EXHIBIT 10.34
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of August 8, 1997,
by and between Penske Motorsports, Inc., a Delaware corporation (the
"Purchaser") and Grand Prix Association of Long Beach, Inc., a California
corporation (the "Corporation").
RECITALS
A. Subject to the terms and conditions, set forth herein, the Purchaser
desires to purchase from the Corporation, 315,000 shares of Common Stock, no par
value, of the Corporation (the "Shares"), representing 7.2% of the Corporation's
issued and outstanding Common Stock.
B. The Corporation desires to sell the Shares to Purchaser on the terms
and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth in this Agreement and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Purchaser and the
Corporation agree as follows:
ARTICLE ONE 1
1.1 SALE AND PURCHASE OF THE SHARES. On the basis of the
representations, warranties, covenants and agreements, and subject to the terms
set forth herein, the Corporation hereby issues and sells to the Purchaser, free
and clear of any and all liens and encumbrances of whatever character created by
the Corporation ("Liens") and the Purchaser hereby purchases, acquires and
accepts delivery from the Corporation, the Shares, for an aggregate purchase
price of Three Million Eight Hundred Eighty Seven Thousand One Hundred Dollars
($3,887,100) (the "Purchase Price").
1.2 DELIVERIES. In order to give effect to the transaction
contemplated by Section 1.1 hereof, (i) the Purchaser hereby delivers to the
Corporation a bank cashier's check or wire transfer of immediately available
funds in the amount of the Purchase Price, and (ii) the Corporation hereby
delivers to the Purchaser certificates representing the Shares.
ARTICLE TWO 2
2.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. In order to
induce the Purchaser to enter into this Agreement and to purchase the Shares,
the Corporation hereby represents and warrants to the Purchaser as follows:
(a) ORGANIZATION; QUALIFICATION. The Corporation is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California. The Corporation has full corporate power and
authority to own and operate its properties and assets and to conduct and carry
on its business as it is now being conducted and operated. The Corporation (i)
is duly qualified to do business and is in good standing in each jurisdiction in
which the ownership or lease of real property or the conduct of its business
requires it to be so qualified and (ii) has all governmental licenses,
certifications, permits, approvals and other authorizations necessary to own its
properties and assets and carry on its business as it is presently being
conducted, except, in each case, where the failure to so qualify or be in good
standing, or to have obtained any such governmental licenses, certifications,
permits, approvals and other authorizations, could not reasonably be expected to
have a Material Adverse Effect (as hereinafter defined).
(b) AUTHORIZATION. The Corporation has full corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and consummate the transactions contemplated hereby. This Agreement
has been duly authorized by all necessary corporate action on the part of the
Corporation, has been duly and validly executed and delivered by the
Corporation, and (assuming due execution and delivery by the Purchaser)
constitutes the legal, valid and binding obligation of the Corporation,
enforceable in accordance with its terms, except as such enforcement may be
limited by general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors' rights generally.
(c) CAPITALIZATION. The authorized capital stock of the
Corporation consists of (i) 20,000,000 shares of Common Stock, no par value (the
"Common Stock"), of which 3,768,286 shares of Common Stock are issued and
outstanding as of the date hereof; (ii) 10,000,000 shares of Preferred Stock, no
par value (the "Preferred Stock"), of which none of the shares of the Preferred
Stock are issued and outstanding as of the date hereof other than the "Series B
Preferred Stock" (as hereinafter defined); and (iii) 250,000 shares of Series B
Convertible Preferred Stock ("Series B Preferred Stock"), of which 250,000
shares of the Series B Preferred Stock are issued and outstanding as of the date
hereof. The Shares have been duly authorized and upon payment of the Purchase
Price in accordance with the terms hereof will be validly issued, fully paid and
non-assessable, and have not been subject to or issued in violation of (i i) any
preemptive or other rights of any Person to acquire securities of the
Corporation, or (ii ii) subject to the accuracy of the representations and
warranties of Article Three, any applicable securities laws. Except as set forth
in SCHEDULE 2(C) to this Agreement, there are no outstanding (i) securities or
instruments convertible into or exchangeable for any of the capital stock of the
Corporation; (ii) options, warrants, subscriptions or other rights to acquire
capital stock of the Corporation; or (iii) commitments, agreements or
understanding of any kind to which the Corporation is a party, including
employee benefit arrangements, relating to the issuance or repurchase by the
Corporation of any capital stock of the Corporation, any such securities or
instruments convertible into or exchangeable for capital stock of the
Corporation or any such options, warrants or rights. As of the date hereof, the
Corporation had reserved not more than (x) 474,718 shares of Common Stock for
issuance upon exercise of outstanding stock options, and (y) 400,000 shares of
Common Stock for option and other "Section 423" stock purchase grants that may
be made in the future pursuant to the Corporation's 1996 stock option plan, in
each case subject to adjustment pursuant to the anti-dilution provisions
thereof. SCHEDULE 2(C) shall also set forth the name of the holder and vesting
schedule for each outstanding convertible security, option, warrant or similar
right, as well as the number of shares of Common Stock subject thereto.
(d) NO VIOLATION. Except as set forth in Schedule 2(d), the
execution, delivery and performance of this Agreement by the Corporation does
not and will not (i) conflict with or violate any provision of the Corporation's
Articles of Incorporation or By-laws, (ii) violate or breach any provision of,
or constitute or result in a default (or an event which, with notice or lapse of
time or both, would constitute such a default) under, or result in the
imposition of any lien upon or the creation of a security interest in the
assets, business or properties of the Corporation pursuant to, any note, bond,
mortgage, indenture, deed, license, franchise, permit, lease, contract or other
agreement to which the Corporation is a party or by which the Corporation or any
of its assets is bound or subject, (iii) violate any order, writ, injunction,
decree, judgment or ruling of any court or governmental authority applicable to
the Corporation, (iv) violate any statute, law, rule or regulation applicable to
the Corporation, or (v) require the Corporation to obtain any waiver, consent,
approval or authorization of, or make any filing with, any governmental
authority, except such reports as may be required to be filed by the Corporation
with the Securities and Exchange Commission (the "Commission") pursuant to
Regulation D promulgated under the 1933 Act (as hereinafter defined) or the
Securities and Exchange Act of 1934 (the "1934 Act").
(e) SEC REPORTS. The Corporation has filed all forms,
reports and documents required to be filed with the Commission prior to the date
hereof, and has heretofore delivered or made available to the Purchaser, in the
form filed with the Commission, its (i) Annual Report on Form 10-KSB for the
fiscal year ended November 30, 1996, (ii) its Quarterly Reports on Form 10-QSB
for the quarters ended February 28, 1997 and May 31, 1997, and (iii) its Proxy
Statement with respect to the 1997 annual
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meeting of its shareholders (collectively, the "SEC Reports"). The SEC Reports
(i) were prepared in all material respects in compliance with the requirements
of the 1934 Act, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Corporation
included in such SEC Reports were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (A) as otherwise indicated in such financial statements and the notes
thereto or, in the case of audited statements, in the related report of the
Corporation's independent accountants or (B) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present the consolidated financial position,
results of operations and cash flows of the Corporation as of the dates thereof
and for the periods indicated therein (subject, in the case of any unaudited
interim financial statements, to normal year-end audit adjustments).
(f) ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 2(f), since November 30, 1996, there has not been (i) any event or
change in circumstances that has had or could reasonably be expected to have a
material adverse effect on the business, financial condition, results of
operations, properties or prospects of the Corporation and its subsidiaries
taken as a whole or on the ability of the Corporation to timely consummate the
transactions contemplated hereby (a "Material Adverse Effect"), or (ii) any
damage, destruction or loss that has had or could reasonably be expected to have
a Material Adverse Effect.
(g) STATUS, TITLE TO ASSETS.
(i) GENERAL. Except as disclosed in Schedule 2(g)
attached hereto or in the SEC Reports, the Corporation has good and
marketable title to all the properties and assets reflected in the
latest audited balance sheet included in such SEC Reports (except
properties sold or otherwise disposed of since the date thereof in the
ordinary course of business), free and clear of all claims, liens,
charges, security interests, or encumbrances of any nature whatsoever
except (i) statutory liens securing payments not yet due and (ii) such
imperfections or irregularities of title, claims, liens, charges,
security interests, or encumbrances as do not materially affect the use
of the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such properties, or
as do not materially impair the marketability thereof.
(ii) LEASED PROPERTIES. Except as disclosed in the
SEC Reports filed prior to the date of this Agreement, the Corporation
is the valid lessee of all material leasehold estates reflected in the
latest audited financial statements included in such SEC Reports or
acquired after the date thereof (except for leases that have expired
without default by their terms since the date thereof) and is in valid
possession of the properties purported to be leased thereunder, and
each such lease is in full force and effect and without default
thereunder in any material respect by the lessee or, to the
Corporation's knowledge, the lessor.
(h) LITIGATION AND PROCEEDINGS. Except as set forth in the
SEC Reports or SCHEDULE 2(H) attached hereto, no litigation, proceeding, whether
civil or criminal, or governmental investigation is pending or, to the
Corporation's knowledge, threatened against or relating to the Corporation or
its properties or businesses which could reasonably be expected to have a
Material Adverse Effect.
(i) TAX RETURNS AND AUDITS. The Corporation has duly filed
all federal, state, local and foreign tax returns required to be filed by it and
has duly paid or made adequate provision for the payment of all Federal income
and other material taxes that are due and payable pursuant to such returns or
pursuant to any assessment with respect to taxes in such jurisdictions, whether
or not in connection with such returns. Except as set forth in SCHEDULE 2(I),
there are no pending, or to the Corporation's knowledge, threatened, claims
asserted for taxes or assessments of the Corporation or relating to the
Corporation's present practices in computing or reporting taxes which could
reasonably be
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expected to have a Material Adverse Effect. Adequate provision has been made in
the Corporation's most recent balance sheet, included in the SEC Reports for all
then accrued and unpaid taxes, whether or not yet due and payable and whether or
not disputed by the Corporation.
(j) ENVIRONMENTAL AND SAFETY LAWS. Except as disclosed in
SCHEDULE 2(J) attached hereto, the Corporation is not the subject of any
environmental enforcement proceeding, and complies in all material respects with
all laws and regulations relating to pollution control and environmental
protection in all jurisdictions in which the Corporation is presently doing
business. In addition, the Corporation has no material liability for past
violations of such laws and regulations in jurisdictions in which the
Corporation presently does business or in the past has done business.
(k) BROKERS, FINDERS, ETC. The Corporation has not employed
any broker, finder or other intermediary in connection with the transactions
contemplated by this Agreement who might be entitled to a fee or commission from
the Corporation or the Purchaser in connection with the transactions
contemplated by this Agreement other than L.H. Friend, Weinress, Xxxxxxxx &
Xxxxxxx, Inc. ("L.H. Friend"). A true, correct and complete description of the
Corporation's fee and other arrangements in connection with this Agreement and
the transactions contemplated hereby with L.H. Friend is included in SCHEDULE
2(K) hereto.
ARTICLE THREE 3
3.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. To induce the
Corporation to enter into this Agreement and to issue and sell the Shares, the
Purchaser hereby represents and warrants to the Corporation as follows:
(a) ORGANIZATION; QUALIFICATION. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Purchaser has full corporate power and
authority to own and operate its properties and assets and to conduct and carry
on its business as it is now being conducted and operated. The Purchaser (i) is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership or lease of real property or the conduct of its business
requires it to be so qualified and (ii) has all governmental licenses,
certifications, permits, approvals and other authorizations necessary to own its
properties and assets and carry on its business as it is presently being
conducted, except, in each case, where the failure to so qualify or be in good
standing, or to have obtained any such governmental licenses, certifications,
permits, approvals and other authorizations, could not reasonably be expected to
have a material adverse effect on the Purchaser.
(b) AUTHORIZATION. The Purchaser has full corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and consummate the transactions contemplated hereby. This Agreement
has been duly authorized by all necessary corporate action on the part of the
Purchaser, has been duly and validly executed and delivered by the Purchaser,
and (assuming due execution and delivery by the Corporation) constitutes the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except as such enforcement may be limited by general equitable
principles or by applicable bankruptcy, insolvency, moratorium, or similar laws
and judicial decisions from time to time in effect which affect creditors'
rights generally.
(c) NO VIOLATION. The execution, delivery and performance of
this Agreement by the Purchaser does not and will not (i) conflict with or
violate any provision of the Purchaser's Articles of Incorporation or By-laws,
(ii) violate or breach any provision of, or constitute or result in a default
(or an event which, with notice or lapse of time or both, would constitute such
a default) under, or result in the imposition of any lien upon or the creation
of a security interest in the assets, business or properties of the Purchaser
pursuant to, any material note, bond, mortgage, indenture, deed, license,
franchise, permit, lease, contract or other agreement to which the Purchaser is
a party or by which the Purchaser or any of its assets is bound or subject,
(iii) violate any order, writ, injunction, decree, judgment or ruling of any
court or governmental authority applicable to the Purchaser, (iv) violate any
statute, law, rule or
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regulation applicable to the Purchaser, or (v) require the Purchaser to obtain
any waiver, consent, approval or authorization of, or make any filing with, any
governmental authority, except such reports as may be required to be filed by
the Purchaser with the Commission pursuant to the 1934 Act.
(d) NO REGISTRATION, ETC. The Purchaser acknowledges that
the Corporation's offering and sale of the Shares to the Purchaser pursuant to
this Agreement (i) has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), or under the securities or "blue sky" laws, rules or
regulations of any State (collectively, the "Securities Laws") and (ii) is
intended to be exempt from registration under the 1933 Act by virtue of Section
4(2) of the 1933 Act and the provisions of Rule 506 of Regulation D promulgated
thereunder by the Commission. In furtherance thereof, the Purchaser represents
and warrants to the Corporation that it is an "accredited investor", as defined
in Rule 501 of Regulation D promulgated under the 1933 Act. The Purchaser
acknowledges that it has been afforded, prior to the execution of this
Agreement, the opportunity to ask questions of, and to receive answers from, the
Corporation and its management. The Shares are being purchased by Purchaser for
its own account for investment and not for resale or distribution to others
within the meaning of the federal Securities Laws. The Purchaser agrees that it
will not transfer the Shares unless such Shares are registered under any
applicable Securities Laws, or unless an exemption is available under such
Securities Laws.
(e) BROKERS, FINDERS, ETC. The Purchaser has not employed
any broker, finder or other intermediary in connection with the transactions
contemplated by this Agreement who might be entitled to a fee or commission from
the Purchaser or the Corporation upon execution of this Agreement or
consummation of such transactions.
ARTICLE FOUR 4
COVENANTS OF THE CORPORATION
AND THE PURCHASER
4.1 FURTHER ASSURANCES. Subject to the terms and conditions hereof,
each of the Purchaser and the Corporation agree to use all reasonable efforts to
take, or cause to be taken, all further actions and to do, or cause to be done,
all things necessary, proper or reasonably requested by the other to give effect
to the transactions contemplated by this Agreement.
4.2 PREEMPTIVE RIGHTS. If, subsequent to the date hereof and during
the "Covered Period" (as hereinafter defined), the Corporation desires to issue
and sell any shares of capital stock of the Corporation (other than "Excluded
Stock," as hereinafter defined), the Corporation shall afford the Purchaser
"preemptive rights" (exercisable within 10 days following reasonably detailed
written notice from the Corporation of the proposed sale of stock) in order to
permit the Purchaser to maintain its proportionate percentage ownership in the
Corporation (it being agreed that the Purchaser's "proportionate" ownership
shall be computed by comparing the Corporation's aggregate number of outstanding
shares of common stock to the aggregate number of shares of common stock then
held by Purchaser and acquired pursuant to this Agreement on the date hereof and
the "Right of First Refusal Agreement" being executed by Purchaser on or about
the date hereof). As used herein, the term (x) "Covered Period" shall mean the
period commencing on the date hereof and ending on the earliest to occur of (i)
the date four years after the date hereof, and (ii) the date Purchaser no longer
owns at least 80% of the Shares acquired pursuant to this Agreement on the date
hereof; and (y) "Excluded Stock" shall mean (i) securities issued upon exercise
of options or warrants or conversion of convertible securities outstanding as of
the date hereof as disclosed in SCHEDULE 2(C) to this Agreement, (ii) shares of
Common Stock issuable pursuant to stock options or "Section 423" stock purchase
rights (with per share exercise or purchase prices no less than 85% of the fair
market value of the Common Stock on the date of grant) that may be granted in
the future pursuant to the Company's 1996 and 1993 stock option plans (as such
plans are currently in effect), (iii) securities issued to Purchaser or Penske
Motorsports, Inc. ("Penske") or any of their respective affiliates, (iv) shares
of Common Stock issued in "private placement" transactions that constitute bona
fide financings or acquisitions, if and only if, with respect to
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this item (iv), (A) at least 50%-in-interest of the acquirors of such stock (the
"New Shareholders") enter into agreements (in form reasonably acceptable to
Purchaser) substantially the same as the Right of First Refusal Agreement (with
the term of such agreement not to exceed the then remaining term of the Right of
First Refusal Agreement), and (B) the identity of all of such New Shareholders
is approved by the Purchaser, which approval shall not be unreasonably withheld
or delayed it being agreed that approval shall not be required with respect to
(x) institutional investors, or (y) any other New Shareholder that would not be
required to file or amend a Schedule 13D statement with respect to the
Corporation by reason of its acquisition or ownership of Common Stock (a
"Non-13D Filer"); PROVIDED, HOWEVER, that upon consummation of such a financing
or acquisition where the Purchaser does not approve the Non-13D Filer (whether
or not required), the Corporation shall be obligated to file a "shelf" resale
registration statement with the Commission within 15 business days of the
consummation of such financing or acquisition with respect to the potential
public offering and sale of up to all of the shares of Common Stock owned by
Purchaser unless a "shelf" resale registration statement is then in effect or on
file with the Commission with respect to such shares of Common Stock owned by
Purchaser, and (v) securities issued pursuant to stock dividends, stock splits,
and similar "no sale" events that apply generally to all shares of outstanding
Common Stock.
4.3 RIGHT TO NOMINATE DIRECTORS. The Corporation shall (i) take all
corporate action necessary to immediately cause the size of the Corporation's
Board to be increased by one and appoint one (1) individual designated by the
Purchaser and reasonably acceptable to the Corporation's Board (it being agreed
that any of Purchaser's officers who also serves as an executive officer or
director of Purchaser shall be deemed reasonably acceptable to the Corporation's
Board), as a member of the Board of Directors of the Corporation to fill such
vacancy, and (ii) thereafter during the Covered Period use reasonable efforts,
consistent with and no less than are taken with respect to all other nominees to
the Board of Directors, to have such designee (or other reasonably acceptable
designee of Purchaser) to be nominated and elected to its Board of Directors at
each election of the Corporation's directors (it being agreed that Purchaser
shall be entitled to two (2) designees for election as director if at any time
during the Covered Period Purchaser acquires the Corporation's Common Stock
hereafter transferred by Penske, and, as a result of such acquisition, Penske or
any of its affiliates loses its rights to nominate a director designee). Each
Purchaser designee elected to the Board of Directors shall be indemnified by the
Corporation to the fullest extent permitted by law and, without limiting the
generality of the foregoing, shall be given indemnification agreement
protection, if any, by the Corporation in the same form as currently in effect
for the Corporation's current directors. The Corporation agrees to provide each
such Purchaser designee with the same compensation paid by the Corporation to
its other outside directors and to reimburse the Purchaser's designee for
out-of-pocket expenses reasonably incurred in connection with his or her
attendance of Board meetings. In the event the Purchaser's designee(s) is (are)
not elected as a member of the Board of Directors during the Covered Period, the
Corporation shall take all corporate action necessary to entitle such
designee(s) to attend and participate in all of the Corporation's Board of
Directors meetings.
4.4 PUBLICITY. Except as required by law or by the rules of the
Nasdaq Stock Market or the Commission, neither of the parties hereto shall issue
or make any public release or announcement concerning this Agreement or the
transactions contemplated hereby. In addition, each party shall use its
reasonable best efforts to first consult in advance with the other party
concerning the content of any required public release or arrangement relating to
this Agreement.
4.5 INDEMNITY. Each of the Purchaser and the Corporation hereby
agrees to indemnify and hold harmless the other and the other's officers,
directors and agents, and their respective successors and assigns, from, against
and in respect of any and all demands, claims, actions or causes of action,
assessments, liabilities, losses, costs, damages, penalties, charges, fines or
expenses, including without limitation attorney's fees and expenses, arising out
of or relating to any breach by such indemnifying party of any representation,
warranty, covenant or agreement made in this Agreement. Such right to
indemnification shall be in addition to any and all other rights of the parties
under this Agreement or otherwise, at law or in equity.
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4.6 ACCESS. The Corporation shall during the Covered Period: (i)
afford to the Purchaser and its agents and representatives reasonable access to
the properties, books, records and other information of the Corporation,
provided that such access shall be granted upon reasonable notice and at
reasonable times during normal business hours in such a manner as to not
unreasonably interfere with normal business operations; (ii) use its reasonable
efforts to cause the Corporation's personnel, without unreasonable disruption of
normal business operations, to assist the Purchaser in its investigation of the
Corporation pursuant to this Section 4.6; and (iii) furnish promptly to the
Purchaser all information and documents concerning the business, assets,
liabilities, properties and personnel of the Corporation as the Purchaser may
from time to time reasonably request. In addition, from the date of this
Agreement, the Corporation shall cause one or more of its officers to confer on
a regular basis with officers of the Purchaser and to report on the general
status of its ongoing operations.
4.7 SHARES. The Corporation shall use its reasonable best efforts to
take any and all action necessary after the date hereof so that the Shares sold
by the Corporation to the Purchaser are listed on the Nasdaq National Market.
4.8 USE OF PROCEEDS. Without the prior written consent of the
Purchaser, the Corporation shall use the Purchase Price proceeds solely to fund
capital expenditures for Board approved improvement projects that are intended
to enhance the Corporation's ability to promote additional sanctioned
motorsports events at the Corporation's Millington, Tennessee and/or Madison,
Illinois facility(ies).
4.9 FUTURE STOCK ISSUANCE. Without the prior written consent of
Purchaser, and notwithstanding Section 4.2 hereof, during the Covered Period,
the Corporation shall not issue (or agree to issue) any shares of capital stock
other than Excluded Stock.
4.10 STANDSTILL. Until the "Standstill Termination Date" (as
hereinafter defined), Purchaser and its affiliates (which for purposes hereof
shall not include Penske or any of its subsidiaries) will not, directly or
indirectly, without the express permission of the Corporation's Board of
Directors, (A) purchase or offer to purchase any of the Corporation's equity
securities (or securities convertible into the Corporation's equity securities),
(B) conduct a "proxy contest" to obtain control of the Corporation's Board, or
(C) enter into any non-market transaction to sell Common Stock to any person or
entity which does not agree in writing (in form reasonably acceptable to the
Corporation) to be subject to and bound by the provisions of this Section 4.10;
PROVIDED, HOWEVER, that nothing herein shall limit the right of the Purchaser
and its affiliates to (i) purchase securities pursuant to, and exercise all
other rights contemplated by, this Agreement and the "Right of First Refusal
Agreement" being executed in connection herewith, (ii) purchase additional
Common Stock that does not represent more than 5% of the Corporation's aggregate
outstanding shares of Common Stock, (iii) except to the extent limited by the
Right of First Refusal Agreement, vote shares and exercise rights as directors
and/or (iv) if and only if Purchaser owns at least 10% of the outstanding shares
of the Corporation's Common Stock by reason of (A) purchases pursuant to this
Agreement on or about the date hereof, and (B) purchases pursuant to the Right
of First Refusal Agreement, purchase additional Common Stock that, together with
such purchases and purchases made pursuant to the preceding clause (ii),
represents in the aggregate not more than 20.5% of the Corporation's aggregate
outstanding shares of Common Stock (it being agreed that any purchases pursuant
to this item (iv) shall reduce on a one-for-one basis the number of shares that
Purchaser is entitled to purchase under the Right of First Refusal Agreement);
PROVIDED, FURTHER, that the provisions of this Section 4.10 shall automatically
terminate in full if (x) the Corporation enters into a merger, asset purchase,
business combination or similar agreement pursuant to which the Corporation's
shareholders would own less than fifty percent (50%) of the surviving
corporation's capital stock, or (y) a tender offer or exchange offer commences
for the Corporation's equity securities. For purposes hereof, "Standstill
Termination Date" means the earlier of (A) the sixth anniversary of the date of
this Agreement, and (B) the date that Xxxxxxxxxxx X. Xxxx no longer serves as
Chief Executive Officer of the Corporation (unless within 120 days of the
termination of Xx. Xxxx'x service a successor is appointed who is approved by
Purchaser, which approval shall not be unreasonably withheld or delayed).
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4.11 BREACH OF REPRESENTATION REGARDING OUTSTANDING SECURITIES. The
parties specifically agree that if the Corporation's representation regarding
outstanding securities set forth in Section 2.3 hereof and the related SCHEDULE
2(C) is incorrect, then (x) the Corporation shall promptly file and use its
reasonable best efforts to have declared effective as soon as practicable
thereafter the shelf resale registration statement contemplated by Section 2 of
the "Registration Rights Agreement" being executed in connection herewith,
notwithstanding the time periods set forth therein, (y) the Purchaser shall have
the option to purchase (at a per share exercise price equal to the per share
Purchase Price paid pursuant to this Agreement) the number of shares equal to
50% of the excess (the "Total Shortfall Number"), if any, of (A) the "Actual
Fully Diluted Shares" OVER (B) the "Disclosed Fully Diluted Shares," AND (iii)
if and only if the fair market value of the Total Shortfall Number of shares of
Common Stock (based on the "Then Fair Market Value") exceeds $250,000, the
Purchaser shall have the right, exercisable by written notice within 60 days of
the "Shortfall Discovery Date," to require the Corporation to purchase all or
any specified number of the shares of Common Stock then held by Purchaser, at a
price equal to the greater of (i) the Then Fair Market Value, and (ii) the per
share Purchase Price paid pursuant to this Agreement. For purposes of this
Section 4.11:
(a) "Actual Fully Diluted Shares" means the sum of (i) all
shares of Common Stock to be issued Purchaser pursuant to this Agreement and all
shares to be issued to Penske on or about the date hereof, plus (ii) the
aggregate number of shares of Common Stock that are currently outstanding, to be
issued upon conversion of outstanding convertible securities, to be issued
pursuant to outstanding options, warrants or other rights, and/or to be issued
pursuant to awards that can be made in the future under the Corporation's
current employee benefit plans.
(b) "Disclosed Fully Diluted Shares" means that number of
Actual Fully Diluted Shares described in paragraph (a)(ii) above that are
accurately set forth on SCHEDULE 2(C).
(c) "Then Fair Market Value" means the average closing sales
price for the Common Stock during the ten trading days preceding the Shortfall
Discovery Date.
(d) "Shortfall Discovery Date" means the first date that the
Corporation or the Purchaser notifies the other of any misrepresentation in
Section 2(c) hereof and provides a reasonable description thereof.
Notwithstanding the above, the Total Shortfall Number shall be reduced
by the number of shares of Common Stock which become subject to and bound by the
terms of the Right of First Refusal Agreement within twenty (20) business days
subsequent to the earlier of (x) the Shortfall Discovery Date, and (y) the date
that the Chief Executive Officer or Chief Financial Officer of the Corporation
had actual knowledge of the likelihood of a Total Shortfall Number.
ARTICLE FIVE 5
MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Florida (without reference to the conflict of laws provisions or principles
thereof).
5.2 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; but neither this Agreement nor any of the rights, benefits or
obligations hereunder shall be assigned, by operation of law or otherwise, by
either party hereto without the prior written consent of the other party.
Nothing in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
-8-
5.3 AMENDMENT; WAIVER. This Agreement shall not be changed, modified or
amended in any respect except by the mutual written agreement of the parties
hereto. Any provision of this Agreement may be waived in writing by the party
which is entitled to the benefits thereof. No waiver of any provision of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall any such waiver constitute a
continuing waiver.
5.4 NOTICES. Any notices, requests, demands and other communications
required or permitted to be given hereunder must be in writing and, except as
otherwise specified in writing, will be deemed to have been duly given when
personally delivered, telexed or facsimile transmitted, or three days after
deposit in the United States mail, by certified mail, postage prepaid, return
receipt requested, as follows:
IF TO THE CORPORATION: Grand Prix Association of Long Beach, Inc.
0000 Xxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO: Xxxxx X. Xxxxxx
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
IF TO PURCHASER: Penske Motorsports, Inc.
0000 X. Xxx Xxxxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO: Xxxxxxxxx Traurig Xxxxxxx Xxxxxx
Xxxxx & Quentel, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change its address for the purposes of this Agreement by
giving notice of such change of address to the other parties in the manner
herein provided for giving notice.
5.5 SURVIVAL. The representations and warranties of the
parties set forth in this Agreement shall survive the Closing; provided, that
all such representations and warranties shall expire, terminate and be of no
force and effect (or provide the basis for any claim) and no party hereto shall
have any obligation to indemnify any other party with respect thereto unless
written notice of any claim with respect thereto is received prior to the third
anniversary of this Agreement.
5.6 SEVERABILITY. Any term or provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction only, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
-9-
5.7 HEADINGS. The captions, headings and titles herein are for
convenience of reference only and shall not effect the construction, meaning or
interpretation of this Agreement or any term or provision hereof.
5.8 COUNTERPARTS. This Agreement may be executed through the
use of one or more counterparts, each of which shall be deemed an original and
all of which shall be considered one and the same agreement, notwithstanding
that all parties are not signatories to the same counterpart.
5.9 EXPENSES. Each party to this Agreement shall bear their
own fees, costs and expenses incurred in connection with the negotiation,
execution and consummation of this Agreement and the transactions contemplated
hereby.
5.10 ENTIRE AGREEMENT. Except for written agreements executed
on or about the date hereof in connection with the transactions contemplated
hereby, this Agreement merges and supersedes any and all prior agreements,
understandings, discussions, assurances, promises, representations or warranties
among the parties with respect to the subject matter hereof, and contains the
entire agreement among the parties with respect to the subject matter hereof.
-10-
IN WITNESS WHEREOF, the Corporation and the Purchaser have each duly
executed this Agreement as of the date first above written.
PENSKE MOTORSPORTS, INC.
BY: /s/ XXXXXXX X. XXXXXX
-----------------------------------------
XXXXXXX X. XXXXXX
GRAND PRIX ASSOCIATION OF
LONG BEACH, INC.
BY: /s/ Xxxxxxxxxxx X. Xxxx
-----------------------------------------
XXXXXXXXXXX X. XXXX
-11-
SCHEDULE 2(c)
NAME WARRANTS CONVERTIBLE SHARES 1993 OPTIONS
(1)
---- -------- ------------------
Xxxxxxxxxxx X. Xxxx 174,435
Xxxxx X. Xxxxxxxxxx 108,702
Xxxxxx Xxxxxx 20,830 (6)
Xxxxxxx X. Xxxxx 12,691 (6)
Xxxx Xxxxx 31,728
Xxxxx Xxxxxx 9,064 (6)
Xxxxx Xxxxxxxx 14,939
Xxxxx Xxxx 11,952 (7)
Xxxxxx X. Xxxxxx 11,952 (7)
Xxxxxx Xxxxxx 14,939
Xxxxxx Xxxxx 14,939
Xxx Xxxxxxxx 11,952 (2)(3)
Xxxx Xxxxx 11,952 (3)
Xxxx X. Xxxxx, Xx. 11,952 (3)
EDMARJON-RONBREWDAVE, LLC.
A Tennessee limited liability company
(successor in interest to Memphis International
Motorsports Corporation) 45,000 (4)
L. H Friend, Weinress,
Xxxxxxxx & Xxxxxxx, Inc. 31,250 (5)
----------------
(1) Options granted 12/93 under the Corporation's 1993 Stock Option Plan vest
one-fifth on 12/1/94, 12/1/95, 12/1/96, 12/1/97 and 12/1/98 respectively,
except as otherwise noted.
(2) Subject to right of first refusal agreement dated 8/8/97 between he and
Xxxxxxxxxxx X. Xxxx.
(3) All fully vested.
(4) Holders of Series B Convertible Preferred shares have the right to
convert to Common stock of the Corporation on a share for share basis, as
more fully described in the Certificate of Rights, Preferences and
Privileges of Series B Convertible Preferred Shares as amended, filed
with the California Secretary of State.
(5) Warrant to purchase 31,250 shares of common stock of the Corporation for
$10.00 per share must be exercised prior to June 24, 2001.
(6) Remaining 2/5 of original grant, 1/2 will vest on 12/1/97 and the
balance on 12/1/98.
(7) Remaining 4/5 of original grant. 1/2 is vested, 1/4 will vest on 12/1/97
and the balance on 12/1/98.
Note: 1993 Stock options, Series B Covertible Preferred shares and L.H.
Friend, etc. Warrant are all subject to certain anti-dilution provisions.
SCHEDULE 2(d)
None.
SCHEDULE 2(f)
CHANGE OF RACES DATES FROM MEMPHIS MOTORSPORTS PARK TO GATEWAY RACEWAY. The
Corporation's recent decision to move the ARCA and USAC Silver Crown series
events scheduled for September 13, and 14, 1997, from Memphis Motorsports Park
to Gateway Raceway due to construction delays.
WEATHER AND CONSTRUCTION DELAYS. Adverse weather conditions have caused delays
and could cause future delays in construction at Gateway Raceway and/or Memphis
Motorsports Park. Construction delays resulting from various other factors have
or could have an Material Adverse Effect on the Corporation's ability to meet
the deadlines necessary to host the major events scheduled in 1997 at Gateway
Raceway and/or Memphis Motorsports Park. The Corporation's motorsports events
could be adversely affected by weather patterns and seasonal weather changes.
MANPOWER OVERLOAD AND GROWTH MANAGEMENT. The operation of the 1997 major events
at Gateway Raceway and/or Memphis Motorsports Park placed substantial burdens on
the Corporation's management resources and financial controls since the
Corporation has never before promoted and/or operated more than three major
events in one year.
EFFECT OF SEASONALITY. The Corporation had very limited racing during the winter
season and, accordingly, reported an operating loss during its first fiscal
quarter.
GOVERNMENT REGULATION OF SPONSORS. The Corporation derives a significant portion
of its revenue each year from sponsorship and advertising by various companies,
including tobacco and liquor companies. The impact of the recently settled
litigation between various states' attorneys general and several large tobacco
companies, as well as other tobacco litigation, could have a Material Adverse
Effect. In addition, actions by certain liquor companies with respect to
advertising could lead to additional regulation or otherwise may have a Material
Adverse Effect.
ENVIRONMENTAL MATTERS. There may be undetected environmental contamination at
the Corporation's Long Beach, Gateway Raceway or Memphis Motorsports Park
properties. Present but undetected environmental contamination, as well as the
conduct of the Corporation's business could have resulted in damage to persons
or property or contamination of the environment by pollutants, substances,
contaminants or wastes. The Corporation could have liability under California,
Illinois or Tennessee statutes, or Federal law, including but not limited to the
Federal Water Pollution Control Act, Comprehensive Environmental Response,
Compensation and Liability Act, and the Resource Conservation and Recovery Act
for violations of environmental laws by the Company or by prior owners of its
properties.
LIABILITY FOR PERSONAL INJURIES. Motorsports activities, construction and
weather conditions have resulted in injuries to third parties including
participants and spectators at the Corporation's facilities. If the Corporation
is held liable for personal injuries beyond the scope of its insurance coverage,
such liability could result in a Material Adverse Effect.
SCHEDULE 2(h)
Claim by former Chief Financial Officer for wrongful termination, as of the
date hereof no lawsuit filed but counsel has been retained by such former chief
financial officer and threatens to seek damages including punitive and attorneys
fees.
SCHEDULE 2(i)
None.
SCHEDULE 2(j)
The Corporation obtained Phase I environmental reports on all properties it owns
prior to the purchase thereof and knows of no presence of undetectable
environmental hazards at any of those properties. Because Phase I reports do not
include testing of soil, water or air or other types of samples, it is possible
that there may be undetected environmental contamination at one or more of the
Corporation's properties. In addition, the conduct of the Corporation's business
may result in damage to persons or property or contamination of the environment
by pollutants, substances, contaminants or wastes used, generated or disposed of
by the Corporation (for example, gasoline used at the motorsports facilities).
The Corporation could have liability under California, Illinois or Tennessee
statutes, or Federal law, including but not limitied to the Federal Water
Pollution Control Act, Comprehensive Environmental Response, Compensation and
Liability Act, and the Resource Conservation and Recovery Act for past
violations of environmental laws by prior owners of those properties.
SCHEDULE 2(k)
L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc. compensation agreement pursuant
to which the Corporation has agreed to compensate L. H. Friend etc. $50,000.00
for its services in connection with this Agreement and the transactions
contemplated hereby.
