Exhibit 2.1
MEMBERSHIP INTERESTS PURCHASE
AGREEMENT
This Membership
Interests Purchase Agreement (the “Agreement”), dated
as of November 30, 2004, is by and among United Midwestern
Promoters Motorsports, LLC, an Ohio limited liability company (the
“Company”), and National Speedways of Iowa, Inc., an
Iowa Corporation, Track Enterprises, Inc., an Illinois Company, Ken
Schrader Racing, Inc., a North Carolina Corporation, and Lebanon
Valley Auto Racing Corp. a New York Corporation, the holders of all
of the outstanding membership interests in the Company (each, a
“Member”, and collectively, the “Members”),
and Boundless Motor Sports Racing, Inc., a Colorado corporation
(“Purchaser”).
W I T N E S S E T H :
WHEREAS, the
Members are the legal and beneficial holders of all issued and
outstanding membership interests in the Company (the
“Interests”), and the Members desire to sell, and
Purchaser desires to purchase, the Interests;
NOW, THEREFORE, in
consideration of the mutual representations, warranties and
covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as
follows:
ARTICLE I
Definitions
1.1.
Definitions . Certain terms used in this Agreement but not
otherwise defined shall have the meanings ascribed thereto in
Exhibit A attached hereto.
ARTICLE II
Purchase and Sale
2.1. Purchase
and Sale of Interests . Subject to and upon the terms and
conditions contained herein, at the Closing, the Members shall
sell, transfer, assign, convey and deliver to Purchaser, free and
clear of all adverse claims, security interests, liens, claims and
encumbrances, and Purchaser shall purchase, accept and acquire from
the Members, the Interests. In selling their Interests to
Purchaser, each Member and the Company hereby waives the provisions
of Section 6.1.4 of the Operating Agreement.
2.2. Purchase
Price . The purchase price for the Interests shall be an amount
equal to $2,400,000 (the “Purchase Price”), which shall
be payable as follows:
(a) $200,000
of which was paid by Purchaser to Members, in October 2004
(which amount is refundable by Members, if the Closing does not
occur, by wire transfer of immediately available funds within two
(2) business days following a refund request by Purchaser, if
any of the following conditions are identified by Purchaser:
(i) the Company has any liability or obligations which the
Company has not agreed in writing to pay-off prior to the Closing;
(ii) the Company has any encumbrances of any kind, on any of
its assets which the Company has not agreed in writing to get
released prior to Closing; (iii) the assets of the
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Company do not include all of the
assets listed on Schedule 3.14(a)(2) and the Stacker 2
Agreement; or (iv) the Stacker 2 Agreement is not in full
force or effect);
(b) $1,600,000
of which shall be payable at the Closing in immediately available
funds (the “Closing Cash Consideration”);
and
(c) the
remaining $600,0000 of which shall be payable by the delivery to
Members of 164,384 shares (the “Purchaser Shares”) of
the common stock, par value $0.0001 per share (the “Purchaser
Common Stock”).
In addition, at the Closing,
Purchaser shall execute and deliver to the Members warrants to
purchase up to an aggregate of 40,000 shares of Purchaser Common
Stock, which warrants shall be in the form of Exhibit F
attached hereto (the “Warrants”). The Closing Cash
Consideration and the shares of Purchaser Shares shall be divided
among the Members according to their respective Percentage of
Member’s Interest, which ownership and ownership percentages
are set forth on Schedule 3.1.
2.3. Cash;
Accounts Receivable . Any cash in the Company’s bank
accounts as of the Closing shall be distributed to the Members in
accordance with their ownership percentages set forth in
Schedule 3.1. Except as provided in the following sentence,
any amounts received by the Company (pre or post-Closing) on the
accounts receivables listed on Schedule 2.3, shall be
distributed to the Members in accordance with their ownership
percentages set forth in Schedule 3.1.
2.4.
Post-Closing Adjustment . In the event that the average
closing price of the Purchaser Common Stock for the ten-trading
days immediately preceding the one-year anniversary of the Closing
Date (the “Average Anniversary Price”) is less than
$3.65 per share, then Purchaser shall issue to Members additional
shares of Purchaser Common Stock equal to the difference between:
(i) $600,000 divided by the Average Anniversary Price, less
(ii) 164,384, with any such additional shares being divided
among the Members pursuant to the Percentage of Member’s
Interest set forth in Schedule 3.1; provided, however, that in
lieu of issuing to the Members additional shares of Purchaser
Common Stock, Purchaser may elect in writing to purchase, at a
purchase price of $3.65 a share (the “Repurchase
Price”), the Purchaser Shares from the Members, and upon such
election, the Members shall sell the Purchaser Shares to Purchaser
at the aggregate Repurchase Price for such shares. Any adjustments
under this Section 2.4 shall appropriately take into account any
stock splits, stock dividends, recapitalizations or the like by
Purchaser.
ARTICLE III
Representations and Warranties of the Company and
Members
The
Company and Members, jointly and severally, represent and warrant
that the following are true and correct as of the date hereof (all
Schedules referenced in this Article III are contained in the
Company Disclosure Schedule of even date herewith):
3.1. Ownership
of the Interests . Each Member owns, beneficially and of
record, good and marketable title to the Interests, which ownership
is set forth on Schedule 3.1. The Interests constitutes all of
the issued and outstanding equity interests in the Company. At
the
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Closing, Members will convey to
Purchaser good and marketable title to the Interests, free and
clear of any security interests, liens, adverse claims,
encumbrances, equities, proxies, options, members’ agreements
or restrictions.
3.2.
Organization and Good Standing; Qualification . The Company
is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Ohio, with all
requisite limited liability company power and authority to carry on
the business in which it is engaged, to own the properties it owns,
to execute and deliver this Agreement and the other documents,
instruments and agreements contemplated hereby (this Agreement and
such other documents, instruments and agreements are sometimes
collectively referred to herein as the “Transaction
Documents”) and to consummate the transactions contemplated
thereby. The Company is not required to be qualified or licensed to
do business in any state. The Company does not have any assets,
employees or offices in any state other than Indiana, Illinois and
Iowa.
3.3.
Capitalization . Ownership of the Interests is set forth in
Schedule 3.1. All capital contributions to be paid for the
Interests have been paid in full. There exist no options, warrants,
subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, membership interests in the
Company. Neither Members nor the Company are parties to or bound
by, nor do they have any knowledge of, any agreement, instrument,
arrangement, contract, obligation, commitment or understanding of
any character, whether written or oral, express or implied,
relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any membership interests in the Company. No
membership interests in the Company have been issued or disposed of
in violation of the preemptive rights of any of the Company’s
members.
3.4. Company
Records . The copies of the Articles of Organization and
Operating Agreement, and in each case, all amendments thereto, of
the Company that have been delivered to Purchaser are true, correct
and complete copies thereof, as in effect on the date hereof. The
Company has delivered to Purchaser accurate consents to all actions
taken without meetings by the Managers, the Advisory Board and the
members of the Company since the formation of the Company. The
Company has never had any actual meetings by the Managers, the
Advisory Board or the members of the Company. The Company has no
Managers, and the Advisory Board is authorized to act on behalf of
the Company.
3.5.
Authorization and Validity . The execution, delivery and
performance by the Company and Members of the Transaction
Documents, and the consummation of the transactions contemplated by
the Transaction Documents have been duly authorized by the Company
and Members. The Transaction Documents have been duly executed and
delivered by the Company and Members and constitute legal, valid
and binding obligations of the Company and Members, enforceable
against the Company and Members in accordance with their respective
terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors’ rights
generally or the availability of equitable remedies. The sale of
the Interests by Members to Purchaser will not impair the ability
or authority of the Company to carry on its business as now
conducted in any respect.
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3.6.
Subsidiaries . The Company does not own, directly or
indirectly, any of the capital stock of any other corporation or
any equity, profit sharing, participation or other interest in any
corporation, partnership, joint venture or other entity.
3.7. No
Violation . Neither the execution, delivery or performance of
the Transaction Documents nor the consummation of the transactions
contemplated by the Transaction Documents will (i) conflict
with, or result in a violation or breach of the terms, conditions
or provisions of, or constitute a default under, the Articles of
Organization or Operating Agreement of the Company (i.e.,
provisions of Section 6.1.4 of the Operating Agreement have
been waived pursuant to Section 2.1 above) or any agreement,
indenture or other instrument under which the Company or Members
are bound or to which the Interests or any of the assets of the
Company are subject, or result in the creation or imposition of any
security interest, lien, charge or encumbrance upon the Interests
or any of the assets of the Company, or (ii) violate or
conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company, Members, the
Interests or the assets of the Company. The Company and Members
have complied with all laws, regulations and licensing requirements
and have filed with the proper authorities all necessary statements
and reports.
3.8.
Consents . No consent, authorization, approval, permit or
license of, or filing with, any governmental or public body or
authority, any lender or lessor or any other person or entity is
required to authorize, or is required in connection with, the
execution, delivery and performance of the Transaction Documents on
the part of the Company or Members.
3.9. Financial
Statements . Prior to the Closing, the Company will furnish to
Purchaser the following financial information of the Company:
(i) detailed general ledgers of the Company for the last
fiscal year and the period subsequent to that date;
(ii) copies of all federal and state income tax returns;
(iii) copies of prior years audit reports, if any;
(iv) bank statements for the last 24 months, to the
extent obtainable; (v) billing records for the last
24 months; (vi) records regarding amounts paid during the
last 24 months and all current outstanding bills;
(vii) copies of all operating and capital leases, if any;
(viii) copies of all loan agreements on any loans outstanding
during the last 24 months; (ix) copies of any points or
bonus systems used to compensate drivers; (x) copies of
marketing and sponsorship agreements; (xi) payroll tax reports
for last 24 months; and (xii) the members register (the
“Financial Information). The Financial Information is in
accordance with the books and records of the Company, and fairly
and accurately present the financial condition and results of
operations of the Company since inception. Set forth on
Exhibit 3.9 is the proposed budget for the Company for 2004
(the “Budget”). The Budget accurately reflects the
actual income and expenses of the Company for 2004, and there are
no other obligations or expenses incurred by the Company in 2004 in
excess of $25,000.
3.10.
Liabilities and Obligations . As of the Closing, except as
provided in Schedule 3.10(a), the Company has no liabilities
or obligations of any kind. Except as set forth on
Schedule 3.10(b), as of the Closing, the Company has not
received any pre-payments for the 2005 racing season. Within thirty
(30) days after the Closing, the Members agree to repay the
$150,000 prepayment listed on Schedule 3.10(b), and the
Company shall be entitled to receive
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any and all amounts payable by
Hoosier to the Company for the 2005 racing season, without
deduction of said $150,000.
3.11. Operating
Matters . Prior to Closing, the Company will furnish to
Purchaser copies of the form of members agreement and sanctioning
agreement pertaining to the above matters.
3.12. Employee
Matters . Schedule 3.12 contains a complete and accurate
list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and
other cash compensation (the “Cash Compensation”) of
all employees of the Company. As of the Closing Date, all amounts
owed to the employees of the Company for the period prior to the
Closing have been paid in full. There are no employment agreements
between the Company and any of its employees, and all of the
employees of the Company are terminable “at will”
without any liability for severance or any other benefits as a
result of any termination after the Closing by the Company. The
Company has not engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national
origin, age or handicap in its employment conditions or practices.
There are no: (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age or handicap
discrimination charges or complaints pending or threatened against
the Company before any federal, state or local court, board,
department, commission or agency nor does any basis therefor exist;
or (ii) existing or threatened labor strikes, disputes,
grievances, controversies or other labor troubles affecting the
Company, nor does any basis therefor exist.
3.13. Employee
Benefit Plans . The Company does not, and has not, sponsored or
contributed to on behalf of its employees any employee benefit
plans (the “Employee Benefit Plans”) (within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”).
3.14. Title;
Leased Assets . The Company does not own any interest in any
real property. Except as set forth in Schedule 3.14(a)(1), the
Company has good, valid and marketable title to all tangible and
intangible personal property owned by it (collectively, the
Personal Property”). The Personal Property includes, without
limitation, the assets listed on Schedule 3.14(a)(2). The only
lease of real or personal property to which the Company is a party,
either as lessor or lessee, is an office lease in a mobile home
park in Evansville, Indiana, with a lease rate of $165 per month,
which lease is terminable at will at any time. All such leases are
valid and enforceable in accordance with their respective terms
except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors’ rights generally or the
availability of equitable remedies. The Company owns, leases or
otherwise possesses a right to use all assets used in the conduct
of the business of the Company, which will not be impaired by the
consummation of the transactions contemplated hereby.
3.15.
Commitments . Set forth on Schedule 3.15 is a complete
list of all agreements, contracts, instruments and arrangements,
oral or written, to which the Company is a party (collectively, the
“Contracts”). There are no existing defaults, events of
default or events, occurrences, acts or omissions that, with the
giving of notice or lapse of time or both, would constitute
defaults by the Company, and no penalties have been incurred nor
are amendments pending, with respect to the Contracts. The
Contracts are in full force and effect and are valid
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and enforceable obligations of
the parties thereto in accordance with their respective terms, and
no defenses, off-sets or counterclaims have been asserted or, to
the best knowledge of the Company and Members, may be made by any
party thereto, nor has the Company waived any rights thereunder.
The Company has not received notice of any default with respect to
any Commitment. Neither the Company nor Members have received
notice of any plan or intention of any other party to any Contract
to exercise any right to cancel or terminate any Contract, and
neither the Company nor Members know of any fact that would justify
the exercise of such a right. Neither the Company nor Members
currently contemplates, or has reason to believe any other person
or entity currently contemplates, any amendment or change to any
Contract.
3.16.
Insurance . A list and brief description of all insurance
policies of the Company are set forth in Schedule 3.16, which
policies are in full force and effect. All of such policies are
valid and enforceable policies, issued by insurers of recognized
responsibility in amounts and against such risks and losses as is
customary in the industry of the insured.
3.17. Patents,
Trade-marks, Service Marks and Copyrights . Set forth in
Schedule 3.17(a), is a true and correct description of the
following (the “Proprietary Rights”): (i) all
URL’s, domain and website addresses, logos, all trade-marks,
trade-names, service marks and other trade designations, including
common law rights, registrations and applications therefor, and all
patents, copyrights and applications currently owned, in whole or
in part, by the Company with respect to the business of the
Company, and all licenses, royalties, assignments and other similar
agreements relating to the foregoing to which the Company is a
party (including expiration date if applicable); and (ii) all
agreements relating to technology, know-how or processes that the
Company is licensed or authorized to use by others, or which it
licenses or authorizes others to use. Except as set forth in
Schedule 3.17(b), the Company has the sole and exclusive right
to use the Proprietary Rights without infringing or violating the
rights of any third parties. Use of the Proprietary Rights does not
require the consent of any other person and the Proprietary Rights
are freely transferable. No claim has been asserted by any person
to the ownership of or right to use any Proprietary Right or
challenging or questioning the validity or effectiveness of any
license or agreement constituting a part of any Proprietary Right,
and neither the Company nor any Member knows of any valid basis for
any such claim. Each of the Proprietary Rights is valid and
subsisting, has not been cancelled, abandoned or otherwise
terminated (unless otherwise specifically noted on
Schedule 3.17(b)) and, if applicable, has been duly issued or
filed. The Company and Members have no knowledge of any claim that,
or inquiry as to whether, any product, activity or operation of the
Company infringes upon or involves, or has resulted in the
infringement of, any proprietary right of any other person, Company
or other entity; and no proceedings have been instituted, are
pending or are threatened that challenge the rights of the Company
with respect thereto.
3.18. Trade
Secrets and Customer Lists . The Company has the right to use,
free and clear of any claims or rights of others all trade secrets,
customer lists and proprietary information required for the
marketing of all merchandise and services formerly or presently
sold or marketed by the Company. The Company is not using or in any
way making use of any confidential information or trade secrets of
any third party, including without limitation any past or present
employee of the Company.
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3.19. Taxes
. All Tax Returns required to be filed by or on behalf of the
Company have been properly prepared and duly filed with the
appropriate taxing authorities in all jurisdictions in which such
Tax Returns are required to be filed. All Taxes (whether or not
shown on such Tax Returns) payable by or on behalf of the Company
have been paid in full. The Company has complied in all respects
with all applicable laws relating to the payment of any withholding
of Taxes and has duly and timely withheld from employees’
salaries, wages and other compensation and has paid over to the
appropriate Tax authorities all amounts required to be so withheld
and paid over for all periods under all applicable laws. Neither
the Company nor Members have executed or filed with the IRS or any
other Tax authority any contract, waiver or other document or
arrangement extending or having the effect of extending the period
for assessment or collection of Taxes (including, but not limited
to, any applicable statute of limitation), and no power of attorney
with respect to any Tax matter is currently in force. No claim has
been made by a Tax authority in a jurisdiction where the Company
does not file Tax Returns such that the Company or the Business is
or may be subject to taxation by the jurisdiction.
3.20.
Compliance with Laws . The Company and Members have complied
with all laws, regulations and licensing requirements and has filed
with the proper authorities all necessary statements and reports
with respect to the operation of the Business. There are no
existing violations by the Company or Members of any federal, state
or local law or regulation that could affect the property or
business of the Company. The Company possesses all necessary
licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted.
3.21.
Finder’s Fee . Neither the Company nor Members have
incurred any obligation for any finder’s, broker’s or
agent’s fee in connec
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