 20,476
<INCOME-CONTINUING> 29,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,254
<EPS-PRIMARY> .69
<EPS-DILUTED> .67
</TABLE>
Exhibit 99.1
SPEEDWAY MOTORSPORTS, INC.
OFFER TO EXCHANGE
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
Pursuant to the Prospectus dated September __, 1997.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON ____________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON ___________________________, 1997.
BY MESSENGER, MAIL, OR OVERNIGHT DELIVERY:
First Trust National Association
First Trust Center
Suite 200
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Ms. Kathe Barrett
FACSIMILE TRANSMISSION:
(612) 244-0711
CONFIRM BY TELEPHONE:
(612) 244-0719
Ms. Kathe Barrett
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 September
__, 1997 (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 an
aggregate principal amount of up to $125,000,000 8 1/2% Senior Subordinated
Notes Due 2007 (the "New Notes") for an equal principal amount of the
outstanding 8 1/2% Senior Subordinated Notes Due 2007 (the "Old 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
<PAGE>
New Notes will bear interest at a rate equal to 8 1/2% per anum. Interest on the
New Notes is payable semiannually, commencing February 15, 1998, on February 15
and August 15 of each year (each, an "Interest Payment Date") and shall accrue
from August 4, 1997, 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 October 3, 1997; (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to December 2, 1997 (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, or (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.
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 is to be completed by a holder of Old Notes either if Old
Notes are to be forwarded herewith or if a tender of Old Notes, if available, is
to be made by book-entry transfer
2
<PAGE>
to the account maintained by the Exchange Agent at The Depository Trust Company
(the "Book- Entry-Transfer Facility") pursuant to the procedure set forth in
"The Exchange Offer" section of the Prospectus. 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") 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. 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>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF OLD 1 2 3
NOTES
Name(s) and Address(es) Aggregate Principal Amount Principal Amount
of Registered Holder(s) Note Number(s)* of Old Note(s) Tendered**
(Please fill in, if blank)
</TABLE>
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.
[ ] CHECK HERE IS 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_________________
3
<PAGE>
[ ] 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:_______________________________________________________________
4
<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) 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
5
<PAGE>
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."
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.
6
<PAGE>
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):___________________
7
<PAGE>
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 OR A
BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY) 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
8
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Dated:____________________________________________________________________, 1997
_______________________________________________________________________________x
_______________________________________________________________________________x
(Signature(s) of Owner) (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:____________________________________________________________________, 1997
9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1993, AS AMENDED, FOR ANY AND ALL OUTSTANDING 8 1/2%
SENIOR SUBORDINATED NOTES DUE 2007
SPEEDWAY MOTORSPORTS, INC.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Notes either if Notes
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" section of the Prospectus. Physically
tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter, must be received by
the Exchange Agent at the address set froth herein on or prior to the Expiration
Date, or the tendering holder must comply 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 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 through an Eligible Institution (as defined below) and
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 execution of the Notice of Guaranteed Delivery, the tendered
Old Notes, a duly executed Letter and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) such
properly completed and executed documents required by this Letter and the
tendered Old Notes in proper form for transfer must be received by the Exchange
Agent within four business days after the Expiration Date.
The method of delivery of this Letter, the Old Notes 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 suggested that the 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.
See "The Exchange Offer" section of the Prospectus.
10
<PAGE>
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.
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.
11
<PAGE>
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 (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.
12
<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.
13
<PAGE>
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.
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<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: SPEEDWAY MOTORSPORTS, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN:____________________________________
Form W-9 TIN IN THE BOX AT RIGHT AND (Social Security Number or
CERTIFY BY SIGNING AND Employer Identification
DATING BELOW. Number)
------------------------------------------------ ----------------------------------------
Department of the
Treasury
Internal Revenue
Service
------------------------------------------------ ----------------------------------------
Payor's Request for Part 2 -- TIN Applied for [ ]
Taxpayer
Identification
Number ("TIN")
and Certification
- ---------------------------- ------------------------------------------------ ----------------------------------------
</TABLE>
CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me).
(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
SIGNATURE:_____________________________________________________________
DATE___________________________________________________________________
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.
- --------------------------------------------------------------------------------
15
<PAGE>
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, 31 percent of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- ------------------------------ -----------------------------
Signature Date
16
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 September ___, 1997 (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 First 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 or hand delivery
to 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: FIRST TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
BY MESSENGER, MAIL, OVERNIGHT DELIVERY:
First Trust National Association
First Trust Center
Suite 200
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Ms. Kathe Barrett
FACSIMILE TRANSMISSION:
(612) 244-0711
CONFIRM BY TELEPHONE:
(612) 244-0719
Ms. Kathe Barrett
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.
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.
<PAGE>
Principal Amount of Old Notes Tendered Name(s) of Record Holder(s):
$_____________________________________ ______________________________________
Note Certificate Nos. (if available): ______________________________________
______________________________________ Address(es):
______________________________________ ______________________________________
______________________________________ ______________________________________
______________________________________ ______________________________________
If Old Notes will be delivered by book- Area Code and Telephone Number(s):
entry transfer to The Depositary Trust ______________________________________
account number. ______________________________________
Account Number: 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:_______________________________________________________________
