<PAGE>
 
                                                                   EXHIBIT 10.42

                               GUARANTY AGREEMENT
                               ------------------



     FOR VALUE RECEIVED, and in consideration of credit given or to be given,
advances made or to be made, or other financial accommodation from time to time
afforded or to be afforded to GATEWAY INTERNATIONAL MOTORSPORTS CORPORATION, an
Illinois corporation (hereinafter called the "Debtor"), by FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States, and having a place of business in Memphis,
Tennessee (hereinafter called the "Bank"), the undersigned, GRAND PRIX
ASSOCIATION OF LONG BEACH, INC. (hereinafter the "Guarantor"), hereby jointly
and severally (if more than one), for themselves, their heirs, executors,
administrators and successors absolutely and unconditionally guarantee(s) the
full and prompt payment to the Bank, at maturity (whether by acceleration or
otherwise) and at all times thereafter, of each and all of the following:

          1.  The indebtedness (and interest thereon) incurred under that
     certain Reimbursement Agreement dated as of January 1, 1998, between Debtor
     and Bank (the "Reimbursement Agreement") pursuant to which Bank has issued
     its Irrevocable Standby Letter of Credit No. S983013 in the Stated Amount
     of $2,501,825.00 (the "Letter of Credit"), said indebtedness and interest
     being payable to the order of the Bank, at the offices of the Bank at 165
     Madison Avenue, Memphis, Tennessee 38103, Attention: Metropolitan Division,
     or at such other place as the Bank may designate in writing, being executed
     by the Debtor, and being given for value received, said Reimbursement
     Agreement and Letter of Credit being incorporated herein by reference as
     fully and particularly as if set out verbatim herein; and

          2.  All obligations of Debtor pursuant to any and all renewals,
     modifications, or extensions, in whole or in part, of the Reimbursement
     Agreement and Letter of Credit; and

          3.  All obligations of the Debtor or Memphis International Motorsports
     Corporation ("Motorsports") under and pursuant to any deed of trust,
     mortgage, security agreement, assignment of rents and leases, or other
     security document (collectively herein called "Security Documents") which
     now or hereafter secures the payment of the indebtedness evidenced by the
     Reimbursement Agreement and the Letter of Credit; and

          4.  All obligations of Debtor or Motorsports pursuant to any and all
     renewals, modifications, or extensions, in whole or in part, of any of the
     Security Documents;

together with all expenses, legal and/or otherwise (including court costs and
reasonable attorney's fees) incurred by the Bank in collecting or endeavoring to
collect the Indebtedness, or any part thereof, in protecting any collateral, and
in enforcing this Guaranty (all of which is hereinafter collectively referred to
as the "Indebtedness").

     THIS GUARANTY SHALL BE A CONTINUING, ABSOLUTE AND UNCONDITIONAL GUARANTY,
and shall remain in full force and effect until the Indebtedness (and interest
thereon 
<PAGE>
 
and expenses in connection therewith), and all renewals, modifications, or
extensions thereof, in whole or in part, shall have been fully paid and
satisfied and shall remain in full force and effect thereafter until written
notice of its discontinuance, addressed to 165 Madison Avenue, Memphis,
Tennessee 38103 Attn: Metropolitan Division, shall be actually received by the
Bank by faxed copy with originals to follow (the burden of proof of receipt by
the Bank of such notice being in all cases upon the Guarantor), and also until
any and all said indebtedness, or any extensions or renewals thereof, existing
before receipt of such notice, and expenses in connection therewith, shall be
fully paid. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. The death, dissolution
or withdrawal of the Guarantor (or any of them, if more than one) shall not
terminate this Guaranty until notice of any such death, dissolution or
withdrawal, given as above provided, shall have actually been received by the
Bank, and until all of said indebtedness, or any extensions or renewals thereof,
existing before receipt of such notice shall be fully paid. And in the event of
any such death, dissolution or withdrawal and notice thereof to the Bank, this
Guaranty shall, notwithstanding, continue and remain in force against any
surviving Guarantor until discontinued as hereinabove provided.

     The Bank is hereby expressly authorized to make from time to time, without
notice to anyone:  any renewals, modifications or extensions, whether such
renewals, modifications or extensions be in whole or in part and without limit
as to the number of such extensions or of the renewal periods thereof, and
without notice to or further assent from the undersigned, sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other dispositions
including, without limitation, cancellations, of all or any part of the
collateral pledged to secure the Indebtedness or any part of said Indebtedness,
either express or implied, or of any contracts or instruments evidencing any
thereof, or of any security or collateral therefor, and/or to take any security
for or other guaranties upon any of said Indebtedness; and the liability of the
Guarantor (or any of them, if more than one) shall not be in any manner
affected, diminished or impaired thereby, or by any lack of diligence, failure,
neglect or omission on the part of the Bank to make any demand or protest, or
give any notice of dishonor or default, or to realize upon or protect any of
said Indebtedness, or any collateral or security therefor, or to exercise any
lien upon or right of appropriation or setoff of any moneys, accounts, credits,
or property of said Debtor, possessed by the Bank, towards the liquidation of
said Indebtedness, or by any application of payments or credits thereon.  The
Bank shall have the exclusive right to determine how, when and what application
of payments and credits, if any, shall be made on said Indebtedness, or any part
thereof, and shall be under no obligation, at any time, to first resort to, make
demand on, file a claim against, or exhaust its remedies against the Debtor, or
any one or more of the Guarantors, or other persons or corporations, their
properties or estates, or to resort to or exhaust its remedies against, any
collateral, security, property, liens or other rights whatsoever.  It is
expressly agreed that the Bank may at any time make demand for payment on, or
bring suit against the Guarantor (or any of them, if more than one), or any
other guarantors, may compound with the Guarantor or any other guarantor for
such sums or on such terms as Bank may see fit and release the Guarantor (or any
of them, if more than one) or any other guarantor from all further liability to
the Bank, without thereby impairing the rights of the Bank in any respect to
demand, sue for and collect the balance of the Indebtedness from any guarantor
not so released; and that any claims against Debtor, against any 

                                      -2-
<PAGE>
 
other guarantor, or against any collateral, accruing to the Guarantor (or any of
them, if more than one) by reason of payments made hereunder shall be in all
respects junior and subordinate to any obligation then or subsequently owed by
the Debtor or by such other guarantor to the Bank. In addition, the liability of
the Guarantors (or each of them, if more than one) shall not be affected by any
lack of validity or enforceability of the guaranteed debt. As security for the
undertakings and obligations of the Guarantor hereunder, the Guarantor (or each
of them, if more than one) expressly grants and gives to the Bank a right of
immediate setoff, without demand or notice, of the balance of every deposit
account, now or at any time hereafter existing, of the Guarantor (or each of
them, if more than one) with the Bank, and a general lien upon, and security
interest in all money, negotiable instruments, commercial paper, notes, bonds,
stocks, credits and/or choses in action, or any interest therein, and any other
property, rights, and interests of the Guarantor (or each of them, if more than
one) or any evidence thereof, which have or any time shall come into the
possession, custody, or control of the Bank, and, in the event of default
hereunder, the Bank may sell or cause to be sold at public or private sale in
any manner which may be lawful, for cash or credit and upon such terms as the
Bank may see fit, and (except as may be otherwise expressly provided by the
Uniform Commercial Code, or other applicable law) without demand or notice to
the Guarantor (or each of them, if more than one), all or any of such security,
and the Bank (unless prohibited by the Uniform Commercial Code from so doing) or
any other person may purchase such property, rights or interests so sold and
thereafter hold the same free of any claim or right of whatsoever kind,
including any right or equity or redemption, of the Guarantor (or each of them,
if more than one), such demand, notice, right or equity of redemption being
hereby expressly waived and released.

     In the event of the death, incompetency, dissolution, liquidation,
insolvency (however evidenced) of the Debtor, or institution of bankruptcy or
receivership proceedings by the Debtor, or in the event that any involuntary
bankruptcy or receivership proceedings filed against the Debtor shall not be
dismissed within thirty (30) days following the institution of such proceedings,
then and in any such event all of the Indebtedness shall, for the purposes of
this Guaranty, and at the option of the Bank, immediately become due and payable
from the Guarantor; and, in such event, any and all sums or payments of any
nature which may be or become due and payable by the Debtor to the undersigned
are hereby assigned to the Bank, and shall be collectible by the Bank, without
necessity for other authority than this instrument, until the Indebtedness shall
be fully paid and discharged, but such collection by the Bank shall not in any
respect affect, impair or diminish any other rights of the Bank hereunder.

     The granting of credit from time to time by the Bank to the Debtor, in
excess of the amount to which right of recovery under this Guaranty is limited
and without notice to the Guarantor (or any of them, if more than one), is
hereby expressly authorized and shall in no way affect or impair this Guaranty;
and, in the event that the Indebtedness of the Debtor to the Bank shall so
exceed the amount to which this Guaranty is limited, any payment by the Debtor
or any collections or recovery by the Bank from any sources other than this
Guaranty may first be applied by the Bank to any portion of the Indebtedness
which exceeds the limits of this Guaranty.

     The Guarantor (or each of them, if more than one) will not exercise any
rights that Guarantor (or any of them, if more than one) may acquire by way of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until all of the Indebtedness shall have been paid in full.  If 

                                      -3-
<PAGE>
 
any amount shall be paid to the Guarantor (or any of them, if more than one) on
account of such subrogation rights at any time when all the Indebtedness shall
not have been paid in full, such amount shall be held in trust for the benefit
of the Bank and shall forthwith be paid to the Bank to be credited and applied
upon the Indebtedness.

     NOTWITHSTANDING ANY PROVISION OF THE PRECEDING PARAGRAPH TO THE CONTRARY,
IF AT ANY TIME THE GUARANTOR (OR ANY OF THEM, IF MORE THAN ONE) IS OR BECOMES AN
"INSIDER" (AS DEFINED FROM TIME TO TIME IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) WITH RESPECT TO THE DEBTOR, THE GUARANTOR (OR EACH OF THEM, IF MORE THAN
ONE) WAIVES ANY AND ALL RIGHTS OF SUBROGATION AGAINST THE DEBTOR WITH RESPECT TO
THIS GUARANTY, WHETHER SUCH RIGHTS ARISE UNDER AN EXPRESS OR IMPLIED CONTRACT OR
BY OPERATION OF LAW, IT BEING THE INTENTION OF THE PARTIES THAT, IF ANY
GUARANTOR IS AN "INSIDER" WITH RESPECT TO THE DEBTOR, THE GUARANTOR SHALL NOT BE
DEEMED TO BE A "CREDITOR" (AS DEFINED IN SECTION 101 OF THE FEDERAL BANKRUPTCY
CODE) OF THE DEBTOR, BY REASON OF THE EXISTENCE OF THIS GUARANTY IN THE EVENT
THAT THE DEBTOR BECOMES A DEBTOR IN ANY PROCEEDING UNDER THE FEDERAL BANKRUPTCY
CODE.

     Notwithstanding any other provision of this Guaranty to the contrary, if
the obligations of the Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or Federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other law affecting the
rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of the Guarantor's (or each of them, if more
than one) liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor (or each of them, if more than one)
or any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.

     The Bank may without any notice whatsoever to anyone, sell, assign or
transfer all or any part of said Indebtedness; and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
said Indebtedness shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits; but the Bank shall have an unimpaired right, prior
and superior to that of any said assignee, transferee or holder, to enforce this
Guaranty for the benefit of the Bank, as to so much of said Indebtedness that
has not been sold, assigned or transferred.

     No act of commission or omission of any kind, or at any time, on the part
of the Bank in respect of any matter whatsoever shall in any way affect or
impair this Guaranty. This Guaranty is in addition to and not in substitution
for or discharge of any other Guaranty held by the Bank.  The Guarantor (or each
of them, if more than one) waives any rights of action Guarantor (or any of
them, if more than one) might have against the Bank because of the exercise by
the Bank in any manner howsoever of any rights granted to the Bank herein.

     This Guaranty contains the entire agreement between the parties and every
part thereof shall be binding upon the Guarantor (or each of them, if more than
one), Guarantor's successors and 

                                      -4-
<PAGE>
 
assigns, as fully as though everywhere specifically mentioned, and shall inure
to the benefit of the Bank, and its successors and assigns, and shall be
construed according to the laws of the State of Tennessee, in which state it is
accepted by the Bank.

     If any provision hereof is invalid or unenforceable, the remaining
provisions hereof shall not be affected by such invalidity or unenforceability.
Each term and provision contained herein shall, however, be valid and
enforceable to the fullest extent permitted by applicable law.

     The Guarantor (or each of them, if more than one) acknowledges that this
Guaranty Agreement is and shall be effective against such Guarantor upon
execution by such Guarantor (regardless of whether any other person named herein
as Guarantor shall sign), and delivery hereof to the Bank, or its agent; and
that it shall not be necessary for the Bank to execute any acceptance hereof or
otherwise to signify or express its acceptance hereof.

     ALL OF THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST THE OTHER ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY BE
DELIVERED IN THE FUTURE) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP BETWEEN THE PARTIES TO THIS AGREEMENT.

     IN WITNESS WHEREOF, the Guarantor (or each of them, if more than one) has
caused this Guaranty Agreement to be executed by its duly authorized officers on
this the ____ day of January, 1998.


ATTEST:                             GRAND PRIX ASSOCIATION OF LONG 
                                    BEACH, INC.

_______________________________     By:____________________________

Title:_________________________     Title:_________________________

                                      -5-
<PAGE>
 
STATE OF ______________
COUNTY OF _____________

     Before me, ______________________________, a Notary Public in and for the
State and County aforesaid, personally appeared ___________________ and
______________________, with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who, upon oath, acknowledged himself
(or herself) to be the ______________________ and _______________, respectively,
of GRAND PRIX ASSOCIATION OF LONG BEACH, INC., the within-named bargainor, a
corporation, and that they as such ________________________ and _______________,
being duly authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by themselves
as such ____________________ and _______________.

     WITNESS my hand and seal at office, on this the ____ day of January, 1998.


                                          ______________________________________
                                          Notary Public
My Commission Expires:

______________________

                                      -6-