NOTE PURCHASE AGREEMENT
Exhibit
10.5
This Note
Purchase Agreement, dated as of September 28, 2007 (this “Agreement”), is
entered into by and among Dirt Motor Sports, Inc., d/b/a World Racing Group,
Inc. a Delaware corporation (the “Company”), and the
other signatories hereto (each a “Lender” and
collectively, the “Lenders”).
RECITALS
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A.
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On
the terms and subject to the conditions set forth herein, Lenders are
willing to purchase from Company and Company is willing to issue and sell
to Lenders, Senior Secured Promissory Notes, substantially in the form
attached hereto as Exhibit A (each a “Note” and
collectively, the “Notes”), in the
principal amount of up to Fifteen Million Dollars ($15,000,000), subject
to the conditions set forth in Section
9(a)(ii);
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B.
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As
additional consideration for the issuance of the Notes by the Company, the
Company is issuing to the Lenders shares of common stock, $0.001 par value
per share (“Common Stock”),
of the Company at the rate of 275,000 shares for each One Million Dollars
($1,000,000) of principal amount of Notes purchased pursuant to this
Agreement (or in the event a Lender would beneficially own more than 4.99%
of all of the outstanding Common Stock after giving effect to the forgoing
issuance of Common Stock to such Lender, shares of the Company’s Series E
Preferred Stock convertible into a like number of shares of Common Stock)
(collectively, the “Note
Shares”);
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C.
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As
a condition to the purchase of the Notes and the Note Shares, the Company
has agreed to grant a continuing security interest in all of the assets of
the Company, excluding any vehicles and leased equipment (the “Assets”), on
substantially the terms and conditions set forth in a Security Agreement
attached hereto as Exhibit B, and to grant a mortgage lien in certain real
property (the “Real Property”
and together with the Assets, the “Collateral”)
owned by the Company on substantially the terms and conditions set forth
in a form of Mortgage attached hereto as Exhibit C (each a “Mortgage” and
collectively, the “Mortgages”);
and
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D.
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As
an additional condition to the purchase of the Notes and the Note Shares,
each Subsidiary (as defined herein) has agreed, on a joint and several
basis with the other Subsidiaries, to guaranty, on a joint and several
basis with the other Subsidiaries, the full and prompt payment of the
principal of and interest on the Notes and performance of the Company of
all of its present and future obligations as set forth in the Transaction
Documents, on substantially the terms and conditions set forth in the
Guaranty attached hereto as Exhibit D (the “Guaranty”). This
Agreement, the Notes, the Guaranty, the Security Agreement, the Escrow
Agreement (as defined herein) and the Mortgages are referred to herein
collectively as the “Transaction
Documents”).
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AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing, and the representations, warranties, and
conditions set forth below, the parties hereto, intending to be legally bound,
hereby agree as follows:
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1. Issuance and Sale of the
Note and Note Shares. In reliance upon the representations,
warranties and covenants of the parties set forth herein, the Company agrees to
issue, sell and deliver to each Lender, and each Lender agrees, severally and
not jointly, to purchase from the Company a Note in the principal amount set
forth below Lender’s name on the signature page hereto and that number of Note
Shares set forth below Lender’s name on the signature page
hereto. The purchase price for the Note and Note Shares shall be
equal to the principal amount indicated on the face of the Note and set forth
below Lender’s name on the signature page hereto. The Company and the
Lender are executing and delivering this Agreement and issuing the Notes and
Note Shares in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
“Securities
Act”), including Regulation D (“Regulation D”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder. The Notes and the Note Shares are sometimes
collectively referred to herein as the “Securities”).
2. Closing;
Delivery. The Company will deliver to Lenders the Notes
against receipt by the Company of the purchase price for the Notes in an
aggregate purchase price of up to Fifteen Million Dollars ($15,000,000) (the
“Purchase
Price”). The Purchase Price shall be paid in cash or by
cancellation of outstanding indebtedness. The Note Shares shall be
issued within five (5) business days following the receipt by the Company of the
purchase price for the Note.
(a) Initial
Closing. The initial closing (the “Initial Closing”) of
the purchase and sale of the Notes and Note Shares to be acquired by the Lenders
from the Company under this Agreement shall take place at the offices of Xxxxxx
Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 at 10:00 a.m., New York time (i) on or before __________, 2007; provided, that all of
the conditions set forth in Sections 6 and 7 hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith and Lenders
have executed this Agreement to purchase at least $9,000,000 principal amount of
the Notes (inclusive of the principal amount of short term notes funded prior to
the Initial Closing Date exchanged into Notes in connection with the Initial
Closing), or (ii) at such other time and place or on such date as the Lenders
and the Company may agree upon (the “Initial Closing
Date”). The Company acknowledges that a portion of the
Purchase Price shall be paid by certain Lenders surrendering for cancellation
certain short term notes issued by the Company to such Lenders prior to the
Initial Closing Date. At the Initial Closing, each Lender shall
deliver its Purchase Price by wire transfer to an escrow account designated by
the escrow agent or if all or any part of the Purchase Price is being paid by
cancellation of outstanding indebtedness, by delivery to the Company of any note
or other document evidencing such indebtedness.
(b) Additional
Closings. After the Initial Closing, the Company may conduct
any number of additional closings (each, an “Additional Closing”)
until $15,000,000 principal amount of Notes have been issued and sold to the
Lenders. The Initial Closing and Additional Closings are sometimes
referred to herein as a “Closing”. The
date of any Additional Closing is hereinafter referred to as the “Additional Closing
Date”. At each Additional Closing, each Lender shall deliver
its Purchase Price by wire transfer to an escrow account designated by the
escrow agent.
3. Representations and
Warranties of the Company. The Company hereby represents and
warrants to Lender that the statements contained in the following paragraphs of
this Section are all true and correct as of the date hereof and as of the time
of issuance of the Note (except as set forth on the Schedule of Exceptions
attached hereto with each numbered Schedule corresponding to the section number
herein):
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(a) Organization and
Standing. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now
conducted and proposed to be conducted. The Company does not have any
Subsidiaries (as defined in Section 3(h)) or own securities of any kind in any
other entity except as set forth on Schedule 3(h) hereto.
The Company and each such Subsidiary (as defined in Section 3(h)) is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement,
“Material Adverse
Effect” means any material adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
Subsidiaries and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
perform any of its obligations under the Transaction Documents in any material
respect.
(b) Corporate
Power. The Company has all requisite legal and corporate power
to enter into, execute and deliver the Transaction Documents. This
Agreement, the Guaranty, the Security Agreement and the Mortgages are, and, upon
issuance, the Notes will be, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, moratorium, and other laws of general
application affecting the enforcement of creditors’ rights.
(c) Authorization. All
corporate and legal action on the part of the Company, its officers, directors
and shareholders necessary for the execution and delivery of the Transaction
Documents, the sale and issuance of the Note and the Note Shares, and the
performance of the Company’s obligations hereunder and under the other
Transaction Documents, have been taken. When paid for and issued in
accordance with the terms hereof, the Notes shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights of refusal of
any kind. When the Note Shares are issued and paid for in accordance
with the terms of this Agreement, such Note Shares will be duly authorized by
all necessary corporate action and validly issued and outstanding, fully paid
and nonassessable, free and clear of all liens, encumbrances and rights of
refusal of any kind and the holders shall be entitled to all rights accorded to
a holder of Common Stock.
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(d) Capitalization. The
authorized capital stock of the Company as of the date hereof is set forth on
Schedule 3(d)
hereto. All of the outstanding shares of the Common Stock and any
other outstanding security of the Company have been duly and validly authorized
and validly issued, fully paid and nonassessable and were issued in accordance
with the registration or qualification provisions of the Securities Act, or
pursuant to valid exemptions therefrom. Except as set forth in this
Agreement and as set forth on Schedule 3(d) hereto,
no shares of Common Stock or any other security of the Company are entitled to
preemptive rights, registration rights, rights of first refusal or similar
rights and there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as
set forth on Schedule
3(d) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for
customary transfer restrictions contained in agreements entered into by the
Company in order to sell restricted securities or as provided on Schedule 3(d) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 3(d), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company. Except as disclosed on Schedule 3(d), (i)
there are no outstanding debt securities, or other form of material debt of the
Company or any of its Subsidiaries, (ii) there are no contracts, commitments,
understandings, agreements or arrangements under which the Company or any of its
Subsidiaries is required to register the sale of any of their securities under
the Securities Act, (iii) there are no outstanding securities of the Company or
any of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings, agreements or arrangements
by which the Company or any of its Subsidiaries is or may become bound to redeem
a security of the Company or any of its Subsidiaries, (iv) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities, (v) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements, or
any similar plan or agreement and (vi) as of the date of this Agreement, except
as disclosed on Schedule 3(d), to the
Company’s and each of its Subsidiaries’ knowledge, no person or group of related
persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Exchange Act (as defined below))) or has the right to acquire by
agreement with or by obligation binding upon the Company, beneficial ownership
of in excess of 5% of the Common Stock. Any person with any right to
purchase securities of the Company that would be triggered as a result of the
transactions contemplated hereby or by any of the other Transaction Documents
has waived such rights or the time for the exercise of such rights has passed,
except where failure of the Company to receive such waiver would not have a
Material Adverse Effect. Except as set forth on Schedule 3(d), there
are no options, warrants or other outstanding securities of the Company
(including, without limitation, any equity securities issued pursuant to any
Company Plan) the vesting of which will be accelerated by the transactions
contemplated hereby or by any of the other Transaction
Documents. Except as set forth in Schedule 3(d), none
of the transactions contemplated by this Agreement or by any of the other
Transaction Documents shall cause, directly or indirectly, the acceleration of
vesting of any options issued pursuant the Company’s stock option
plans.
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(e) No
Conflicts. The
execution, delivery and performance by the Company of its obligations under the
Transaction Documents will not: (i) conflict with or result in a breach of or a
default under any of the terms or provisions of, (A) the Company's certificate
of incorporation (the “Certificate”) or by-laws (”Bylaws”), or (B) any material
provision of any indenture, mortgage, deed of trust or other material agreement
or instrument to which the Company is a party or by which it or any of its
material properties or assets (including, without limitation, the Collateral) is
bound, (ii) result in a violation of any material provision of any law, statute,
rule, regulation, or any existing applicable decree, judgment or order by any
court, Federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company, or any of its material
properties or assets or (iii) result in the creation or imposition of any
material lien, charge or encumbrance upon any material property or assets of the
Company or any of its subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be bound
or to which any of their property or any of them is subject except, in the case
of clauses (ii) and (iii), for such violations, breaches, conflicts, defaults or
other occurrences which, individually or in the aggregate, would not have a
Material Adverse Effect.
(f) No Approvals. No
consent, approval or authorization of or designation, declaration or filing with
any governmental authority on the part of the Company is required in connection
with the valid execution and delivery of the Transaction Document.
(g) Commission Documents,
Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the “Commission
Documents”). At the times of their respective filings, the
Form 10-QSB for the fiscal quarters ended June 30, 2006, September 30, 2006,
March 31, 2007 and June 30, 2007 (collectively, the “Form 10-QSB”) and the
Form 10-KSB for the fiscal year ended December 31, 2006 (the “Form 10-KSB”)
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and the Form
10-QSB and Form 10-KSB did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the Commission Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the
Commission. Such financial statements have been prepared in
accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) 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 in all material
respects the financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
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(h) Subsidiaries. Schedule 3(h) hereto
sets forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership of the outstanding stock or other interests of such
Subsidiary. For the purposes of this Agreement, “Subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares
of capital stock of each Subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable. Except as set forth on
Schedule 3(h)
hereto, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital
stock. Neither the Company nor any Subsidiary is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence except as set forth on Schedule 3(h)
hereto. Neither the Company nor any Subsidiary is party to, nor has
any knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of any Subsidiary.
(i) No Material Adverse
Change. Since December 31, 2006, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 3(i)
hereto and as disclosed in its Commission Documents.
(j) No Undisclosed
Liabilities. Except as disclosed on Schedule 3(j) hereto,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company’s or its Subsidiaries respective
businesses or which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
(k) No Undisclosed Events or
Circumstances. Since December 31, 2006, except as disclosed on
Schedule 3(k)
hereto, no event or circumstance has occurred or exists with respect to the
Company or its Subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(l) Indebtedness. Schedule 3(l) hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or Indebtedness for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
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(m) Title to
Assets. Each of the Company and the Subsidiaries has good and
valid title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated on Schedule 3(m) hereto
or such that, individually or in the aggregate, do not cause a Material Adverse
Effect. Any leases of the Company and each of its Subsidiaries are
valid and subsisting and in full force and effect. Schedule 3(m) sets
forth a complete list of all real property owned by the Company and its
Subsidiaries.
(n) Actions
Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except
as set forth in the Commission Documents or on Schedule 3(n) hereto,
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against or involving the Company, any Subsidiary or any of
their respective properties or assets, which individually or in the aggregate,
would reasonably be expected, if adversely determined, to have a Material
Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or
directors of the Company or Subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(o) Compliance with
Law. The business of the Company and the Subsidiaries has been
and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth in the Commission Documents or on Schedule 3(o) hereto
or such that, individually or in the aggregate, the noncompliance therewith
could not reasonably be expected to have a Material Adverse
Effect. The Company and each of its Subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(p) Taxes. The
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. Except as disclosed on Schedule 3(p) hereto
or in the Commission Documents, none of the federal income tax returns of the
Company or any Subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever, whether pending or threatened against the Company or any Subsidiary
for any period, nor of any basis for any such assessment, adjustment or
contingency.
(q) Certain
Fees. Except as set forth on Schedule 3(q) hereto,
the Company has not employed any broker or finder or incurred any liability for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
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(r) Disclosure. Except
for the transactions contemplated by this Agreement, the Company confirms that
neither it nor any other person acting on its behalf has provided any of the
Lenders or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information. To the Company’s
knowledge, neither the representations and warranties contained in Section 3 of this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Lenders by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(s) Operation of
Business. Except as set forth on Schedule 3(s) hereto,
the Company and each of the Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others
except where failure to own such property or possess such rights would not have
a Material Adverse Effect.
(t) Environmental
Compliance. Except as set forth on Schedule 3(t) hereto
or in the Commission Documents, the Company and each of its Subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under
any Environmental Laws. “Environmental Laws” shall mean
all applicable laws relating to the protection of the environment including,
without limitation, all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges,
releases or threatened releases of hazardous substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material or wastes,
whether solid, liquid or gaseous in nature. To the Company’s
knowledge, the Company has all necessary governmental approvals required under
all Environmental Laws as necessary for the Company’s business or the business
of any of its subsidiaries. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect and to the
knowledge of the Company, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate any
Environmental Law after the Closing Date or that may give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(u) Books and Records; Internal
Accounting Controls. The records and documents of the Company
and its Subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the Subsidiaries, the location of
their assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company or any Subsidiary. The Company
and each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of directors, to provide
reasonable assurance 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
actions are taken with respect to any differences.
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(v) Material
Agreements. Except for the Transaction Documents (with respect
to clause (i) only), as disclosed in the Commission Documents or as set forth on
Schedule 3(v)
hereto, or as would not be reasonably likely to have a Material Adverse Effect,
(i) the Company and each of its Subsidiaries have performed all obligations
required to be performed by them to date under any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, filed or
required to be filed with the Commission (the “Material
Agreements”), (ii) neither the Company nor any of its Subsidiaries has
received any notice of default under any Material Agreement and, (iii) to the
Company’s knowledge, neither the Company nor any of its Subsidiaries is in
default under any Material Agreement now in effect.
(w) Transactions with
Affiliates. Except as set forth on Schedule 3(w) hereto
and in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the Commission Documents or in the Company’s most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
(x) Securities Act of
1933. Based in material part upon the representations herein
of the Lenders, the Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws. Neither
the Company nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of any of the Securities.
(y) Employees. Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth on Schedule 3(y)
hereto. Except as set forth on Schedule 3(y) hereto,
neither the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary required
to be disclosed in the Commission Documents that is not so
disclosed. No officer, consultant or key employee of the Company or
any Subsidiary whose termination, either individually or in the aggregate, would
be reasonably likely to have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any Subsidiary.
(z) Investment Company Act
Status. The Company is not, and as a result of and immediately
upon the Closing will not be, an “investment company” or a company “controlled”
by an “investment company,” within the meaning of the Investment Company Act of
1940, as amended.
-9-
(aa) ERISA. No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan (as defined below) by the Company or any of its Subsidiaries
which is or would be materially adverse to the Company and its
Subsidiaries. The execution and delivery of this Agreement and the
issuance and sale of the Securities will not involve any transaction which is
subject to the prohibitions of Section 406 of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) or in connection with which a tax
could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986,
as amended, provided that, if any of the Lenders, or any person or entity that
owns a beneficial interest in any of the Lenders, is an “employee pension
benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a “party in interest” (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(aa), the term “Plan”
shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are or
have been made, by the Company or any Subsidiary or by any trade or business,
whether or not incorporated, which, together with the Company or any Subsidiary,
is under common control, as described in Section 414(b) or (c) of the
Code.
(bb) Independent Nature of
Lenders. Except as otherwise provided in the Section 11(c) of
this Agreement: (i) the Company acknowledges that the obligations of each Lender
under the Transaction Documents are several and not joint with the obligations
of any other Lender, and no Lender shall be responsible in any way for the
performance of the obligations of any other Lender under the Transaction
Documents; (ii) the Company acknowledges that the decision of each Lender to
purchase securities pursuant to this Agreement has been made by such Lender
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Lender or by any agent or employee of any other
Lender, and no Lender or any of its agents or employees shall have any liability
to any Lender (or any other person) relating to or arising from any such
information, materials, statements or opinions; (iii) the Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Lender pursuant hereto or thereto, shall be deemed to constitute
the Lenders as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Lenders are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents; (iv) the Company acknowledges that
each Lender shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose;
(v) the Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Lenders and such counsel does not represent all of the Lenders but only such
Lender and the other Lenders have retained their own individual counsel with
respect to the transactions contemplated hereby; (vi) the Company acknowledges
that it has elected to provide all Lenders with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or
requested to do so by the Lenders.
-10-
(cc) No Integrated
Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act in a manner that would prevent the Company from selling
the Securities pursuant to Regulation D and Rule 506 thereof under the
Securities Act, nor will the Company or any of its affiliates or subsidiaries
take any action or steps that would cause the offering of the Securities to be
integrated with other offerings in a manner that would prevent the Company from
selling the Securities pursuant to Regulation D and Rule 506 thereof under the
Securities Act. The Company does not have any registration statement
pending before the Commission or currently under the Commission’s
review. Except as set forth on Schedule 3(cc)
hereto, since December 1, 2006, the Company has not offered or sold any of its
equity securities or debt securities convertible into shares of Common
Stock.
(dd) Xxxxxxxx-Xxxxx
Act. The Company is in compliance with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the “Xxxxxxxx-Xxxxx Act”),
and the rules and regulations promulgated thereunder, that are effective and
presently applicable to the Company and intends to comply with other applicable
provisions of the Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated
thereunder, upon the effectiveness and applicability of such provisions with
respect to the Company.
4. Representations and
Warranties by Lender. Each Lender represents and
warrants severally and not jointly, to the Company as of the time of issuance of
the Note as follows:
(a) Organization and
Standing. If Lender is an entity, Lender is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate or other entity power and authority
to carry on its business as now conducted and proposed to be
conducted. If Lender is an entity, the address of its principal place
of business is as set forth on the signature page hereto, and if Lender is an
individual, the address of its principal residence is as set forth on the
signature page hereto
(b) Power. If
Lender is an entity, Lender has all requisite legal and corporate or other
entity power and authority to enter into, execute and deliver each of the
Transaction document to which it is a party. Each Transaction
Document to which Lender is a party has been duly and validly authorized,
executed and delivered by Lender is the valid and binding obligation of Lender,
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors’ rights.
(c) Authorization. If
Lender is an entity, all corporate or other entity and legal action on the part
of Lender, its officers, directors, managers, shareholders, partners, or
members, as applicable, necessary for the execution and delivery of the
Transaction Documents to which it is a party, the purchase of the Note and the
performance of Lender’s obligations such Transaction Documents have been
taken.
-11-
(d) No Conflict; Required
Filings and Consents. Neither the execution and delivery of
this Agreement or the other Transaction Documents by Lender nor the performance
by Lender of its obligations hereunder will: (i) if Lender is an entity,
conflict with Lender’s Certificate or Bylaws, or other similar organizational
documents; (ii) violate any statute, law, ordinance, rule or regulation,
applicable to Lender or any of the properties or assets of Lender; or (iii)
violate, breach, be in conflict with or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
permit the termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of Lender under, or result in the creation or imposition of any lien
upon any properties, assets or business of Lender under, any material contract
or any order, judgment or decree to which Lender is a party or by which it or
any of its assets or properties is bound or encumbered except, in the case of
clauses (ii) and (iii), for such violations, breaches, conflicts, defaults or
other occurrences which, individually or in the aggregate, would not have a
material adverse effect on its ability to perform its obligations under the
Transaction Documents.
(e) Acquisition for
Investment. The Lender is purchasing the Note and Note Shares
(collectively, the “Securities”) solely
for its own account for the purpose of investment and not with a view to or for
sale in connection with distribution. The Lender does not have a
present intention to sell any of the Securities, nor a present arrangement
(whether or not legally binding) or intention to effect any distribution of any
of the Securities to or through any person or entity; provided, however, that by
making the representations herein, such Lender does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with Federal and state
securities laws applicable to such disposition. The Lender
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that Lender is capable of evaluating the merits and risks
of Lender's investment in the Company, (ii) is able to bear the financial risks
associated with an investment in the Securities, (iii) has been given full
access to such records of the Company and to the officers of the Company as it
has deemed necessary or appropriate to conduct its due diligence investigation,
and (iv) has had the opportunity to ask representatives of the Company certain
questions and request certain additional information regarding the finances,
operations, business and prospects of the Company and has had any and all such
questions and requests answered to its satisfaction.
(f) Rule
144. The Lender understands that the Securities are
“restricted securities” as defined in Rule 144, and must be held indefinitely
unless such Securities are registered under the Securities Act or an exemption
from registration is available. The Lender acknowledges that such
person is familiar with Rule 144 of the rules and regulations of the Commission,
as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that
such Lender has been advised that Rule 144 permits resales only under certain
circumstances. The Lender understands that to the extent that Rule
144 is not available, such Lender will be unable to sell any Securities without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(g) No General
Solicitation. The Lender acknowledges that the Securities were
not offered to such Lender by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television, radio or the internet, or (ii) any seminar or meeting
to which such Lender was invited by any of the foregoing means of
communications. The Lender, in making the decision to purchase the
Securities, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties.
-12-
(h) Accredited
Investor. The Lender is an “accredited investor” (as defined
in Rule 501 of Regulation D), and such Lender has such experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in the Securities. Such Lender is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act and such
Lender is not a broker-dealer. The Lender acknowledges that an
investment in the Securities is speculative and involves a high degree of
risk.
(i) Title. If
the Lender is paying all or any part of the Purchase Price by cancellation of
outstanding indebtedness (“Debt”), such Holder owns and holds, beneficially and
of record, the entire right, title, and interest in and to the Debt, free and
clear of all rights and Encumbrances (as defined below), such Holder has full
power and authority to forgive the Debt and, other than the transactions
contemplated by this Agreement, there is no outstanding plan, pending proposal,
or other right of any person to acquire all or any of the
Debt. Encumbrances shall
mean any security or other property interest or right, claim, lien, pledge,
option, charge, security interest, contingent or conditional sale, or other
title claim or retention agreement, interest or other right or claim of third
parties, whether perfected or not perfected, voluntarily incurred or arising by
operation of law, and including any agreement (other than this Agreement) to
grant or submit to any of the foregoing in the future.
5. Security. The
Company’s obligations under the Notes shall be secured by the Security Agreement
and the Mortgages.
6. Conditions Precedent to the
Obligation of the Company to Close and to Sell the
Securities. The obligation hereunder of the Company to close
and issue and sell the Securities to the Lenders at each Closing is subject to
the satisfaction or waiver, at or before such Closing of the conditions set
forth below. These conditions are for the Company’s sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Lenders’
Representations and Warranties. The representations and
warranties of each Lender shall be true and correct in all material respects
(except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of each Closing Date as though made at
that time, except for representations and warranties that are expressly made as
of a particular date, which shall be true and correct in all material respects
(except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of such date.
(b) Performance by the
Lenders. Each Lender shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Lenders at or prior to each Closing Date.
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase
Price. The Purchase Price for the Securities shall have been
delivered to the Company on each Closing Date.
(e) Delivery of Transaction
Documents. The Transaction Documents shall have been duly
executed and delivered by the Lenders and, with respect to the Escrow Agreement,
the escrow agent, to the Company.
-13-
(f) Escrow
Agreement. At the Closing, the Lenders shall have executed and
delivered the Escrow Agreement.
7. Conditions Precedent to the
Obligation of the Lenders to Close and to Purchase the
Securities. The obligation hereunder of the Lenders to
purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before each Closing,
of each of the conditions set forth below. These conditions are for
the Lenders’ sole benefit and may be waived by the Lenders at any time in their
sole discretion.
(a) Accuracy of the Company’s
Representations and Warranties. Each of the representations
and warranties of the Company in this Agreement and the other Transaction
Documents shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of each Closing Date as though made at that time, except for
representations and warranties that are expressly made as of a particular date,
which shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of such
date.
(b) Performance by the
Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to each Closing Date.
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or
Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(e) Opinion of
Counsel. The Lenders shall have received an opinion of counsel
to the Company, dated the date of each Closing, substantially in the form of
Exhibit E
hereto, with such exceptions and limitations as shall be reasonably acceptable
to counsel to the Lenders.
(f) Notes. At
or prior to each Closing Date, the Company shall have delivered to the Lenders
the Notes (in such denominations as each Lender may request).
(g) Secretary’s
Certificate. The Company shall have delivered to the Lenders a
secretary’s certificate, dated as of each Closing Date, as to (i) the
resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
-14-
(h) Officer’s
Certificate. On each Closing Date, the Company shall have
delivered to the Lenders a certificate signed by an executive officer on behalf
of the Company, dated as of each Closing Date, confirming the accuracy of the
Company’s representations, warranties and covenants as of each Closing Date and
confirming the compliance by the Company with the conditions precedent set forth
in paragraphs (b)-(d) and (m) of this Section 7 as of each Closing Date
(provided that, with respect to the matters in paragraphs (d) of this Section 7,
such confirmation shall be based on the knowledge of the executive officer after
due inquiry).
(i) Security
Agreement. At the Closing, the Company shall have executed and
delivered the Security Agreement to each Lender.
(j) Mortgages. At
the Closing, the Company shall have executed the Mortgages.
(k) Guaranty. At
the Closing, the Subsidiaries shall have executed the Guaranty.
(l) UCC Financing
Statements. The Company shall have filed the UCC-1 financing
statement(s) in substantially the forms attached hereto as Exhibit F with the
Secretary of State of the State(s) of Delaware and Florida.
(m) Material Adverse
Effect. No Material Adverse Effect shall have occurred at or
before each Closing Date.
(n) Escrow
Agreement. At the Closing, the Lenders shall have executed and
delivered the Escrow Agreement.
(o) Consent of Holders of Series
D Preferred Shares. At the Closing, the Company shall have
received the consent of at least eighty percent (80%) of the holders of the
Company’s Series D Convertible Preferred Stock to complete the transactions
contemplated in this Agreement.
8. Intentionally
Omitted.
9. Covenants. The
Company covenants with each Lender as follows, which covenants are for the
benefit of each Lender and their respective permitted assignees.
(a) Use of
Proceeds. The Company shall use the proceeds from the Notes as
follows:
(i) $12,000,000
of the proceeds shall be used as follows:
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(1)
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no
less than $1,500,000 and no greater than $2,500,000 for the
repayment of the outstanding principal amount of the following
mortgages: (x) the mortgage dated June 30, 2005 relating to the
purchase of Volusia Speedway Park and (y) the mortgage dated November
7, 2004 relating to the purchase of Lernerville Speedway; provided, that, the
allocation of such proceeds earmarked in this Section 9(a)(i)(1) to make
partial, full or no payments of the outstanding principal amount of the
mortgages described in (x) and (y) hereof shall be at the Company’s sole
discretion.
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-15-
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(2)
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$423,000
for repayment of the outstanding principal amount plus such additional
amount for payment of accrued interest on the promissory note in favor of
Xxxxx Xxxxxxxx relating to the Company’s purchase of Dirt Motor Sports,
Inc.; and
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(3)
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the
balance for general corporate and working capital
purposes.
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(ii)
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Any
amount in excess of $12,000,000 in proceeds shall be restricted to use by
the Company for (i) the repayment of any outstanding mortgages on property
owned by the Company, or (ii) in connection with a bona fide strategic
investment or transaction.
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(b) Additional
Debt. Other than (i) promissory notes issued in payment of
interest under the Notes and (ii) up to $500,000 for the purchase or lease of
vehicles or equipment secured by such vehicles or equipment, the Company shall
not issue any securities or other financial instruments that rank senior to or
pari-passu to the Notes, without the prior written consent of the Required
Lenders. “Required Lenders”
shall mean any Lender or group of Lenders if the sum of the principal amount of
the Notes then outstanding held by such Lenders aggregates at least sixty
percent (60%) of the total principal amount of all of the Notes then
outstanding. Such relative principal amount of each Lender is
referred to herein as such Lender’s “Ratable
Share”.
(c) Payments under the
Notes. Amounts owing by the Company under the Notes shall be
allocated to each Lender according to its Ratable Share, and each payment or
prepayment by the Company with respect to principal, interest or other amounts
due from the Company to the Lenders with respect to the Notes, shall be made in
proportion to the Ratable Share of each Lender.
(d) Securities
Compliance. The Company shall notify the Commission in
accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Lenders,
or their respective subsequent holders.
(e) Registration and
Listing. The Company shall cause its Common Stock to continue
to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in
all respects with its reporting and filing obligations under the Exchange Act,
to comply with all requirements related to any registration statement filed
pursuant to this Agreement, and to not take any action or file any document
(whether or not permitted by the Securities Act or the rules promulgated
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act or Securities Act,
except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is
trading. Subject to the terms of the Transaction Documents, the
Company further covenants that it will take such further action as the Lenders
may reasonably request, all to the extent required from time to time to enable
the Lenders to sell the Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act. Upon the request of the Lenders, the Company
shall deliver to the Lenders a written certification of a duly authorized
officer as to whether it has complied with the issuer requirements of Rule
144.
-16-
(f) Inspection
Rights. Provided the same would not be in violation of
Regulation FD, the Company shall permit, during normal business hours and upon
reasonable request and reasonable notice, each Lender or any employees, agents
or representatives thereof, so long as such Lender shall be obligated hereunder
to purchase the Notes, for purposes reasonably related to such Lender’s
interests as a stockholder, to examine the publicly available, non-confidential
records and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
publicly available, non-confidential affairs, finances and accounts of the
Company and any Subsidiary with any of its officers, consultants, directors and
key employees.
(g) Compliance with
Laws. The Company shall comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which would be reasonably likely to have a Material Adverse
Effect.
(h) Keeping of Records and Books
of Account. The Company shall keep and cause each Subsidiary
to keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its Subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
(i) Reporting
Requirements. If the Commission ceases making the Company’s
periodic reports available via the Internet without charge, then the Company
shall furnish the following to each Lender so long as such Lender shall be
obligated hereunder to purchase the Securities or shall beneficially own
Securities:
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(1)
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Quarterly
Reports filed with the Commission on Form 10-QSB as soon as practical
after the document is filed with the Commission, and in any event within
five (5) days after the document is filed with the
Commission;
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(2)
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Annual
Reports filed with the Commission on Form 10-KSB as soon as practical
after the document is filed with the Commission, and in any event within
five (5) days after the document is filed with the Commission;
and
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(3)
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Copies
of all notices, information and proxy statements in connection with any
meetings that are, in each case, provided to holders of shares of Common
Stock, contemporaneously with the delivery of such notices or information
to such holders of Common Stock.
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(j) Other
Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
to perform of the Company or any Subsidiary under any Transaction
Document.
(k) Reporting
Status. So
long as a Lender beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
-17-
(l) Disclosure of
Transaction. The Company shall issue a press release
describing all the material terms of the transactions contemplated hereby (the
“Press
Release”) on the day of each Closing but in no event later than one hour
after such Closing; provided, however, that if the
Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing Date. The Company shall also file
with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing
the material terms of the transactions contemplated hereby (and attaching as
exhibits thereto this Agreement, the form of Note, the Guaranty, the Mortgages,
the Security Agreement and the Press Release) as soon as practicable following
each Closing Date but in no event more than two (2) Trading Days following the
Closing Date, which Press Release and Form 8-K shall be subject to prior review
and reasonable comment by the Lenders. “Trading Day” means
any day during which the principal exchange on which the Common Stock is traded
shall be open for trading.
(m) Disclosure of Material
Information. The Company covenants and agrees that except for
the information included in the Transaction Documents, neither it nor any other
person acting on its behalf has provided or will provide any Lender or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Lender shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Lender shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
(n) Pledge of
Securities. The Company acknowledges that the Securities may
be pledged by a Lender in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Lender
effecting a pledge of the Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document. At the Lenders’ expense,
the Company hereby agrees to execute and deliver such documentation as a pledgee
of the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by a Lender.
(o) Subsidiary
Guarantors. The Company agrees to cause each Subsidiary
created or acquired by the Company from the date hereof to execute and deliver
to the Lenders a Guaranty pursuant to which such Subsidiary will unconditionally
guaranty, on a joint and several basis with the other Subsidiaries, the full and
prompt payment of the principal of and interest on the Notes.
-18-
(p) Participation
Right.
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(1)
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So
long as the Notes are outstanding, commencing on the date hereof and
terminating on such date as the Company has sold Subsequent
Financing Securities for a purchase price equal to twice the principal
amount of Notes issued and sold hereunder, each Lender shall have a right
to purchase its Pro Rata Portion of all Subsequent Financing Securities
that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Subsequent Financing Securities
excluded by Section 9(q) hereof (each an “Offering”).
Each Lender’s “Pro Rata
Portion” shall equal the product of fifty percent (50%) of the
gross dollar amount of the Subsequent Financing Securities proposed be
issued and sold by the Company and a fraction the numerator of which shall
be the principal amount of the Note purchased by such Lender hereunder and
the denominator of which shall be the aggregate principal amount of all
Notes issued hereunder. The term “Subsequent Financing
Securities” shall mean: (i) any Common Stock, preferred stock or
other security of the Company, (ii) any security convertible or
exercisable, with or without consideration, into any Common Stock,
preferred stock or other security of the Company, or (iii) any promissory
note, debenture or other debt issued by the
Company.
|
|
(2)
|
Notice of
Right. In the event the Company proposes to undertake an
issuance of Subsequent Financing Securities, it shall give the Lenders
written notice of its intention, describing the type of Subsequent
Financing Securities and the price and terms upon which the Company
proposes to issue the same and the proposed closing date of the issuance
of Subsequent Financing Securities, which shall be within twenty (20)
calendar days from the date of such notice. Each Lender shall
have ten (10) days from the date of receipt of any such notice to agree to
purchase any shares of such Subsequent Financing Securities (up to such
Lender’s Pro Rata Portion), for the price and upon the terms specified in
the notice, by giving written notice to the Company and stating therein
the quantity of Subsequent Financing Securities to be
purchased.
|
|
(3)
|
Right of
Over-Allotment. The Company shall offer to each Lender
who has elected to purchase its full Pro Rata Portion (a “Fully-Exercising
Holder”), by the giving of written notice, any Subsequent Financing
Securities that the Lenders had a right to purchase hereunder which such
Lenders did not previously elect to purchase. The
Fully-Exercising Holders shall thereafter have ten (10) days from the date
of receipt of such written notice to agree to purchase all or any portion
of such available Subsequent Financing Securities; in the event that the
Fully-Exercising Holders collectively elect to purchase more than the
available Subsequent Financing Securities, the Subsequent Financing
Securities shall be made available to the Fully-Exercising Holders
ratably, in accordance with their respective Pro Rata
Portions.
|
|
(4)
|
Exercise of
Rights. If one or more Lenders exercises its right of
first offer hereunder, the closing of the purchase of the Subsequent
Financing Securities with respect to which such right has been exercised
shall take place within twenty (20) days following the giving of notice to
Lenders under Section 9(q) hereof.
|
-19-
|
(5)
|
Lapse and
Reinstatement of Right. The Company shall have twenty
(20) days following the giving of notice to Lenders under Section 9(q)
hereof to sell the Subsequent Financing Securities included in the
Offering at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company’s
notice. In the event the Company has not sold the Subsequent
Financing Securities or entered into an agreement to sell the Subsequent
Financing Securities within twenty (20) days following the giving of
notice to Lenders under Section 9(q), the Company shall not thereafter
issue or sell any Subsequent Financing Securities without first offering
such securities to the Lenders in the manner provided
above.
|
(q) Excluded Subsequent
Financing Securities. The rights of first offer established by Section
9(p) shall have no application to any of the following Subsequent Financing
Securities:
|
(1)
|
Subsequent
Financing Securities issued or issuable upon conversion or exercise of any
preferred stock, warrants, options, convertible debt or other rights to
acquire any securities of the Company outstanding as of the date
hereof;
|
|
(2)
|
Subsequent
Financing Securities issued or issuable to employees, officers, directors,
consultants or other persons performing services for the Company pursuant
to any stock option plan, stock purchase plan, management incentive plan,
consulting agreement or arrangement or other contract or undertaking
approved by the Board of Directors of the
Company;
|
|
(3)
|
Subsequent
Financing Securities issued in a public offering;
or
|
|
(4)
|
Subsequent
Financing Securities issued to acquire assets or an ownership interest in
any business or entity.
|
(r) Additional
Covenants. The Company shall comply with, and cause each
Subsidiary to comply with, any covenants set forth in Section 6 of the
Notes.
10. Indemnification.
(a) General
Indemnity. The Company agrees to indemnify and hold harmless
the Lenders (and their respective directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the Lenders
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. Each Lender severally but not
jointly agrees to indemnify and hold harmless the Company and its directors,
officers, affiliates, agents, successors and assigns from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys’ fees, charges and disbursements)
incurred by the Company as result of any inaccuracy in or breach of the
representations, warranties or covenants made by such Lender
herein. The maximum aggregate liability of each Lender pursuant to
its indemnification obligations under this Section 10 shall not exceed the
portion of the Purchase Price paid by such Lender hereunder.
-20-
(b) Indemnification
Procedure. Any party entitled to indemnification under this
Section 10 (an “indemnified party”) will give written notice to the indemnifying
party of any matters giving rise to a claim for indemnification; provided, that
the failure of any party entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Section 10 except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any
action, proceeding or claim is brought against an indemnified party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to participate in and, unless in the reasonable judgment of the
indemnified party a conflict of interest between it and the indemnifying party
may exist with respect of such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified
party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the
indemnifying party elects in writing to assume and does so assume the defense of
any such claim, proceeding or action, the indemnified party’s costs and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep
the indemnified party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party
shall not be liable for any settlement of any action, claim or proceeding
effected without its prior written consent. Notwithstanding anything
in this Section 10 to the contrary, the indemnifying party shall not, without
the indemnified party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such
claim. The indemnification required by this Section 10 shall be made
by periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity
agreements contained herein shall be in addition to (a) any cause of action or
similar rights of the indemnified party against the indemnifying party or
others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
11. Miscellaneous
(a) Fees and
Expenses. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the
Company shall pay, at the Closing all actual attorneys’ fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by one counsel
to the Lenders in connection with the preparation, negotiation, execution and
delivery of this Agreement and the transactions contemplated hereunder and any
amendments, modifications or waivers of this Agreement or any of the other
Transaction Documents. In addition, the Company shall pay all
reasonable fees and expenses incurred by the Lenders in connection with the
enforcement of this Agreement or any of the other Transaction Documents,
including, without limitation, all reasonable attorneys’ fees and
expenses. The Company shall pay all stamp or other similar taxes and
duties levied in connection with issuance of the Notes and the Note Shares
pursuant hereto.
-21-
(b) Confidentiality; Non-Public
Information. Lender acknowledges and agrees that
that the existence of this Agreement and the information contained
herein and in the other Transaction Documents is of a confidential nature and
shall not, without the prior written consent of the Company, be disclosed by
Lender to any person or entity, other than Lender’s personal financial and legal
advisors for the sole purpose of evaluating an investment in the Company, and
that it shall not, without the prior written consent of the Company, directly or
indirectly, make any statements, public announcements or release to trade
publications or the press with respect to the subject matter of this Agreement,
the Guaranty, the Note or the Security Agreement. Lender further
acknowledges and agrees that the information contained herein and in the other
documents relating to this transaction may be regarded as material non-public
information under United States federal securities laws, and that United States
federal securities laws prohibit any person who has received material non-public
information relating to the Company from purchasing or selling securities of the
Company, or from communicating such information to any person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell securities of the Company. Accordingly, until
such time as any such non-public information has been adequately disseminated to
the public, Lender shall not purchase or sell any securities of the Company, or
communicate such information to any other person.
(c) Waivers and Amendments;
Actions by Lenders. Any provision of this Agreement, the
Security Agreement, the Mortgages, the Guaranty, or the Notes may be amended,
waived or modified upon the prior written consent of both the Company and the
Required Lenders; provided, further, that no amendment or waiver approved
pursuant to the preceding clause may apply to less than all of the Lenders,
without the approval of each Lender whose interest would be adversely
affected. Without the written consent of the Required Lenders, no
Lender may release any of the Collateral, bring an action to enforce rights
against the Company or any guarantor of the Notes, exercise remedies with
respect to an Event of Default (as defined in the Notes), enforce remedies under
the Security Agreement or otherwise take action against or with respect to the
Collateral, or enforce remedies under the Guaranty. Any such
amendment, modification, waiver, agreement or action effected in accordance with
this Section 11(c) shall be binding upon the Company and each Lender and his or
its successors and assigns even if they do not execute such
document. No consideration shall be offered or paid to any Lender to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. This provision constitutes
a separate right granted to each Lender by the Company and shall not in any way
be construed as the Lenders acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.
(d) Governing
Law. This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflicts of law
principles which would result in the application of the substantive law of
another jurisdiction. This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.
-22-
(e) Consent to Jurisdiction;
Venue.
The
parties agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue. The parties
irrevocably consent to personal jurisdiction in the state and federal courts of
the state of New York. The Company and each Lender consent to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 11(e) shall affect or
limit any right to serve process in any other manner permitted by
law. The Company and the Lenders hereby agree that the prevailing
party in any suit, action or proceeding arising out of or relating to the
Securities, this Agreement or the other Transaction Documents, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing
party. The parties hereby waive all rights to a trial by
jury.
(f) Entire
Agreement. This Agreement together with the exhibits attached
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subject matter hereof and thereof.
(g) Notices. All
notices and other communications required or permitted hereunder shall be in
writing and shall be hand delivered or sent via facsimile, overnight courier
service or mailed by certified or registered mail, postage prepaid, return
receipt requested, addressed or sent to the addresses listed on the signature
page hereto or at such other addresses as the parties shall have furnished to
each other in writing. Notices sent via hand delivery shall be
effective when received, notices sent facsimile shall be effective upon written
confirmation of transmission (if also sent by another form of notice permitted
hereunder within 24 hours of sending the facsimile), notices sent by overnight
courier shall be effective upon receipt, and notices mailed by certified or
registered mail, postage prepaid return receipt requested, shall be effective
five business days after deposit with the U.S. Postal Service.
(h) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. After the
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this
Agreement. The Lenders may assign the Securities and its rights under
this Agreement and the other Transaction Documents and any other rights hereto
and thereto without the consent of the Company.
(i) No Third Party
Beneficiaries. Except as contemplated by Section 11 hereof,
this Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
(j) Validity. If
any provision of this Agreement or the Note shall be judicially determined to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired
thereby.
(k) Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall be deemed to constitute one
instrument.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
-23-
IN
WITNESS WHEREOF, the parties have caused this Note Purchase Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
|
ADDRESS:
0000 Xxxx Xxxxx Xxxx, Xxxxx X
Xxxxxxx, XX 00000
|
DIRT MOTOR
SPORTS, INC
D/B/A
WORLD RACING GROUP, INC.:
|
|
By: /s/ Xxxxx
Xxxxxx
Name:
Xxxxx
Xxxxxx
Title: Chief
Financial Officer
|
|
|
ADDRESS:
c/o North Sound Sound Capital LLC
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
|
LENDER:
NORTH SOUND LEGACY INSTITUTIONAL FUND LLC
By:
North Sound Capital LLC; Manager
By: /s/
Xxxxxx X.
XxXxxxx
Name:
Xxxxxx X. XxXxxxx
Title:
Chief Investment Officer
Principal Amount of Note
Purchased: $____
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): ____
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged:
$____
|
-24-
|
XXXXXXXX INVESTMENT MASTER FUND LTD
By: /s/ Xxxxx
Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: President
Principal Amount of Note
Purchased: $1,000,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): ____
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $____
CIPHER 06 LLC
By:
/s/ Xxxxxxx X.
Xxxx
Name: Xxxxxxx X. Xxxx
Title: Managing Member
Principal Amount of Note
Purchased: $____
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): ____
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged:
$____
|
-25-
|
X.X. XXXXXXXXX,
TOWEIN CAPITAL PARTNERS, I, L.P.
By:
/s/ Xxxxxx
Xxxx
Name: Xxxxxx Xxxx
Title:
A Managing Member of the G.P.
Principal Amount of Note
Purchased: $250,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): 68,750 *
2
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $250,000
BASSO MULTI-STRATEGY HOLDING FUND LTD.
By:
/s/ Xxxxxx X.
Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Authorized Signatory
Principal Amount of Note
Purchased: $920,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): 253,000 (plus
50,600 shares from Bridge Loan)
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $84,000 (plus accrued & unpaid
interest)
|
-26-
|
BASSO FUND LTD
By: /s/ Xxxxxx X.
Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Authorized Signatory
Principal Amount of Note
Purchased: $80,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): 22,000 (plus
4,400 shares from Bridge Loan)
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $16,000 (plus accrued & unpaid
interest)
VICIS CAPITAL MASTER FUND
By: /s/ Xxxxx X.
Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: CFO Vicis Capital LLC
Principal Amount of Note
Purchased: $____
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275): ____
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged:
$____
|
-27-
| TRELLUS SMALL CAP
OPPORTUNITY OFFSHORE FUND LIMITED
By: /s/ Xxxx
Xxxxx
Name: Xxxx
Xxxxx
Title: President
Principal Amount of Note
Purchased: $400,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275):
110,000
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $____
TRELLUS SMALL
CAP OPPORTUNITY FUND, LP
By: /s/ Xxxx
Xxxxx
Name: Xxxx
Xxxxx
Title: President
Principal Amount of Note
Purchased: $600,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275):
165,000
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged:
$____
|
-28-
|
TRELLUS
OFFSHORE FUND LIMITED
By: /s/
Xxxx
Xxxxx
Name:
Xxxx Xxxxx
Title:
President
TRELLUS PARTNERS II,
LP
Principal
Amount of Note Purchased: $785,000
Number of
Note Shares (Principal Amount of Note Purchased multiplied by .275):
215,875
If paying
all or part of the Purchase Price by exchanging short term notes, set
forth the amount of short term being exchanged: $____
By: /s/
Xxxx
Xxxxx
Name:
Xxxx Xxxxx
Title:
President
Principal
Amount of Note Purchased: $40,000
Number of
Note Shares (Principal Amount of Note Purchased multiplied by .275):
11,000
If paying
all or part of the Purchase Price by exchanging short term notes, set
forth the amount of short term being exchanged:
$____
|
-29-
|
TRELLUS PARTNERS, LP
By: /s/
Xxxx
Xxxxx
Name:
Xxxx Xxxxx
Title: President
IROQUOIS MASTER FUND
LTD.Principal
Amount of Note Purchased: $675,000
Number of
Note Shares (Principal Amount of Note Purchased multiplied by .275):
185,625
If paying
all or part of the Purchase Price by exchanging short term notes, set
forth the amount of short term being exchanged: $____
By: /s/ Xxxxxx
Xxxxxxxxx
Name: Xxxxxx
Xxxxxxxxx
Title:
Authorized Signatory
Principal Amount of Note
Purchased: $1,000,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275):
275,000
If paying all or part of the Purchase Price by
exchanging short term notes, set forth the amount of short term being
exchanged: $
-
|
-30-
| NORTH SOUND LEGACY
INTERNATIONAL LTD.
By: North
Sound Capital LLC, Investment
Advisor
By: /s/ Xxxxxx X.
XxXxxxxx
Name: Xxxxxx X.
XxXxxxxx
Title: Chief Investment
Officer
Principal Amount of Note
Purchased: $900,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275):
247,500
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $150,000 initial principal
NORTH SOUND LEGACY
INSTITUTIONAL FUND LLC
By: North
Sound Capital LLC, Manager
By: /s/ Xxxxxx X.
XxXxxxxx
Name: Xxxxxx X.
XxXxxxxx
Title: Chief Investment
Officer
Principal Amount of Note
Purchased: $300,000
Number of Note Shares
(Principal Amount of Note Purchased multiplied by .275):
82,500
If paying all or part of the
Purchase Price by exchanging short term notes, set forth the amount of
short term being exchanged: $50,000 initial
principal
|
-31-
EXHIBIT
A
FORM
OF NOTE
-32-
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DIRT MOTOR SPORTS, INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED. NOTWITHSTANDING THE FOREGOING, THIS NOTE MAY BE PLEDGED IN CONNECTION
WITH A LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE.
DIRT
MOTOR SPORTS, INC. d/b/a WORLD RACING GROUP, INC. SENIOR SECURED
NOTE
| U.S. $15,000,000.00 | Issuance Date: ______ 2007 |
| No.: [ ] | Maturity Date: March 15, 2010 |
FOR VALUE RECEIVED, the
undersigned, Dirt Motor Sports, Inc., d/b/a
World
Racing Group, Inc., a Delaware corporation (the "Company"), hereby
promises to pay to ____ the order
of ___
or any future permitted holder of this note (the "Payee"), at the principal
office of
the Payee set forth herein, or at such other place as the Payee may designate in
writing to the Company, the principal sum of up to Fifteen Million Dollars
($15,000,000.00), or such other amount as may be outstanding hereunder, together
with all accrued but unpaid interest, in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts and in immediately available funds, as provided in this note
(this "Note").
This Note, together with other notes of like kind up to a total principal amount
of $ 15 million shall be referred to as the "Notes".
This Note has been
executed and delivered pursuant to the Note Purchase Agreement
dated as of___ , 2007 (the "Note Purchase Agreement") by and
among the Company
and the Lenders listed therein. ^|pftaiized terms used and not otherwise defined
herein shall have the meanings set forth for such terms in the Note Purchase
Agreement. The rights of the holder of this Note (including but not limited to
those described in Section 5 hereof) are subject to the provisions and
restrictions of the Note Purchase Agreement, including but not limited to
Section 11 (c) of the Note Purchase Agreement.
-33-
1. Principal and Interest
Payments.
(a) The
Company shall repay in full the entire principal balance then outstanding under
this Note on the first to occur (the "Maturity Date") of:
(i) March 15, 2010, or (ii) the acceleration of the obligations as contemplated
by this Note. Beginning on the issuance date of this Note (the "Issuance Date"), the
outstanding principal balance of this Note shall bear interest at a rate per
annum equal to twelve and one-half percent (12.5%) (the "Interest Rate"),
payable on each of March 15, June 15, September 15, and December 15 following
the date hereof through the Maturity Date; provided, however,
that the interest payments due on December 15, 2007, March 15, 2008 and Jgjfe^
|008 shall be payable in cash on the Issuance Date; provided, further,
that any interest payments' due commencing on September 15,2008 shall be
payable, at the option of the Company (i) in cash at the Interest Rate, or (ii)
additional senior notes with principal amounts equal to the interest then due at
a rate of thirteen and one-half percent (13.5%) per annum. Interest shall be
computed on the basis of a 360-day year of twelve (12) 30-day months.
Furthermore, upon the occurrence of an Event of Default, then to the extent
permitted by law, the Company will pay interest to Payee, payable on demand, on
the outstanding principal balance of the Notes from the date of the Event of
Default until such Event of Default is cured at a rate of the lesser of fifteen
percent (15%) and the maximum applicable legal rate per annum.
2. Security. This Note
shall be secured by a perfected security interest in all of the assets of the
Company, including all trade and service marks and real property owned by the
Company but excluding vehicles and any leased equipment as provided in the
Security Agreement
dated ___ , 2007 among the Company and the Payees dated as of
the date hereof
(the "Security Agreement") and the Mortgages.
3. Non-Business Days.
Whenever any payment to be made shall be due on a Saturday, Sunday or a public
holiday under the laws of the State of New York, such payment may be due on the
next succeeding business .day^^nd such next succeeding day shall be included in
the calculation of the amount of accruedifeiest-payable on such
date.
4. Events of Default.
The occurrence of any of the following events shall be an "Event of Default"
under this Note:
(a) the
Company shall fail to make the payment of any amount of any principal
outstanding for a period of three (3) business days after the date such payment
shall become due and payable hereunder; or
(b) the
Company shall fail to make any payment of interest for a period of five (5)
business days after the date such interest shall become due and payable
hereunder; or
-34-
(c) any
representation, warranty or certification made by the Company herein or in the
Note Purchase Agreement, Security Agreement or in any certificate or financial
statement shall prove to have been false or incorrect or breached in a material
respect on the date as of which made; or
(d) the
failure by the Company to perform or observe any covenant, agreement or
obligation contained in this Note, the Note Purchase Agreement or the Security
Agreement within ten (10) days after receipt! of oyr^tten notice from Payee of
such failure to so perform or observe; or 'r,C;''iJ
(e) the
holder of any indebtedness of the Company or any Subsidiary in excess of
$250,000 shall accelerate any payment of any amount or amounts of principal or
interest on any indebtedness prior to its stated maturity or payment date,
whether such indebtedness now exists or shall hereinafter be created, and such
accelerated payment entitles the holder thereof to immediate payment of such
indebtedness which is due and owing and such indebtedness has not been
discharged in full or such acceleration has not been stayed, rescinded or
annulled within ten (10) business days of such acceleration; or
(f) a
judgment or order for the payment of money shall be rendered against
the Company or any Subsidiary in excess of $500,000 in the aggregate (net of any
applicable
insurance coverage) for all such judgments or orders against all such persons
(treating any
deductibles, self insurance or retention as not so covered) that shall not be
discharged, and all such
judgments and orders remain outstanding, and there shall be any period of sixty
(60) consecutive
days following entry of the judgment or order in excess of $500,000 or the
judgment or order
which causes the aggregate amount described above to exceed $500,000 during
which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in
effeot;
or \
'
(g) the
Company shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic), (iv) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors' rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under the United
States Bankruptcy Code or under the comparable laws of any jurisdiction (foreign
or domestic), or (vi) take any action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing; or
-35-
(h) a
proceeding or case shall be commenced in respect of the Company or any
Subsidiary without its application or consent, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets or (iii) similar relief in respect
of it under any law providing for the relief of debtors, and such proceeding or
case described in clause (i), (ii) or (iii) shall continue undismissed, or
unstayed and in effect, for a period of thirty (30) consecutive days or any
order for relief shall be entered in an involuntary case under the Bankruptcy
Code or under the comparable laws of any jurisdiction (foreign or domestic)
against the Company or any Subsidiary or action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing shall be
taken with respect to the Company or any Subsidiary and shall continue
undismissed, or unstayed and in effect for a period of thirty (30) consecutive
days; or
(i) the
suspension from listing or the failure of the Common Stock to be listed
on the OTC Bulletin Board for a period of ten (10) consecutive trading days;
or
(j) upon
the occurrence of a Change in Control Event. "Change in Control Event" shall
mean: (1) the acquisition by an individual, entity or group (each, a "Person")
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act, as amended (the "Exchange Act") of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially *owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 50% .orcmbre of either (A) the
then-outstanding shares of Common Stock of the Company (the "Outstanding Common
Stock") or (B) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Voting
Securities"); provided, however,
that the following acquisitions shall not constitute a Change in Control Event:
(I) any acquisition directly from the Company of Outstanding Voting Securities
(excluding an acquisition pursuant to the exercise, conversion or exchange of
any security exercisable for, convertible into or exchangeable for common stock
or voting securities of the Company, unless the Person exercising, converting or
exchanging such security acquired such security directly from the Company or an
underwriter or agent of the Company), (II) any acquisition by any employee
benefit plan or related trust sponsored or maintained by the Company or any
corporation controlled by the Company, or (III) any acquisition by any
corporation pursuant to a Business Combination (as defined in this Section 4(j)
below) that complies with clauses (A) and (B) of subsection (3) of this section;
(2) an event that results in the Continuing Directors (as defined below) not
constituting a majority of the Board of Directors of the Company (or, if
applicable, the board of directors of a successor corporation to the Company)
(the "Board");
or (3) the consummation of a merger, consolidation, reorganization,
recapitalization or share exchange involving the Company or a sale or other
disposition of all or substantially all of the assets of the Company (a "Business
Combination"), unless, immediately following such Business Combination,
each of the following two conditions is satisfied:
-36-
(A) all or substantially all of
individuals and entities who were the beneficial owners of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of the then-outstanding shares of common stock and the combined voting power
of the then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination, which shall include, without limitation, a corporation
that as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more subsidiaries
(such resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership of
the Outstanding Common Stock and Outstanding Voting Securities, respectively,
immediately prior to such Business Combination, and (B) no person (excluding the
Acquiring Corporation or any employee benefit plan or related trust maintained
or sponsored by the Company or by the Acquiring Corporation) beneficially owns,
directly or indirectly, 30% or more of the then-outstanding shares of common
stock of the Acquiring Corporation, or of the combined voting power of the
then-outstanding securities of such corporation entitled to vote generally in
the election of directors (except to the extent that such ownership existed
prior to the Business Combination). "Continuing Director"
means, at any date, a member of the Board: (A) who was a member of the Board on
the date of this Agreement, or (B) who was nominated or elected subsequent to
such date by at least a majority of the directors who were Continuing
Dire|gprj|at the time of such nomination or election or whose election to the
Board was recommeriu^ajor endorsed by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election; provided,
however, that there shall be excluded from this clause (B) any individual whose
initial assumption of office occurred as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies or consents,
by or on . behalf of a person other than the Board; or
(k) the
failure by the Company to perfect all of the security interests as described in
Section 2 hereof within forty-five (45) days of the Closing Date;
(1) any
breach or failure in any respect to comply with Section 7 of this
Note; or
(m) a
default under any of the Notes.
5. Remedies Upon An Event of
Default. If an Event of Default shall have occurred and shall be
continuing, the Payee of ithis Note may, subject to the terms of the Note
Purchase Agreement, declare all or part b'f^the entire unpaid principal balance
of this Note, together with all interest accrued hereon, due and payable, and
thereupon, the same shall be accelerated and so due and payable within ten (10)
business days of receipt of notice by the Payee. Subject to the terms of the
Note Purchase Agreement, the Payee may exercise or otherwise enforce any one or
more of the Payee's rights, powers, privileges, remedies and interests under
this Note, the Security Agreement, the Guaranty or applicable law. No course of
delay on the part of the Payee shall operate as a waiver thereof or otherwise
prejudice the right of the Payee. No remedy conferred hereby shall be exclusive
of any other remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
-37-
6. Covenants.
(a) Prepayment. The
Company may prepay the Note, including all accrued and unpaid interest at any
time, with a make whole provision in an amount equal to an additional six months
of interest payments or interest for the remainder of the term if such
prepayment occurs within six months of the Maturity Date.
(b) Rank. All payments
due under this Note (a) shall rank pari passu with all other
Notes and (b) shall be senior to aJU other Indebtedness of the Company and its
Subsidiaries, whether
currently existing
l|^vh^i|ajfter formed or
acquired, other
than the outstanding mortgage dated March 15, 200pm*lav6r !of Xxxxx
X. Xxxxxx relating to the Volusia Speedway Park.
(c) Incurrence of
Indebtedness. So long as this Note is outstanding, the Company shall not,
and the Company shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by the Notes and (ii) other Permitted
Indebtedness. "Permitted Indebtedness" means
(i) promissory notes issued in payment of interest under the Notes and (ii) up
to $500,000 in the aggregate for the purchase or lease of vehicles or equipment
secured by such vehicles or equipment; provided, however,
that the Company shall not issue any securities or other financial instruments
that rank senior to or pari-passu to the Notes, without the prior written
consent of the Required Lenders and (iii) indebtedness secured by Permitted
Liens. "Required
Lenders" shall mean any Lender or group of Lenders if the sum of the
principal amount of the Notes then outstanding held by such Lenders aggregates
at least sixty percent (60%) of the total principal amount of all of the Notes
then outstanding.
(d) Existence of
TUens. So
long as this Note is outstanding, the Company
shall not, and the Company shall hot permit any of its Subsidiaries to, directly
or indirectly,
allow or suffer to exist any mortgage, lien, pledge, charge, security interest
or other encumbrance
upon or in any property or assets (including accounts and contract rights) owned
by the
Company or any of its Subsidiaries (collectively, "Liens") other than
Permitted Liens. "Permitted Liens"
means (i) any Lien for taxes not yet due or delinquent or being contested in
good
faith by appropriate proceedings for which adequate reserves have been
established in accordance
with US GAAP, (ii) any statutory Lien arising in the ordinary course of business
by operation
of law with respect to a liability that is not yet due or delinquent, (iii) any
Lien created by
operation of law, such as materialmen's liens, mechanics' liens and other
similar liens, arising in the
ordinary course of business with respect to a liability that is not yet due or
delinquent or that are
being contested in good faith by appropriate proceedings, (iv) Liens securing
the Company's
obligations under the Notes, (v) Liens (A) upon or in any equipment acquired or
held by the
Company or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
equipment,
or (B) existing on such equipment at the time of its acquisition, provided that
the Lien is
confined solely to the property so acquired and improvements thereon, and the
proceeds of such
equipment, (vi) Liens incurred in connection with the extension, renewal or
refinancing of the
indebtedness secured by Liens of the type described in clause (v) above,
provided that any extension,
renewal or replacement Lien to the property encumbered by the existing
Lien and the principal amount ol^Me Indebtedness being extended, renewed or
refinanced
does not increase, (vii) Liens securing the Company's obligations under this
Note and the other
Notes; (viii) Liens in favor of customs and revenue authorities arising as a
matter of law to
secure payments of custom duties in connection with the importation of goods and
(ix) Liens
arising from judgments, decrees or attachments in circumstances not constituting
an Event of
Default under Section 4(f).
-38-
(e) Restricted Payments.
The Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or
make any payments in respect of, by the payment of cash or cash equivalents (in
whole or in
part, whether by way of open market purchases, tender offers, private
transactions or otherwise),
all or any portion of any Permitted Indebtedness, whether by way of payment in
respect
of principal of (or premium, if any) or interest on, such Indebtedness if at the
time such payment
is due or is otherwise made or, after giving effect to such payment, an event
constituting an Event
of Default has occurred and is continuing. Notwithstanding the foregoing, the
Company
may, during the occurrence of an Event of Default, continue to make regularly
scheduled
payments of principal and interest (but not prepayments or payments upon
acceleration)
on the Indebtedness permitted pursuant to clauses (ii) of the definition of
Permitted Indebtedness.
(f) Restriction on Redemption
and Cash Dividends. Until all of the Notes have been redeemed or
otherwise satisfied in accordance with their terms, the Company shall not,
directly or indirectly, redeem, repurchase or declare or pay any cash dividend
or distribution on its capital stock, other than payment of dividends on shares
of its Series D Convertible Preferred Stock as declared by the Board of
Directors out of assets-legally available therefore, without the prior express
written consent of the Required Lenders.
7. Replacement. Upon
receipt of a duly executed, notarized and unsecured written statement from the
Payee with respect to the loss, theft or destruction of this Note (or any
replacement hereof), and without requiring an indemnity bond or other security,
or, in the case of a mutilation of this Note, upon surrender and cancellation of
such Note, the Company shall issue a new Note, of like tenor and amount, in lieu
of such lost, stolen, destroyed or mutilated Note.
8. Parties in Interest.
Transferability. This Note shall be binding upon the Company and its
successors and assigns and the terms hereof shall inure to the benefit of the
Payee and its successors and permitted assigns. This Note may be transferred or
sold, subject to the provisions of Section 16 of this Note) or, pledged,
hypothecated or otherwise granted as security by the Payee.
9. Amendments. This Note
may not be modified or amended in any manner except in writing executed by the
Company and the Payee.
10. Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery by
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The Company will
give written notice to the Payee at least thirty (30) days prior to the date on
which the Company closes its books or establishes a record date (x) with respect
to any dividend or distribution upon the common stock of the Company, (y) with
respect to any pro rata subscription offer to holders of common stock of the
Company or (z) for determining rights to vote with respect to a major
transaction, dissolution, liquidation or winding-up and in no event shall such
notice be provided to such holder prior to such information h^|iia(de known to
the public. The Company will also give written notice to the Payee at
le|ft*twenty (20) days prior to the date on which dissolution, liquidation or
winding-up will take place and in no event shall such notice be provided to the
Payee prior to such information being made known to the public.
-39-
Address
of the Payee:
Address
of the Company:
Dirt
Motor Sports, Inc.
d/b/a
World Racing Group, Inc.
0000 Xxxx
Xxxxx Xxxx., Xxxxx X
Xxxxxxx
XX 00000
Tel. No.:
(000) 000-0000
Fax
No.: .
with a
copy to:
Fox
Rothschild LLP
000 Xxxxx
Xxxxx Xxxxxxxx 0
Xxxxxxxxxxxxx,
XX 00000-0000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
Tel. No.:
(000) 000-0000
Fax No.:
(000) 000-0000
11. Governing Law. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Delaware, without regard to the conflicts of law principles which
would result in the application of the substantive law of another jurisdiction.
This Note shall not be interpreted of construed with any presumption against the
party causing this Note to be drafted.
12. Headings. Article and
section headings in this Note are included herein for purposes of convenience of
reference only and shall not constitute a part of this Note for any other
purpose. ,
13. Remedies. Characterizations,
Other Obligations, Breaches and Injunctive Relief. The remedies
provided in this Note shall be cumulative and in addition to all other remedies
available under this Note, the Note Purchase Agreement, the Security Agreement,
the Guaranty at law or in equity (including, without limitation, a decree of
specific performance and/or other injunctive relief), no remedy contained herein
shall be deemed a waiver of compliance with the provisions giving rise to such
remedy and nothing herein shall limit a Payee's right to pursue actual damages
for any failure by the Company to comply with the terms of this Note. Amounts
set forth or provided for herein with respect to payments and the like (and the
computation thereof) shall be the amounts to be received by the Payee and shall
not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable and material harm to
the Payee and that the remedy at law for any such breach may be inadequate.
Therefore the Company agrees that, in the event of any such breach or threatened
breach, the Payee shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
-40-
14. Failure or Indulgence
:-Not Waiver. No failure or delay on the part of the Payee in the exercise of
any power, right or privilege hereunder (including without limitation to perfect
any security interest granted to Payee by this Note) shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
15. Enforcement Expenses.
The Company agrees to pay all costs and expenses of enforcement of this Note,
including, without limitation, reasonable attorneys' fees and
expenses.
16. Binding Effect. The
obligations of the Company and the Payee set forth herein shall be binding upon
the successors and assigns of each such party.
17. Compliance with Securities
Laws. The Payee of this Note acknowledges that this
Note is being acquired solely for the Payee's own account and not as a nominee
for any other
party, and for investment, and that the Payee shall not offer, sell or otherwise
dispose of this Note
other than in compliance with the laws of the United States of America and as
guided by the
rules of the Securities and Exchange Commission. This Note and any Note issued
in substitution
or replacement therefore shall /.be stamped or imprinted with a legend in
substantially
the following
form:
"THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DIRT MOTOR SPORTS, INC. SHALL HAVE RECEIVED
AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED."
18. Severability. The
provisions of this Note are severable, and if any provision shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this
N^^inianyJurisdiction.
19. Consent to
Jurisdictiolt^Each of the Company and the Payee hereby irrevocably
submits to the jurisdiction of the United States District of Delaware or the
Superior Court of Delaware for the purposes of any suit, action or proceeding
arising out of or relating to this Note; and the Company hereby irrevocably
submits to the jurisdiction of any federal and/or state courts in any locality
in which any Collateral may be located. Each of the Company and the Payee hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company and the
Payee consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address set forth in Section 10
hereof and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing in this Section 19 shall affect or limit
any right to serve process in any other manner permitted by law.
-41-
20. Company Waivers.
Except as otherwise specifically provided herein, the Company and all others
that may become liable for all or any part of the obligations evidenced by this
Note, hereby waive presentment, demand, notice of nonpayment, protest and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this
Note, and do hereby consent to any number of renewals of extensions of the time
or payment hereof and agree that any such renewals or extensions may be made
without notice to any such persons and without affecting their liability herein
and do further consent to the release of any person liable hereon, all without
affecting the liability of the other persons, firms or Company liable for the
payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.
No delay
or omission on the part of the Payee in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Payee, nor shall any waiver by the Payee of any such
right or rights on any one occasion be deemed a waiver of the same right or
rights on any future occasion.
IN WITNESS WHEREOF, the
Company has executed and delivered this Note as of the date first written
above.
DIRT
MOTOR SPORTS, INC. d/b/a WORLD
RACING GROUP, INC.
By: ____
Name:
Title:
-42-
EXHIBIT
B
FORM
OF SECURITY AGREEMENT
-43-
SECURITY
AGREEMENT
SECURITY
AGREEMENT (as amended, restated, supplemented or otherwise modified from time to
time in accordance herewith and including all attachments, exhibits and
schedules hereto,
the "'Agreement''),
dated ___ , 2007, made by Dirt Motor Sports,
Inc.d/b/a World
Racing Group, Inc., a Delaware corporation ("Dirt
Motor"'), and
Xxxxxx & Miracle Concessions, LLC, a Florida limited liability company ("C
&M" and
together with Dirt Motor, the "Grantor "), in favor of each
of the Secured Parties whose names are set forth on Exhibit A hereto
(collectively, the "Secured
Parties
").
WHEREAS,
the Grantor has issued separate senior secured promissory notes to the Secured
Parties (the "Notes") in the aggregate principal
amount of up to $15,000,000 pursuant to a Note Purchase Agreement by and among
the Grantor and each of the Secured Parties dated the date hereof (the "Purchase
Agreement");
and
WHEREAS,
it is a condition precedent to'the^ Secured Parties making the loan evidenced by
the Notes to the Grantor that the Grantor execute and deliver to the Secured
Parties a security agreement and other documents
(including mortgages) providing for the grant to the Secured Parties of a
continuing security interest in substantially all real and personal properly and
assets of the Grantor, all in substantially the form hereof to secure the
Obligations (hereinafter defined).
NOW,
THEREFORE, the parties agree as follows:
ARTICLE I
Definitions
Section
1.1. Definition
of Terms
Used Herein. All
capitalized terms used herein and not defined herein have the respective
meanings provided therefor in the Purchase Agreement. All terms defined in the
Uniform Commercial Code (hereinafter defined) as in effect from time to time and
used herein and not otherwise defined herein (whether or not such terms are
capitalized) have the same definitions herein as specified therein. The rights
of the Secured Parties hereunder (including but not limited to those described
in Article VI and Section 7.14 hereof) are subject to Section 11(c) of the
Purchase Agreement.
Section
1.2. Definition
of Certain
Terms Used Herein.
As used herein, the following terms have the following
meanings:
"Collateral" means all real and personal
property, of every kind and nature, wherever located, all accounts receivable of
the Grantor and all fixture property of every kind and nature, including,
without limitation, all furniture, fixtures, equipment, raw materials,
inventory, or other goods, accounts, contract rights, rights to the payment of
money, insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent licenses, patent applications, trademarks,
trademark licenseSj trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to xxx and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses,
permits, agreements of any kind or nature pursuant to which the Grantor
possesses, uses or has authority to possess or use property (whether tangible or
intangible) of others or others possess, use or have authority to possess or use
property (whether tangible or intangible) of the Grantor, and all recorded data
of any kind orlhauofe, regardless of the medium of recording including, without
limitation, all books and records, software, writings, plans, specifications and
schematics; and all proceeds and products of each of the foregoing. For purposes
of this Security Agreement, "Collateral" shall exclude so much of Grantor's
property as is described in the Mortgages and shall exclude vehicles and any
leased equipment.
-44-
"Defaulf means any event or
circumstance which, with the giving of notice, the lapse of time, or both, would
(if not cured, waived, of Otherwise remedied during such time) constitute an
Event of Default.
"Existing
Lien" means
any Liens set forth on Schedule 3.3 attached hereto. "Event
of
Default" has the
meaning specified in the Notes. "Indemnitees " has the meaning specified
in Section 7.5(b).
"Lien" means: (i) any interest
in property securing an obligation owed to, or a claim by, a Person other than
the owner of the property, whether such interest is based on the common law,
statute, or contract, and including a security interest, charge, claim, or lien
arising from a mortgage, deed of trust, encumbrance, pledg0,vhyipQthecation,
assignment, deposit arrangement, agreement, security agreement, conditional
xxx#0)!r<trust receipt or a lease, consignment or bailment for security
purposes; (ii) to the extent not included under clause (i), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property; and (iii) any contingent or other agreement to provide any of the
foregoing.
"Mortgages" shall mean the
mortgages or deeds of trust relating to the real property owned by
Grantor.
"Notes" has the meaning assigned to
such term in the first recital of this Agreement.
"Permitted
Lien" shall mean
(i) Existing Liens, (ii) Liens on equipment and purchase money security
interests in respect of obligations to pay money not in excess of $500,000 and
(iii) without duplication, "Permitted Liens" as defined in the
Notes.
"Obligations" means all indebtedness,
liabilities, obligations, covenants and duties of the Grantor to the Secured
Parties of every kind, nature and description, direct or indirect, absolute or
contingent, due or not due, now existing of hereafter arising under or in
connection with the Notes, the Purchase Agreement and this
Agreement.
"Registered
Organization "
means anientity formed by filing a registration document with a United
States Governmental Authority, such as a corporation, limited partnership or
limited liability company.
"Required
Lenders" has the
meaning set forth in Section 9(b) of the Purchase Agreement.
"Security
Interest" has
the meaning specified in Section 2.1 of this Agreement.
"Uniform
Commercial Code "
means the Uniform Commercial Code from time to time in effect in the
State of New York.
-45-
ARTICLE
II. Security Interest
Section
2.1. Security
Interest. As
security for the payment and performance, in full of the Obligations, and any
extensions, renewals, modifications or refinancings of the Obligations, the
Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Secured Parties, and hereby grants to the
Secured Parties, their successors and assigns, a security interest in, all of
such Grantor's right, title and interest in, to and under the Collateral (the
"Security
Interest").
Section
2.2. No
Assumption ofLiab0M\ The Security Interest is
granted as security only and shall not subject the Secured Parties to, or in any
way alter or modify, any obligation or liability of the Grantor with respect to
or arising out of the Collateral.
ARTICLE
III. Representations and Warranties
The
Grantor represents and warrants to the Secured Parties that:
Section
3.1. Title
and Authority.
The Grantor has good and valid rights in and title to the Collateral with
respect to which it has purported to grant a security interest hereunder and has
full power and authority to grant to the Secured Parties the Security Interest
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other Person other
than any consent or
approval which has been obtained.
Section
3.2. Filings;
Actions to Achieve Perfection. Fully executed Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations containing a
description of the Collateral have been delivered to the Secured Parties for
filing in each United States governmental, municipal or other office specified
in Schedule A, which^eiaffithe filings,, recordings and registrations that are
necessary to publish notice of and protecf^eivafMity of and to establish a
legal, valid and perfected security interest in favor of the Secured Parties in
respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United, States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of the
Grantor's name, location, identity or corporate structure. The Grantor's name is
listed in the preamble of this Agreement identically to how it appears on its
certificate of incorporation or other organizational documents.
Section
3.3. Validity
and Priority of
Security Interest.
The Security Interest constitutes (a) a legal and valid security interest
in all the Collateral securing the payment and performance of the Obligations,
(b) subject only to the filings described in Section 3.2 above and other
previously
perfected security interests in the Collateral listed on Schedule 3.3 to this
Agreement ("Existing
Liens") and
Permitted Liens, a security interest in all Collateral in which a security
interest may be perfected by filing, r%c#aing or registration in the United
States pursuant to the Uniform Commercial Code or other applicable law in the
United States (or any political subdivision thereof) and its territories and
possessions or any other country, state or nation (or any political subdivision
thereof). The Security Interest is and shall be subordinate to any other
Existing Lien on any of the Collateral.
-46-
Section
3.4. Absence
of Other
Liens. The
Collateral is owned by the Grantor free and clear of any Lien other than
Permitted Liens. Without limiting the foregoing and except as set forth on
Schedule 3.4 to this Agreement, the Grantor has not filed or consented to any
filing described in Section 3.2 in favor of any Person other than the Secured
Parties, nor permitted the granting or assignment of a security interest or
permitted perfection of any security interest in the Collateral in favor of any
Person other than the Secured Parties. The Secured Parties' having possession of
all instruments and cash constituting Collateral from time to time and the
filing of financing statements in the offices referred to in Schedule A hereto
results in the perfection of such security interest. Such security interest is*
of in the case of Collateral in which the Grantor obtain rights after the date
hereof, will be, a perfected security interest. Such notices, filings and all
other action necessary or desirable to perfect and protect such security
interest have been duly taken.
Section
3.5. Valid
and Bindim Q$JMiibn\ This Agreement
constitutes the legal, valid and binding obligation of the Grantor, enforceable
against the Grantor in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies,, and (iii) to the extent the
indemnification provisions contained in this Agreement may be limited by
applicable federal or state securities laws.
ARTICLE
IV. Covenants
Section
4.1. Change
of Name;
Location of
Collateral; Place of
Business, State of Formation
or Organization.
(a) The
Grantor shall notify the Secured Parties in writing promptly of any change (i)
in its corporate name or in any trade name used to identify it in the conduct of
its business or in the ownership of its properties, (ii) in the location of its
chief executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it (including the
establishment of any such new office or facility), (iii) in its identity
or corporate structure such that a filed filing made under the Uniform
Commercial Code becomes misleading or (iv) in its Federal Taxpayer
Identification Number. In extension of the foregoing, the Grantor shall not
effect or perf^^y"change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Secured Parties to continue at all times following
such change to have a valid, legal and perfected security interest in all the
Collateral.
(b) Without
limiting Section 4.1 (a), without the prior written consent of the Secured
Parties in each instance, the Grantor shall not change its (i) principal
residence, if it is an individual,
(ii) place of business, if it has only one place of business and is not a Registered
Organization, (iii) principal place of business, if it has more than one place
of business and is not a Registered Organization, or (iv) state of
incorporation, formation or organization, if it is a Registered
Organization.
-47-
Section
4.2. Records. The Grantor shall maintain,
at its own cost and expense, such complete and accurate records with respect to
the Collateral owned by it as is consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which the Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral, and, at such time
or times as any of the Secured Parties may reasonably request, promptly to
prepare an4;de|i;^r to, such Secured Party a duly certified schedule or
schedules in form and detail satisftldry to such Secured Party showing the
identity, amount and location of any and all Collateral.
Section
4.3. Periodic
Certification; Notice of
Changes. In the
event there should at any time be any change in the information represented and
warranted herein or in the documents and instruments executed and delivered in
connection herewith, the Grantor shall immediately notify the Secured Parties in
writing of such change (this notice requirement shall be in extension of and
shall not limit or relieve the Grantor of any other covenants
hereunder).
Section
4.4. Protection
of
Security. The
Grantor shall, at its own cost and expense, take any and all actions necessary
to defend title to the Collateral against all persons and to defend the Security
Interest of the Secured Parties in the Collateral and the priority thereof
against any Lien other than Existing Liens and Permitted Liens.
Section
4.5. Inspection
and Verification.
The Secured Parties and such persons as the Secured Parties may
reasonably designate shall have the right to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantor's
affairs with the officers of the Grantor and its independent accountants and tp
verify under reasonable procedures the validity, amount, quality, quantity,
value, c|^|i0hahd status of, or any other matter relating to, the Collateral,
including, in the case of collalfta%n tfie possession of any third Person and
upon an Event of Default, by contacting any account debtor or third Person
possessing such Collateral for the purpose of making such a verification.
Out-of-pocket expenses in connection with any inspections by representatives of
the Secured Parties shall be (a) the obligations of the Grantor with respect to
any inspection after the Secured Parties' demand payment of the Notes or (b) the
obligation of the Secured Parties in any other case.
Section
4.6. Taxes;
Encumbrances. At
their option, the Secured Parties may discharge Liens, other than Existing Liens
and Permitted Liens, at any time levied or placed on the Collateral and may pay
for the maintenance and preservation of the Collateral to the extent the Grantor
fails to do so and the Grantor shall reimburse the Secured Parties on demand for
any payment made or any expense incurred by the Secured Parties pursuant to the
foregoing authorization; provided, however, that nothing in this Section shall
be interpreted as excusing the Grantor from the performance of, or imposing any
obligation on the Secured Parties to cure or perform, any covenants or other
obligation of the Grantor with respect to any Lien or maintenance or
preservation of Collateral as set forth herein.
-48-
Section
4.7. Use and
Disposition of&ttlateral. The Grantor shall not make
or permit to be made an assignment, pledge or hypothecation of any Collateral or
shall grant any other Lien in respect of the Collateral other than Existing
Liens (and replacements thereof) and Permitted Liens without the prior written
consent of the Secured Parties. The Grantor shall not make or permit to be made
any transfer of any Collateral outside of the normal course of business and the
Grantor shall remain at all times in possession of the Collateral owned by it,
Other
than with respect to Existing Liens and other liens approved by the
Secured Parties.
Section
4.8. Insurance/Notice
of
Loss. Within a
reasonable period of time following the date of this Agreement, Grantor, at its
own expense, shall maintain or cause to be maintained insurance covering
physical loss or
damage to the Collateral. In extension of the foregoing and without
limitation, such insurance shall be payable to the Secured Parties as loss payee
under a "standard" loss payee clause, and the Secured Parties shall be listed as
an "additional insured" on Grantor's general liability insurance. Such insurance
shall not be terminated, cancelled or not renewed for any reason, including
non-payment of insurance premiums, unless the insurer shall have provided the
Secured Parties at least 30 days prior written notice. Grantor irrevocably
makes, constitutes and appoints the Secured Parties (and all officers, employees
or agents designated by the Secured Parties) as its true and lawful agent and
attorney-in-fact for the purpose, at any time following the Secured Parties;'
demand for payment of the Notes, of making, settling and adjusting claims in
respect of Coll^eral; under policies of insurance, endorsing the name of Grantor
on any check, draft, instrument or other item of payment for the proceeds of
Such
policies of insurance and for making all determinations and decisions
with respect thereto. In the event that Grantor at any time or times shall fail
to obtain or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Secured Parties may, without
waiving or releasing any obligation or liability of Grantor hereunder, in their
sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Secured Parties
deem advisable. All sums disbursed by the Secured Parties in connection and in
accordance with this Section, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable upon demand, by
Grantor to the Secured Parties and shall be additional Obligations secured
hereby. Grantor shall promptly notify the Secured Parties if any material
portion of the Collateral owned or held by Grantor is damaged or destroyed. The
proceeds of any casualty insurance in respect of any casualty loss of any of the
Collateral shall (i) so long as the Secured Parties have not demanded payment of
the Notes, be disbursed to Grantor for direct application by Grantor solely to
the repair or replacement of Grantor's property so damaged or destroyed, and
(ii) in all other circumstances, be held by the Secured Parties as cash
collateral for the Obligations. The Secured Parties may, at their sole option,
disburse from time to time all or any part of such proceeds so held as cash
collateral, upon such terms and conditions as the Secured Parties may reasonably
prescribe, for direct/apt)l^tion by the Secured Parties solely to the repair or
replacement of Grantor's property so damlgedor destroyed, or Grantor may apply
all or any part of such proceeds to the Obligations.
Section
4.9. Legend. Grantor shall legend, in
form and manner satisfactory to the Secured Parties, its accounts and its books,
records and documents evidencing or pertaining thereto with an appropriate
reference to the fact that such accounts have been assigned to the Secured
Parties and that the Secured Parties have a security interest
therein.
-49-
ARTICLE
V. Further Assurances; Power of Attorney
Section
5.1. Further
Assurances.
Grantor shall, at its own expense, execute, acknowledge, deliver and
cause to be duly filed all such further instruments and documents and take all
such actions as the Secured Parties may from time to time reasonably request to
better assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby, including the payment of any fees and taxes
required in connection with the execution and delivery of this Agreement, the
granting of the Security Interest and the filing of any financing statements
(including fixture filings) or other documents in connection herewith or
therewith. If any amount payable under or inxonnection with any of the
Collateral shall be or become evidenced by any promissory noter^^^x instrument, such note
or instrument shall be immediately pledged and delivered to the Secured Parties,
duly endorsed in a manner satisfactory to the Secured Parties.
Section
5.2. Power
of
Attorney.
(a) Grantor
hereby irrevocably (as a power coupled with an interest) constitutes and
appoints the Collateral Agent (as defined in Section 7.14 hereof) and all
officers, employees or agents designated by the Collateral Agent, its
attorney-in-fact with full power of substitution, for the benefit of the Secured
Parties, (i) to take
all appropriate action and to execute all documents and instruments that may be
necessary or desirable to accomplish the purposes of this Agreement, and without
limiting the generality of the foregoing, Grantor hereby grants the power to
file one or more financing statements (including fixture filings), continuation
statements, filings with the United States Patent and Trademark Office or United
States Copyright Office (or any successor office or any similar office in any
other country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by Grantor,
without the signature of Grantor, and naming Grantor as debto)rga^|f
the'Collateral Agent and/or the Secured Parties as secured party; and
(ii) at any
time following any applicable cure period for an Event of Default (i) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral or
any part thereof; (ii) to demand, collect, receive payment of, give receipt for
and give discharges and releases of all or any of the Collateral; (iii) to sign
the name of Grantor on any invoice or xxxx of lading relating to any of the
Collateral; (iv) to send verifications of accounts to any account debtor or any
other Person liable for an account; (v) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (vi) to settle, compromise,
compound, adjust or defend any actions, suits or proceeding relating to all or
any of the Collateral; and (vii) to use, sell, assign, transfer, pledge, make
any agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Secured
Parties were the absolute owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Secured
Parties to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Secured Parties, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken or omitted to be taken by the
Secured Parties with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of Grantor or to any claim
or action against the Secured Parties.
-50-
(b) The
provisions of this Article shall in no event relieve Grantor of any of its
obligations hereunder with respect to the Collateral or any part thereof or
impose any obligation on the Secured Parties to proceed in any particular manner
with respect to the Collateral of any part thereof, or in any way limit the
exercise by the Secured Parties of any other or further right which it may have
on the date of this Agreement or hereafter, whether hereunder, by law or
otherwise.
ARTICLE VI.
Remedies
Section
6.1. Remedies
upon Default.
(a) Upon me
occurrence and during the continuance of an Event of Default, Grantor agrees to
deliver each item of its Collateral to the Secured Parties on demand, and it is
agreed that the Secured Parties shall have the right to take any of or all the
following actions at the same or different times (but at all times subject to
any Existing Liens): with or without legal process and with or without prior
notice or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral,
exercise Grantor's right to xxxx and receive payment for completed work and,
generally, to exercise any and all rights afforded to a secured party under the
Uniform Commercial Code of other applicable law. Without limiting the generality
of the foregoing, Grantor agrees that the Secured Parties shall have the right,
subject to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale or at
any broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Secured Parties shall deem appropriate. The Secured
Parties shall be authorized at any such sale (if it deems it advisable to do so)
to restrict the prospective bidders or purchasers to persons who will represent
and agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Secured Parties shall have the right to
assign-transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at'any such sale shall hold the property
sold absolutely, free from any claim or right on the part of Grantor, and
Grantor hereby waives (to the extent permitted by law) all rights of redemption,
stay and appraisal which Grantor now has or fnay at any time in the future have
under any rule of law or statute now existing or hereafter enacted.
(b) The
Secured Parties shall give Grantor ten (10) days' written notice (which Grantor
agrees is reasonable notice within the meaning of Section 9-504(3) of the
Uniform Commercial Code) of the Secured Parties' intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale
is to be
made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Secured Parties may fix and state in the notice (if any) of such sale. At
any such sale, the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Secured Parties may (in their
sole and absolute discretion) determine. The Secured Parties shall not be
obligated to make any sale of any Collateral if it shall determine to;
regardless of the fact that notice of sale of such Collateral shall have been
given. The Soured Parties may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Secured Parties until the sale price is paid by the purchaser or purchasers
thereof, but the Secured Parties shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, the Secured Parties may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to the Secured Parties from Grantor as a credit against the
purchase price, and the Secured Parties may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability to Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Secured Parties shall be free to carry
out such sale pursuant to such agreement and Grantor shall not be entitled to
the return o^ftjie; Collateral or any portion thereof subject thereto,
notwithstanding the fact that
after tr^^^urli Parties shall have entered into such
an agreement all Obligations have been paid in full As an alternative to
exercising the power of sale herein conferred upon it, the Secured
Parties may proceed by a suit or suits at law or in equity to foreclose this
Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
-51-
Section
6.2. Application
of Proceeds. The
Secured Parties and the Collateral Agent on behalf of the Secured Parties shall
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
(a) FIRST, to
the payment of all costs and expenses incurred by the Secured Parties in
connection with such collection or sale or otherwise in connection with this
Agreement Or
any of the Obligations, including all court costs and the fees and
exppses of its agents and legal counsel, and any other costs or expenses
incurred in connection with the exercise of any right or remedy hereunder, under
the Purchase Agreement and the Notes and the other Transaction
Documents;
(b) SECOND,
to the payment in full of the Obligations distributed among the Secured Parties
on a pro rata basis; and
(c) THIRD,
to Grantor, its successors or assigns, or to whomsoever may be lawfully entitled
to receive the same, or as a court of competent jurisdiction may otherwise
direct.
Subject
to the foregoing, the Secured Parties shall have absolute discretion as to the
time of application of such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Secured Parties (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of any such proceeds, moneys or balances by the Secured Parties or
of the officer making the sale shall be a sufficient discharge to the purchaser
or purchasers of the Collateral so sold and such purchaser or purchasers shall
not be obligated to see to the application of any part of the purchase money
paid over to the Secured Parties or such officer or be answerable in any way for
the misapplication thereof.
Section
6.3. Grant
of License
to Use Intellectual Property. For the purpose of enabling
the Secured Parties to exercise rights and remedies under this Article at such
time as the Secured Parties shall be lawfully entitled to exercise such rights
and remedies, to the extent not prohibited by any intellectual property license,
Grantoj- hereby grants to the Secured Parties an irrevocable, non-exclusive
license (exercisable without pllySe'nt of royalty or other compensation to
Grantor) to use, license or sub-license any of the Collateral consisting of
intellectual property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof. The
use of such license by the Secured Parties may be exercised, at the option of
the Secured Parties, only following the Secured Parties' demand for payment of
the Notes.
-52-
ARTICLE
VII. Miscellaneous
Section
7.1. Notices. All communications and
notices hereunder to the Grantor and to the Secured Parties shall (except as
otherwise expressly permitted herein) be in writing and delivered to the Grantor
or the Secured Parties, as the case may be, as provided in the Purchase
Agreement.
Section
7.2. Security
Interest Absolute.
All rights of the Secured Parties hereunder, the Security Interest and
all obligations of Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Purchase
Agreement, the Notes, any Loan Document or any agreement with respect to any of
the Obligations or any other agreement or instrument relating to any of
tfe||fe!lg0„ihg, (b) any change in the time, manner or place of payment of, or
in any other term of,'111* or'any of the Obligations, Or
any other amendment or waiver of or any consent to any departure from the
Purchase Agreement, the Notes, any Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.
Section
7.3. Survival
of
Agreement. All
covenants, agreements, representations and warranties made by Grantor herein and
in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement shall be considered to have been relied
upon by the Secured Parties and shall survive the making of the loan and the
execution and delivery to the Secured Parties of the Notes, regardless of any
investigation made by the Secured Parties or on their behalf; and shall continue
in full force and effect until this Agreement shall terminate. -
Section
7.4. Binding
Effect; SeverW9&eement: Successors and Assigns. This Agreement shall become
effective as to Grantor when a counterpart hereof executed on behalf of Grantor
shall have been delivered to the Secured Parties and a counterpart hereof shall
have been executed on behalf of the Secured Parties, and thereafter shall be
binding upon Grantor and the Secured Parties and their respective successors and
assigns, and shall inure to the benefit of Grantor, the Secured Parties arid
their respective successors and assigns, except that Grantor Shall not have the
right to assign or transfer its rights or obligations hereunder or any interest
herein or in the Collateral (and any such assignment or transfer shall be void)
except as expressly contemplated by this Agreement, the Purchase Agreement and
the Notes.
Section
7.5. Secured
Parties' Fees and Expense: Indemnification.
(a) Grantor
agrees to pay upon demand to the Secured Parties the amount of; any and
all reasonable expenses, including all reasonable fees, disbursements and other
charges of its counsel and of any experts or agents, which the Secured Parties
may incur in connection with (i) the administration of this Agreement (including
the customary fees and charges of the Secured Parties for any audits conducted
by them or on their behalf with respect to the accounts inventory), (ii) the
custody or preservation of, orjhesale of, collection from or other
realization
"upon any
of the Collateral, (iii) the exercise^^celment or protection of any of the
rights of the Secured Parties hereunder or (iv) the failure oTGrantor to perform
or observe any of the provisions hereof.
-53-
(b) Grantor
agrees to indemnify the Secured Parties and the agent, contractors and employees
of the Secured Parties (collectively, the "Indemnitees") against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery, or performance of this
Agreement or any agreement or instrument contemplated hereby or any claim,
litigation, investigation or proceeding relating hereto or to the Collateral,
whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such
amounts payable as provided hereunder shall be additional Obligations secured
hereby. The provisions of this Section shall remain operative and in full force
and effect regardless of the termination of this Agreement, the Purchase
Agreement and the Notes, the consummation of the transactions contemplated
hereby, the repayment of any of the Obligations, the invalidity or
unenforceabil|^Mji| term or provision of this Agreement, the Purchase Agreement
or the Notes, or any iriv|pglti6n made by or on behalf of the Secured Parties.
All amounts due under this Section shall be payable on written demand
therefor.
Section
7.6. GOVERNING LAW. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY OF THE CONFLICTS OF
LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF
ANOTHER JURISDICTION. THIS AGREEMENT SHALL NOT BE INTERPRETED OR CONSTRUED WITH
ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE
DRAFTED.
Section
7.7. Waivers;
Amendment.
(a) No
failure or delay of the Secured Parties in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
therecfS^|tne: exercise of any other right or power. The rights and remedies of
the Secured Parties hereurltier'arid under the Purchase Agreement are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement, the Purchase Agreement, or the
Notes or the other Transaction Documents or consent to any departure by Grantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Grantor in any case shall entitle Grantor to any other or further
notice or demand in similar or other circumstances.
(b) Neither
this Agreement nor any provision hereof may be waived, amended Or
modified except pursuant to an agreement or agreements, in writing
entered into by the Required Lenders and Grantor.
Section
7.8. WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESStY>QR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT 0$
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE
PURCHASE AGREEMENT AND THE NOTES, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
-54-
Section
7.9. Severability. In the event any one or
more of the provisions contained in this Agreement should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
Section
7.10. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall constitute an original
but all of which when taken together shall constitute but one contract. Each
party shall Jae.^ntMed to rely on a facsimile signature of any other party
hereunder as if it were an origirial.
Section
7.11. Jurisdiction;
Consent to Service ofProcess.
(a) Grantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, the Purchase Agreement or the Notes, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Secured Parties may otherwise have to bring any action or proceeding relating to
this Agreement, the Purchase Agreement or the Notes against Grantor or its
properties in the courts of any jurisdiction.
(b) Grantor
hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any of which it may now or hereafter have to the
laying of venue of any suit, action or proceea|Sgliarising out of or relating to
this Agreement, the Purchase Agreement or the Notes in any New York State or
Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding iii any such court.
(c) Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 7.1. Nothing in this Agreement will affect the
right of any party to this Agreement to process in any other manner permitted by
law.
Section
7.12. Termination. This Agreement and the
Security Interest shall terminate when all the Obligations have been paid in
full, at which time the Secured Parties shall execute and deliver to Grantor, at
Grantor's expense, all Uniform Commercial Code termination statements and
similar documents which Grantor shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section shall be without recourse to or warranty by the Secured
Parties.
-55-
Section
7.13. -Prejudgment
Remedy Waiver.
Grantor acknowledges that this Agreement, the Purchase Agreement and the
Notes evidence a commercial transaction and that it could, under certain
circumstances have the right, to notice of and hearing on the right of the
Secured Parties to obtain a prejudgment remedy, suchcS§
attachment, garnishment and/or replevin, upon Commencing any litigation against
Grantor. ^liMitbifanding, Grantor hereby waives all rights to notice, judicial
hearing or prior court order to which it might otherwise have the right under
any state or federal statute or constitution in connection with the obtaining by
the Secured Parties of any prejudgment remedy by reason of this Agreement, the
Purchase Agreement, the Notes or by reason of the Obligations or any renewals or
extensions of the same. Grantor also waives any and all
objection which it might otherwise assert, now or in the future, to the exercise
or use by titie Secured Parties of any right of setoff, repossession or self
help as may presently exist under statute or common law.
Section
7.14. Collateral
Agent.
(a) Each
Secured Party hereby appoints Cipher Capital Partners LLC (the "Collateral Agent") as the
Collateral Agent hereunder and each Secured Party authorizes the Collateral
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Transaction Documents as are delegated to the
Collateral Agent under such agreements and to exercise such powers^ are
reasonably incidental thereto. Without limiting the foregoing, each Secured
Party he||^;
authorizes the Collateral Agent to execute and deliver, and to perform its
obligations under, each of the documents to which the Collateral Agent is a
party relating to security for the obligations under the Notes, to exercise all
rights, powers and remedies that the Collateral Agent may have under such
Transaction Documents and, in the case of the Transaction Documents, to act as
agent for the Secured Parties under such Transaction Documents.
(b) As to any
matters not expressly provided for by this Agreement and the other document
relating thereto (including enforcement or collection), the Collateral Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding upon all Secured Parties; provided, however, that the
Collateral Agent shall not be required to take any action that (i) the
Collateral Agent in good faith believes exposes it to personal liability unless
the Collateral Agent receives an indemnification satisfactory to it from the
Secured Parties with respect to such action or (ii) is contrary to this
Agreement or applicable law. The Collateral Agent agrees to give to each Secured
Party prompt notice of (i) each notice given to it by the Company pursuant to
the terms of this Agreement or the other Transaction Documents and (ii) the
actions taken by the Collateral Agent on behalf of the Secured Party., If the
Collateral Agent receives conflicting instructions from the Secured Parties it
wilMolftte required to act until it receives instructions from the Secured
Parties holding a majority o'Mie Notes (calculated in dollar amounts rather than
noteholders).
-56-
(c) In
performing its functions and duties hereunder and under the Transaction
Documents and the other documents required to be executed or delivered in
connection therewith, the Collateral Agent is acting solely on behalf of the
Secured Parties and its duties are entirely administrative in nature. The
Collateral Agent does not assume and shall not be deemed to have assumed any
obligation other than as expressly set forth herein, in the Transaction
Documents and any other documents required to be executed or delivered in
connection therewith related hereto or any other relationship as the agent,
fiduciary or trustee of or for any Secured Party or holder of any other
obligation under this Agreement or the Notes. The Collateral Agent may perform
any of its duties under any Transaction Document by or through its agents or
employees.
(d) None of
the Collateral Agent, any of its affiliates or any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken
by it,
him, her or them under or in connection with this Agreement or the other
Transaction Documents, except for its, his, her or their oifSiigloss negligence
or willful misconduct.
(e) Each
Secured Party acknowledges that it shall, independently and without reliance
upon the Collateral Agent or any other Secured Party conduct its own independent
investigation of the financial condition and affairs of the Company and its
Subsidiaries in connection with the issuance of the Securities. Each Secured
Party also acknowledges that it shall, independently and without reliance upon
the Collateral Agent or any other Secured Party and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and other
Transaction Documents. For avoidance of doubt, each Secured Party represents
that it has had no contact with the Collateral Agent; and acknowledges that the
Collateral Agent has had no role in the negotiation or preparation of the
Transaction Documents and was contacted after such negotiations and documents
were finalized for the purpose of serving solely in the administrative role of
Collateral Agent under this Agreement.
(f) Each
Secured Party, severally but not jointly and on a pro rata basis, agrees to
indemnify the Collateral Agent and each of its affiliates, and each of their
respective directors, officers, employees, agents and advisors (to the extent
not reimbursed by the Borrower), from any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements (including fees, expenses ;and
disbursements of financial and legal advisors) of any kind or nature whatsoever
Iriatniiy'be imposed oh, incurred by, or asserted against, the Collateral Agent
or any of its affiliates, directors, officers, employees, agents and advisors in
any way relating to or arising out of this Agreement or the other Transaction
Documents or any action taken or omitted by the Collateral Agent under this
Agreement or the document related thereto; provided, however, that no
Secured Party shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Collateral Agent's or such Affiliate's gross
negligence or willful misconduct.
-57-
(g) The
Collateral Agent may resign at any time by giving written notice thereof to the
Secured Parties and the Company. Upon any such resignation, the Secured Parties
shall have the right to appoint a successor Collateral Agent. If no successor
Collateral Agent shall have been so appointed by the Secured Parties, and shall
have accepted such appointment, within 30 days after the retiring Collateral
Agent's giving of notice of resignation, then the retiring Collateral Agent may,
on behalf of the Secured Parties, appoint a successor Collateral Agent, selected
from among the Secured Parties. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, such successor Collateral
Agent shall succeed to, and become vested with, all the rights, powers,
privileges and duties of the retiring Collateral Agent, and the retiring
Collateral Agent shall be discharged from its duties and obligations under this
Agreement, the Transaction Documents andanyittnerdocuments required to be
executed or delivered in connection therewith. Prior to any retiring Collateral
Agent's resignation hereunder as Collateral Agent, the retiring Collateral Agent
shall take such action as may be reasonably necessary to assign to the successor
Collateral Agent its rights as Collateral Agent under the Transaction Documents.
After such resignation, the retiring Collateral Agent shall continue to have the
benefit of this Agreement as to any actions taken or omitted to be taken by it
while it was
Collateral Agent under this Agreement, the Transaction Documents and any other
documents required to be executed or delivered in connection
therewith.
(h) Each
Secured Party agrees that any action taken by the Collateral Agent in
accordance
with the provisions of this Agreement or of the other document relating thereto,
and the
exercise by the Collateral Agent or the Secured Parties of the powers set forth
herein or therein,
together with such other powers as are reasonably incidental thereto, shall be
authorized and
binding upon all of the Secured Parties.
(i) Each
of the Secured PartiQfp^by directs, in accordance with the terms hereof,
the Collateral Agent to release (or in the case of clause (ii) below, release or
subordinate) any Lien
held by the Collateral Agent for the benefit of the Secured Parties against any
of the following:
(i) all of the Collateral upon payment and satisfaction in full of all
obligations under the Notes
and all other obligations under the Transaction Documents that the Collateral
Agent has been
notified in writing are then due and payable; (ii) any assets that are subject
to a Lien permitted
by Section 3.2); and (iii) any part of the Collateral sold or disposed of by the
Company or any
Subsidiary if such sale or disposition is permitted by this Agreement and the
Notes (or permitted
pursuant to a waiver or consent of a transaction otherwise prohibited by this
Agreement
and the Notes). Each of the Secured Parties hereby directs the Collateral Agent
to execute
and deliver or file such termination and partial release statements and do such
other things as
are necessary to release Liens to be released pursuant to this Section 7.14
promptly upon the
effectiveness of any such release.
(j) The
contact information for the Collateral Agent is: Cipher Capital Partners LLC,
c/x Xxxxxxx Xxxx Partners, 000 Xxxxxxx Xxxxxx, 0xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Xxxx. The fax number for Cipher
Capital Partners is (000) 000-0000 and the E-mail address is xxxxx@xxxxxxxxxxxx.xxx.
The telephone number for Cipher Capital Partners is (000) 000-0000.
-58-
(k) The Collateral
Agent:
(i) shall not
be responsible in any manner for the i validity, correctness or sufficiency of
any document or instrument ireceived by or made available to it, in its capacity
as Collateral
Agent
hereunder.
(ii) shall be
entitled to act upon any written certificate, statement, notice, demand,
request, consent, agreement or other instrument whatever, not only in reliance
upon its due execution and the validity and effectiveness of its provisions, but
also as to the accuracy and completeness of any information therein contained,
which the Collateral Agent shall in good faith believe to be genuine and to have
been signed or presented by any authorized person.
(iii) shall be
entitled to request and receive from any party hereto such documents in addition
to those provided for herein as the Collateral Agent may deem necessary to
resolve any questions
of fact involveol||it'the\ administration of its duties hereunder.
(iv) may, at
the expense of the remaining parties, consult independent counsel of its choice
in respect to any question relating to its duties or responsibilities under this
Agreement, and shall not be liable for any action taken or omitted in good faith
on advice of such counsel.
(v) shall be
under no obligation to advance any monetary sum in connection with the
maintenance or administration of this Agreement, to institute or defend any
action, suit or legal proceeding in connection herewith, or to take any other
action likely to involve the Collateral Agent in expense, unless first
indemnified by the remaining parties to the Collateral Agent's
satisfaction.
(vi) shall not
be bound by any amendment to this Agreement or by any other such amendment or
agreement unless the same shall have been executed by the Collateral
Agent.
(vii) shall
have only such duties and responsibilities as are expressly set forth in this
Agreement in the performance of its obligations hereunder.
(viii) acknowledges
specifically its obligations under section 6.2(b) above regarding pro rata
distributions of the proceeds of any collection or sale of the Collateral, as
well as any Collateral consisting of cash.
(ix) may, if
it becomes uncertain concerning its rights and responsibilities with respect to
its duties or if it receives instructions with respect to the Collateral that it
believes to be in conflict with this Agreement or is advised that a dispute has
arisen with respect to its duties under this Agreement, without liability,
refrain from taking any action until it is directed otherwise in a writing
signed by all of the Secured Parties or by an order of a court of competent
jurisdiction. The Collateral Agent is not obligated to institute or defend any
legal proceedings, although it may, in its sole discretion and at the r^hiai^ihg
parties' expense, institute or defend such proceedings l-fmcludihg proceedings
seeking a declaratory judgment) and join interested parties.
-59-
(x) The
Collateral Agent will be paid a fee of $3,000 for its agreement to serve as the
Collateral Agent. This fee is payable upon the execution of this
Agreement.
[Signature
page follows]
IN
WITNESS WHEREOF, the parties have duly executed this Security Agreement as the
day and year first written above.
DIRT
MOTOR SPORTS, INC.
By:
Name:
Title:
XXXXXX
& MIRACLE CONCESSIONS, LLC
By:
Name:
Title:
SECURED
PARTY
Name:
Title:
Acknowledged
and agreed:
Collateral
Agent:
By:
Name:
Title:
-60-
EXHIBIT
A Secured Parties
SCHEDULE
A
Places
of Business; Chief Executive Office; Filing Locations Dirt Motor Sports, Inc.
d/b/a World Racing Group, Inc.
State of
Incorporation; Delaware
Chief Executive
Office:
0000-X
Xxxx Xxxxx Xxxx.
Xxxxxxx,
XX 00000
Filing
Locations:
Secretary
of State of the State of Delaware
Xxxxxx
& Miracle Concessions, LLC
State of
Organization: Florida
Chief Executive
Office:
0000-X
Xxxx Xxxxx Xxxx.
Xxxxxxx,
XX 00000
Filing
Locations:
Secretary
of State of the State of Florida
-61-
|
|
SCHEDULE
3.3 Existing Liens
|
Xxxxx X.
Xxxxxx holds a security interest in the real property and personal property
collectively referred to as Lernerville Speedway located at 000 X. Xxxx Xxxx,
Xxxxxx XX 00000 pursuant to the Mortgage dated November 30,2004 by and between
the Grantor, Boundless Racing, Inc. and guaranteed by DIRT Motor Sports, Inc.
f/k/a Boundless Motor Sports Racing, Inc. and Xxxxx X. Xxxxxx.
Xxxxxxx
X. Xxxxxx holds a security interest in the real property and personal property
collectively referred to as Volusia Speedway Park located at 0000 X. Xxxxxxx 00,
Xxxxxx Xxxxxxx, Xxxxxxx 00000 pursuant to the Mortgage dated June 30, 2005 by
and between the Grantor, Boundless Racing, Inc. and guaranteed by DIRT Motor
Sports, Inc. f/k/a Boundless Motor Sports Racing, Inc. and Xxxxxxx X.
Xxxxxx.
Xxxxx
Finance, LLC holds a security interest in certain personal property, primarily
lighting improvements, located at Lernerville speedway pursuant to a Lease dated
March 6,2007 by and between DIRT Motor Sports, Inc. and Xxxxx Finance,
LLC.
Bank of
America NA holds a security interest in two (2) 2005 Ford F350 Trucks pursuant
to vehicle finance agreements dated February 16,2007 by and between DIRT Motor
Sports, Inc. and Bank of America NA.
Commerce
Bank holds a security interest in a 2005 Haulmark MotorHome (VIN ending # #4256)
pursuant to a vehicle finance agreement dated January 15, 2007 by and between
DIRT Motor Sports, Inc. and Commerce Bank.
CNH
Capital America LLC holds a security interest in a 1999 CASE BackHoe (serial
ending #8004) pursuant to a finance agreement dated April 27,2006 by and between
DIRT Motor Sports, Inc. and CNH Capital America LLC.
Chase
Auto Finance holds a security interest in a 2005 Dodge Sprinter Van (VIN ending
#7899) pursuant
to a vehicle finance agreement dated July 21, 2005 by and between DIRT Motor
Sports, Inc. and Chase Auto
Finance.
Xxxx
Deere Credit holds a security interest in aJolin Deere Tractor/Loader pursuant
to a Loan Contract/Security Agreement dated April 9,2007 by and between DIRT
Motor Sports, Inc. and Xxxx Deere Credit.
-62-
SCHEDULE
3.4 Absence of Other Liens
Xxxxx X.
Xxxxxx holds a security interest in the real property and personal property
collectively referred to as Lernerville Speedway located at^B'Xx Xxxx Xxxx,
Xxxxxx XX 00000 pursuant to the Mortgage dated November 30,2004 by and between
the Grantor, Boundless Racing, Inc. and guaranteed by DIRT Motor Sports, Inc.
f/k/a Boundless Motor Sports Racing, Inc. and Xxxxx X. Xxxxxx.
Xxxxxxx
X. Xxxxxx holds a security interest in the real property and personal property
collectively referred to as Volusia Speedway Park located at 0000 X. Xxxxxxx 00,
Xxxxxx Xxxxxxx, Xxxxxxx 00000 pursuant to the Mortgage dated June 30,2005 by and
between the Grantor, Boundless Racing, Inc. and guaranteed by DIRT Motor Sports,
Inc. f/k/a Boundless Motor Sports Racing, Inc. and Xxxxxxx X.
Xxxxxx.
Xxxxx
Finance, LLC holds a security interest in certain personal property, primarily
lighting improvements, located at Lernerville speedway pursuant to a Lease dated
March 6,2007 by and between DIRT Motor Sports, Inc. and Xxxxx Finance,
LLC.
Bank of
America NA holds a security interest in two (2) 2005 Ford F350 Trucks pursuant
to vehicle finance agreements dated February 16,2007 by and between DIRT Motor
Sports, Inc. and Bank of America NA.
Commerce
Bank holds a security interest in ^2^05 Haulmark MotorHome (VIN ending # #4256)
pursuant to a vehicle finance agreement dated January 15, 2007 by and between
DIRT Motor Sports, Inc. and Commerce Bank.
CNH
Capital America LLC holds a security interest in a 1999 CASE BackHoe (serial
ending #8004) pursuant to a finance agreement dated April 27, 2006 by and
between DIRT Motor Sports, Inc. and CNH Capital America LLC.
Chase
Auto Finance holds a security interest in a 2005 Dodge Sprinter Van (VIN ending
#7899) pursuant to a vehicle finance agreement dated July 21, 2005 by and
between DIRT Motor Sports, Inc. and Chase Auto Finance.
Xxxx
Deere Credit holds a security interest in a Xxxx Deere Tractor/Loader pursuant
to a Loan Contract/Security Agreement dated April 9,2007 by and between DIRT
Motor Sports, Inc. and Xxxx Deere Credit.
-63-
EXHIBIT
C
FORM
OF MORTGAGE
-64-
Prepared by. Record and
Return To:
Xxxxxx
Xxxxxx, Esquire Fox Rothschild, LLP 000 Xxxxx Xxxxx, Xxxxxxxx #0 Xxxxxxxxxxxxx,
Xxx Xxxxxx 00000
Parcel
Id No.:
MORTGAGE AND SECURITY
AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT ("Mortgage") is made
on___ , 2007,
between DIRT MOTOR SPORTS, INC. d/b/a WORLD RACING GROUP, INC.,
with an address of 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxx X, Xxxxxxx, Xxxxx Xxxxxxxx
00000 (the "Mortgagor")
and [LIST NAMES OF LENDERS], with an address of . (collectively,
the "Mortgagee").
WHEREAS,
Mortgagor has borrowed certain funds from the Mortgagee pursuant to the Note
Purchase Agreement dated as of the date hereof (the "Note Purchase Agreement";
capitalized terms used herein and not defined herein have the meanings set forth
in the Note Purchase Agreement) as evidenced by the Notes in the aggregate
principal sum of FIFTEEN MILLION DOLLARS ($15,000,000) (collectively, the
"Loan") upon such terms and conditions as therein provided;
WHEREAS,
Mortgagor and Mortgagee agree and acknowledge that the total value of the
Mortgaged
Property (as hereinafter defined) is equal to and
that the amount secured
by this Mortgage is hereby limited to said amount.
The
Mortgagor has agreed to enter into this mortgage (the "Mortgage") to grant to
Mortgagee a mortgage lien on and security interest in and to the Mortgaged
Property (as hereinafter defined) as security for the payment and performance of
all Obligations (as hereinafter defined) of the Mortgagor to the Mortgagee
hereunder and under the Note Purchase Agreement* the Notes and the other
Transaction Documents (collectively, the "Loan Documents"), and intending to be
legally bound, Mortgagor does hereby grant, sell, bargain, mortgage, assign,
transfer, pledge and convey to the Mortgagee, and does hereby grant a security
interest (the "Security Interest") to the Mortgagee in Mortgagor's right, title,
and interest in and to the following described property, whether now owned or
hereafter acquired (collectively, the "Mortgaged Property"):
a. all of
the tract or parcel of land and premises known described in Exhibit "A" attached
hereto and made a part of hereof;
b. all
improvements, material, property rights and interests including but not limited
to:
i. all
buildings and other improvements now or hereafter located on the Mortgaged
Property (the "Improvements");
ii. all
streets, lanes, alleys, passages, ways, water courses, easements and
appurtenances whatsoever thereunto belonging in or in any way made appurtenant
hereafter, and the reversions and remainder, with respect thereto;
-65-
iii. all
present and future fixtures attached or to be attached to the Mortgaged
Property;
iv. all
building materials, building machinery and building equipment delivered on site
to the Mortgaged Property during the course of, or in connection with, the
construction of, or reconstruction of, or remodeling of any building and
improvements from time to time during the term of this Mortgage;
v. all
awards or payments, mcluding interest thereon, which may be made with respect to
the Mortgaged Property, whether from the exercise of the right of eminent domain
(including any transfer made in lieu of the exercise of said right), or for any.
other injury to or decrease in the value of the Mortgaged Property, including
without limitation, all awards or payments of estimated compensation, all
damages to the Premises or Improvements resulting from any taking, all machinery
and equipment dislocation expenses, all settlement amounts and apportionment of
taxes;
vi. all
insurance policies covering the Mortgaged Property and all proceeds of any
unearned premiums on any such insurance policies including, without limitation,
the right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Mortgaged
Property;
vii. all
future leases and other agreements affecting the use and occupancy of the
Mortgaged Property now or hereafter entered into, and all licenses, permits and
agreements with or from all boards, public utilities, agencies, departments,
governmental or otherwise, relating to or affecting the Mortgaged Property or
the use and occupancy thereof, whether heretofore or hereafter issued or
executed;
viii. all
income, rents, issues, profits, revenues, royalties, proceeds, credits, deposits
and options arising out of, under or relating to the use and operation of the
Mortgaged Property and all leases, chattels real, subleases, subtenancies,
occupancy agreements, licenses or concessions affecting the Mortgaged Property,
including, without limitation, the right, power and authority given to and
conferred upon Mortgagor under any assignment of leases to collect and apply
such income, rents, issues, profits and proceeds;
ix. all
general intangibles arising from, used or held in connection with, or relating
to the Mortgaged Property or the ownership, use, occupancy, enjoyment,
operation, management, development or improvement thereof, including, without
limitation, all governmental permits relating to construction, all subdivision
maps and applications therefor, all subdivision public reports and applications
therefor, all architectural and engineering drawings, plans and specifications,
soil tests, feasibility studies, engineering reports, environmental, building
and other permits, certificates of occupancy, construction, management and other
contracts, franchises, licenses and all names under or by which the Mortgaged
Property or any present or future improvements on the Mortgaged Property may at
any time be operated or known, and all rights to carry on business under any
such names, or any variant thereof, and all trademarks and goodwill in any way
relating to the Mortgaged Property.
TOGETHER
WITH all substitutions therefore, all additions (including without limitation
all cash and dividends and other distributions and all rights, privileges and
options relating to, declared or
granted in connection with property) and all proceeds thereof and products of
each of the foregoing in any form whatsoever.
-66-
HABENDUM CLAUSE
TO HAVE
AND TO HOLD all of the Mortgaged Property unto Mortgagee and its successors and
assigns, forever, upon the terms and conditions herein set
forth.
AND IT IS
AGREED AND UNDERSTOOD that until an Event of Default, (as such term is defined
herein), shall have occurred and the Required Mortgagees (as hereinafter
defined) have elected to foreclose as detailed herein, Mortgagor may retain
possession of the Mortgaged Property.
COVENANTS, REPRESENTATIONS
AND WARRANTIES
IT IS
HEREBY COVENANTED by the parties hereto that the Mortgaged Property is to be
held and applied subject to the further terms herein set forth; and Mortgagor,
for itself and its successors and assigns, hereby covenants, agrees, represents
and warrants with and to Mortgagee as follows:
1. Title to Mortgaged
Property. Mortgagor represents, warrants, covenants and agrees Mortgagor
shall at all times remain the legal and beneficial owner of good and marketable
indefeasible title in fee simple absolute to all of the Mortgaged Property.;
Mortgagor has full power and authority to grant the Mortgaged Property as
provided in this Mortgage and will forever warrant and defend its grant made
herein against any and all claims and demands whatsoever, except as specifically
provided in this Mortgage.
2. Definition of
Obligations. This Mortgage secures the payment and performance of the
following indebtedness, liabilities and obligations (collectively referred to
herein as the "Obligations"):
a. the
Obligations of the Mortgagor set forth in the Note Purchase Agreement, the Notes
and the other Transaction Documents; and
b. all other
sums due or to become due under the Notes and this Mortgage including all
extensions, renewals, modifications or reamortizations of the debt evidenced by
the Notes, all increases or additions to such debt, and all other debts,
obligations and liabilities of every kind and character of Mortgagor now or
hereafter existing in favor of Mortgagee whether such debts, obligations or
liabilities be direct or indirect, primary or secondary, joint or several, fixed
or contingent, and whether originally payable to Mortgagee or to a third party
and subsequently acquired by Mortgagee.
3. Responsibility and
Preservation of Mortgaged Property; Compliance with Laws. Mortgagor
assumes all liability and responsibility in connection with all Mortgaged
Property acquired by Mortgagor and the obligation of Mortgagor to pay all
Obligations shall in no way be affected or diminished by reason of the fact that
any such Mortgaged Property may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to Mortgagor. Mortgagor shall keep the Mortgaged
Property protected and in good order, condition and repair at all times and
shall not: (a) commit, permit or suffer any waste, damage, disfigurement or
injury to or upon the Mortgaged Property or any portion thereof; or (b)
demolish, destroy, or remove any buildings, fixtures, structures or improvements
thereafter erected on or annexed or affixed to the Mortgaged Property. Mortgagor
further agrees and covenants to comply with and perform at its own expense any
and all present or future, ordinary or extraordinary, foreseen or unforeseen
laws, regulations, ordinances
or requirements concerning the Mortgaged Property or any portion thereof, or the
use thereof, or the streets adjacent thereto, of the federal, state or municipal
governments, or of any departments, subdivisions, bureaus or offices thereof, or
of any governmental, public or quasi-public authorities now created or hereafter
created or of the National Board of Fire Underwriters, any local Board of Fire
Underwriters, or other body having similar functions, or of any liability, fire
or other insurance company having policies outstanding with respect to the
Mortgaged Property or any part thereof (mcluding, without limitation, all laws,
regulations, ordinances and requirements relating to environmental issues and
hazardous substances) (said laws, regulations, orciinances and requirements
hereafter collectively referred to as the "Laws").
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4. Taxes. Mortgagor
shall pay, before the same becomes delinquent, all taxes, assessments and
charges of every nature (collectively, "Taxes") and by whomever assessed that
may now or hereafter be levied or assessed against, or that by reason of
nonpayment may become a lien upon, the Mortgaged Property, or any part thereof,
and, if requested by Mortgagee, Mortgagor shall, prior to the date each Tax
would become delinquent by reason of nonpayment, submit to Mortgagee official
Tax payment receipts or other evidence acceptable to Mortgagee of the due and
punctual payment thereof. Mortgagor shall not claim on demand or be entitled to
any credit on account of the Obligations for any part of the taxes paid with
respect to the Mortgaged Property or any part thereof and no deduction shall
otherwise be made or claimed from the taxable value of the Mortgaged Property,
or any part thereof, by reason of this Mortgage.
5. Insurance. In the
event Mortgager shall improve the Mortgaged Property thereby constructing
buildings or other improvements thereon, then Mortgagor shall carry adequate
insurance against all liability and hazards, mcluding without limitation, fire
and casualty insurance for the mortgaged property as are usually carried by
entities engage in the same or a similar business situated as Mortgagor. In the
event of a casualty loss, Mortgagor shall utilize the insurance proceeds to
rebuild the premises or apply the proceeds to the outstanding mortgaged sums due
pursuant to the terms of this mortgage to satisfy any outstanding indebtedness
hereunder. The aforesaid liability insurance shall be in an amount satisfactory
to Mortgagee and shall name Mortgagee as an additional insured.
6. Tenant's Compliance with
Laws. Mortgagor shall cause all future tenants, if any, under any leases
to comply, with all Laws affecting the Mortgaged Property.
7. Right to Inspect and
Cure. The Mortgagee shall, upon reasonable advance written notice to
Mortgagor, have the right to conduct or have conducted by its agents or
contractors, such inspections as the Mortgagee shall deem necessary or advisable
from time to time.
8. Estoppel Certificate.
Mortgagor will certify, by a writing duly acknowledged, to Mortgagee or to any
proposed assignee of this Mortgage, the amount of principal and interest then
owing on the Obligations and whether, to Mortgagor's best knowledge, any offsets
or defenses exist against the Obligations, within five (5) days after a request
therefor is received by Mortgagor.
9. Prohibition on
Transfers. Mortgagor shall not at any time (i) sell, assign, transfer,
convey, lease with option of sale, or dispose of all or any part of or interest
in the Mortgaged Property, or (ii) suffer or permit transfer by operation of law
of the Mortgaged Property, or any part thereof or interest therein, without the
prior written consent thereto of Mortgagee unless the then remaining balance due
under this Mortgage and Notes is satisfied. In the event that the ownership of
the Mortgaged Property or any portion thereof becomes vested in a person other
than Mortgagor, Mortgagee may, without notice to Mortgagor, deal with such
successor or successors in interest with reference to this Mortgage, and the
indebtedness hereby secured, in the same manner as with Mortgagor, without in
any way vitiating or discharging Mortgagor's liability hereunder or upon the
indebtedness hereby secured. No sale of the Mortgaged Property shall operate to
release, discharge, modify, change or affect the original liability of Mortgagor
herein, either in whole or in part. Any violation of the foregoing limitations
shall be deemed an Event of Default hereunder.
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10. Reports and Notices.
Mortgagor will furnish Mortgagee with copies of reports and notices pertaining
to the Mortgaged Property or any portion thereof, its value or its operations,
and which are submitted by Mortgagor to, or received by Mortgagor from, any
legally constituted authority having jurisdiction of operations conducted on the
Mortgaged Property, including, but without limitation, any licensing agency, or
which deal with any imposition, condemnation of all or any portion of the
Mortgaged Property or default under any mortgage or security agreement
encumbering the Mortgaged Property or any portion thereof. r
11. Further Assurances.
Mortgagor will execute, acknowledge and deliver, at Mortgagor's own cost and
expense, all such further acts, deeds, conveyances, assignments, notices of
assignment, transfers and assurances as Mortgagee shall form time to time
reasonably require for the better granting, bargaining, selling, assigning and
conveying to Mortgagee of the Mortgaged Property.
12. Authorization to Make
Payments. Mortgagor hereby authorizes Mortgagee or its
designee:
a. To pay
all taxes or other governmental charges, with all interest costs and charges
accruing thereon, which may at any time be or become a lien on the Mortgaged
Property, or any portion thereof;
b. To effect
any insurance required hereunder and to pay the premiums thereon; provided,
however, that none of the above provisions shall be construed as obligatory upon
Mortgagee or as making it liable for loss, damage or injury which may result
from the non-insurance of the Mortgaged Property, or any portion thereof, or
other failure;
c. To incur
or pay any claim, lien, encumbrance or other expense in protecting its rights
hereunder and the security hereby granted;
d. To do
such things as may, in the judgment of Mortgagee, be necessary or advisable in
order to perform and observe any present agreement affecting or restricting the
use of, or pertaining to, the Mortgaged Property, or any portion thereof,
including, without limitation, the making of such repairs and the taking of such
steps as Mortgagee deems reasonably necessary to prevent or cure waste and the
payment of any reasonable sums and the mcurring of reasonable expenses,
including attorneys' fees; and
e. To appear
or participate in any action or proceeding purporting to affect the security
hereof, it being understood that Mortgagee shall have no obligation, expressed
or implied, to advance any funds, incur any expense or liability, or take any
action authorized by this provision or any other provision of this
Mortgage.
13. Definition of Event of
Default. The occurrence of any one or more of me following events shall
constitute an Event of Default hereunder:
a.
Mortgage;
or the
failure of Mortgagor to make any payments required under the Notes or
this
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b. Mortgagor
shall fail to perform or observe any other term, covenant, warranty, obligation,
provision, representation, or agreement contained in this Mortgage or any other
Obligation;
c. Any
representation, statement, or warranty made in this Mortgage shall prove to have
been false or incorrect in any material respect when made;
d. Mortgagor
shall transfer all or a part of the Mortgaged Property in violation of
thisMortgage;
e. The
holder of any lien shall commence foreclosure proceedings against the Mortgaged
Property or any part thereof;
f. Mortgagor
shall be insolvent, or shall file a voluntary petition in bankruptcy or a
voluntary petition seeking to effect a plan or other arrangement with
creditors;
g. Mortgagor
shall be adjudicated bankrupt, or shall make an assignment for the benefit of
creditors, or shall apply for or consent to the appointment of any receiver or
trustee for itself, or for the Mortgaged Property or any part thereof, or for
all or any substantial portion of its other property/or a suit shall be
instituted against Mortgagor seeking to establish bankruptcy, insolvency,
arrangement, debt adjustment, receivership, sequestration, liquidation or
attachment of the Mortgagor, or of the Mortgaged Property or any part thereof,
or of all or any substantial portion of its other property which is not
dismissed within sixty (60) days thereafter;
h. The
Mortgaged Property or any part thereof is taken or damaged by eminent domain,
alteration on the grade of any street, or other injury to or decrease in the
value of the Mortgaged Property, by reason of any public or quasi-public
improvement or condemnation proceeding or any other similar manner
("Condemnation"), regarding such condemnation or proposed
condemnation;
i. The
Mortgaged Property is materially damaged by any fire or casualty not
covered
by insurance sufficient to provide for the material restoration
thereof;
j. The
occurrence of an "Event of Default" under any Loan Document.
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14. Rights and Remedies on
Default.
a. Acceleration. Upon
the occurrence and during the continuance of any Event of Default, in addition
to any other rights, powers or remedies conferred herein or by operation of law,
the Required Mortgagees, in their sole judgment and discretion, may declare the
then unpaid principal balance secured by this Mortgage (the "Principal Balance"),
the accrued interest thereon and any other accrued but unpaid portion of the
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by Mortgagor. "Required Mortgagees"
means any individual Mortgagee or group of Mortgagees where the sum of the
principal amount of the Notes then outstanding held by such Mortgagee or
Mortgagees aggregates at least sixty percent (60%) of the total principal amount
of all of the Notes then outstanding.
b. Foreclosure and Sale.
If an Event of Default shall occur and be continuing, Mortgagee shall have the
right and option to take possession of the Mortgaged Property and/or proceed
with foreclosure and to sell, to the extent and in the manner permitted by
applicable law, all or any portion of the Mortgaged Property at one or more
sales, as an entirety or in parcels, at such place or places, in such manner and
upon such notice as may be required by applicable law, or, in the absence of any
such requirement, as Mortgagee may deem appropriate, and to make conveyance to
the purchaser or purchasers. Nothing contained in this Section 14(b) shall
be construed so as to limit in any way Mortgagee's rights to sell the Mortgaged
Property, or any portion thereof, by private sale if, and to the extent that,
such private sale is permitted under the laws of the applicable jurisdiction or
by public or private sale after entry of a judgment by any court of competent
jurisdiction so ordering. Mortgagor hereby irrevocably appoints Mortgagee to be
the attorney-in-fact of Mortgagor (coupled with an interest) and in the name and
on behalf of Mortgagor to execute and deliver any deeds, transfers, conveyances,
assignments, assurances and notices which Mortgagor ought to execute and
deliver, and to do and perform any other acts or things which Mortgagor ought to
do and perform under the covenants herein contained and, generally, to use the
name of Mortgagor in the exercise of any of the powers hereby conferred on
Mortgagee. At any such sale: (a) whether made under the power herein contained
or any other legal enactment, or by virtue of any judicial proceedings or any
other legal right, remedy or recourse, it shall not be necessary for Mortgagee
to have physically present, or to have constructive possession of, the Mortgaged
Property (Mortgagor hereby covenanting and agreeing to deliver to Mortgagee any
portion of the Mortgaged Property not actually or constructively possessed by
Mortgagee immediately upon demand by Mortgagee) and the title to and right of
possession of any such property shall pass to the purchaser thereof as
completely as if the same had been actually present and delivered to purchaser
at such sale; (b) each instrument of conveyance executed by Mortgagee shall
contain a general warranty of title, binding upon Mortgagor and its successors
and assigns; (c) each and every recital contained in any instrument of
conveyance made by Mortgagee shall conclusively establish the truth, and
accuracy of the matters recited therein, including, without limitation,
nonpayment and/or nonperformance of the Obligations and advertisement and
conduct of such sale in the manner provided herein and otherwise required by
applicable law; (d) any and all prerequisites to the validity thereof shall be
conclusively presumed to have been performed; (e) the receipt of Mortgagee, or
of such other Person or officer making the sale, shall be a sufficient discharge
to the purchaser for its purchase money and neither such purchaser nor its
assigns or personal representatives shall thereafter be obligated to see to the
application of such purchase money, or be in any way answerable for any loss,
misapplication or non-application thereof; (f)to the fullest extent permitted by
applicable law, Mortgagor shall be completely and irrevocably divested of all of
its right, title, interest, estate, claim and demand whatsoever, either at law
or in equity (including any statutory or common law right of redemption, which
is hereby waived to the fullest extent permitted by applicable law), in and to
the property sold in any such event, and such sale shall be a perpetual bar,
both at law and in equity, against Mortgagor and any and all other Persons
claiming by, through or under Mortgagor; and (g) to the extent and under such
circumstances as are permitted by applicable law, Mortgagee may be a purchaser
at any such sale, and shall have the right, after paying or accounting for all
costs of said sale or sales, to credit the amount of the then unpaid Obligations
to the amount of its bid (in the order of priority set forth in Section 15 hereof) in
lieu of cash payment. Each remedy provided in this instrument is distinct from
and cumulative with all other rights and remedies provided hereunder or afforded
by applicable law or equity, and may be exercised concurrently, independently or
successively, in any order whatsoever.
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c. Judicial Foreclosure.
If any Event of Default shall occur and be continuing, Mortgagee shall have the
right and power to proceed by a suit or suits in equity or at law, whether for
the specific performance of any covenant or agreement herein contained or in aid
of the execution of any power herein granted, or for any foreclosure hereunder
or for the sale of the Mortgaged Property under the judgment or decree of any
court or courts of competent jurisdiction, or for the enforcement of any other
appropriate legal or equitable remedy.
d. Mortgagee's Agents.
If any Event of Default shall occur and be continuing, Mortgagee may appoint or
delegate any one or more persons as agent to perform any act or acts necessary
or incident to any sale held by Mortgagee, including the posting of notices and
the conduct of sale, but in the name and on behalf of Mortgagee.
e. Receiver. If any
Event of Default shall occur and be continuing, Mortgagee may apply for and
obtain as a matter of right and without notice to Mortgagor, which notice is
hereby expressly waived by Mortgagor, the appointment of a receiver to collect
the rents of the Mortgaged Property and to preserve the security hereof, either
before or after any foreclosure sale or the sale of the Mortgaged Property under
the order of a court or courts of competent jurisdiction or under executory or
other legal process, without regard to the value of the Mortgaged Property as
security for the amount then due to Mortgagee, or the solvency of any entity or
entities, person or persons primarily or secondarily liable for the payment of
such amounts; the rents of the Mortgaged Property, in any such event, having
heretofore been assigned to Mortgagee pursuant to this Mortgage as additional
security for the payment of the Obligations secured hereby. Any money advanced
by Mortgagee in connection with any such receivership shall be a demand
obligation (which obligation Mortgagor hereby expressly promises to pay) owing
by Mortgagor to Mortgagee and shall be subject to the provisions of Section 15 <
hereof.
f. Uniform Commercial Code
Remedies. Mortgagee shall have all of the rights, remedies and recourses
with respect to the personalty and the fixtures afforded to it by the applicable
UCC, including, without limitation, the right to take possession of the
personalty and the fixtures or any part thereof, and to take such other measures
as Mortgagee may deem necessary for the care, protection and preservation of the
personalty and the fixtures, in addition to, and not in limitation of, the other
rights, remedies and recourses afforded by this Mortgage or any other Loan
Document.
g. Mortgagees Right to
Cure. Mortgagee shall provide Mortgagor with ten (10) days to cure a
monetary Event of Default. Mortgagee shall provide Mortgagor with a thirty (30)
day time period to cure a non-monetary Event of Default, which period shall
begin the date Mortgagor knows or should have known of the existence of such
Event of Default, provided, however, that if the cure of the non-monetary Event
of Default requires more than thirty (30) days, Mortgagee shall extend the cure
period to forty-five (45) days so long as Mortgagor has commenced the cure
within the thirty (30) day period, and is diligently pursuing the
same.
h. Required Consent of
Mortgagee Prior to Election of Remedies. Should an Event of Default
continue beyond any and all applicable notice, grace and cure periods as
detailed above, Mortgagor shall not proceed with any remedies detailed in this
section or otherwise available at law or in equity without first obtaining
written consent from the Required Mortgagees. Upon receipt of written consent
for the Required Mortgagees, Mortgagee may pursue any and all rights detailed
herein or otherwise available at law or in equity.
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15. Application of
Proceeds. After me occurrence and during me continuance of an Event of
Default, the proceeds of any sale of and any other amounts generated by the
holding, leasing, operating or other use of the Mortgaged Property shall be
applied by Mortgagee (or the receiver, if one is appointed), to the extent that
funds are so available therefrom, in accordance with the provisions of the Note
Purchase Agreement or, if not so provided, then in the following order of
priority, except to the extent otherwise required by applicable
law:
(a) first, to
the payment of the reasonable and necessary costs and expenses of taking
possession of the Mortgaged Property and of holding, using, leasing, repairing,
improving the same, including reasonable (i) receivers' fees, (ii) court costs,
(iii) attorneys' and accountants' fees, (iv) costs of advertisement and title
search fees, and (v)the payment of any and all Impositions, liens, security
interests or other rights, titles or interests equal or superior to the lien and
security interest of this Mortgage (except those to which the Mortgaged Property
has been sold subject to and without in any way implying Mortgagee's prior
consent to the creation thereof);
(b) second,
to the payment of all amounts other than the Principal Balance and accrued but
unpaid interest which may be due to Mortgagee hereunder, under the Note Purchase
Agreement, the Notes or the other Loan Documents, together with interest thereon
as provided herein;
(c) third, to
the payment of the Obligations in such order and manner as Mortgagee determines
in its sole discretion; and
(d) fourth,
to Mortgagor or as otherwise required by any governmental requirement. Mortgagor
shall be liable for any deficiency remaining.
16. Remedies Cumulative.
The parties agree and acknowledge that the Mortgagee shall not be permitted to
exercise any remedies under this Mortgage until such time as it obtains consent
from the Required Mortgagees as detailed above. No remedy herein conferred upon
Mortgagee is intended to be exclusive of any other remedy, but every such remedy
shall be cumulative and shall be in addition to every other remedy herein
conferred or now or hereafter existing at law or in equity or by
statute.
17. Delay Not a Waiver.
No delay or omission of Mortgagee in exercising any right or remedy arising upon
the happening of any Event of Default shall impair any right or remedy or shall
be construed to be a waiver of any such Event of Default or an acquiescence
therein; and every right and remedy given by this Mortgage to Mortgagee may be
exercised upon consent from the Required Mortgagees as detailed above from time
to time and as often as may be deemed expedient by Required
Mortgagees.
18. Headings. The Section
and Clause headings herein are for convenience only and are not to be deemed a
part of the agreement between the parties.
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19. Counterparts. This
Mortgage may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
20. Severability. If any
term or provision of this Mortgage or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Mortgage, or the appUcation of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of the Mortgage shall
be valid and be enforced to the fullest extent permitted by law.
21. Successors and
Assigns. The word "Mortgagee" as used herein shall be construed as
descriptive of Mortgagee named herein, its successors and assigns. The word
"Mortgagor" as used herein shall be construed as descriptive of Mortgagor named
herein and of any subsequent owner or owners of the Mortgaged Property or any
part thereof. All of the covenants and agreements of Mortgagor herein contained
shall be binding upon and assumed by the successors and assigns of
Mortgagor.
22. Release. Upon full
payment of the Obligations and all other amounts secured by this Mortgage, which
full payment is acknowledged by Mortgagee to be satisfaction in full of the Loan
secured by this Mortgage, this Mortgage shall be null and void; otherwise it
shall remain in full force and effect. In the event that this Mortgage shall,
pursuant to the terms of this Section become null and void, Mortgagee shall,
within a reasonable time after receipt of the written request of Mortgagor
therefore, at Mortgagor's sole expense, execute and deliver to Mortgagor a
satisfaction of this Mortgage in recordable form and the appropriate termination
statements as provided for and by the Uniform Commercial Code.
23. Security Agreement.
This Mortgage shall constitute a security agreement to the extent that any of
the Property constitute fixtures or other personal property, and Mortgagee shall
have all the rights of a secured party under the Uniform Commercial Code as
amended from time to time.
24. Governing Law. This
Mortgage shall be governed, construed and enforced by and under the laws of the
state in which the Mortgage Property is located.
25. Notices. All notices,
requests, demands, directions and other communications which may or are required
to be given, served or sent by either Mortgagee or Mortgagor to the other shall
be given, served or sent by nationally recognized overnight courier or certified
mail, return receipt requested, to the address as set forth in the first
paragraph of this document unless a party notifies the other of a different
address.
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26. Payment Of Costs And
Expenses. Mortgagor shall immediately reimburse the Mortgagee for all
costs and expenses which the Mortgagee may incur by reason of, or arising out
of, or in connection with: (a) any Event of Default; (b) any action or
proceeding in which the Mortgagee may appear in or commence to protect,
preserve, exercise or enforce their rights, remedies or security interests under
this Mortgage, or under any document or instrument evidencing the Obligations
secured by this Mortgage, or which otherwise relates to the Mortgaged Property,
including all appeals therefrom; (c) the performance of any act authorized or
permitted hereunder; and (d) the exercise of any other rights or remedies under
this Mortgage, or under any document or instrument evidencing the Obligations
secured by this Mortgage, or otherwise relating to the protection of the
Mortgagee's rights and interest hereunder or under any document or instrument
evidencing the Obligations secured hereby, whether or not a suit or proceeding
is instituted. Such costs and expenses shall include, without limitation, the
fees, charges and expenses of attorneys, expert witnesses, costs and expenses of
searching records, examining title and determining rights in, title to, or the
value of, the Mortgaged or the boundaries thereof, including title company
charges, title insurance premiums, publication costs, and other charges incident
thereto, all whether or not a suit or proceeding is instituted, provided that
such reimbursable costs and expenses shall not include any costs and expenses
incurred by the Mortgagees as a result of its gross negligence or willful
misconduct. Mortgagor agrees to and shall pay, immediately and without demand,
all sums so expended by the Mortgagee, together with interest from the date of
expenditure, at the highest interest rate then payable under the documents and
instruments evidencing the Obligations, all of which sums plus interest shall
constitute additional indebtedness secured by this Mortgage.
27. Amendment. Any term,
covenant, agreement or condition of this Mortgage may be amended, or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively) by one or more substantially concurrent written
instruments signed by Mortgagor and the Required Mortgagees.
28. ACKNOWLEDGEMENT OF RECEIPT
OF COPY. MORTGAGOR HEREBY DECLARES AND ACKNOWLEDGES THAT IT HAS RECEIVED,
WITHOUT CHARGE, A TRUE COPY OF THIS MORTGAGE.
29. Construction. This
Mortgage shall be interpreted and construed with the terms of the Note executed
of even date herewith.
[Remainder
of Page Intentionally Left Blank]
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IN
WITNESS WHEREOF, Mortgagor and Mortgagee has executed this Mortgage on the date
set forth above.
|
WITNESS:
By:_____
Name:
WITNESS:
By:___
Name:
|
MORTGAGOR:
By:_____
Name:
Title:
MORTGAGEE:
By:____
Name:
Title:
|
CERTIFICATE
OF RESIDENCE
I certify that the address of the Mortgagee named in this Mortgage
is
By:____
Name:
Title:
-76-
STATE OF:
COUNTY
OF:
On
this _____ day of, 2007, before me the undersigned, personally
appeared _____ ,
who I am satisfied is the person who signed the foregoing instrument,
and he did acknowledge that he signed, sealed and delivered the same as his
voluntary act and deed.
STATE
OF:
:ss
COUNTY OF
:
On
this _____ day of, 2007, before me the undersigned,
personally appeared _____ ,
who I am satisfied is the person who signed the foregoing instrument,
and he did acknowledge that he signed, sealed and delivered the same as his
voluntary act and deed.
-77-
Exhibit
"A" Legal Description of the Mortgaged Property [See
Attached]
-78-
EXHIBIT
D
FORM
OF GUARANTY
-79-
SUBSIDIARY
GUARANTY
SUBSIDIARY
GUARANTY (this "Guaranty") dated
_____ , 2007 made by the
Persons listed on the signature pages hereof under the caption "Subsidiary
Guarantors" (each a "Subsidiary
Guarantor"), in favor of the Lenders whose names are set forth on Exhibit A hereto (the
"Lenders").
WHEREAS, Dirt
Motor Sports, Inc. d/b/a World Racing Group, Inc., a Delaware corporation (the
"Company") and
the Lenders are parties to a Note Purchase Agreement dated the date hereof (the
"Note Purchase
Agreement"; the terms defined therein and not otherwise defined herein
being used herein as therein defined);
WHEREAS, each
Subsidiary Guarantor will derive substantial direct and indirect benefit from
the transactions contemplated by the Note Purchase Agreement; and
WHEREAS, it
is a condition precedent to the Lenders making the loan evidenced by the Notes
to the Company that each Subsidiary Guarantor shall have executed and delivered
this Subsidiary Guaranty.
NOW,
THEREFORE, in consideration of the premises and in order to induce the Lenders
to make the loans under the Note Purchase Agreement, each Subsidiary Guarantor,
jointly and severally with each other Subsidiary Guarantor, hereby agrees as
follows:
1. No Impairment. The
Lenders may at any time and from time to time, either before or after the
maturity thereof, without notice to or further consent of the undersigned,
extend the time of payment of, exchange or surrender any collateral for, renew
or extend any of the obligations under the Transaction Documents (the "Obligations") or
increase or decrease the interest rate thereon, or any other agreement with the
Company or with any other party to or person liable on any of the Obligations,
or interested therein, for the extension, renewal, payment, compromise,
discharge or release thereof, in whole or in part, or for any modification of
the terms thereof or of any agreement between the Lenders and the Company or any
such other party or person, or make any election of rights the Lenders may deem
desirable under the United States Bankruptcy Code, as amended, or any other
federal or state bankruptcy, reorganization, moratorium or insolvency law
relating to or affecting the enforcement of creditors' rights generally (any of
the foregoing, an "Insolvency Law")
without in any way impairing or affecting this Guaranty. This Guaranty shall be
effective regardless of the subsequent incorporation, merger or consolidation of
the Company, or any change in the composition, nature, personnel or location of
the Company and shall extend to any successor entity to the Company, including a
debtor inpossession or the like under any Insolvency Law.
-80-
2. Guaranty Absolute.
Each of the undersigned jointly and severally guarantees that the Obligations
will be paid strictly in accordance with the terms of the Note Purchase
Agreement, the Notes or the other Transaction Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Company
with respect thereto. The Subsidiary Guarantors hereby knowingly accept the full
range of risk encompassed within a contract of "continuing guaranty" which risk
includes the possibility that the Company will contract additional obligations
and liabilities for which the Subsidiary Guarantors may be liable hereunder
after the Company's financial condition or ability to pay its lawful debts when
they fall due has deteriorated, whether or not the Company has properly
authorized incurring such additional obligations and liabilities. The
undersigned acknowledge that (i) no oral representations, including any
representations to extend credit or provide other financial accommodations to
the Company, have been made by the Lenders to induce the undersigned to enter
into this Guaranty and (ii) any extension of credit to the Company shall be
governed solely by the pr,6M|io5as-to;f the
Transaction Documents. The liability of each of the undersigned under this
Guaranty' shall be absolute and unconditional, in accordance with its terms, and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation: (a) any
waiver, indulgence, renewal, extension, amendment or modification of or
addition, consent or supplement to or deletion from or any other action or
inaction under or in respect of the Note Purchase Agreement, the Notes or the
other Transaction Documents or any assignment or transfer of any thereof, (b)
any lack of validity Or enforceability of the Note Purchase Agreement, the Notes
or the other Transaction Documents or any assignment or transfer of any thereof,
(c) any furnishing of any additional security to the Lenders or its assignees or
any acceptance thereof or any release of any security by the Lenders or its
assignees, (d) any limitation on any party's liability or obligation under the
Note Purchase Agreement, the Notes or the other Transaction Documents or any
assignment or transfer of any thereof or any invalidity or unenforceability, in
whole or in part, of any such document, instrument or agreement or any term
thereof, (e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Company, or any action taken with respect to this Guaranty by any trustee or
receiver, or by any court, in any such proceeding, whether or not the
undersigned shall have notice or knowledge of any of the foregoing, (f) any
exchange, release or nonperfection of any collateral, or any release, or
amendment or waiver of pr^n|ent to departure from any guaranty or security, for
all or any of the Obligations or (g) any ol^|r^n-chmstance
which might otherwise constitute a defense available to, or a discharge of, the
undersigned. Any amounts due from the undersigned to the Lenders shall bear
interest until such amounts are paid in full at the highest rate then applicable
to the Obligations. Obligations include post-petition interest whether or not
allowed or allowable.
3. Waivers.
(a) This
Guaranty is a guaranty of payment and not of collection. The Lenders shall be
under no obligation to institute suit, exercise rights or remedies or take any
other action against the Company or any other person or entity liable with
respect to any of the Obligations or resort to any collateral security held by
it to secure any of the Obligations as a condition precedent to the undersigned
being obligated to perform as agreed herein and each of the Subsidiary
Guarantors hereby waives any and all rights which it may have by statute or
otherwise which would require the Lenders to do any of the foregoing. Each of
the Subsidiary Guarantors further consents and agrees that the Lenders shall be
under no obligation to marshal any assets in favor of the Subsidiary
Guarantor,
or against or in payment^o^anylor all of the Obligations, The undersigned hereby
waives all suretyship defenses and any rights to interpose any defense,
counterclaim or offset of any nature and description which the undersigned may
have or which may exist between and among the Lenders, the Company and/or the
undersigned with respect to the undersigned's obligations under this Guaranty,
or which the Company may assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, fraud, payment (other
than cash payment in full of the Obligations), statute of frauds, bankruptcy,
infancy, statute of limitations, accord and satisfaction, and
usury.
(b) Each of
the undersigned further waives (i) notice of the acceptance of this Guaranty, of
the extensions of credit, and of all notices and demands of any kind to which
the undersigned may be entitled, including, without limitation, notice of
adverse change in the Company's financial condition or of any other fact which
might materially increase the risk of the undersigned and (ii) presentment to or
demand of payment from anyone whomsoever liable upon any of the Obligations,
protest, notices of presentment, nonpayment or protest and notice of any
sale of collateral security or any default of any sort.
-81-
(c) Notwithstanding
any payment or payments made by the undersigned hereunder, or any setoff or
application,.of funds of the undersigned by the Lenders, the undersigned shall
not be entitled to'Uflubfogated to any of the rights of the Lenders against the
Company or against any collateral or guarantee or right of offset held by the
Lenders for the payment of the Obligations, nor shall the undersigned seek or be
entitled to seek any contribution or reimbursement from the Company in respect
of payments made by the undersigned hereunder, until all amounts owing to the
Lenders by the Company On
account of the Obligations are indefeasibly paid in full. If,
notwithstanding the foregoing, any amount shall be paid to the undersigned on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the undersigned in
trust for the Lenders, segregated from other funds of the undersigned, and shall
forthwith upon, and in any event within two (2) business days of, receipt by the
undersigned, be turned over to the Lenders in the exact form received by the
undersigned (duly endorsed by the undersigned to the Lenders, if required), to
be applied against the Obligations pro rata among the Lenders, whether matured
or unmatured, in such order as the Lenders may determine, subject to the
provisions of the Transaction Documents. Any and all present and future
obligations and liabilities of the Company to any of the undersigned are hereby
waived and postponed in favor of, and subordinated to the full payment and
performance of, all Obligations of the Company to the Lenders.
4. Representations and
Warranties. 1 Each of
the undersigned hereby jointly and severally represents and warrants (all of
which representations and warranties shall survive until all Obligations are
indefeasibly satisfied in full and the Transaction Documents have been
irrevocably terminated), that:
(a) Corporate
Status. It is a corporation, partnership or limited
liability company, as the case may be, duly formed, validly existing and in good
standing under the laws
of its jurisdiction of formation indicated on the signature page hereof and has
full power, authority and legal right to own its property and assets and to
transact the business in which it is engaged.
(b) Authority and
Execution. It has full power, authority and legal right to execute and
deliver, and to perform its obligations under, this Guaranty and has taken all
necessary corporate, partnership or limited liability company, as the case may
be, action to authorize the execution, delivery and performance of this
Guaranty.
(c) Legal, Valid and Binding
Character. This Guaranty constitutes its legal, valid and binding
obligation enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting the enforcement of creditor's
rights and general principles of equity that restrict the availability of
equitable or legal remedies.
(d) Violations. The
execution, delivery and performance of this Guaranty will not violate any
requirement of law applicable to it or any contract, agreement or instrument to
which it is a party or by which it or any of its property is bound or result in
the creation or imposition of any mortgage, lien or other encumbrance other than
in favor of the Lenders on any of its property or assets pursuant to the
provisions of any of the foregoing, which, in any of the foregoing cases, could
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on the business, operations, properties, prospects, or
financial condition of any Subsidiary Guarantor and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Subsidiary Guarantor to perform any of its obligations
under this Guaranty in any material respect (a "Material Adverse
Effect").
-82-
(e) Consents or
Approvals?^-No consent of any other person or entity (including, without
limitation, any creditor of the undersigned) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
in connection with the execution, delivery, performance, validity or
enforceability of this Guaranty by it, except to the extent that the failure to
obtain any of the foregoing could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
(f) Litigation. No
litigation, arbitration, investigation or administrative proceeding of or before
any court, arbitrator or governmental authority, bureau or agency is currently
pending or, to the best of its knowledge, threatened (i) with respect to this
Guaranty or any of the transactions contemplated by this Guaranty or (ii)
against or affecting it, or any of its property or assets, which, in each of the
foregoing cases, if adversely determined, would reasonably be expected to have a
Material Adverse Effect.
(g) Financial Benefit. It
has derived or expects to derive a financial or other advantage from each and
every loan, advance or extension of credit made under the Transaction Documents
or other Obligation incurred by the Company to the Lenders.
(h) Solvency. As of the
date of this Guaranty, (a) the fair saleable value of its assets exceeds its
liabilities and (b) it is meeting its current liabilities as they
mature.
5. Remedies upon an Event of
Default.
(a) If any
Event of Default shall occur and be continuing under any agreement made by the
Company or any of the undersigned to the Lenders, any and all Obligations shall
for purposes hereof, at the Lenders' option, be deemed due and payable without
notice notwithstanding that any such Obligation is not then due and payable by
the Company.
(b) Each of
the undersigned will promptly notify each Lender of any default by such
undersigned in its respective performance or observance of any term or condition
of any agreement to which the undersigned is a party if the effect of such
default is to cause, or permit the holder of any obligation under such agreement
to cause, such obligation to become due prior to ;itsjstated maturity and, if
such an event occurs, the Lenders shall have the right to accelefafl;sUch
undersigned's obligations hereunder.
6. Payments from the Subsidiary
Guarantor. The Lenders, in their sole and absolute discretion, with or
without notice to the undersigned, may apply on account of the Obligations any
payment from the undersigned or any other guarantors, or amounts realized from
any security for the Obligations, or may deposit any and all such amounts
realized in a non-interest bearing cash collateral deposit account to be
maintained as security for the Obligations.
7. Costs. The
undersigned shall pay on demand, all costs, fees and expenses (including
expenses for legal services of every kind) relating or incidental to the
enforcement Or
protection of the rights of the Lenders hereunder or under any of the
Obligations.
8. No Termination. This
is a continuing irrevocable guaranty and shall remain in full force and effect
and be binding upon the undersigned, and each of the undersigned's successors
and assigns, until all of the Obligations have been indefeasibly paid in full.
If any of the present or future Obligations are guarantied by persons,
partnerships, corporations or other entities in addition to the undersigned, the
death, release or discharge in whole or in part or the bankruptcy, merger,
consolidation, incorporation, liquidation or dissolution of one or more of
them
shall not discharge or affect the liabilities of any undersigned under this
Guaranty.
-83-
9. Recapture. Anything
in this guaranty to the contrary notwithstanding, if the Lenders receives any
payment or payments on account of the liabilities guaranteed hereby, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver, or any other party under any Insolvency Law, common law or
equitable doctrine, then to the extent of any sum not finally retained by the
Lenders, the undersigned's obligations to the Lenders shall be reinstated and
this Guaranty shall remain in full force and effect (or be reinstated) until
payment shall have been made to the Lenders, which payment shall be due on
demand.
10. Books and Records.
The books and records of the Lenders showing the account between the Lenders and
the Company shall be admissible in evidence in any action or proceeding, shall
be presumptively correct for purposes of establishing the items therein set
forth and shall constitute prima facie proof thereof.
11. No Waiver. No failure
on the part of the Lenders to exercise, and no delay in exercising, any right,
remedy or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Lenders of any>right, remedy or power
hereunder preclude any other or future exercise of any other legal righlfremedy
or power. Each and every right, remedy and power hereby granted to the Lenders
or allowed it by law or other agreement shall be cumulative and not exclusive of
any other, and may be exercised by the Lenders at any time and from time to
time.
12. Waiver of Jury Trial.
EACH OF THE UNDERSIGNED HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE LENDERS, AND/OR ANY OF THE UNDERSIGNED ARISING
OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS GUARANTY, THE NOTE PURCHASE AGREEMENT, THE
NOTES OR THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
13. Governing Law;
Jurisdiction. This Guaranty cannot be changed or terminated orally, and
shall be governed by and construed and enforced in accordance with the laws of
the State of New York applicable to contracts made and performed in such state,
without regard to principles of conflicts of laws which would result, in the
application of the substantive law of another jurisdiction. Each of the
undersigne|!n|reby
consents and agrees that the state Or
federal courts located in the County of New York, of New York shall have
exclusive jurisdiction to hear and determine any claims or disputes between any
of the undersigned, on the one hand, and the Lenders, on the other hand,
pertaining to this Guaranty or any of the Transaction Documents or to any matter
arising out of or related to this Guaranty or any of the Transaction Documents;
provided, that
each of the undersigned acknowledges that any appeals from those courts may have
to be heard by a court located outside of the County of New York, State of New
York; and further
provided, that nothing in this Guaranty shall be deemed or operate to
preclude the Lenders from bringing suit or taking other legal action in any
other jurisdiction to collect the obligations, to realize on the collateral or
any other security for the obligations, or to enforce a judgment or other court
order in favor of the Lenders. Each of the undersigned expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and each undersigned hereby waives any objection which it may have
based upon lack of personal jurisdiction, improper venue or forum non conveniens.
Each of the undersigned hereby waives personal service of the summons, complaint
and other process issued in any such action or suit and agrees that service of
such summons, complaint and other process may be made by registered or certified
mail addressed to such undersigned in accordance with Section 17 and that
service so made shall be deemed completed upon the earlier of such undersigned's
actual receipt thereof or three (3) days after deposit in the U.S. mail, proper
postage prepaid.
-84-
14. Understanding With Respect
to Waivers and Consents. Each Subsidiary Guarantor warrants and agrees
that each of the waivers and consents set forth in this Guaranty is made
voluntarily and unconditionally after consultation with outside legal counsel
and with full knowledge of its significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which such Subsidiary
Guarantor otherwise may have against the Company, the Lenders or any other
person or entity or against any collateral. If, notwithstanding the intent of
the parties that the terms of this Guaranty shall control in any and all
circumstances, any such waivers or consents are determined to be unenforceable
under applicable law, such waivers and consents shall be effective to the
maximum extent permitted by law.
15. Severability. To the
extent permitted by applicable law, any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such"'prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Amendments, Waivers.
No amendment or waiver of any provision of this Guaranty nor consent to any
departure by the undersigned therefrom shall in any event be effective unless
the same shall be in writing executed by each of the undersigned directly
affected by such amendment and/or waiver and the Lenders.
17. Notice. All notices
and other communications required or permitted hereunder shall be in writing and
shall be hand delivered or sent via facsimile, overnight courier service or
mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed or sent to the addresses listed" on the signature page
hereto or at such other addresses as the parties shall have furnished to each
other in writing. Notices sent via hand delivery shall be effective when
received, notices sent facsimile shall be effective upon written confirmation of
transmission (if also sent by another form of notice permitted hereunder within
24 hours of sending the facsimile), notices sent by overnight courier shall be
effective upon receipt, and notices mailed by certified or registered mail,
postage prepaid return receipt requested, shall be effective five business days
after deposit with the U.S. Postal Service.
18. Successors. This
Guaranty is binding upon each Subsidiary Guarantor, its successors and assigns
and (b) inure to the benefit of and be enforceable by the Lenders and their
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (b), subject to Section 10(h) of the Note Purchase Agreement,
the Lenders may assign or Otherwise
transfer all or any portion of its rights and obligations under the Note
Purchase Agreement or other Transaction Documents to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof of a Lender, in each case as and to the extent provided in Section 10(h)
of the Note Purchase Agreement. No Subsidiary Guarantor shall have the right to
assign its obligations hereunder or any interest herein without the prior
written consent of the Lender.
19. Joinder. It is
understood and agreed that any person or entity that desires to become a
Subsidiary Guarantor hereunder, or is required to execute a counterpart of this
Guaranty
after the date hereof pursuant to the requirements of the Transaction Documents,
shall become a Subsidiary Guarantor hereunder by (x) executing a joinder
agreement in form and substance satisfactory to the Lenders, (y) delivering
supplements to such exhibits and annexes to such Transaction Documents as the
Lenders, shall reasonably request and/or as may be required by such joinder
agreement and (z) taking as specified in this Guaranty as would have been taken
by such Subsidiary Guarantor had it been an original party to this Guaranty, in
each case with all documents required above to be delivered to the Lenders and
with all documents and actions required above to be taken to the reasonable
satisfaction of the Lenders.
-85-
20. Release. Nothing
except indefeasible payment in full of the Obligations shall release any of the
undersigned from liability under this Guaranty.
21. Remedies Not
Exclusive. The remedies conferred upon the Lenders in this Guaranty are
intended to be in addition to, and not in limitation of any other remedy or
remedies available to the Lenders under applicable law or
otherwise.
22. Limitation of Obligations
under this Guaranty. Each Subsidiary Guarantor and the Lenders (by its
acceptance of the benefits of this Guaranty) hereby confirms that it is its
intention that this Guaranty not constitute a fraudulent transfer or conveyance
for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act of
any similar Federal or state law. To effectuate the foregoing intention, each
Subsidiary Guarantor and the Lenders (by its acceptance of the benefits of this
Guaranty) hereby irrevocably agrees that the Obligations guaranteed by such
Subsidiary Guarantor shall be limited to such amount as will, after giving
effect to such maximum amount and all, otheif (contingent or otherwise)
liabilities of suclr> Subsidiary Guarantor that are relevant under^jtich laws
and after giving effect to any rights to contribution pursuant to any agreement
providing for an equitable contribution among such Subsidiary Guarantor
(including this Guaranty), result in the Obligations of such Subsidiary
Guarantor under this Guaranty in respect of such maximum amount not constituting
a fraudulent transfer or conveyance.
23. Reference to Section 11(c)
of the Note Purchase Agreement. Notwithstanding anything herein to the
contrary, the rights of any Lender or any other Person to enforce this Guaranty,
or take action under this Guaranty or otherwise in respect of the Obligations
against any Subsidiary Guarantor, is subject to the restrictions set forth in
Section 11(c) of the Note Purchase Agreement.
-86-
IN WITNESS
WHEREOF, this Guaranty has been executed by the undersigned as date and year
here above written.
SUBSIDIARY
GUARANTORS:
By:
Name:
Title:
Address:
Telephone:
Facsimile:
State of
Formation:
-87-
EXHIBIT
E
FORM
OF OPINION
1. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own, lease and operate its properties and assets, and to carry on its
business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse
Effect.
2. The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the Notes
and the Note Shares. The execution, delivery and performance of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required. Each
of the Transaction Documents have been duly executed and delivered, and the
Notes and the Note Shares have been duly executed, issued and delivered by the
Company and each of the Transaction Documents constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its respective terms.
3. The
Note Shares have been duly authorized and, when delivered against payment in
full as provided in the Purchase Agreement, will be validly issued, fully paid
and nonassessable.
4. The
execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of the Notes and the Note Shares do not
(a) violate any provision of the Certificate or Bylaws, (b) to our
knowledge, conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party and which is
set forth on Schedule I, (c) to our knowledge, create or impose a lien, charge
or encumbrance on any property of the Company under any agreement or any
commitment which is set forth on Schedule I to which the Company is a party or
by which the Company is bound or by which any of its respective properties or
assets are bound, or (d) result in a violation of any Federal or state statute,
rule, regulation, or to our knowledge any violation of any order, judgment,
injunction or decree (including Federal securities laws and regulations)
applicable to the Company or by which any property or asset of the Company is
bound or affected, except, in all cases other than violations pursuant to clause
(a) above, for such conflicts, default, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect.
5. No
consent, approval or authorization of or designation, declaration or filing with
any governmental authority on the part of the Company is required under Federal
or state law, rule or regulation in connection with the valid execution,
delivery and performance of the Transaction Documents, or the offer, sale or
issuance of the Notes and the Note Shares other than filings as may be required
by applicable Federal and state securities laws and regulations and any
applicable stock exchange rules and regulations.
6. To
our knowledge: (i) there is no action, suit, claim, investigation or proceeding
pending or threatened against the Company which questions the validity of the
Purchase Agreement or the transactions contemplated thereby or any action taken
or to be taken pursuant thereto; (ii) there is no action, suit, claim,
investigation or proceeding pending, or threatened, against or involving the
Company or any of its properties or assets and which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect; or (iii)
there are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any officers or directors of the Company in their capacities as
such.
-88-
7. Assuming
that all of the Purchasers’ representations and warranties in the Purchase
Agreement are complete and accurate and a Form D is filed with the Unites States
Securities and Exchange Commission, the offer, issuance and sale of the Notes
and Note Shares in conformity with the terms of the Note Purchase Agreement are
exempt from the registration requirements of the Securities Act of 1933, as
amended.
8. The
provisions of the Security Agreement are sufficient to create a valid security
interest in favor of the Purchasers in those items and types
of collateral of the Company (as defined in the Security Agreement -
hereinafter the “Collateral”) in which
a security interest may be created under Article 9 of the __________ Uniform
Commercial Code (“UCC”). Upon:
(i) the due filing of the UCC Financing Statements with the Office of the
Secretary of the State of Delaware; and (ii) the execution and delivery of the
Transaction Documents, the Purchasers will have perfected a security interest
under Article 9 of the UCC in all right, title and interest of the Company in
those items and types of Collateral of the Company in which a security interest
can be created under Article 9 of the UCC and perfected by the filing of a
financing statement.
9. The
Company is not, and as a result of and immediately upon Closing will not be, an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
-89-
EXHIBIT
F
UCC-1
FINANCING STATEMENT
-90-
-91-
Attached
Statement Re Item #4 Accompanying Form UCC-1 Financing Statement Pertaining to
Debtor
Xxxxxx
& Miracle Concessions, LLC 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxx X Xxxxxxx, XX
00000
Item #4
This Financing Statement covers the following Collateral:
All real
and personal property, of every kind and nature, wherever located, all accounts
receivable of the Debtor and all fixture property of every kind and nature,
including, without limitation, all furmture, fixtures, equipment, raw materials,
inventory, or other goods, accounts, contract rights, rights to the payment of
money, insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without hitnitation, all tax refund claims,
license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to xxx and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to which the Debtor
possesses, uses or has authority to possess or use property (whether tangible or
intangible) of others or others possess, use or have authority to possess or use
property (whether tangible or intangible) of the Debtor, and all recorded data
of any kind or nature, regardless of the medium of recording including, without
limitation, all books and records, software, writings, plans, specifications and
schematics; and all proceeds and products of each of the foregoing.
The
Documentary Stamp Tax does not apply to this transaction.
# #
#
-92-
DISCLOSURE
SCHEDULE
TO
NOTE
PURCHASE AGREEMENT
-93-
SCHEDULE
3(d)
Authorized
Shares:
100,000,000
Common Stock, $.001 par value per share
10,000,000
Preferred Stock, $.01 par value per share of which 20,000 are designated as
Series D Convertible Preferred Stock
Issued
and Outstanding
Common: 14,670,240
shares
Series D
Convertible Preferred: 17,684 shares
Shares
issued with registration rights:
17,875,000 shares to
be issued upon conversion of the Series D Convertible Preferred
Stock.
2,520,178 common
shares to be issued upon exercise of Series D Warrants to purchase common
stock.
1,186,266 common shares to be issued upon
exercise of Placement Agent Warrants to purchase common stock.
40,000 common
shares to be issued upon exercise of the Acquisition Warrants to purchase common
stock
1,432,797 common
shares to be issued upon exercise of the other warrants.
1,948,510 common
shares to be issued upon exercise of the Promissory Note Warrants
Anticipated
reserves for potential option pools:
300,000
for
racing teams under contract to the Company.
3,200,000
for
Company employees.
-94-
SCHEDULE
3(h)
Subsidiaries:
All
wholly owned
Boundless
Track Operations, Inc. – Nevada
Boundless
Motor Sports Racing, Inc. – Texas
GPX
Partners, LLC – Texas
GPX
Acquisition, LLC – Texas
Xxxxxx
& Miracle Concessions, LLC – Florida
Volusia
Operations, LLC – Florida
Volusia
Speedway Park Entertainment, LLC – Florida
Volusia
Speedway Park, Inc. - Florida
Boundless
Racing, Inc. – Texas
World of
Outlaws, Inc. – Texas
Federation
Dirt International, Inc. – Nevada
Dirt
Motorsports, Inc. – New York
United
Midwestern Promoters Motorsports, LLC - Ohio
-95-
SCHEDULE
3(i)
- None
-
-96-
SCHEDULE
3(j)
- None
-
-97-
SCHEDULE
3(k)
None.
-98-
SCHEDULE
3(l)
Promissory
Notes secured by the following operating equipment:
|
Schedule
of Existing Vehicle and Equipment Notes
|
||||||||||||||||||||||||
|
Balance
@
|
Remainder
of
|
2011
&
|
||||||||||||||||||||||
|
31-Mar-07
|
2007
|
2008
|
2009
|
2010
|
Thereafter
|
|||||||||||||||||||
|
Notes
Payable:
|
||||||||||||||||||||||||
|
Bank
of American (2 Ford Dually trucks)
|
57,975 | 13,607 | 19,498 | 21,169 | 3,701 | |||||||||||||||||||
|
Case
Back Hoe
|
14,381 | 3,105 | 4,515 | 4,986 | 1,775 | - | ||||||||||||||||||
|
Dodge
Sprinter -
|
23,277 | 4,746 | 6,775 | 7,324 | 4,433 | |||||||||||||||||||
|
Haulmark
Motorhome – Sprint Series
|
127,833 | 2,084 | 2,849 | 3,092 | 3,357 | 116,451 | ||||||||||||||||||
|
Xxxx
Deere tractor, Volusia
|
19,773 | 4,160 | 6,591 | 6,591 | 2,431 | |||||||||||||||||||
|
Xxxxx
Lighting, Lernerville
|
64,395 | 5,413 | 10,990 | 12,102 | 13,327 | 22,563 | ||||||||||||||||||
| 307,633 | 33,114 | 51,217 | 55,264 | 29,024 | 139,014 | |||||||||||||||||||
$2,340,000
notes payable issued in connection with the purchase of Lernerville Speedway,
bearing interest at 7% payable annually. The balance is due upon maturity on
November 7, 2008. This note is secured by a mortgage on the
Lernerville Speedway Facility. This note will be repaid with the proceeds from
the issuance of the Notes.
$2,000,000
note payable issued in connection with the purchase of Volusia Speedway, bearing
interest at one percent over prime and payable in fifty-nine equal monthly
installments commencing at $24,000 per month and adjusted quarterly for changes
in interest rates with the balance of the outstanding principal and accrued
interest due on June 30, 2010, most recently bearing interest at 9.25%.
Outstanding principle balance at June 30, 2007: $1,735,849.70. This note is
secured by a mortgage on the real property, and security agreement covering the
other assets acquired from Volusia Speedway.
$423,000
note payable to an individual bearing interest at 8%. Due on June 15, 2007. This
note will be repaid with the proceeds from the issuance of the
Notes.
Defaults
with respect to Indebtedness:
The
$423,000 note payable to an individual bearing interest at 8% was due June 15,
2007 and will be repaid with the proceeds from the issuance of the
Notes.
-99-
SCHEDULE
3(m)
- None
-
-100-
SCHEDULE
3(n)
The
Company is a defendant in a lawsuit brought by the former General Counsel of the
Company, Xxxxxx Xxxxxxx, currently pending in the United States District Court
for the District of Colorado, alleging breach of contract for, among other
things, failure to issue stock options, restricted stock, and bonuses to Xx.
Xxxxxxx during his employment with the Company. The complaint seeks
unspecified damages. The Company believes that the complaint is
without merit, and is vigorously defending the action.
The
Company is a defendant in a lawsuit brought by the former Chief Accounting
Officer of the Company, Xxx Xxxxx, currently pending in the District Court of
Cleveland County for the State of Oklahoma, alleging age discrimination, breach
of an oral contract and fraud in the inducement. The complaint
seeks unspecified damages. The Company believes that the complaint is
without merit, and is vigorously defending the action.
-101-
SCHEDULE
3(o)
- None
-
-102-
SCHEDULE
3(p)
State
of New York Sales tax commission – Open periods under review.
-103-
SCHEDULE
3(q)
Per
Engagement Letter attached hereto.
-104-
SCHEDULE
3(s)
- None
-
-105-
SCHEDULE
3(t)
- None
-
-106-
SCHEDULE
3(v)
The
$423,000 note payable to an individual bearing interest at 8% was due June 15,
2007 and will be repaid with the proceeds from the issuance of the
Notes.
-107-
SCHEDULE
3(w)
Lease
Agreement for concessions with Xxxxxx & Miracle Concessions, LLP for Volusia
Speedway Park: Volusia Operations, LLC entered into a Lease Agreement with
Xxxxxx & Miracle Concessions, LLP expiring on December 31, 2007 with
subsequent one year renewal terms whereby Miracle & Xxxxxx Concessions will
provide for and operate the beer booth stand at Volusia Speedway for the term of
this Agreement.
Employment
agreements with officers of the Company:
|
(1)
|
Xxx
Xxxxxxx: Effective February 20, 2006 for a three year term, Xx. Xxxxxxx
shall serve as the Company’s Executive Vice President and Chief Marketing
Officer whereby he shall receive an annual salary of $180,000, formulaic
incentive compensation, discretionary incentive compensation, 300,000
options of the Company’s common stock at at exercise price of $3.75 per
share, and 150,000 shares of restricted common stock. All terms and
conditions of the Employment Agreement can be viewed in the Company’s 8k
filing on March 2, 2006.
|
|
(2)
|
Xxx
Xxxxxxx: Effective February 20, 2006 for a three year term, Xx. Xxxxxxx
shall serve as the Company’s Executive Vice President of Operations
whereby he shall receive an annual salary of $180,000, formulaic incentive
compensation, discretionary incentive compensation, 300,000 options of the
Company’s common stock at an exercise price of $3.75 per share, and
150,000 shares of restricted common stock. All terms and conditions of the
Employment Agreement can be viewed in the Company’s 8k filing on March 2,
2006.
|
|
(3)
|
Xxxxx
Xxxxxx: Effective February 1, 2005 for a term of three years, Xx. Xxxxxx
shall serve as the Company’s Chief Financial Officer whereby he shall
receive an annual salary of $180,000, and 300,000 options of the Company’s
common stock. All terms and conditions of the Employment Agreement can be
viewed in the Company’s 8k filing on July 28,
2005.
|
|
(4)
|
Xxx
Xxxxx: Effective February 1, 2006 for a term of two years, Xx. Xxxxx shall
serve as the Company’s President and Acting Chief Executive Officer
whereby he shall receive an annual salary of $180,000, and 300,000 options
of the Company’s common stock at an exercise price of $3.75 per share, and
150,000 shares of restricted common stock. All terms and conditions of the
Employment Agreement can be viewed in the Company’s 8k filing on August
18, 2006.
|
-108-
SCHEDULE
3(y)
Employment
agreements with Officers of the Company
Refer to
Schedule 3(w).
