SERIES B CONVERTIBLE PREFERRED STOCK EXCHANGE AGREEMENT
EXHIBIT
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This Exchange Agreement (this “Agreement”) is dated as of April , 2006, by and
among Dirt Motor Sports, Inc., a Delaware corporation (the “Company”), and the holders of
shares of the Company’s Series B Convertible Preferred Stock and Series C Convertible Preferred
Stock whose signatures appear on the signature page attached hereto (the “Holders”).
Recitals:
WHEREAS, certain Holders currently hold an aggregate of shares of Series B
Convertible Preferred Stock of the Company, par value $.01 per share and stated value $
per share, convertible into shares of the Company’s common stock (“Common Stock”) at a
conversion price of $ per share (the “Series B Preferred Shares”), issued pursuant
to that Series B Convertible Preferred Stock Purchase Agreement dated as of , 200
by and among the Company and the Holders (the “Series B Purchase Agreement”); and
WHEREAS, subject to the terms and conditions set forth herein, the Company desires to cancel
and retire the Series B Preferred Shares and forfeit any and all rights under the Series B Purchase
Agreement and the Certificate of Designation of the Relative Rights and Preferences of the Series B
Convertible Preferred Stock filed with the Colorado Secretary of State on , 200
and
the Holders are willing to exchange the Series B Preferred Shares for an aggregate of shares
of Series D Convertible Preferred Stock of the Company, par value $.01
per share and stated value $3,000 per share, convertible into shares of Common Stock at a
conversion price of $3.00 per share (the “Series D Preferred Shares”).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby agreed and acknowledged, the parties hereby agree as follows:
AGREEMENT:
1. Securities Exchange.
(a) In consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, each Holder agrees to deliver to the Company the
Series B Preferred Shares in exchange for the Series D Preferred Shares and the Company agrees to
issue and deliver the Series D Preferred Shares to the Holders in exchange for the Series B
Preferred Shares.
(b) The closing under this Agreement (the “Closing”) shall take place at the offices
of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ upon the
satisfaction of each of the conditions set forth in Sections 4 and 5 hereof (the “Closing
Date”).
(c) At the Closing, the Company shall issue to the Holders an aggregate of ___
Series D Preferred Shares as set forth on Exhibit A hereto and the Holders shall deliver to
the Company for cancellation the Series B Preferred Shares. The Series D Preferred Shares are
sometimes referred to herein as the “Securities”.
2. Representations, Warranties and Covenants of the Holders. Each of the Holders
hereby makes the following representations and warranties to the Company, and covenants for the
benefit of the Company, with respect solely to itself and not with respect to any other Holder:
(a) If a Holder is an entity, such Holder is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization.
(b) This Agreement has been duly authorized, validly executed and delivered by each Holder and
is a valid and binding agreement and obligation of each Holder enforceable against such Holder in
accordance with its terms, subject to limitations on enforcement by general principles of equity
and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and each
Holder has full power and authority to execute and deliver the Agreement and the other agreements
and documents contemplated hereby and to perform its obligations hereunder and thereunder.
(c) Each Holder understands that the Securities are being offered and sold to it in reliance
on specific provisions of Federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of each Holder set forth herein for purposes of qualifying for exemptions from
registration under the Securities Act of 1933, as amended (the “Securities Act”) and
applicable state securities laws.
(d) Each Holder is an “accredited investor” as defined under Rule 501 of Regulation D
promulgated under the Securities Act.
(e) Each Holder is and will be acquiring the Securities for such Holder’s own account, and not
with a view to any resale or distribution in whole or in part, in violation of the Securities Act
or any applicable securities laws.
(f) The offer and sale of the Securities is intended to be exempt from registration under the
Securities Act, by virtue of Section 3(a)(9) and/or 4(2) thereof. Each Holder understands that the
Securities purchased hereunder have not been registered under the Securities Act and that none of
the Securities can be sold or transferred unless they are first registered under the Securities Act
and such state and other securities laws as may be applicable or the Company receives an opinion of
counsel reasonably acceptable to the Company that an exemption from registration under the
Securities Act is available (and then the Securities may be sold or transferred only in compliance
with such exemption and all applicable state and other securities laws).
3. Representations, Warranties and Covenants of the Company. The Company represents
and warrants to each Holder, and covenants for the benefit of each Holder, as follows:
(a) The Company has been duly incorporated and is validly existing and in good standing under
the laws of the state of Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as currently conducted, and is
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duly registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its business requires
such registration or qualification, except where the failure to register or qualify would not have
a Material Adverse Effect. For purposes of this Agreement, “Material Adverse Effect” shall
mean 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 this Agreement in any material respect.
(b) The Securities have been duly authorized by all necessary corporate action and, when paid
for or issued in accordance with the terms hereof, the Securities shall be validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of
refusal of any kind.
(c) This Agreement has been duly authorized, validly executed and delivered on behalf of the
Company and is a valid and binding agreement and obligation of the Company enforceable against the
Company in accordance with its terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally,
and the Company has full power and authority to execute and deliver the Agreement and the other
agreements and documents contemplated hereby and to perform its obligations hereunder and
thereunder.
(d) The execution and delivery of the Agreement and the consummation of the transactions
contemplated by this Agreement by the Company, 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 or by-laws, or (B) of 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 is bound, (ii) result in a violation of any 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 (i)(B), (ii) or (iii) for
any such conflicts, breaches, or defaults or any liens, charges, or encumbrances which would not
have a Material Adverse Effect.
(e) The delivery and issuance of the Securities in accordance with the terms of and in
reliance on the accuracy of each Holder’s representations and warranties set forth in this
Agreement will be exempt from the registration requirements of the Securities Act.
(f) 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 this Agreement or the offer, sale or issuance of the Securities or the
consummation of any other transaction contemplated by this Agreement.
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(g) The Company has complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and delivery 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 preliminary conversations or 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.
(h) The Company represents that it has not paid, and shall not pay, any commissions or other
remuneration, directly or indirectly, to the Holder or to any third party for the solicitation of
the exchange of the Series B Preferred Shares pursuant to this Agreement.
(i) The Company covenants and agrees that promptly following the Closing Date, all outstanding
Series B Preferred Shares will be cancelled and retired by the Company.
4. Conditions Precedent to the Obligation of the Company to Issue the Securities. The
obligation hereunder of the Company to issue and deliver the Securities to each Holder is subject
to the satisfaction or waiver, at or before the Closing Date, of each 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) Each Holder shall have executed and delivered this Agreement.
(b) Each Holder 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 such Holder at or prior to the Closing Date.
(c) The representations and warranties of each Holder shall be true and correct in all
material respects as of the date when made and as of the 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 as of such date.
5. Conditions Precedent to the Obligation of the Holders to Accept the Securities. The
obligation hereunder of each Holder to accept the Securities is subject to the satisfaction or
waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions
are for each Holder’s sole benefit and may be waived by each Holder at any time in its sole
discretion.
(a) The Company shall have executed and delivered this Agreement.
(b) The Company shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Agreement to be performed, satisfied or
complied with by the Company at or prior to the Closing Date.
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(c) Each of the representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though made at that time,
except for representations and warranties that speak as of a particular date, which shall be true
and correct in all material respects as of such date.
(d) No statute, 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 at or prior to the Closing Date.
(e) As of the Closing Date, no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, shall be pending against or affecting the
Company, or any of its properties, which questions the validity of the Agreement or the
transactions contemplated thereby or any action taken or to be taken pursuant thereto. As of the
Closing Date, no action, suit, claim or proceeding before or by any court or governmental agency or
body, domestic or foreign, shall be pending against or affecting the Company, or any of its
properties, which, if adversely determined, is reasonably likely to result in a Material Adverse
Effect.
6. Rights, Benefits and Obligations of Series D Convertible Preferred Stock Purchase
Agreement and Registration Rights Agreement. The Company and the Holders hereby agree that the
Company and the Holders shall have all of the rights and benefits, and be subject to all of the
obligations, under (i) the Series D Convertible Preferred Stock Purchase Agreement dated as of
April ___, 2006 among the Company and the purchasers named therein (the “Series D Purchase
Agreement”) and (ii) the Registration Rights Agreement dated as of April ___, 2006 among the
Company and the purchasers named therein (the “Registration Rights Agreement”), in each
case, with respect to the Securities issued pursuant to this Agreement.
7. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without giving effect conflicts of
law principles that would result in the application of the substantive laws of another
jurisdiction. Each of the parties consents to the exclusive jurisdiction of the Federal courts
whose districts encompass any part of the County of New York located in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party waives its right to a trial by
jury. Each party to this Agreement irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law.
8. Notices. All notices and other communications provided for or permitted hereunder
shall be made in writing by hand delivery, express overnight courier, registered first class mail,
or telecopier (provided that any notice sent by telecopier shall be confirmed by other means
pursuant to this Section 11), initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of this Section.
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(a) if to the Company:
Dirt Motor Sports, Inc.
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Attention: Chief Executive Officer
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with a copy to:
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(b) if to the Holders:
At the address of such Holder set forth on Exhibit A to this Agreement.
All such notices and communications shall be deemed to have been duly given: when delivered by
hand, if personally delivered; when receipt is acknowledged, if telecopied; or when actually
received or refused if sent by other means.
9. Entire Agreement. This Agreement constitutes the entire understanding and
agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or
contemporaneous oral or written proposals or agreements relating thereto all of which are merged
herein. This Agreement may not be amended or any provision hereof waived in whole or in part,
except by a written amendment signed by both of the parties.
10. Counterparts. This Agreement may be executed by facsimile signature and in
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, this Agreement was duly executed on the date first written above.
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EXHIBIT A
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