SUPPORT AGREEMENT
SUPPORT AGREEMENT (this "Agreement"), dated as of March __, 1998
between the persons listed on Schedule A hereto (each, a "Shareholder") and
Dover Downs Entertainment, Inc., a Delaware corporation ("Parent").
WITNESSETH:
WHEREAS, concurrently herewith, Parent, ____________ Acquisition
Corporation, a California corporation and wholly-owned subsidiary of Parent
("Sub"), and The Grand Prix Association of Long Beach, Inc., a California
corporation (the "Company"), are entering into an Agreement and Plan of Merger
(the "Merger Agreement"), pursuant to which it is contemplated that Sub shall
merge with the Company (the "Merger");
WHEREAS, each Shareholder owns, as of the date hereof, the number of
shares of Common Stock, no par value, of the Company (the "Common Stock") set
forth opposite such Shareholder's name on Schedule A hereto (the "Existing
Shares", together with any shares of Common Stock acquired after the date hereof
and prior to the termination hereof, hereinafter collectively referred to as the
"Shares") and the number of options to purchase Common Stock set forth opposite
such Shareholder's name on Schedule A hereto;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Shareholder agree, and each
Shareholder has agreed, to enter into this Agreement; and
WHEREAS, Parent has entered into the Merger Agreement in reliance on
Shareholder's representations, warranties, covenants and agreements hereunder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other, good and valuable consideration, and intending to be
legally bound hereby, it is agreed as follows:
1. Agreement to Vote. Each Shareholder hereby agrees that, during the time the
Merger Agreement is in effect, at any meeting of the shareholders of the
Company, however called, that such Shareholder shall: (a) vote the Shares in
favor of the Merger, (b) vote the Shares in favor of the election of up to three
(3) nominees of Parent to the Board of Directors of the Company after the
nomination of such persons by the Board of Directors of the Company in
accordance with the terms of the Merger Agreement, and (c) vote the Shares
against any action or agreement that such Shareholder is advised by the Board of
Directors of the Company in the applicable proxy materials would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of Company under the Merger Agreement. Each Shareholder acknowledges
receipt and review of a copy of the Merger Agreement. In furtherance thereof,
each Shareholder hereby irrevocably grants to, and appoints, Xxxxx X.
Xxxxxxxxxx, and any
other individual who shall hereafter be designated by Parent, such Shareholder's
proxy and attorney-in-fact (with full power of substitution), and for and in the
name, place and stead of such Shareholder, subject to Section 5 hereof, to vote
the Shares held by such Shareholder in accordance with the terms and conditions
of the provisions of the first sentence of this Section 1.1. Each Shareholder
represents that any proxies heretofore given in respect of such Shareholder's
Shares that conflict with the foregoing proxy are not irrevocable, and that any
such proxies are hereby revoked. Each Shareholder hereby affirms that its proxy
set forth in this Section is coupled with an interest and is irrevocable until
such time as this Agreement terminates in accordance with its terms. Such
Shareholder hereby further affirms that the irrevocable proxy is given in
connection with the execution of the Merger Agreement, and that such irrevocable
proxy is given to secure the performance of such Shareholder's voting
obligations under this Agreement. Such Shareholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof.
2. Option.
2.1. Each Shareholder hereby grants to Parent an irrevocable option,
subject to Section 5, exercisable as provided herein ("Option"), to purchase the
Shares for shares of Parent Common Stock (as defined in the Merger Agreement) in
accordance with the Exchange Ratio set forth in the Merger Agreement (provided,
however, that the reference to the fifteen (15) consecutive business days next
preceding the Effective Time in the definition of Average Closing Price therein
shall be a reference to the fifteen (15) consecutive business days next
preceding termination of the Merger Agreement). The purchase price shall also
include the associated Parent Rights as provided in the Merger Agreement (such
rights, together with the shares of Parent Common Stock, being referred to
herein as the "Option Purchase Price"). In addition to the shares of Parent
Common Stock, Parent agrees to indemnify each Shareholder against all income
taxes due or to become due, if any, which result directly from the sale of the
Shares to Parent or the issuance of the Parent Common Stock to such Shareholder
(but not from the subsequent resale of such Parent Common Stock) as a result of
Parent's exercise of the Option, grossed up to reflect the income taxes due as a
result of the payments of such tax liabilities, including tax liabilities
relating to all gross-up payments, by Parent. Such amount due shall be paid by
Parent to each Shareholder at least 10 days prior to the due date for each of
such taxes (including estimated payment due dates).
2.2. The Option may be exercised by Parent, as a whole and not in part,
at any time commencing upon the termination of the Merger Agreement pursuant to
and in accordance with Section 10.4(a) or 10.4(b) thereof for a period
terminating on the later of (a) August 30, 1998 or, if the Merger shall have not
theretofore been consummated because of a failure of a condition set forth in
Sections 9.1(b), (c) or (d) of the Merger Agreement, September 30, 1998, as
applicable, or (b) the date which is 45 days following the date this Option
first became exercisable. If the Parent wishes to exercise the Option, the
Parent shall give written notice to each Shareholder of Parent's intention to
exercise the Option (with a copy thereof to the Company) specifying the place,
time and date not earlier than three business days and not later than 20 days
from the date such notice is given for the closing of such purchase (the
"Closing"). The Closing shall be held on the date specified in such notice
unless, on such date, there shall be any preliminary or
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permanent injunction or other order, decree or ruling by any court of competent
jurisdiction or any other legal restraint or prohibition preventing the
consummation of such purchase, in which event such Closing shall be held as soon
as practicable following the lifting, termination or suspension of such
injunction, order, restraint or prohibition (each party agreeing to use its
reasonable best efforts to have such injunction, order, restraint or prohibition
lifted, terminated or suspended), but in any event within two business days
thereof; provided, however, that Parent's right to acquire the Shares shall
terminate on the date this Agreement terminates pursuant to Section 5 hereof.
Each Shareholder's obligations to sell Shares upon exercise of the Option is
subject to the conditions that (i) any waiting period under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), applicable to the purchase of the Shares shall have expired or been
terminated and (ii) there shall be no preliminary or permanent injunction or
other order, decree or ruling preventing or restricting the sale of the Shares.
Parent and each Shareholder shall each promptly make such filings and provide
such information as may be required under the HSR Act with respect to the
purchase of the Shares.
2.3. Parent hereby agrees that, in the event that it purchases the
Shares pursuant to the Option, as promptly as practicable thereafter, Parent
will, or cause Sub to either (i) make a tender offer for the remaining Shares to
the shareholders of the Company (other than Parent and its direct and indirect
wholly-owned subsidiaries) or (ii) consummate a merger of Sub with and into the
Company (the consummation of which shall be subject only to the condition that
no court, arbitrator or governmental body, agency or official shall have issued
any order, decree or ruling prohibiting the consummation of such tender offer or
merger) pursuant to which the shareholders of the Company (other than any direct
or indirect wholly-owned subsidiary of Parent and holders with perfected
dissenters' rights) will receive shares of Parent Common Stock and Parent Rights
equal to the Option Purchase Price per share of Common Stock, and will take such
actions as may be necessary or appropriate in order to effectuate such tender
offer or merger at the earliest practicable time.
2.4. Payment and Delivery of Certificates. At any Closing hereunder (a)
the Parent shall deliver to each Shareholder the shares of Parent Common Stock
required to be delivered pursuant herein and (b) such Shareholder shall each
deliver or cause to be delivered to the Parent a certificate or certificates
evidencing their Shares in proper form for transfer, accompanied by stock powers
duly executed in blank against receipt of the Parent Common Stock referenced in
item (a). The shares of Parent Common Stock issued to the Shareholders upon
exercise by Parent of the Option will be the subject of a registration statement
declared effective by the Securities Exchange Commission pursuant to the
Securities Act of 1933, as amended.
2.5. Adjustment Upon Changes in Capitalization. In the event of any
dividend other than regular quarterly cash dividends on the Parent Common Stock
not materially greater than in the past, distribution, stock split, stock
dividend, reclassification, subdivision, recapitalization, combination or
exchange of shares or other similar transaction with respect to the Common
Stock, the Option Purchase Price shall be appropriately adjusted.
2.6. If, after purchasing the Shares pursuant to the Option, Parent or
Sub or any of its affiliates enters into any agreement or understanding during
the period commencing on the date
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of the Closing and ending on the first anniversary thereof, pursuant to which it
is entitled to receive any cash or non-cash consideration (valued at its fair
market value) in respect of the Shares in connection with an Alternative
Proposal (as defined in the Merger Agreement), Parent shall promptly pay, or
cause to be promptly paid, over to the Shareholders, as an addition to the
Option Purchase Price (valued based on the Average Closing Price referenced in
Section 2.1) the excess, if any, of such consideration over the Option Purchase
Price paid for the Shares which are so sold; provided, however, that (i) if the
consideration received by Parent or Sub or any of its affiliates shall be
securities listed on a national securities exchange or trade on the Nasdaq
National Market, the per share fair market value of such consideration shall be
equal to the closing price per share of such securities listed on such national
securities exchange or the Nasdaq National Market on the date such transaction
is consummated, and (ii) if the consideration received by Parent or Sub or any
of its affiliates shall be in a form other than cash or securities, the per
share value shall be determined in good faith as of the date such transaction is
consummated by Parent and the Shareholders, or, if Parent and the Shareholders
cannot reach agreement, by a nationally recognized investment banking firm
reasonably acceptable to the parties. With respect to non-cash consideration,
Parent may, at its option, deliver to the Shareholders their allocable portion
of such non-cash consideration in satisfaction of Parent's obligation with
respect to that portion of the consideration.
3. Representations and Warranties of Shareholder. Each Shareholder represents
and warrants, as to itself, to Parent as follows:
3.1. Ownership of Shares. On the date hereof the Existing Shares are all of the
Shares currently beneficially owned by such Shareholder other than pursuant to
Options (as defined in the Merger Agreement). Such Shareholder does not have any
rights to acquire any additional shares of Common Stock other than pursuant to
Options. Such Shareholder currently has with respect to the Existing Shares, and
at Closing will have with respect to the Shares, good, valid and marketable
title, free and clear of all liens, encumbrances, restrictions, options,
warrants, rights to purchase, voting agreements or voting trusts, and claims of
every kind (other than the encumbrances created by this Agreement, the ROFR
Agreement, other encumbrances identified on Schedule B which will be discharged
at or prior to or at the Closing and other than restrictions on transfer under
applicable Federal and State securities laws). The sale of the Shares to Parent
upon exercise of the Option will transfer to Parent good, valid and marketable
title to the Shares, free of all liens, encumbrances, restrictions and claims of
every kind other than restrictions on transfer under applicable federal and
state securities laws.
3.2. Power; Binding Agreement. Each Shareholder has the full legal
right, power and authority to enter into and perform all of such Shareholder's
obligations under this Agreement. The execution and delivery of this Agreement
by such Shareholder will not violate any other agreement to which such
Shareholder is a party including, without limitation, any voting agreement,
shareholders agreement or voting trust. This Agreement has been duly executed
and delivered by such Shareholder and constitutes a legal, valid and binding
agreement of such Shareholder, enforceable in accordance with its terms. Neither
the execution or delivery of this Agreement nor the consummation by such
Shareholder of the transactions contemplated hereby will (a) other than filings
required under the federal or state securities laws or the GCL
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(as defined in the Merger Agreement), require any consent or approval of or
filing with any governmental or other regulatory body, or (b) constitute a
violation of, conflict with or constitute a default under, any contract,
commitment, agreement, understanding, arrangement or other restriction of any
kind to which such Shareholder is a party or by which such Shareholder is bound.
3.3. Finder's Fees. No person is, or will be, entitled to any
commission or finder's fees from such Shareholder in connection with this
Agreement or the transactions contemplated hereby exclusive of any commission or
finder's fees referred to in the Merger Agreement.
4. Representations and Warranties of Parent. Parent represents and warrants to
the Shareholders as follows:
4.1. Authority. Parent has full legal right, power and authority to
enter into and perform all of its obligations under this Agreement. The
execution and delivery of this Agreement by Parent will not violate any other
agreement to which Parent is a party. This Agreement has been duly executed and
delivered by Parent and constitutes a legal, valid and binding agreement of
Parent, enforceable in accordance with its terms. Neither the execution of this
Agreement nor the consummation by Parent of the transactions contemplated hereby
will (a) require any consent or approval of or filing with any governmental or
other regulatory body, or (b) constitute a violation of, conflict with or
constitute a default under, any contract, commitment, agreement, understanding,
arrangement or other restriction of any kind to which Parent is a party or by
which it is bound.
4.2. Finder's Fees. No person is, or will be, entitled to any
commission or finder's fee from Parent in connection with this Agreement or the
transactions contemplated hereby exclusive of any commission or finder's fees
referred to in the Merger Agreement.
5. Termination. This Agreement (other than the provisions of Sections 6 and 7)
shall terminate on the earliest of (a) the Effective Time (as defined in the
Merger Agreement), and (b) the later of (i) August 30, 1998 or, if the Merger
shall have not theretofore been consummated because of a failure of a condition
set forth in Sections 9.1(b), (c) or (d) of the Merger Agreement, September 30,
1998, as applicable, and (ii) the date which is the 45th calendar day following
the termination of the Merger Agreement pursuant to Section 10.4(a) or 10.4(b)
thereof, and (c) the date of the termination of the Merger Agreement (other than
pursuant to Section 10.4(a) or 10.4(b) thereof) in accordance with its terms.
6. Expenses. Except as provided in Section 18, each party hereto will pay all of
its expenses in connection with the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of its counsel and other
advisers.
7. Confidentiality. Each Shareholder recognizes that successful consummation of
the transactions contemplated by this Agreement may be dependent upon
confidentiality with respect to these matters. In this connection, pending
public disclosure, each Shareholder agrees that such Shareholder will not
disclose or discuss these matters with anyone (other than officers, directors,
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legal counsel and advisors of any Shareholder or the Company, if any) not a
party to this Agreement, without prior written consent of Parent, except for
filings required pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, or disclosures Shareholder's legal
counsel advises in writing are necessary in order to fulfill Shareholder's
obligations imposed by law, in which event Shareholder shall give prompt prior
notice of such disclosure to Parent. Anything in this Section 7 to the contrary
notwithstanding, nothing in this Agreement shall limit any Shareholder from
exercising any of its rights or performing any of its duties as an officer or a
director of the Company.
8. Certain Covenants of Each Shareholder.
8.1. Except in accordance with the provisions of this Agreement, each
Shareholder agrees, while this Agreement is in effect, not to, directly or
indirectly:
(1) grant any proxies, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares; or
(2) take any action to encourage, initiate or solicit any
inquiries or the making of any Alternative Proposal or, except to the extent
Shareholder believes is required for Shareholder, in its capacity as an officer
or director of Company, to discharge its fiduciary duties, following
consultation with counsel, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Alternative Proposal or otherwise assist or facilitate any effort
or attempt by any person or entity (other than Parent, or their officers,
directors, representatives, agents, affiliates or associates) to make or
implement an Alternative Proposal. Shareholder will immediately cease and cause
to be terminated any existing activities, discussions or negotiations on its
part with any parties conducted heretofore with respect to any of the foregoing,
and will notify Parent promptly if it becomes aware of any such inquiries or
that any proposals are received by, any such information is requested from, or
any such negotiations or discussions are sought to be instituted or continued
with, the Company (or its officers, directors, representatives, agents,
affiliates or associates).
8.2. Each Shareholder agrees, while this Agreement is in effect, to
notify Parent promptly of the number of any shares of Common Stock acquired by
each Shareholder after the date hereof.
8.3. Each Shareholder hereby resigns at the Effective Time from all
director or officer positions held in the Company or any direct or indirect
subsidiary of the Company except as provided in any employment agreement being
entered into or continued in connection with the transactions contemplated
herein.
8.4. Each Shareholder agrees that it will not transfer any of the
Shares unless the transferee agrees to be bound by the terms of this Support
Agreement, including, without limitation, the provisions of Articles 1 and 2
hereof.
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8.5. Each Shareholder who has vested options to acquire shares of
Common Stock hereby agrees that, upon the receipt of a written request from
Parent during the term hereof, it will exercise such options as soon as
reasonably practicable after its receipt of such notice (if not theretofore
exercised). Parent hereby agrees that it will indemnify each Shareholder so
exercising such options against all income taxes due or to become due, if any,
which result from the issuance of shares of Common Stock upon the exercise of
such option and/or, if the Option is exercised, upon the exercise of the Option
by Parent, grossed up to reflect the income taxes due as a result of the
payments of such tax liabilities, including tax liabilities related to all
gross-up payments, by Parent. Such amount due shall be paid by Parent to each
Shareholder at least 10 days prior to the due date for each of such taxes
(including estimated payment due dates).
9. Notices. All notices or other communications required or permitted hereunder
shall be in writing (except as otherwise provided herein), given in the manner
provided in the Merger Agreement, and shall be deemed duly given when received,
addressed as follows:
If to Parent:
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Attention: , Chief Financial Officer
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Facsimile: ( )
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With a copy to:
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Attention: , Chief Financial Officer
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Facsimile: ( )
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If to any Shareholder, at its address set forth on
Schedule A hereto.
10. Entire Agreement; Amendment. This Agreement, together with the documents
expressly referred to herein, constitute the entire agreement among the parties
hereto with respect to the subject matter contained herein and supersede all
prior agreements and understandings among the parties with respect to such
subject matter. This Agreement may not be modified, amended, altered or
supplemented except by an agreement in writing executed by the party against
whom such modification, amendment, alteration or supplement is sought to be
enforced.
11. Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns and personal
representatives, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties, except that Parent may assign, any
or all of its rights and obligations hereunder to any direct or indirect
wholly-owned
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subsidiary of Parent without the consent of Shareholder or Company,
but no such transfer shall relieve Parent of its obligations under this
Agreement if such subsidiary does not perform the obligations of Parent
hereunder.
12. Governing Law. Except as expressly set forth below, this Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof. In addition, Parent and each Shareholder hereby
agree that any dispute arising out of this Agreement, the offer or the Merger
shall be heard in the Court of Chancery of the State of Delaware or in the
United States District Court for the District of Delaware and, in connection
therewith, each party to this Agreement hereby consents to the jurisdiction of
such courts and agrees that any service of process in connection with any
dispute arising out of this Agreement, or the Merger may be given to any other
party hereto by certified mail, return receipt requested, at the respective
addresses set forth in Section 9 above.
13. Injunctive Relief. The parties agree that in the event of a breach of any
provision of this Agreement, the aggrieved party may be without an adequate
remedy at law. The parties therefore agree that in the event of a breach of any
provision of this Agreement, the aggrieved party shall be entitled to obtain in
any court of competent jurisdiction a decree of specific performance or to
enjoin the continuing breach of such provision, in each case without the
requirement that a bond be posted, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining such relief, the aggrieved party will
not be precluded from seeking or obtaining any other relief to which it may be
entitled.
14. Counterparts; Facsimile Signature. This Agreement may be executed, including
execution by facsimile, in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same document.
15. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, such provision shall be interpreted to be only
so broad as is enforceable.
16. Further Assurances. Each party hereto shall execute and deliver such
additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
17. Third Party Beneficiaries. Except for Section 2.3, for which the Company is
a third party beneficiary, nothing in this Agreement, expressed or implied,
shall be construed to give any person other than the parties hereto any legal or
equitable right, remedy or claim under or by reason of this Agreement or any
provision contained herein.
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18. Legal Expenses. In the event any legal proceeding is commenced by any party
to this Agreement to enforce or recover damages for any breach of the provisions
hereof, the prevailing party in such legal proceeding shall be entitled to
recover in such legal proceeding from the losing party such prevailing party's
costs and expenses incurred in connection with such legal proceedings, including
reasonable attorneys fees.
19. Amendment and Modification. This Agreement may only be amended, modified and
supplemented by a written document executed by all the parties affected.
20. Obligations Several. The obligations of each Shareholder hereunder are
several, not joint and several.
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IN WITNESS WHEREOF, Parent has caused this Agreement to be executed by
its duly authorized officers, and each Shareholder has duly executed this
Agreement, as of the date and year first above written.
Dover Downs Entertainment, Inc.
By:
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Name:
Title:
SHAREHOLDERS:
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Name:
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Name:
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Name:
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Name:
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Name:
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Name:
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Name:
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Schedule A
Shareholder
(and Address) Shares Owned Options Owned
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Schedule B
Shareholder Encumbrance
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