STOCK PURCHASE AGREEMENT by and between MOTORSPORTS & ENTERTAINMENT OF TENNESSEE, INC., a Nevada corporation AND LJ&J ENTERPRISES OF TENNESSEE, INC., a Tennessee corporation Dated: November 21, 2006
EXECUTION
COPY
by
and between
MOTORSPORTS
& ENTERTAINMENT OF TENNESSEE,
INC.,
a
Nevada corporation
AND
LJ&J
ENTERPRISES OF TENNESSEE, INC.,
a
Tennessee corporation
Dated:
November 21, 2006
TABLE
OF CONTENTS
|
Page
|
||||
|
1.
|
TERMS
OF ACQUISITION
|
1
|
||
|
1.1
|
Stock
Purchase
|
1
|
||
|
1.2
|
Purchase
Price
|
2
|
||
|
1.3
|
Closing
|
2
|
||
|
(a)
|
Closings
|
2
|
||
|
(b)
|
The
Company’s Deliveries Upon Execution of the Agreement
|
2
|
||
|
(c)
|
The
Purchaser’s Deliveries Upon Execution of the Agreement
|
3
|
||
|
(d)
|
Deliveries
At the First Closing
|
3
|
||
|
(e)
|
The
Company’s Deliveries At the Final Closing
|
3
|
||
|
(f)
|
The
Purchaser’s
Deliveries At the Final Closing
|
3
|
||
|
2.
|
ADDITIONAL
AGREEMENTS
|
3
|
||
|
2.1
|
Audits
|
3
|
||
|
2.2
|
Best
Efforts
|
3
|
||
|
2.3
|
Further
Assurances
|
4
|
||
|
3.
|
REPRESENTATIONS
AND WARRANTIES.
|
4
|
||
|
3.1
|
Representations
and Warranties as to the Company
|
4
|
||
|
(a)
|
Capitalization
|
4
|
||
|
(b)
|
Organization;
Good Standing; Power
|
4
|
||
|
(c)
|
Authority;
Validity; No Conflicts
|
4
|
||
|
(d)
|
Governmental
Authorizations; Third-Party Consents
|
5
|
||
|
(e)
|
Financial
Statements
|
5
|
||
|
(f)
|
Interests
in Other Entities
|
5
|
||
|
(g)
|
Title
to Properties; Leases
|
5
|
||
|
(h)
|
Absence
of Undisclosed Liabilities
|
6
|
||
|
(i)
|
Litigation
|
6
|
||
|
(j)
|
Material
Contracts
|
6
|
||
|
(k)
|
Employee
Arrangements
|
6
|
||
|
(l)
|
Tax
Matters
|
6
|
||
|
(m)
|
Compliance
with Applicable Laws
|
7
|
||
|
(n)
|
Regulatory
Permits
|
7
|
||
|
(o)
|
Environmental
Matters
|
7
|
||
|
(p)
|
Absence
of Certain Changes
|
7
|
||
|
(q)
|
Brokers
|
7
|
||
|
(r)
|
Disclosure
|
7
|
||
|
(s)
|
Affiliated
Transactions
|
8
|
||
|
(t)
|
Disclosure
Schedules
|
8
|
||
|
3.2
|
Representations
and Warranties of Purchaser
|
8
|
||
|
(a)
|
Organization
and Power
|
8
|
||
|
(b)
|
Authority;
Validity; No Conflicts
|
8
|
||
|
(c)
|
Compliance
with Law
|
8
|
||
|
(d)
|
Capitalization
|
8
|
||
|
(e)
|
Investment
Intent
|
9
|
||
i
TABLE
OF CONTENTS
(continued)
|
4.
|
CONDITIONS
TO CLOSING.
|
9
|
||
|
4.1
|
Conditions
to Purchaser’s Obligation to Close
|
9
|
||
|
(a)
|
Agreements
and Conditions
|
9
|
||
|
(b)
|
Representations
and Warranties
|
9
|
||
|
(c)
|
No
Legal Proceedings
|
9
|
||
|
(d)
|
Board
Approval
|
9
|
||
|
(e)
|
Officer’s
Certificate
|
9
|
||
|
(f)
|
Absence
of Material Changes
|
9
|
||
|
(g)
|
Consents
|
10
|
||
|
(h)
|
Stock
Certificate
|
10
|
||
|
(i)
|
Secretary’s
Certificate
|
10
|
||
|
(j)
|
Company
Capitalization
|
10
|
||
|
(k)
|
Second
Closing Certificate
|
10
|
||
|
(l)
|
Other
Closing Deliveries
|
10
|
||
|
4.2
|
Conditions
to Company’s Obligations to Close
|
10
|
||
|
(a)
|
Agreements
and Conditions
|
10
|
||
|
(b)
|
Representations
and Warranties
|
10
|
||
|
(c)
|
No
Legal Proceedings
|
10
|
||
|
(d)
|
Purchase
Price
|
11
|
||
|
(e)
|
Shareholders’
Agreement
|
11
|
||
|
5.
|
CERTAIN
TAX MATTERS.
|
11
|
||
|
5.1
|
Tax
Indemnification
|
11
|
||
|
5.2
|
Cooperation
on Tax Matters
|
11
|
||
|
5.3
|
Certain
Taxes
|
11
|
||
|
6.
|
SURVIVAL;
INDEMNIFICATION.
|
12
|
||
|
6.1
|
Survival
of Representations
|
12
|
||
|
6.2
|
Indemnities
of the Company
|
12
|
||
|
6.3
|
Indemnity
of Purchaser
|
12
|
||
|
6.4
|
Limitations
on Indemnification
|
12
|
||
|
7.
|
CONFIDENTIALITY.
|
13
|
||
|
7.1
|
Confidentiality
|
13
|
||
|
7.2
|
Remedies
upon Breach
|
13
|
||
|
8.
|
MISCELLANEOUS
PROVISIONS.
|
13
|
||
|
8.1
|
Counterparts;
Interpretation
|
13
|
||
|
8.2
|
Governing
Laws
|
13
|
||
|
8.3
|
Partial
Invalidity and Severability
|
13
|
||
|
8.4
|
Waiver
|
14
|
||
|
8.5
|
Acceptance
by Fax
|
14
|
||
|
8.6
|
Fees
and Disbursements
|
14
|
||
|
8.7
|
Attorneys’
Fees
|
14
|
||
|
8.8
|
Further
Assurances
|
14
|
||
|
8.9
|
Notice
|
14
|
||
|
8.10
|
Termination
|
15
|
||
|
8.11
|
Effects
of Termination
|
15
|
||
ii
TABLE
OF CONTENTS
(continued)
|
8.12
|
Assignment
|
16
|
||
|
8.13
|
Binding
Effect; Benefits
|
16
|
||
|
8.14
|
Rules
of Construction
|
16
|
||
|
8.15
|
Waiver
of Jury Trial
|
17
|
||
SCHEDULES
|
Schedule
3.1(a)
|
Capitalization
|
|
Schedule
3.1(b)
|
Organization;
Good Standing; Power
|
|
Schedule
3.1(c)
|
Authority;
Validity; No Conflicts
|
|
Schedule
3.1(d)
|
Governmental
Authorizations; Third-Party Consents
|
|
Schedule
3.1(e)
|
Financial
Statements
|
|
Schedule
3.1(g)
|
Title
to Properties; Leases
|
|
Schedule
3.1(h)
|
Absence
of Undisclosed Liabilities
|
|
Schedule
3.1(i)
|
Litigation
|
|
Schedule
3.1(j)
|
Material
Contracts
|
|
Schedule
3.1(l)
|
Tax
Matters
|
|
Schedule
3.1(p)
|
Absence
of Certain Changes
|
|
Schedule
3.1(q)
|
Brokers
|
|
Schedule
3.1(s)
|
Affiliated
Transactions
|
EXHIBITA
|
EXHIBIT
A
|
Shareholders’
Agreement
|
|
EXHIBIT
B
|
Escrow
Agreement
|
iii
This
STOCK
PURCHASE AGREEMENT (this
“Agreement”)
is
made this 21st day of November, 2006, by and between Motorsports
& Entertainment of Tennessee, Inc.,
a Nevada
corporation (“Purchaser”),
LJ&J Enterprises of Tennessee, Inc.,
a
Tennessee corporation (the “Company”)
(each,
a “Party”
and
collectively, the “Parties”).
RECITALS
WHEREAS,
the
Company is principally engaged in the business of motorsports development and
racetrack management, acquisition and design (the “Business”);
WHEREAS,
the
Company and Purchaser have agreed to enter into certain transactions pursuant
to
this Agreement whereby the Company shall issue, transfer and deliver to
Purchaser, and Purchaser shall purchase from the Company shares of common stock,
$1.00 par value per share, of the Company (the “Company
Common Stock”),
so
that effectively as of the Final Closing Date, upon payment of the final tranche
of the Purchase Price by Purchaser to the Company, the Purchaser shall have
purchased from the Company eighty percent (80%) of all of the issued and
outstanding of the Company Common Stock as of the Final Closing Date, in the
manner and subject to the terms and conditions hereinafter set
forth.
NOW,
THEREFORE,
in
consideration of the premises and the mutual representations, warranties,
covenants and agreements herein contained, and of the certain good and valuable
consideration, the receipt and sufficiency is hereby acknowledged, the parties
hereby agree as follows:
1. Terms
of Acquisition.
1.1 Stock
Purchase.
(a) Subject
to the terms and conditions of this Agreement, the Company shall issue,
transfer, convey and deliver to Purchaser, and the Purchaser shall purchase,
acquire and accept from the
Company, all right, title and interest, legal and equitable, beneficial and
of
record, in an amount of shares of the Company Common Stock (the “Purchased
Shares”), so that effectively as of the First Closing, the Purchaser shall
be the owner of Purchased Shares representing forty percent (40%) of the Company
Common Stock as of the First Closing Date, and as of the Final Closing, the
Purchaser shall be the owner of Purchased Shares representing eighty
percent (80%) of the Company Common Stock as of the Final Closing
Date.
(b) The
Parties hereby agree that the stock purchase transactions shall occur as
follows: (i) upon execution of this Agreement, the Purchaser, or its assigns,
will pay and deliver to the Company a sum of Two Hundred and Fifty Thousand
Dollars ($250,000.00), and the Company shall issue, sell, transfer, convey
and
deliver to the Escrow Agent an original stock certificate representing forty
percent (40%) of all of the outstanding shares of Company Common Stock (the
“First Closing Certificate”), which shall be effective as of the
1st
day of
January, 2007 (the “First Closing”); and (ii) the Purchaser will use its
best efforts to pay and deliver to the Company the Final Payment, as defined
below, by March 1, 2007, or within three (3) business days after the
effectiveness of ARC’s Registration Statement on Form SB-2, filed or to be filed
by American Racing Capital, Inc., a Nevada corporation (“ARC”) with the
U.S. Securities and Exchange Commission (the “SEC”) in connection with
those certain financing transactions with New Millennium Capital Partners II
LLC, AJW Qualified Partners LLC, New Millennium Capital, AJW Offshore Ltd.
and
AJW Partners LLC (the “Investors”) (the “Final Closing”). On the
Final Closing Date, Purchaser, or its assigns, will pay and deliver to the
Company the Final Payment, and the Company shall issue, sell, transfer, convey
and deliver to Purchaser an original stock certificate (the “Final Closing
Certificate”), such that the Purchased Shares issued by the Company to
Purchaser at the Final Closing, plus the Purchased Shares issued by the Company
to the Purchaser at the First Closing shall represent in aggregate eighty
percent (80%) of all of the outstanding shares of Company Common Stock as
of the Final Closing Date. The originally issued certificates evidencing the
Company Common Stock shall be delivered at each Closing by Company to Purchaser,
free and clear of all Liens, accompanied by duly executed stock
powers (endorsed in blank) and with any necessary stock transfer tax stamps
affixed thereto.
1
(c) Upon
execution of the Agreement, the Company shall deliver and transfer to the Escrow
Agent the First Closing Certificate to be held in escrow pursuant to that
certain Escrow Agreement. On the First Closing Date, the Escrow Agent shall
deliver and transfer the First Closing Certificate to the Purchase. On the
Final
Closing Date, the Company shall deliver and the Final Closing Certificate to
the
Purchaser.
1.2 Purchase
Price.
The
Parties agree that the Purchase Price shall be Seven Hundred Thousand
Dollars ($700,000.00) (the “Purchase
Price”)
to the
Company. On July 24, 2006, ARC, on behalf of the Purchaser, paid an amount
of
Two Hundred Thousand Dollars ($200,000) (the “Option
Payment”)
to the
Company in the form of an option payment towards the payment of the Purchase
Price, as memorialized under that certain Agreement dated July 24, 2006, by
and
between ARC and the Company. At the First Closing, the Company shall be entitled
the sum of Four Hundred and Fifty Thousand Dollars ($450,000) (the “First
Closing Payment”),
which
shall be paid as such: (i) the Option Payment shall be credited against the
First Closing Payment; and (ii) the sum of Two Hundred and Fifty Thousand
Dollars ($250,000.00) shall be delivered to the Company by Purchaser upon
execution of the Agreement by the Parties. At the First Closing, the Company
shall issue and deliver the First Closing Certificate subject to Section 1.3.
At
the Final Closing, the Purchaser shall deliver to the Company the sum of Two
Hundred and Fifty Thousand Dollars ($250,000.00) (the “Final
Payment”)
and
the Company shall issue and deliver to the Purchaser the Final Closing
Certificate.
1.3 Closing.
(a) Closings.
The
First Closing and the Final Closing shall take place at the offices of
Purchaser’s counsel, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLP, located
at Miami Center, 20th Floor, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇, ▇▇ ▇▇▇▇▇; provided,
that all conditions precedent set forth in Sections 4.1 and 4.2 hereof shall
have been satisfied or waived in writing.
(b) The
Company’s Deliveries Upon Execution of the Agreement.
Subject
to the terms and conditions of this Agreement, the Company shall deliver the
following:
(i)
An
original stock certificate evidencing an amount of Purchased Shares which
represent forty percent (40%) of all of the issued and outstanding shares of
Company Common Stock as of the First Closing Date, accompanied by stock
powers (endorsed in blank) duly executed by an officer of Company and any
necessary stock transfer tax affixed thereto. This First Closing Certificate
shall be delivered to the Escrow Agent to be held in escrow until the First
Closing Date;
(i)
the
Shareholders’ Agreement, in the form attached hereto as Exhibit
A.
(ii) the
Escrow Agreement, in the form attached hereto as Exhibit
B.
2
(c) The
Purchaser’s Deliveries Upon Execution of the Agreement.
Subject
to the terms and conditions of this Agreement, Purchaser shall deliver to the
Company the following:
(i) the
Shareholders’ Agreement, in the form attached hereto as Exhibit
A.
(ii) the
Escrow Agreement, in the form attached hereto as Exhibit
B.
(d) Deliveries
At the First Closing.
Subject
to the terms and conditions of this Agreement, the following duly executed
documents shall be delivered at the First Closing:
(i) the
Company shall deliver to Purchaser the Consents set forth on Schedule
3.1(d); and
(ii)
the
Company shall deliver to Purchaser the Officer’s Certificate set forth
in
Section 4.1(e); and
(iii) the
Company shall deliver to Purchaser the Secretary’s Certificate required
by Section 4.1(i); and
(iv) the
Escrow Agent shall release the First Closing Certificate to
Purchaser.
(e) The
Company’s Deliveries At the Final Closing.
Subject
to the terms and conditions of this Agreement, Company shall deliver the
following duly executed documents:
(i)
An
original stock certificate evidencing an amount of Purchased Shares, such that
the Purchased Shares evidenced by the First Closing Certificate, plus the
Purchased Shares issued by the Company to the Purchaser at the Final Closing,
represent in aggregate eighty percent (80%) of all of the issued and
outstanding shares of Company Common Stock as of the Final Closing Date. The
Final Closing Certificate shall be accompanied by stock powers (endorsed in
blank) duly executed by an officer of the Company and any necessary stock
transfer tax affixed thereto;
(ii) the
Consents set forth on Schedule 3.1(d);
(iii) the
Officer’s Certificate set forth in Section 4.1(e); and
(iv) the
Secretary’s Certificate required by Section 4.1(i).
(f) Purchaser’s
Deliveries At the Final Closing.
Subject
to the terms and conditions of this Agreement, Purchaser shall pay and deliver
to Company the Final Payment.
2. Additional
Agreements.
2.1 Audits.
The
Company hereby agrees that its financial statements shall be subject to an
independent audit (each an “Audit”)
for
the period of Fiscal Year 2004 and Fiscal Year 2005 (each an “Audited
Period”).
Purchaser shall utilize an independent certified public accountant qualified
to
practice before the SEC to complete such audit, and shall bear the costs for
such audit only insofar as such audit covers the Audited Period.
2.2 Best
Efforts.
Subject
to the terms and conditions provided in this Agreement, each of the parties
shall use its best efforts in good faith to take or cause to be taken as
promptly as practicable all reasonable actions that are within its power to
cause to be fulfilled those conditions precedent to its obligations or the
obligations of the other party to consummate the transactions contemplated
by
this Agreement that are dependent upon its actions.
3
2.3 Further
Assurances.
Each
party shall deliver any and all other instruments or documents required to
be
delivered pursuant to, or necessary or proper in order to give effect to, the
provisions of this Agreement, including, without limitation, all necessary
stock
powers and such other instruments of transfer as may be necessary or desirable
to consummate the transactions contemplated by this Agreement.
3. Representations
and Warranties.
3.1 Representations
and Warranties as to the Company.
As of
each Closing, the Company hereby, represents and warrants to Purchaser as
follows:
(a) Capitalization.
(i) As
of November 1, 2006, the authorized capital stock of the Company consists solely
of One Thousand (1000) shares of common stock, $1.00 par value per share,
of which One Thousand (1000) shares are issued and outstanding. Prior or on
the
date of each Closing, the Company shall have increased its authorized common
stock as set forth in Schedule 3.1(a) in order to effectuate the transactions
contemplated by this Agreement. As of each Closing Date, all shares of Company
Common Stock have been duly authorized and validly issued and are fully paid
and
non-assessable.
(ii)
All
prior
offerings and issuances of Company Common Stock have been made in accordance
with applicable federal and state securities Laws. Except as disclosed in
Schedule 3.1(a), and (i) no shares of the Company’s capital stock are
subject to rights of first refusal, preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any
shares of capital stock of the Company, (iv) there are no outstanding
securities or instruments of the Company which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of
the Company, (v) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the sale of the
common shares of Company Common Stock as described in this Agreement
and (vi) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement.
(b) Organization;
Good Standing; Power. The
Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State
of
Tennessee, and has full corporate power and authority to own, lease and operate
its assets and properties and to carry on its Business as presently conducted
by
it. Schedule 3.1(b) hereto sets forth a true and complete list of all states
and
other jurisdictions in which the Company is duly qualified and in good standing
to transact business as a foreign corporation. Except for those states and
jurisdictions set forth on Schedule 3.1(b), there are no other states or
jurisdictions in which the character and location of the properties owned or
leased by the Company and the conduct of its Business make any such
qualification necessary, except any where the failure to be so qualified would
not have a Material Adverse Effect.
(c) Authority;
Validity; No Conflicts.
The
execution and delivery by the Company of this Agreement, the performance by
the
Company of its obligations hereunder, and the consummation of the transactions
contemplated thereby, have been duly authorized by all necessary corporate
action on the part of the Company, and the Company has all necessary corporate
power with respect thereto. This Agreement is the valid and binding obligation
of the Company, enforceable against it in accordance with its terms, except
to
the extent that enforceability thereof may be limited by general equitable
principles or the operation of bankruptcy, insolvency, reorganization,
moratorium or similar Laws. Except as set forth on Schedule 3.1(c), neither
the
execution and delivery by the Company of this Agreement, nor the consummation
of
the transactions contemplated hereby, nor the performance by the Company of
its
obligations hereunder, shall (or, with the giving of notice or the lapse of
time or both, would) (i) conflict with or violate any provision of the
Charter or By-Laws of the Company, as amended; (ii) give rise to a
conflict, breach or default, or any right of termination, cancellation or
acceleration of remedies or rights, or otherwise result in a loss of benefits
to
the Company, under the provisions of any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which the Company is
a
party or by which it or any of its properties or assets is otherwise
bound; (iii) violate any Law applicable to the Company or any of its
properties or assets; (iv) result in the creation or imposition of any Lien
upon any of the properties or assets of the Company or cause Purchaser or the
Company to be subject to any Tax; (v) interfere with or otherwise adversely
affect the ability of the Company to carry on the business as presently
conducted; or (vi) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give rise to any right to revoke,
suspend, terminate or modify any Permit.
4
(d) Governmental
Authorizations; Third-Party Consents.
Except
as set forth on Schedule 3.1(d) hereto, no approval, consent, waiver, exemption,
order, authorization or other action by, or notice to or filing with, any
governmental authority or any Person, and no lapse of a waiting period, is
required to be obtained by the Company in connection with (or in order to
permit) the execution, delivery or performance by any of them of this Agreement
or the consummation of the transactions contemplated hereby or
thereby (collectively, the “Consents”).
(e) Financial
Statements.
Within
sixty (60) days of the Final Closing, the Company will deliver to Purchaser
true and complete copies of its (i) audited balance sheet as of December
31, 2004 and the related audited statements of income (loss), retained
earnings and cash flow for the fiscal year then ended (the “2004
Financial Statements”)
and (ii) audited balance sheet as of December 31, 2005 and the related
unaudited statements of income (loss), retained earnings and cash flow for
the fiscal year then ended (the “2005
Financial Statements”) and
will
deliver to Purchaser a true and complete copy of the Estimated 2006 Balance
Sheet and Estimated 2006 Income Statement. The Financial Statements upon
completion will be attached hereto as Schedule 3.1(e).
(f) Interests
in Other Entities.
The
Company does not, directly or indirectly, (i) own, of record or
beneficially, any shares of voting stock or any other equity securities of
any
Person; (ii) have any other ownership or equity or debt interest, of record
or beneficially, in any Person; or (iii) have any obligation or right,
fixed or contingent, to purchase or subscribe for any interest in, advance
or
loan monies to, or in any way make an investment in, any Person or to share
any
profits or capital investments in other Person.
(g) Title
to Properties; Leases.
Except
as set forth on Schedule 3.1(g), the Company has good and marketable title
to
all of its properties and assets, real and personal, including, but not limited
to, those reflected in the audited balance sheet contained in the 2005 Financial
Statements (except as since sold or otherwise disposed of in the ordinary
course of business, or as expressly provided for in this Agreement), free and
clear of all encumbrances, liens or charges of any kind or character except:
(a) those securing liabilities of the Company incurred in the ordinary
course (with respect to which no default exists); (b) liens of
real estate and personal property taxes; and (c) imperfections of
title and encumbrances, if any, which, in the aggregate (i) are not
substantial in amount; (ii) do not detract from the value of the
property subject thereto or impair the operations of the Company;
and (iii) do not have a Material Adverse Effect on the business,
properties or assets of the Company.
5
(h) Absence
of Undisclosed Liabilities.
The
Company does not have any Liabilities, including guarantees and indemnities
by
the Company of Liabilities of any other Person, except (i) Liabilities as
and to the extent reflected on the Estimated 2006 Balance Sheet; (ii)
Liabilities incurred by it in the ordinary course of business and consistent
with past practice since the date of the 2005 Financial Statement (none of
which is a material Liability for breach of contract, breach of warranty, tort,
infringement, claim, lawsuit or other proceeding) and adequately reflected
on
the books and records of the Company; (iii) obligations not in default
under contracts entered into by it in the ordinary course of business;
and (iv) the Liabilities set forth on Schedule 3.1(h) hereto.
(i) Litigation.
Except
as set forth on Schedule 3.1(i) hereto, there are no claims, suits or actions,
administrative, arbitration or other proceedings, or governmental investigations
pending or threatened against or affecting, or reasonably likely to adversely
affect, the Company or any of its properties, assets or business or the
transactions contemplated hereby. No event has occurred and no circumstance
exists that may give rise to or serve as a reasonable basis for any claim,
suit,
action or other proceeding to be brought or threatened against the Company.
There are no outstanding judgments, orders, stipulations, injunctions, decrees
or awards against the Company that have not been fully satisfied.
(j) Material
Contracts.
Schedule 3.1(j) hereto sets forth a true and complete list, and brief
description, of each Material Contract. True and complete copies of all Material
Contracts required to be set forth on Schedule 3.1(j) have been furnished to
Purchaser and, except as set forth on Schedule 3.1(j), each of them is in full
force and effect. Except as set forth on Schedule 3.1(j), neither the Company
nor any other Person that is a party to a Material Contract or is otherwise
bound thereby is in default thereunder, and no event, occurrence, condition
or
act exists that, with the giving of notice or the lapse of time or both, would
give rise to any default or right of cancellation thereunder. There have been
no
threatened cancellations of any of the Material Contracts and there are no
outstanding disputes thereunder. There are no agreements, understandings or
arrangements with any other Person in respect of the Material Contracts
that (i) give any Person the right to renegotiate or require a
reduction in the price paid to the Company or the repayment of any amount
previously paid, (ii) provide for the sharing of any revenues or
profits by or with the Company or (iii) provide for discounts,
allowances or extended payment terms.
(k) Employee
Arrangements.
The
Company does not have any employee benefit plans.
(l) Tax
Matters.
Except
as set forth on Schedule 3.1(l) hereto:
(i) the
Company has filed (on a timely basis) with the appropriate governmental
agencies any federal, state, local and foreign Tax Returns required to be filed
by it and has timely paid in full all Taxes due. All such Tax Returns were
true
and complete in all respects.
(ii) there
are
no filed Tax liens, and no contemplated Tax liens upon any properties or assets
of the Company other than any statutory liens for Taxes not yet due and
payable;
(iii) the
Company has not waived any statute of limitations in respect of Taxes or
executed or filed with any governmental authority any agreement extending the
period for the assessment or collection of any Taxes, and it is not a party
to
any pending or threatened suit, action or proceeding by any governmental
authority for the assessment or collection of Taxes;
6
(iv) there
is
no unresolved claim by a governmental authority in any jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to
taxation by such jurisdiction;
(v) the
Company has timely withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, or other Person;
(vi) the
unpaid Taxes of the Company (A) did not, as of the date of the Estimated
2006 Balance Sheet, exceed the reserve for Tax Liabilities (other than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Estimated 2006 Balance Sheet
and (B) will not exceed that reserve, as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
the
Company in filing its Tax Returns;
(vii) since
the
date of its incorporation, the Company has always been a Subchapter S
Corporation within the meaning of Section 1361(a)(1) of the Code.
(m) Compliance
with Applicable Laws.
The
Company is and has been in compliance with all Laws applicable to the Company
or
to the conduct of its business or operations or to the use of its properties
or
assets, including, without limitation, all Tax, ERISA, privacy, employment,
environment and human rights Laws. The Company has not received written notice
of any violation or alleged violation of any Law by the Company. To the
knowledge of the Company, there is no pending or proposed legislation applicable
to the Company or to the conduct of its business or operations that, if enacted,
could reasonably be expected to have a Material Adverse Effect. No event has
occurred and no circumstance exists that could reasonably be expected to
constitute or result in (with or without notice or lapse of time or both) a
violation of or failure to comply with (i) a material requirement of any
Law by the Company or (ii) an order of any court with respect to which the
Company or any of its assets or properties is subject.
(n) Regulatory
Permits.
The
Company possesses all material certificates, authorizations and permits issued
by the appropriate federal, state or foreign regulatory authorities necessary
to
conduct their respective businesses, and Company has not received any notice
of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(o) Environmental
Matters.
To the
Company’s knowledge, the Company is not in violation of any Environmental Law,
and, to its knowledge, no material expenditures are or will be required in
order
to comply with any Environmental Law.
(p) Absence
of Certain Changes.
Except
as and to the extent set forth on Schedule 3.1(p) hereto, since October 30,
2006, the Company has not had any material adverse change in the
business.
(q) Brokers.
Except
as set forth on Schedule 3.1(q) hereto, no agent, broker, firm or other Person
acting on behalf of the Company, or under the authority of any of the foregoing,
is or shall be entitled to a brokerage commission, finder’s fee or similar
payment in connection with any of the transactions contemplated hereby from
the
Company or Purchaser.
(r) Disclosure.
No
representation or warranty made by the Company herein contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein not
misleading.
7
(s) Affiliated
Transactions.
Except
as set forth on Schedule 3.1(s) hereto, no director or officer of the
Company (or any of their respective Affiliates or Associates) (i) is a
party to or otherwise a beneficiary of any agreement, transaction or
arrangement (oral or written) with or involving the Company or any
Affiliate or Associate of the Company or (ii) has any claim, monetary or
otherwise, against the Company.
(t) Disclosure
Schedules.
The
Schedules are integral parts of this Agreement. Nothing in a schedule shall
be
deemed adequate to disclose an exception to a representation or warranty made
herein, unless the schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail, including
by explicit cross-reference to another schedule to this Agreement. Without
limiting the generality of the foregoing, the mere listing, or inclusion of
a
copy, of a document or other item shall not be deemed adequate to disclose
an
exception to a representation or warranty made herein, unless the representation
or warranty is being made as to the existence of the document or other item
itself. The Company is responsible for preparing and arranging the Schedules
corresponding to the lettered and numbered sections contained herein. Disclosure
made in a specific schedule shall be deemed not to have been disclosed with
respect to any other schedule unless an explicit cross-reference is
appropriately made.
3.2 Representations
and Warranties of Purchaser.
As of
each Closing, Purchaser hereby represents and warrants to the Company as
follows:
(a) Organization
and Power.
Purchaser is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Nevada, and has full corporate power and
authority to own, lease and operate its assets and properties and to carry
on
its business as presently conducted by it.
(b) Authority;
Validity; No Conflicts.
The
execution and delivery by Purchaser of this Agreement, the performance by
Purchaser of its obligations under this Agreement and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by
all
necessary corporate action on the part of Purchaser, and Purchaser has all
necessary corporate power with respect thereto. This Agreement shall be the
valid and binding obligations of Purchaser, enforceable against it in accordance
with their respective terms, except to the extent that enforceability thereof
may be limited by general equitable principles or the operation of bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar Laws.
Neither the execution and delivery by Purchaser of this Agreement nor the
consummation of the transactions contemplated hereby or thereby, nor the
performance by Purchaser of its obligations hereunder or thereunder,
shall (or, with the giving of notice or the lapse of time or both,
would) (i) conflict with or violate any provision of the Certificate of
Incorporation or By-Laws of Purchaser; (ii) violate any Law applicable to
Purchaser or any of its properties or assets; or (iii) conflict with or
cause a default under any material contract or agreement to which Purchaser
is a
party.
(c) Compliance
with Law.
Purchaser is in compliance with all applicable Laws, except for any
non-compliance as would not have a Material Adverse Effect on the financial
condition, business or assets of Purchaser and its subsidiaries, taken as a
whole.
(d) Capitalization.
(i) The
authorized capital stock of the Purchaser consists of (i) Fifty Five
Million (55,000,000) shares of common stock, $0.01 par value per share, of
which One Thousand (1,000) shares are issued and outstanding. All outstanding
shares of Purchaser capital stock have been duly authorized and validly issued
and are fully paid and non-assessable. All prior offerings and issuances of
Purchaser capital stock have been made in accordance with applicable federal
and
state securities Laws. There are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating
to,
or securities or rights convertible into, any shares of capital stock of the
Purchaser, or contracts, commitments, understandings or arrangements by which
the Purchaser is or may become bound to issue additional shares of capital
stock
of the Purchaser or options, warrants, scrip, rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Purchaser. The Purchaser
does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement.
8
(e) Investment
Intent.
Purchaser
is acquiring the Purchased Shares as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Purchased Shares or any part thereof, without prejudice, however, to such
holder’s right, at all times to sell or otherwise dispose of all or any part of
such Purchased Shares in compliance with applicable federal and state securities
laws. Subject to the immediately preceding sentence, nothing contained
herein shall be deemed a representation or warranty by such Purchaser to hold
the Purchased Shares for any period of time. Such Purchaser is acquiring the
Purchased Shares hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Purchased Shares.
4. Conditions
to Closing.
4.1 Conditions
to Purchaser’s Obligation to Close.
The
obligation of Purchaser to close the transactions contemplated by this Agreement
is subject to the satisfaction of each of the following conditions, any one
or
more of which may be waived by Purchaser in writing at or prior to each
Closing:
(a) Agreements
and Conditions.
On or
before each Closing Date, the Company shall have complied with and duly
performed all agreements, covenants and conditions on their part to be complied
with and performed pursuant to or in connection with this Agreement on or before
the Closing Date.
(b) Representations
and Warranties.
The
representations and warranties of the Company contained in this Agreement shall
be true and complete on and as of each Closing.
(c) No
Legal Proceedings.
No
court or governmental suit, action or proceeding shall have been each instituted
or overtly threatened to restrain or prohibit the transactions contemplated
hereby, and, as of each Closing Date, there will be no court or governmental
action or proceeding pending or threatened against or affecting the Company
that
involves a demand for any judgment or liability, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse
Effect.
(d) Board
Approval.
The
transactions as set forth in this Agreement were approved by the Board of
Directors of the Company.
(e) Officer’s
Certificate.
At each
Closing, Purchaser shall have received a certificate dated the date of Closing,
and executed by an authorized executive officer of the Company to the effect
that the conditions set forth in Sections 4.1(a), 4.1(b) and 4.1(g)
hereof shall have been satisfied.
(f) Absence
of Material Changes.
The
Company shall have not experienced any material adverse change in its business,
operations, customers, suppliers, assets, liabilities, prospects or
condition (financial or otherwise) since October 30, 2006.
9
(g) Consents.
All
Consents required to be set forth on Schedule 3.1(d) hereto shall have been
obtained and delivered to Purchaser.
(h) Stock
Certificate.
On each
Closing Date, Purchaser shall have received an originally issued stock
certificate evidencing all of the Company Common Stock, as described in Section
1.1, with duly executed stock powers attached, in proper form for
transfer.
(i) Secretary’s
Certificate.
At each
Closing, Purchaser shall have received a certificate, dated the date of Closing,
and executed by the Secretary of the Company, certifying the incumbency and
signatures of the officers of the Company authorized to act on behalf of the
Company in connection with the transactions contemplated hereby and attaching
and certifying as true and complete copies of (i) the resolutions duly
adopted by the Board of Directors of the Company authorizing and approving
the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) the Charter and By-Laws of the
Company, each as may have been amended up through the Closing Date.
(j) Company
Capitalization.
Prior
or on the date of each Closing, the Company shall have increased its authorized
common stock as set forth in Schedule 3.1(a) in order to effectuate the
transactions contemplated by this Agreement. If the Company effectuates an
increase in the Company’s capitalization that does not adhere to Schedule
3.1(a), the Company shall notify the Purchaser immediately following such
increase.
(k) First
Closing Certificate.
At the
Final Closing, the Company shall issue and transfer to the Purchaser the First
Closing Certificate, such that the Purchased Shares represent forty
percent (40%) of all of the issued and outstanding shares of Company Common
Stock as of the First Closing Date.
(l) Second
Closing Certificate.
At the
Final Closing, the Company shall issue and transfer to the Purchaser the Second
Closing Certificate, such that the Purchased Shares evidenced by the Second
Closing Certificate, plus the Purchased Shares evidenced by First Closing
Certificate, represent eighty percent (80%) of all of the issued and
outstanding shares of Company Common Stock as of the Final Closing Date.
(m) Other
Closing Deliveries.
Purchaser shall have received at or prior to the Final Closing such other
documents, instruments and certificates as Purchaser may reasonably request
in
order to effectuate the transactions contemplated hereby.
4.2 Conditions
to Company’s Obligations to Close.
The
obligations of to close the transactions contemplated by this Agreement are
subject to the satisfaction of each of the following conditions, any one or
more
of which may be waived by the Company in writing at or prior to the First
Closing and the Final Closing:
(a) Agreements
and Conditions.
As of
each Closing, Purchaser shall have complied with and duly performed all
agreements, covenants and conditions on its part to be complied with and
performed pursuant to or in connection with this Agreement.
(b) Representations
and Warranties.
The
representations and warranties of Purchaser contained in this Agreement shall
be
true and complete on and as of each Closing Date.
(c) No
Legal Proceedings.
No
court or governmental suit, action or proceeding shall have been instituted
or
overtly threatened to restrain or prohibit the transactions contemplated
hereby.
10
(d) Purchase
Price.
Purchaser shall have delivered the Purchase Price in accordance with
Section 1.2 hereof.
(e) Shareholders’
Agreement.
Upon
execution of the Agreement, ARC and LJ&J Enterprises, Inc., a Pennsylvania
corporation, shall simultaneously enter into that certain Shareholders Agreement
which governs the relationships between the Shareholders of Purchaser and the
ownership and management of Purchaser, substantially in the same form and
content as attached hereto on Exhibit
A.
5. Certain
Tax Matters.
5.1 Tax
Indemnification.
The
Company shall defend, indemnify and hold harmless the Purchaser and its
directors, officers, stockholders, agents, Affiliates and Associates, successors
and permitted assigns from and against, and shall pay and reimburse the
foregoing persons for, any and all losses, Liabilities, claims, obligations,
penalties, damages, costs and expenses (including all reasonable attorneys’
fees and disbursements and other costs incurred or sustained by an Indemnitee
in
connection with the investigation, defense or prosecution of any such claim
or
any action or proceeding between the Indemnitee and the Indemnifying Party
or between the Indemnitee and any third party or otherwise), whether or not
involving a third-party claim (collectively, “Losses”),
relating to or arising out of (i) all Taxes or the non-payment thereof
of the Company for all taxable periods ending on or prior to December 31, 2006
(the “Pre-Closing
Tax Period”); (ii) all
Taxes of any member of an affiliated, consolidated, combined or unitary group
of
which the Company (or any predecessor of the Company) is or was a member on
or prior to December 31, 2006, including pursuant to Treasury Regulations
Section 1.1502-6 or any analogous or similar Law; and (iii) all
Taxes of any Person (other than the Company) imposed on the Company as a
transferee or successor, by contract or pursuant to Law; provided, however,
that
the Company shall be liable only to the extent that the aggregate amount of
such
Taxes shall exceed the amount, if any, expressly and properly reserved for
such
Taxes (excluding any reserve for deferred Taxes established to reflect
timing differences between book and tax income) on the Estimated 2006 Balance
Sheet.
5.2 Cooperation
on Tax Matters.
(a) Purchaser
and the Company shall cooperate fully, as and to the extent reasonably requested
by any other party, in connection with the filing of Tax Returns and any audit,
litigation or other proceeding with respect to Taxes pursuant to this
Section 5. Such cooperation shall include the retention and (upon the
other party’s request) the provision of records and information that are
reasonably relevant to any such audit, litigation or other proceeding and making
employees or representatives available on a mutually convenient basis to provide
additional information and explanation of any materials provided hereunder.
The
Company (after the Closing) shall (i) retain all books and records
with respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the applicable
statute of limitations for the respective taxable periods, and to abide by
all
record retention agreements entered into with any taxing authority.
(b) Each
of
Purchaser and the Company shall, upon request from the other party, use
reasonable best efforts to obtain any certificate or other document from any
governmental authority or other Person as may be necessary to mitigate, reduce,
defer or eliminate any Tax that could be imposed (including, but not
limited to, any with respect to the transactions contemplated
hereby).
5.3 Certain
Taxes.
All
transfer (including real property), documentary, sales, stamp, registration
and other similar Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement (including any corporate-level
gains Tax triggered by the sale of the Company Common Stock and any similar
Tax
or other Tax imposed by States or subdivisions) shall be paid by the Company
when due, and the Company will file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, stamp,
registration and other similar Taxes and fees. If required by applicable Law,
Purchaser will, and will cause its Affiliates to, join in the execution of
any
such Tax Returns and other documentation.
11
6. Survival;
Indemnification.
6.1 Survival
of Representations.
Notwithstanding any right of Purchaser to investigate the business and condition
of the Company, Purchaser shall be entitled to rely upon the representations,
warranties, covenants and agreements of the Company. All representations,
warranties and agreements contained in this Agreement (including the
Schedules hereto) and in all certificates required hereby to be delivered with
respect hereto shall be deemed to be representations, warranties and agreements
hereunder and shall survive the Final Closing Date (or, if there is no
Closing, the date hereof) for a period of twelve (12) months; provided, however,
that (i) any such representations, warranties and agreements shall survive
the time(s) that they would otherwise terminate with respect to claims of which
notice has been given as provided in this Agreement prior to such termination;
and (ii) such time limitation shall not apply to the representations,
warranties and agreements contained in (A) Sections 3.1 (h), (l), (m)
(n) (o) and (p) hereof, which shall survive until thirty (30) days
following the expiration of the applicable statute of
limitations (including any extension(s) thereof), and (B) Sections
3.1(a), (c), and (r), 3.2(a) and (b) hereof, which shall survive
indefinitely. Any limitation or qualification set forth in any one
representation and warranty contained in Section 3 hereof shall not limit
or qualify any other representation and warranty contained in such Section.
Each
representation and warranty included in Section 3 is independent and shall
be interpreted without regard to any other representation or warranty contained
in Section 3 (including any more inclusive representation or
warranty). The waiver by any party of any condition at the Closing or the breach
or inaccuracy of any representation or warranty, or the breach of or
non-compliance with any covenant or obligation, shall not affect the right
of
such party to the indemnification, payment or reimbursement of Losses or any
other remedy based on such breach, inaccuracy or non-compliance.
6.2 Indemnities
of the Company.
The
Company shall indemnify, defend and hold harmless Purchaser, its Affiliates
and
Associates and their respective directors, officers, stockholders, agents,
successors and permitted assigns from and against, and shall pay and reimburse
the foregoing Persons for, any and all Losses relating to or arising out of
the
breach (or alleged breach if asserted by a third party) of any
representation, warranty, covenant or agreement of the Company contained in
this
Agreement.
6.3 Indemnity
of Purchaser.
Purchaser shall indemnify, defend and hold harmless the Company and its
permitted assigns from and against, and shall pay and reimburse the foregoing
Persons for, any and all Losses relating to or arising out of the
breach (or alleged breach if asserted by a third party) of any
representation, warranty, covenant or agreement of Purchaser contained in this
Agreement.
6.4 Limitations
on Indemnification.
Notwithstanding any provision contained in this Section 6 to the contrary,
no Indemnitee shall be entitled to assert any claim for indemnification in
respect of breach(es) of representations and warranties under Sections 6.2
or
6.3 hereof until such time as all claims for indemnification (including
those under Section 6 hereof) by such Person hereunder shall exceed
$25,000 (the “Basket”),
such
Basket being deducted from any claim for indemnification; provided, however,
that the aggregate dollar amount of Purchaser’s and the Company’s
indemnification obligations hereunder may not exceed the Purchase Price (the
“Claims
Limitation”),
minus
the non-refundable portion of the Purchase Price, except (i) if the
indemnifying party shall have provided information to Purchaser or to the
Company, as the case may be, in connection herewith or made any representation
or warranty contained herein that, in either case, was fraudulent or made in
bad
faith in which event neither the Basket nor the Claims Limitation shall
apply.
12
7. Confidentiality.
7.1 Confidentiality.
From
and after the Closing Date, the Company and the Company’s officers and
representatives shall not at any time, directly or indirectly, use, exploit,
communicate, disclose or disseminate any Confidential Information (as
defined below) in any manner whatsoever (except disclosure to their
personal financial or legal advisors and as may be required under legal process
by subpoena or other court order; provided, that the Company will take
reasonable steps to provide Purchaser with sufficient prior written notice
in
order to contest such requirement or order). Notwithstanding the foregoing,
the
Company (and each representative or other agent of each Company) may disclose
to
any and all Persons the tax treatment and tax structure of the transaction
contemplated hereby; provided, however, that neither the Company nor any
representative or agent thereof may disclose any information that is not
necessary to understanding the tax treatment and tax structure of the
transactions (including the identity of a party and any information that
could lead another to determine the identity of a party) or any other
information to the extent that such disclosure could result in a violation
of
any federal or state securities Laws.
7.2 Remedies
upon Breach. The
Company acknowledges and agrees that: (i) Purchaser (and the Company)
would be irreparably injured in the event of a breach by the Company of any
of
the obligations under this Section 7; (ii) monetary damages would
not be an adequate remedy for such breach; (iii) Purchaser (and
the Company) shall be entitled to injunctive relief, without the necessity
of
the posting of a bond, in addition to any other remedy that they may have,
in
the event of any such breach; and (iv) the existence of any claims
that the Company may have against Purchaser (and the Company), whether
under this Agreement or otherwise, shall not be a defense to (or reason for
the delay of) the enforcement by Purchaser of any of their rights or remedies
under this Agreement.
8. Miscellaneous
Provisions.
8.1 Counterparts;
Interpretation.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
instrument. This Agreement supersedes all prior discussions and agreements
between the parties with respect to the subject matter hereof, and this
Agreement contains the sole and entire agreement among the parties with respect
to the matters covered hereby. This Agreement shall not be altered or amended
except by an instrument in writing signed by or on behalf of all of the parties
hereto. No ambiguity in any provision hereof shall be construed against a party
by reason of the fact it was drafted by such party or its counsel. References
to
“including” means including without limiting the generality of any description
preceding such term. Nothing expressed or implied in this Agreement is intended,
or shall be construed, to confer upon or give any Person other than a party
any
rights or remedies under or by reason of this Agreement.
8.2 Governing
Laws.
The
validity and effect of this Agreement shall be governed by and construed and
enforced in accordance with the laws of Nevada without regard to principles
of
conflicts of laws thereof. Any dispute, controversy or question of
interpretation arising under, out of, in connection with or in relation to
this
Agreement or any amendments hereof, or any breach or default hereunder, shall
be
litigated exclusively in the state or federal courts of competent jurisdiction
located in Nevada. Each of the parties hereby irrevocably submits to the
jurisdiction of any court of competent jurisdiction located in Nevada. Each
party hereby irrevocably waives, to the fullest extent it may effectively do
so,
the defense of an inconvenient forum to the maintenance of any such action
in
Nevada.
8.3 Partial
Invalidity and Severability.
All
rights and restrictions contained herein may be exercised and shall be
applicable and binding only to the extent that they do not violate any
applicable laws and are intended to be limited to the extent necessary to render
this Agreement legal, valid and enforceable. If any terms of this Agreement
not
essential to the commercial purpose of this Agreement shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it
is
the intention of the parties that the remaining terms hereof shall constitute
their agreement with respect to the subject matter hereof and all such remaining
terms shall remain in full force and effect. To the extent legally permissible,
any illegal, invalid or unenforceable provision of this Agreement shall be
replaced by a valid provision which will implement the commercial purpose of
the
illegal, invalid or unenforceable provision.
13
8.4 Waiver.
Any
term or condition of this Agreement may be waived at any time by the party
which
is entitled to the benefit thereof, but only if such waiver is evidenced by
a
writing signed by such party. No failure on the part of a party to exercise,
and
no delay in exercising, any right, power or remedy created hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or remedy by any such party preclude any other future exercise
thereof or the exercise of any other right, power or remedy. No waiver by any
party to any breach of or default in any term or condition of this Agreement
shall constitute a waiver of or assent to any succeeding breach of or default
in
the same or any other term or condition hereof.
8.5 Acceptance
by Fax.
This
Agreement shall be accepted, effective and binding, for all purposes, when
the
parties have signed and transmitted to each other, by telecopier or otherwise,
copies of the signature pages hereto.
8.6 Fees
and Disbursements.
Each
Party shall, respectively pay their own expenses incurred by each. including,
but not limited to all costs and expenses, including the fees and disbursements
of any counsel and accountants retained by them, incurred by them in connection
with the preparation, execution, delivery and performance of this Agreement
and
the transactions contemplated hereby, whether or not the transactions
contemplated hereby are consummated.
8.7 Attorneys’
Fees.
In the
event of any litigation arising under the terms of this Agreement, the
prevailing party shall be entitled to recover its or their reasonable attorneys’
fees and court costs from the other party, including trial and appellate
proceedings, as well as the costs of collecting any judgment.
8.8 Further
Assurances.
Each
party shall from time to time do and perform such additional acts and execute
and deliver such additional documents and instruments as may be required or
reasonably requested by any party to establish, maintain or protect its rights
and remedies or to effect the purposes of this Agreement.
8.9 Notice.
All
notices and other communications hereunder shall be in writing and shall be
deemed to have been given: (i) when delivered by hand or by confirmed facsimile
transmission; (ii) one (1) day after delivery by internationally
recognized express courier (i.e., Federal Express, DHL); or (iii)
three (3) days after delivery by certified mail, postage prepaid, to a
party at the following addresses (or at such other address for a party as
shall be specified by like notice):
14
|
If
to Company:
|
LJ&J
Enterprises of Tennessee, Inc.
|
|
|
▇.▇.
▇▇▇ ▇▇▇
|
||
|
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
||
|
Attn: ▇▇▇▇▇▇
▇. Mattiolli, III
|
||
|
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
With
a copy to:
|
Schulman,
Treem, Kaminkow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
|
|
|
1800
World Trade Center
|
||
|
▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
|
||
|
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
||
|
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||
|
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
If
to Purchaser:
|
Motorsports
& Entertainment of Tennessee, Inc.,
|
|
|
▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
||
|
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
||
|
Attn: A.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
||
|
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
Attn:
▇▇▇▇▇▇ ▇. Mattiolli, III
|
||
|
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
|
||
|
With
a copy to:
|
▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
|
|
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.- ▇▇▇▇▇ ▇▇▇▇
|
||
|
▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
||
|
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
|
||
|
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
|
||
|
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
|
||
8.10 Termination.
Subject
to the provisions of Section 8.11 hereof, this Agreement may be terminated
at any time prior to the Final Closing Date by any of the
following:
(a) By
the
mutual written agreement of Purchaser, and the Company;
(b) By
either
Purchaser or the Company, if the Final Closing shall not have occurred by March
31, 2007 upon written notice by such terminating party; provided that at the
time such notice is given, a material breach of this Agreement by such
terminating party shall not be the principal reason for the failure of the
Final
Closing to occur;
(c) By
Purchaser, by written notice to the Company, if (i) Purchaser, in its sole
discretion, is unable to secure adequate financing on satisfactory terms; or
(ii) there has been a material violation or breach of the Company’s
covenants or agreements made herein or if any representation or warranty of
the
Company contained herein is materially inaccurate or misleading; or
(d) By
the
Company, by written notice to Purchaser, if there has been a material violation
or breach of any of Purchaser’s covenants or agreements made herein or if any
representation or warranty of Purchaser contained herein is materially
inaccurate or misleading.
8.11 Effects
of Termination.
(a) If
this Agreement shall be terminated as provided in Section 8.10 hereof, then
this Agreement shall forthwith become void and there shall be no liability
or
obligation on the part of the parties hereto (or any of their respective
stockholders, officers, directors, employees, legal beneficiaries, successors,
Affiliates or Associates); provided, however, that (i) no party shall be
relieved of any Losses occurring or sustained as a result of a breach of any
of
such party’s representations, warranties, covenants or agreements contained
herein and (ii) if the Purchaser terminates this Agreement pursuant to
Section 8.10(c)(ii), and the Company hereby agree to pay to the Purchaser
Fifty Thousand Dollars ($50,000) in the aggregate for costs, fees and
expenses of the Purchaser in connection with this transaction. Notwithstanding
any termination of this Agreement, the provisions of
Section 4.1 and
this
Section 8 shall survive.
15
8.12 Assignment.
This
Agreement may not be assigned by the Company without the prior written consent
of Purchaser; provided, however, that (i) Purchaser may assign or delegate
any or all rights or obligations hereunder, to an Affiliate prior to Final
Closing if necessary in connection with its financing or Tax planning
and (ii) Purchaser may assign any and all of its rights hereunder to any
lenders that provide financing to it in connection with the transactions
contemplated hereby and in any related transactions; provided, further, that
Purchaser may assign or delegate any or all of its rights or obligations
hereunder, including its rights under Sections 6 and 7 hereof, to any subsequent
purchaser of the Business, the Company, Purchaser or all or substantially all
of
Purchaser’s or the Company’s assets.
8.13 Binding
Effect; Benefits.
This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any person other than the parties hereto, and their respective
heirs, legal representatives, successors and permitted assigns, any rights,
remedies, obligations or liabilities under, in connection with or by reason
of
this Agreement.
8.14 Rules
of Construction.
Words
used herein, regardless of the number and gender used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires; as used herein, unless
the context clearly requires otherwise, the words “hereof,” “herein,”
“hereinafter” and “hereunder” and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
A
reference to any statute or statutory provision shall be construed as a
reference to the same as it may have been, or as it may from time to time be,
amended, modified or re-enacted.
The
terms
“dollars” and “$” mean United States dollars.
All
references to any Person shall mean and include the successors and permitted
assigns of such Person, and all references to “including” and “include” shall be
understood to mean “including, without limitation.”
The
table
of contents, lists of annexes, schedules and exhibits and section headings
used
in this Agreement are for convenience of reference only and shall not affect
the
interpretation of this Agreement.
This
Agreement is between financially sophisticated and knowledgeable parties and
is
entered into by such party in reliance upon the economic and legal bargains
contained herein, the language used in this Agreement has been negotiated by
the
parties hereto and shall be interpreted and construed in a fair and impartial
manner without regard to such factors as the party who prepared, or caused
the
preparation of, this Agreement or the relative bargaining power of a
party.
16
8.15 Waiver
of Jury Trial.
THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY DOCUMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR A PARTY’S ACCEPTANCE
OF THIS AGREEMENT.
[SIGNATURES
APPEAR ON THE FOLLOWING PAGE]
17
IN
WITNESS WHEREOF,
the
parties hereto have executed this Stock Purchase Agreement the day and year
first above written.
|
COMPANY:
|
||
|
LJ&J
ENTERPRISES OF TENNESSEE, INC.,
a
Tennessee corporation
|
||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. Mattiolli, III | |
|
Name:
|
▇▇▇▇▇▇ ▇. Mattiolli, III | |
|
Title:
|
President | |
|
|
||
|
PURCHASER:
|
||
|
MOTORSPORTS
& ENTERTAINMENT OF
TENNESSEE,
INC.,
a
Nevada corporation
|
||
|
By:
|
/s/ A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
|
Name:
|
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
|
Title:
|
Secretary | |
18
ANNEX
A
TO
STOCK
PURCHASE
AGREEMENT
DEFINITIONS
“Agreement”
has
the
meaning given to such term in the Preamble to this Stock Purchase
Agreement.
“Affiliate”
means,
with respect to any Person, a Person that directly, or indirectly through one
or
more intermediaries, controls or is controlled by, or is under the common
control with, the Person specified (as set forth in Rule 405 promulgated
under the Securities Act of 1933).
“Associate”
means,
when used to indicate a relationship with any Person, (1) a corporation or
organization of which such Person is an officer or partner or is, directly
or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (2) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee
or
in a similar capacity, and (3) any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person or who is
a
director or officer of the Person or any of its parents or subsidiaries (as
set forth in Rule 405 promulgated under the Securities Act of
1933).
“Audit”
has
the
meaning given to such term in Section 2.1.
“Audited
Period”
has
the
meaning given to such term in Section 2.1.
“Basket”
has
the
meaning given to such term in Section 6.4.
“Business”
has
the
meaning given to such term in the Recitals to this Agreement.
“Claims
Limitation” has
the
meaning given to such term in Section 6.4.
“Closing”
means
either the First Closing or the Final Closing, as described in
Section 1.3(a).
“Closing
Date” means
either the First Closing Date or the Final Closing Date.
“Code”
means
the
Internal Revenue Code of 1986, as amended (together with the rules and
regulations thereunder).
“Company”
has
the
meaning given to such term in the Preamble to this Agreement.
“Company
Common Stock” has
the
meaning given to such term in the Recitals to this Agreement.
“Confidential
Information”
means
any and all information (oral or written) relating to the Company and/or
Purchaser and its Affiliates or any of their operations or activities,
including, but not limited to, the terms of this Agreement, information relating
to trade secrets, plans, promotion and pricing techniques, procurement and
sales
activities and procedures, proprietary information, business methods and
strategies (including acquisition strategies), software, software codes,
advertising, sales, marketing and other materials, customers and supplier lists,
data processing reports, customer sales analyses, invoice, price lists or
information, and information pertaining to any lawsuits or governmental
investigation, except such information that is in the public domain (such
information not being deemed to be in the public domain merely because it is
embraced by more general information that is in the public domain), other than
as a result of a breach of any of the provisions hereof.
A-1
“Environmental
Law”
means
any applicable federal, state and local law, ordinance, rule or regulation
that
regulates, fixes liability for, or otherwise relates to, the handling,
use (including use in industrial processes, in construction, as building
materials, or otherwise), treatment, storage and disposal of hazardous and
toxic
wastes and substances, and to the discharge, leakage, presence, migration,
actual release (whether by disposal, a discharge into any water source or
system or into the air, or otherwise) of any pollutant or effluent.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and all
regulations promulgated thereunder.
“Escrow
Agreement” means
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLP.
“Escrow
Agreement” means
that certain Escrow Agreement, dated November 21, 2006, by and between
Purchaser, Company and ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLP, as
Escrow Agent.
“Estimated
2006 Income Statement”
means
unaudited income statement of the Company for the period ended September 30,
2006.
“Estimated
2006 Balance Sheet”
means
the unaudited balance sheets of the Company for the period ended September
30,
2006.
“Final
Closing Date”
means a
date within three (3) business days after the effectiveness of ARC’s
Registration Statement on Form SB-2 in connection with those certain financing
transactions with the Investors.
“Financial
Statements” mean
2004
Financial Statements, the 2005 Financial Statements, the Estimated 2006 Income
Statement and the Estimated 2006 Balance Sheet, collectively.
“Final
Closing”
has
the
meaning given to such term in Section 1.1.
“Final
Closing Certificate”
has
the
meaning given to such term in Section 1.1.
“Final
Closing Date”
means
the date when the Final Closing shall take place.
“Final
Payment”
has the
meaning given to such term in Section 1.2.
“First
Closing”
has
the
meaning given to such term in Section 1.1.
“First
Closing Certificate”
has
the
meaning given to such term in Section 1.1.
“First
Closing Date”
means
January 1, 2007, when the First Closing shall take place.
“Fiscal
Year” means
the
fiscal year of the Company ending on December 31.
“GAAP”
means
United States generally accepted accounting principles.
“Indemnitee”
means
any party which incurs Losses or receives notice of any claim or the
commencement of any action or proceeding with respect to which the other party
(or a party) is obligated to provide indemnification.
A-2
“Indemnifying
Party”
means
any party which is obligated to provide indemnification to the Indemnitee in
connection the Losses pursuant to the terms of this Agreement.
“IRS”
means
the
Internal Revenue Service.
“Laws”
mean
material federal, state, local and foreign laws, statutes, ordinances, rules
or
regulations, orders and administrative rulings promulgated by any governmental
or regulatory authority.
“Liabilities”
mean
debts, liabilities, commitments or obligations, whether absolute or contingent,
asserted or unasserted, known or unknown, liquidated or unliquidated, due or
to
become due, or fixed or unfixed.
“Liens”
mean
all
liens, mortgages, pledges, charges, claims, security interests or encumbrances
of any nature whatsoever.
“Losses”
has
the
meaning given to such term in Section 5.1.
“Material
Adverse Effect” means
an
effect that is more than a minor, de minimis or minimal effect on the Business,
operations, condition (financial or other) or prospects of the Company or
the value of its properties or assets.
“Material
Contract” means
any
contract, purchase order, agreement, mortgage, note, commitment, obligation
and
undertaking to which the Company is a party or by which it is otherwise bound
that involves in excess of Twenty-Five Thousand
Dollars ($25,000).
“Permits”
mean
governmental permits, approvals, licenses, certificates, franchises,
authorizations, consents and orders necessary for the operation of the Business
in the manner that it is presently conducted.
“Person”
or “Persons” means
any
stockholder, officer, employee or director of the Company, or any other natural
person, corporation, partnership, limited liability company or other
entity.
“Pre-Closing
Tax Period” has
the
meaning given to such term in Section 5.1.
“Purchase
Price”
has the
meaning given to such term in Section 1.2.
“Purchaser”
has
the
meaning given to such term in the Preamble to this Agreement.
“Records”
mean
all
original agreements, documents, books, stock ledgers, minutes, correspondence,
and corporate and other records and files, including records and files stored
on
computer disks or tapes or any other storage medium.
“Second
Payment”
has the
meaning given to such term in Section 1.2.
“Schedule”
means all
schedules to this Agreement.
“Shareholders’
Agreement” means
that certain Shareholders’ Agreement, dated November 21, 2006, by and among the
Purchaser, American Racing Capital, Inc., a Nevada corporation and LJ&J
Enterprises, Inc., a Pennsylvania corporation.
“Tax”
means
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code),
customs, duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax, of any kind, whatsoever, including any
interest, penalty or addition thereto, whether disputed or not and including
any
obligations to indemnify or otherwise assume or succeed to the Tax liability
of
any other Person.
A-3
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
any amendment(s) thereof.
“2004
Financial Statements”
has
the
meaning given to such term in Section 3.1(e).
“2005
Financial Statements” has
the
meaning given to such term in Section 3.1(e).
A-4
SCHEDULE
3.1(a)
Company
Capitalization Table
As
of the First Closing Date
- Company shall increase its authorized Common Stock to 9,000 shares, as
follows:
|
Total
Number of Authorized Company Common Stock as of First Closing
Date
|
Break-Down
of Shareholders After Issuance of Shares, as of First Closing
Date
|
|
|
9,000
shares
|
M&ET
- 3,600 shares (40%)
|
|
|
Other
shareholders - 5,400 (60%)
|
||
As
of the Final Closing Date
- Company shall increase its authorized Common Stock to 60,000 shares, as
follows:
|
Total
Number of Authorized Company Common Stock as of Final Closing
Date
|
Break-Down
of Shareholders After Issuance of Shares, as of Final Closing
Date
|
|
60,000
shares
|
M&ET
- 48,000 shares (80%)
|
|
Other
shareholders - 12,000 (20%)
|
|