EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of December 30, 2017,
is entered into by and among APPLIANCESMART HOLDINGS LLC, a Nevada limited
liability company (the “Buyer”), APPLIANCESMART, INC., a Minnesota corporation
(the “Company”), and APPLIANCE RECYCLING CENTERS OF AMERICA, INC., a Minnesota
corporation (the “Seller”), the sole stockholder of the Company.

 

R E C I T A L S

 

A. The Seller owns all of the issued and outstanding capital stock of the
Company; and

 

B. The Seller desires to sell to the Buyer, and the Buyer desires to purchase
from the Seller, all of the issued and outstanding capital stock of the Company,
upon the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing and the premises and mutual
covenants hereinafter contained, the parties hereto intending to be legally
bound, agree as follows:

 

Article I
DEFINITIONS

 

Section 1.01.     Definitions.

 

Except as otherwise expressly provided in this Agreement, the capitalized terms
used in this Agreement shall have the meanings specified below and shall be
equally applicable to both the singular and plural forms:

 

“Affiliate” as to a specified Person, means a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by or
is under common control with, the Person specified.

 

“Company Business” means the sale of appliances at various retail locations.

 

“Contract” shall mean any written or oral contract, note, bond, mortgage,
indenture, lease, license, or other legally binding agreement, instrument,
commitment, guarantee, executory commitment, understanding or obligation.

 

“Encumbrances” means any lien, security interest, mortgage, pledge,
hypothecation, charge, preemptive right, voting trust, imposition, covenant,
condition, right of first refusal, easement or conditional sale or other title
retention agreement or other restriction; provided, however, that Encumbrances
shall not include any Permitted Encumbrance or any Encumbrances arising under
any of the Transaction Documents.

 

“Equity Securities” means: (a) in the case of a corporation, any and all shares
of capital stock; (b) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of capital stock; (c) in the case of a partnership or limited
liability company, any and all partnership or membership interests (whether
general or limited); (d) in each case, any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person; and (e) in each case, any
option or other right to acquire, or securities or Indebtedness convertible into
or exchangeable for, any of the foregoing.

 

 

 

 

 1 

 

 

 

 

“GAAP” means U.S. generally accepted accounting principles applied consistently
by the Company throughout the periods covered thereby.

 

“Governmental Authority” means any government, any governmental or
quasi-governmental entity or municipality or political or other subdivision
thereof, department, commission, board, self-regulating authority, bureau,
branch, authority, official, agency or instrumentality, and any court, tribunal,
arbitrator or judicial body, in each case, whether federal, state, city, county,
local, provincial, foreign or multi-national.

 

“Indebtedness” means at a particular time, without duplication: (a) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money; (b) any indebtedness evidenced by any note,
bond, debenture or other debt security; (c) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (including trade payables and
other current liabilities incurred in the ordinary course of business); (d) any
commitment by which a Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit); (e) any
indebtedness guaranteed in any manner by a Person (including guarantees in the
form of an agreement to repurchase or reimburse); (f) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss; (g) any indebtedness
secured by an Encumbrance on a Person’s assets; and (h) accrued interest to and
including the Closing Date in respect of any of the obligations described in the
foregoing clauses (a) through (g) of this definition and all premiums,
penalties, charges, fees, expenses and other amounts due in connection with the
payment and satisfaction in full of such obligations.

 

“Inventory” means the consumable inventory of the Company, wherever located,
including, without limitation, all finished goods, work in process, raw
materials, spare parts and all other materials and supplies to be used or
consumed by the Company in the Business.

 

“Liability” means any direct or indirect indebtedness, liability, assessment,
expense, claim, loss, damage, deficiency, obligation or responsibility, known or
unknown, disputed or undisputed, joint or several, vested or unvested, executory
or not, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured, determinable or undeterminable, accrued or unaccrued,
absolute or not, contingent or not, whether or not required to be reflected in
financial statements in accordance with GAAP, and whether due or to become due.

“

Material Adverse Effect” means any change, event, development, circumstance or
effect (each, an “Effect”) that, individually or taken together with all other
Effects is, or would be reasonably expected to be materially adverse to the
business, financial condition, properties or results of operations of the
Company; provided, however, that, in determining whether there has been a
Material Adverse Effect or whether a Material Adverse Effect would occur, this
definition shall exclude any material adverse effect to the extent arising out
of, attributable to, or resulting from: (a) actions or inactions taken by the
Company in compliance with the terms of this Agreement; (b) changes in
conditions generally affecting the industry in which the Company conducts its
business (unless such changes affect the Company in a materially
disproportionate manner compared to other companies in the Company’s industry);
(c) changes in general economic, political or financial market conditions
(unless such changes affect the Company in a materially disproportionate manner
compared to other companies in the Company’s industry); and (d) any outbreak or
escalation of hostilities (including, without limitation, any declaration of war
by the U.S. Congress) or acts of terrorism.

 

 

 

 

 2 

 

 

 

 

“Permits” means any approval, consent, license, accreditation, certification,
registration certificate, permit, waiver or other authorization issued, granted,
given or otherwise made available by or under the authority of any Governmental
Authority.

 

“Person” means any natural person, corporation, partnership, proprietorship,
other business organization, trust, union, association or Governmental
Authority.

 

“Proceeding” means any action, arbitration, mediation, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before
or otherwise involving any Governmental Authority, arbitrator or mediator.

 

“Representative” as to a specified Person means any officer, director,
principal, employee, attorney, accountant, consultant, lender, or other
representative of the Person specified.

 

“Subsidiary” means each corporation, partnership or other entity, fifty percent
(50%) or more of the outstanding voting shares of which or other voting
interests or equity interests in the case of a partnership or other entity are
owned or controlled directly by the Company.

 

“Transaction Documents” means this Agreement, the Transition Services Agreement
and each of the documents to be delivered at the Closing pursuant to the terms
of this Agreement.

 

“Transition Services Agreement” means the Transition Services Agreement
substantially in the form of Exhibit B attached hereto.

 

Article II
CONSIDERATION

 

Section 2.01.     Sale of Stock.

 

Upon the terms and conditions hereinafter set forth, the Seller hereby agrees to
sell, assign, transfer and deliver to the Buyer at the Closing, and the Buyer
hereby agrees to purchase and accept from the Seller at the Closing, upon the
terms and subject to the conditions set forth in this Agreement, 100% of the
issued and outstanding capital stock of the Company (the “Stock”). The Stock
shall be conveyed free and clear of all Encumbrances (other than restrictions on
transfer imposed by applicable federal and state securities laws), including but
not limited to those Encumbrances imposed by the MidCap Credit Agreement (as
defined below).

 

Section 2.02.     Purchase Price.

 

The entire consideration for the purchase and sale of the Stock pursuant to this
Agreement shall be $6,500,000 (the “Purchase Price”). In reliance upon the
representations, warranties and covenants set forth herein and in consideration
of the Seller’s sale, assignment, transfer and delivery of the Stock to the
Buyer, the Buyer shall pay to the Seller the Purchase Price upon Buyer’s receipt
of third-party financing in an amount sufficient to finance the Purchase Price,
and the subsequent delivery of such funds to certain third party lenders of the
Seller and the Company, all of which the parties expect to occur prior to March
31, 2018.

 

Section 2.03.     Transfer Taxes.

 

Notwithstanding anything in this Agreement to the contrary, all transfer,
documentary, stamp, registration and all other Taxes, fees and duties, if any,
incurred in connection with the sale and transfer of the Stock will be split
equally by the Buyer, on the one hand, and the Seller, on the other hand. The
party required by Law to do so will file all necessary tax returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other taxes and fees, and, if required by applicable Law, the
other parties will join in the execution of any such tax returns and other
documentation.

 

 

 

 

 3 

 

 

 

 

Section 2.04.     Tax Withholding.

 

The Buyer shall be entitled to deduct or withhold or cause to be deducted or
withheld from the consideration otherwise payable to, or on behalf of, the
Seller pursuant to this Agreement such taxes, if any, required to be deducted or
withheld in accordance with applicable Laws, which deducted or withheld taxes
shall be remitted to the appropriate taxing authorities in accordance with
applicable Laws.

 

Article III
CLOSING

 

Section 3.01.     Closing.

 

(a)              The closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place by the remote exchange of documents and
signatures by facsimile or electronic mail (.PDF) on the first business day
following the satisfaction (or, to the extent permitted by applicable Law,
waiver) of the conditions set forth in Article IV, commencing at 10:00 a.m.
local time. The date and time of the Closing are herein referred to as the
“Closing Date,” and the Closing shall be deemed effective at 5:01 p.m. (Central
Time) on the Closing Date.

 

(b)             The Seller shall deliver, or cause to be delivered, to a
mutually agreed upon third-party escrow agent (“Escrow Agent”), each of the
following:

 

(i)               a certificate or certificates representing the Stock duly
endorsed for transfer or with duly executed stock powers assigning the Stock to
the Buyer;

 

(ii)             documents and instruments reasonably acceptable to the Buyer
demonstrating the release of all Encumbrances imposed by the MidCap Credit
Agreement and the instruments, documents and agreements contemplated by the
MidCap Credit Agreement, including but not limited to the Security Documents (as
defined in the MidCap Credit Agreement);

 

(iii)           the Transition Services Agreement;

 

(iv)            evidence reasonably acceptable to the Buyer that all of the
outstanding Indebtedness has been repaid in full;

 

(v)             all book and records relating to the organization, ownership and
maintenance of the Company in possession or control of the Seller, if not
already located on the premises of the Company;

 

(vi)            a fairness opinion or valuation of the fair market value of the
Inventory by an independent third party;

 

(vii)          a certificate, signed by an officer of the Company, certifying
the truth and correctness of attached copies of the Company’s organizational
documents (including amendments thereto);

 

 

 

 4 

 

 

 

 

(viii)        a certificate duly issued by the applicable Governmental Authority
in the State of Minnesota and all other jurisdictions in which the Company is
qualified to conduct business, showing that the Company is validly existing or
qualified to do business in such jurisdiction; and

 

(ix)            such other documents and instruments as may be reasonably
required by the Buyer to consummate the transactions contemplated hereby.

 

All of the foregoing shall be held in escrow by the Escrow Agent until such time
as Buyer pays the Purchase Price in accordance with Section 2.02 hereof. Upon
payment of the Purchase Price by Buyer in accordance with Section 2.02 hereof,
all the foregoing shall be automatically released by the Escrow Agent without
any further action by any of the parties hereto.

 

Article IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller hereby represents and warrants to the Buyer that the following
statements contained in this Article IV are true and correct as of the date
hereof (except, as to any representations and warranties that specifically
relate to an earlier date, such representations and warranties are true and
correct as of such earlier date):

 

Section 4.01.     Execution and Effect of Agreement.

 

The Seller has the power and authority to execute and deliver this Agreement and
the other Transaction Documents to which the Seller is a party and to perform
its obligations under each of the Transaction Documents to which the Seller is a
party and to consummate the transactions contemplated by the Transaction
Documents to which the Seller is a party. The execution and delivery by the
Seller of this Agreement and the other Transaction Documents to which the Seller
is a party and the consummation by the Seller of the transactions contemplated
by the Transaction Documents to which the Seller is a party have been duly
authorized by all necessary action on the part of the Seller and no other
proceeding, approval or authorization on the part of the Seller is necessary to
authorize the execution, delivery and performance of this Agreement or any other
Transaction Document to which the Seller is a party or the transactions
contemplated by the Transaction Documents to which the Seller is a party. This
Agreement and each of the other Transaction Documents to which the Seller is a
party have been duly executed and delivered by the Seller and constitute the
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject as to
enforceability, to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity (the “Bankruptcy and
Equity Exceptions”).

 

Section 4.02.     No Violation.

 

Neither the execution or delivery by the Seller of this Agreement or any other
Transaction Document to which the Seller is a party, nor the consummation of the
transactions contemplated by the Transaction Documents to which the Seller is a
party does or will: (a) violate any statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or restriction of any Governmental
Authority to which the Seller is a party or by which or to which it is bound or
subject; (b) require notice to, conflict with or result in a breach of, or give
rise to a right of termination of, or accelerate the performance required by,
any terms of any Contract to which the Seller is a party, or constitute a
default thereunder; or (c) result in the creation of any Encumbrance upon any of
the Seller’s assets (except Encumbrances that individually and in the aggregate
are not material).

 

 

 

 5 

 

 

 

 

Section 4.03.     Title; Agreements.

 

The Seller holds of record and beneficially all of the Stock, free and clear of
any and all Encumbrances or other restrictions on transfer (other than
restrictions on transfer imposed by applicable federal and state securities
laws). The Seller is not a party to any voting trust, proxy or other agreement
or understanding with respect to any equity interest of the Company.

 

Section 4.04.     Litigation; Consents.

 

There are no Proceedings (including any arbitration proceedings), orders, or
claims pending or, to the Seller’s knowledge, threatened against the Seller with
respect to the execution, delivery or performance of this Agreement or the
transactions contemplated hereby or the Stock owned by the Seller; (ii) there
are no investigations, inquiries or other Proceedings involving the Seller
pending or to the Seller’s knowledge, threatened; and (iii) there are no
Proceedings (including any arbitration proceedings), orders, or claims pending
or threatened by the Seller against any third party, at law or in equity, or
before or by any Governmental Authority relating to the Company or the Stock
(including any actions, suits, proceedings or investigations with respect to the
transactions contemplated by this Agreement or any Transaction Document).

 

Section 4.05.     Brokers.

 

Neither the Seller nor any Person acting on behalf of the Seller has agreed to
pay a commission, finder’s fee, investment banking fee or similar payment in
connection with this Agreement or any matter related hereto.

 

Article V
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY

 

The Company and the Seller each represent and warrant to the Buyer that the
following statements contained in this Article V are true and correct as of the
date hereof (except, as to any representations and warranties that specifically
relate to an earlier date, such representations and warranties are true and
correct as of such earlier date):

 

Section 5.01.     Organization and Good Standing.

 

The Company is a corporation duly incorporated and validly existing under the
laws of the State of Minnesota and the Company has full power and authority to
carry on its business in the places and in the manner as now conducted and to
own or hold under lease the properties and assets it now owns or holds under
lease. The Company is duly qualified in all jurisdictions in which the conduct
of its business or activities or its ownership of assets requires qualification
under applicable Laws, except whereby the failure to be so qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
articles of incorporation of the Company and the bylaws of the Company, each as
amended to date, of the Company (the “Organizational Documents”) have been made
available to the Buyer and are in full force and effect. The Company has no
Subsidiaries. The Company does not control directly or indirectly or have any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association.

 

 

 

 

 6 

 

 

 

 

Section 5.02.     Capitalization.

 

The Seller is the record and beneficial owner of all of the Stock. The Stock
comprises the entire capitalization of the Company on a fully diluted basis. For
purposes of this Agreement, “fully diluted basis” shall mean, at the time of
determination, the Stock and any warrants, options, rights to subscribe for or
to purchase, or other securities convertible into, or exercisable or
exchangeable for Equity Securities, assuming, without duplication, the
conversion, exchange or exercise of all outstanding warrants, options, rights to
subscribe for or to purchase, or other securities convertible into, or
exercisable or exchangeable for Equity Securities, that are not already issued
and that are then currently convertible, exchangeable or exercisable. Other than
the Stock, there are no outstanding options (whether under an option plan or
otherwise), rights (preemptive or otherwise), warrants, calls, convertible
securities, commitments or any other arrangements to which the Company is a
party requiring or restricting the issuance, sale or transfer by the Company of
any Equity Securities of or in the Company or any securities convertible
directly or indirectly into Equity Securities of or in the Company or evidencing
the right to subscribe for any Equity Securities, or giving any Person any
rights with respect to the Equity Securities of or in the Company. There are no
voting agreements, voting trusts, equity appreciation rights, phantom equity
plans or other agreements (including cumulative voting rights), commitments or
understandings to which the Company is a party with respect to the Equity
Securities of the Company. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any of
its Equity Securities. All of the Stock has been duly authorized and is validly
issued, fully paid and nonassessable and was not issued in violation of any
statutory or contractual preemptive rights or similar restrictions. There are no
statutory or contractual preemptive rights, rights of first refusal or similar
rights or restrictions with respect to the sale of the Stock hereunder arising
under any written or verbal agreement to which the Company is a party or to
which the Seller is a party.

 

Section 5.03.     Indebtedness; No Undisclosed Liabilities.

 

Other than outstanding accounts payable incurred in the ordinary course of
business, certain personal property leases that are immaterial in amount, and
that indebtedness under that certain Credit and Security Agreement dated as of
May 10, 2017 (the “Midcap Credit Agreement”) (such Indebtedness is collectively
referred to as the “Outstanding Indebtedness”), by and among the lenders
referenced in the Midcap Credit Agreement, MidCap Funding X Trust, as Agent, and
the Company and other borrowers thereto, there is no indebtedness of the
Company. The Company has no liability that would be required under GAAP to be
reserved against or reflected in a balance sheet other than: (i) Liabilities set
forth or reserved against and disclosed on the Balance Sheet; (ii) Liabilities
which have arisen after the Balance Sheet Date in the ordinary course of
business consistent with past practice; or (iii) Liabilities incurred in
connection with this Agreement or any of the other Transaction Documents and the
transactions contemplated hereby or thereby.

 

Section 5.04.     No Change in the Business.

 

Since September 30, 2017, there has been no change in the business, financial
condition, properties or results of operations of the Company that has had or
could be reasonably expected to have a Material Adverse Effect. Since September
30, 2017, the Company has conducted its business in the ordinary course
consistent with past custom and practice.

 

Section 5.05.     Permits; Compliance with Law.

 

(a)                 The Company is in compliance in all material respects with
all applicable federal, state and local laws, rules and regulations of any
Governmental Authority regarding the operation of the Company Business (“Laws”).
The Company has not received any written notices from any Governmental Authority
that it is in material violation or breach of any Laws, which violation or
breach has not been cured to the satisfaction any such Governmental Authority.

 

 

 

 

 7 

 

 

 

 

(b)                 The Company holds all Permits necessary for the conduct of
its business as currently conducted. The Permits are valid and in full force and
effect, and the Company has not received any notice that any Governmental
Authority intends to cancel, suspend, terminate or not renew any of such
Permits. The transactions contemplated by this Agreement and the other
Transaction Documents will not result in a default under, or a breach or
violation of, any of the Permits listed on Schedule 5.05(b).

 

Section 5.06.     Real Property; Leases of Real Property.

 

The Company does not own any real property. Schedule 5.06 contains a true,
complete and correct list of all leases, subleases, license agreements or other
rights of possession or occupancy of real property to which the Company is a
party (each, a “Lease”). All of the Leases are in full force and effect, and the
Company is not in default in any material respect beyond any applicable notice
or grace period, and has not received written notice of any such default still
outstanding on the date hereof under any such Lease. To the Company’s knowledge,
on the date hereof, there exists no uncured material default under any Lease by
any third party. True, complete and correct copies of each Lease have been made
available to the Buyer. Except as described on Schedule 5.06, no consent is
required of any landlord or any other party to any Lease to consummate the
transactions contemplated hereby, and upon consummation of the transactions
contemplated hereby, each Lease will continue to entitle the Company to the use
and possession of the real property specified in such Leases for the purposes
for which such real property is now being used by the Company. The Company has
not agreed, nor is it otherwise committed, to lease any real property except for
the real property described in the Leases.

 

Section 5.07.     Litigation; Consents.

 

(a)                 Other than potential claims with respect to the damage
caused by the fire at 6080 E. Main Street, Columbus, Ohio 43212: (i) there are
no Proceedings, orders, or claims pending or, to the Company’s knowledge,
threatened against or affecting the Company or any assets of the Company or with
respect to any service provided by the Company; (ii) there are no
investigations, inquiries or other Proceedings involving the Company pending or
to the Company’s knowledge, threatened; and (iii) there are no Proceedings,
orders, or claims pending or threatened by the Company against any third party,
at law or in equity, or before or by any Governmental Authority (including any
actions, suits, proceedings or investigations with respect to the transactions
contemplated by this Agreement or any Transaction Document). The Company is not
subject to any arbitration proceedings under collective bargaining agreements or
otherwise or any investigations or inquiries by any Governmental Authority. The
Company is not subject to any judgment, order or decree of any court or other
Governmental Authority and the Company has not received any opinion or
memorandum or legal advice from legal counsel to the effect that the Company is
exposed, from a legal standpoint, to any liability which would reasonably be
expected to result in a Material Adverse Effect.

 

(b)                 No notice to, consent, approval, permit, authorization of,
declaration to or filing with any Governmental Authority or any other third
party to be obtained or made by the Company (collectively, “Consents”) is
required in connection with: (i) the execution and delivery of this Agreement or
any other Transaction Document or the consummation of the transactions
contemplated hereby or thereby, except for those listed on Schedule 5.08(b); or
(ii) a change in control of the Company, except for those listed on Schedule
5.07(b).

 

 

 

 8 

 

 

 

 

Section 5.08.     Certain Payments.

 

Neither the Company nor any of its directors, officers, nor to the Seller’s
knowledge or Company’s knowledge, any of its employees or agents has directly or
indirectly made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment in violation of any federal, state, local,
municipal, foreign or other law, ordinance, regulation, statute or treaty to any
person or entity, private or public, regardless of form, whether in money,
property, or services: (a) to obtain favorable treatment in securing business;
(b) to pay for favorable treatment for business secured; or (c) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any Affiliate thereof.

 

Article VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer hereby represents and warrants to the Seller that the following
statements contained in this Article VI are true and correct as of the date
hereof (except, as to any representations and warranties that specifically
relate to an earlier date, such representations and warranties are true and
correct as of such earlier date):

 

Section 6.01.     Organization and Good Standing. The Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Nevada. The Buyer has full power and authority to own
its properties and carry on its business as it is now being conducted.

 

Section 6.02.     Execution and Effect of Agreement.

 

The Buyer has the power and authority to enter into this Agreement and each of
the other Transaction Documents to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Buyer of this
Agreement and each of the other Transaction Documents to which it is a party and
the consummation by the Buyer of the transactions contemplated hereby and the
Transaction Documents have been duly authorized by all necessary action on the
part of the Buyer, and no other proceeding, approval or authorization on the
part of the Buyer is necessary to authorize the execution, delivery and
performance of this Agreement or any other Transaction Document and the
transactions contemplated hereunder and under the Transaction Documents. This
Agreement and each Transaction Document to which the Buyer is a party have been
duly executed and delivered by the Buyer and constitute the legal, valid and
binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms, except as limited by the Bankruptcy and Equity Exceptions.

 

Section 6.03.     No Violation.

 

Neither the execution or delivery by the Buyer of this Agreement and each of the
other Transaction Documents to which it is a party nor the consummation of the
transactions contemplated under this Agreement and each of the Transaction
Documents to which the Buyer is a party, will: (i) violate any statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or
restriction of any Governmental Authority to which the Buyer is a party or by
which or to which the Buyer or any of its assets or properties is bound or
subject, or the provisions of the organizational documents of the Buyer; or (ii)
conflict in any material respect with or result in a material breach of, or give
rise to a right of termination of, or accelerate the performance required by,
the terms of any material agreement to which the Buyer is a party or to which it
or any of its assets or properties is bound or subject.

 

Section 6.04.     Litigation; Consents.

 

(a)       There is no Proceeding, order or claim pending, or to the Buyer’s
knowledge, threatened, against the Buyer which seeks to restrain, prohibit or
otherwise challenges the consummation, legality or validity of the transactions
contemplated hereby.

 

 

 

 

 9 

 

 

 

 

(b)       No consent, approval, permit, authorization of, declaration to or
filing with any Governmental Authority or any other third party on the part of
the Buyer is required in connection with the execution and delivery of this
Agreement or any other Transaction Documents to which the Buyer is a party, or
the consummation of the transactions contemplated hereunder or under any of the
Transaction Documents to which the Buyer is a party.

 

Section 6.05.     Brokers.

 

Neither the Buyer nor any Person acting on behalf of the Buyer has agreed to pay
a commission, finder’s fee, investment banking fee or similar payment in
connection with this Agreement or any matter related hereto.

 

Article VII

COVENANTS

 

Section 7.01.     Cooperation.

 

If, at any time after the Closing, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Buyer with full
right, title and possession to the Stock, the Seller agrees to take, and will
take, all such lawful and necessary action required to so do or that the Buyer
otherwise reasonably requests to carry out and give effect to the Seller’s
agreements and undertakings pursuant to this Agreement. In furtherance thereof,
the Seller agrees to execute and deliver, or cause to be executed and delivered,
such further instruments or documents or take such other action as may be
necessary or convenient, in the opinion of the Buyer or the Buyer’s legal
counsel, to carry out the transactions contemplated hereby.

 

Section 7.02.     Press Releases.

 

None of the Buyer, the Seller, the Company or any of their respective
Affiliates, directors, officers, Representatives, or agents, shall make any
press release or public announcement disclosing the existence of this Agreement
or make known publicly any facts related to the transactions contemplated hereby
without the prior written consent of the Buyer, on the one hand, or the Seller,
on the other hand, except where such disclosure is required by Law or a national
securities exchange, in which event only after prior consultation with such
other party.

 

Section 7.03.      Transaction Expenses.

 

Each party shall bear all out-of-pocket costs and expenses incurred by such
party to third parties in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the Transaction
Documents to which such Person is a party, and in connection with the
consummation of the transactions contemplated hereby and thereby including,
without limitation, legal, accounting and investment banker’s or broker’s fees
(the “Transaction Expenses”). Without limiting the generality of the foregoing,
all Transaction Expenses of the Company (prior to the Closing) and the Seller
shall be borne, paid, satisfied, and discharged solely and exclusively by the
Seller and shall have been paid in full by the Seller or the Company prior to
the Closing, and neither the Buyer nor the Company shall have any liability or
responsibility therefor.

 

 

 

 

 10 

 

 

 

 

Section 7.04.     Non-Competition and Non-Solicitation.

 

The Seller agrees and confirms that in connection with the agreements and
covenants herein, including, without limitation, the Purchase Price, and as a
material inducement to the Buyer to enter into this Agreement, it agrees with,
and will hereafter fully comply with, abide by, and perform as follows:

 

(a)       Non-Solicitation. The Seller, for itself and on behalf of its
Affiliates, hereby covenants and agrees that it will not (whether directly or
indirectly): (i) for a period of five years after the Closing Date, recruit,
solicit or induce, or attempt to induce, for employment by the Seller or any
Affiliate of the Seller, any Person who is an employee of the Company whose
employment by the Company continues after the Closing; or (ii) for a period of
five years after the Closing Date, solicit, induce or attempt to induce any
customer or potential customer of the Buyer, any of the Buyer’s Affiliates or
the Company, or any customer, client, consultant, independent contractor,
vendor, supplier, or partner of the Buyer, any of the Buyer’s Affiliates or the
Company, to terminate, diminish, or materially alter in a manner harmful to the
Buyer, any of the Buyer’s Affiliates or the Company, its relationship or their
relationships with the Buyer, any of the Buyer’s Affiliates, or the Company. For
purposes of clarity under this Section 8.09 and not by way of limitation, the
Company shall be deemed to include its successors and assigns.

 

(b)       Noncompetition. The Seller, for itself and on behalf of its
Affiliates, covenants and agrees that for a period of five years after the
Closing Date, it will not (whether directly or indirectly): engage in the
Company Business anywhere in the United States, directly or indirectly, as a
shareholder, member, partner, owner, joint venture, investor, lender or in any
other capacity whatsoever.

 

(c)       The Seller hereby acknowledges and confirms that the provisions of
this Section 7.04 are reasonable and necessary to protect the interests of the
Buyer and the Company, that any violation of this Section 7.04 will result in an
immediate, irreparable injury to the Buyer and the Company and that damages at
law would not be reasonable or adequate compensation to the Buyer and the
Company for violation of this Section 7.04 and that, in addition to any other
available remedies, the Buyer and the Company shall be entitled to have the
provisions of this Section 7.04 specifically enforced by preliminary and
permanent injunctive relief without the necessity of proving actual damages or
posting a bond or other security to an equitable accounting of all earnings,
profits and other benefits arising out of any violation of this Section 7.04. In
the event that the provisions of this Section 7.04 shall ever be deemed to
exceed the time, geographic scope or other limitations permitted by applicable
Law, then the provisions shall be deemed reformed to the maximum extent
permitted by applicable Law.

 

Section 7.05.     Tax Matters.

 

Following Seller’s request in writing, Buyer shall make an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (and any
corresponding election under state, local, and foreign tax law) (collectively, a
“Section 338(h)(10) Election”) with respect to the Stock to be acquired by Buyer
under this Agreement.  If a request for a Section 338(h)(10) Election is made
(i) Buyer shall prepare and timely file with the appropriate taxing authorities
any forms used to make the Section 338(h)(10) Election and (ii) Seller and Buyer
each acknowledge and agree to execute and deliver before or after Closing all
federal and state forms used to make a Section 338(h)(10) Election requiring
their signature.  The Company shall include any income, gain, loss, deduction,
or other tax item resulting from the Section 338(h)(10) Election on its tax
returns to the extent required by applicable law.  Seller shall pay (or
reimburse Buyer within 15 days after payment by Buyer or the Company) any tax
imposed on the Company attributable to the making of the
Section 338(h)(10) Election (including, but not limited to, any tax imposed
under Treasury Regulation § 1.338(h)(10)-1(d)(4), and any state, local or
foreign tax imposed on the Company’s gain), and Seller shall indemnify, defend,
and hold harmless Buyer, the Company, and each of their respective successors,
assigns, and Affiliates from and against any liability arising out of any
failure to pay any such tax.

 

 

 

 11 

 

 

 

 

Article VIII
INDEMNIFICATION

 

Section 8.01.     Obligations of the Seller.

 

(a)       As consideration for the commitment of the Buyer hereunder, subject to
the conditions and limitations set forth in this Article VIII, the Seller hereby
agrees to indemnify and hold harmless the Buyer, the Company and each of their
Affiliates, directors, officers, agents and employees and each other Person, if
any, controlling the Buyer (each a “Buyer Indemnified Person”) from and against
any direct loss, damage, Liability, demand, settlement, judgment, award, fine,
penalty, charge, cost or expense of any nature (including, without limitation,
the reasonable fees of counsel) (each, a “Loss”), to which such Buyer
Indemnified Person becomes subject as a result of, or based upon or arising out
of, directly or indirectly: (i) any inaccuracy in or breach of any
representation or warranty made by the Seller in Article IV or the Seller and
the Company in Article V of this Agreement; or (ii) any breach or nonperformance
of any covenant or agreement made or to be performed by the Seller or the
Company pursuant to this Agreement.

 

(b)       For purposes of this Article VIII, the amount of any Loss incurred by
any Buyer Indemnified Person shall be reduced by: (x) any insurance proceeds
received by the Buyer or the Company as a result of such Loss (net of any
deductible or retention amount), which proceeds the Buyer would diligently seek
to claim and obtain; and (y) any third-party recovery received by the Buyer or
the Company as a result of such claims (net of any out of pocket costs of
collection. For the avoidance of doubt, any such offset or setoff shall reduce
dollar-for-dollar any amount due from the Seller. With respect to any Loss
suffered by a Buyer Indemnified Person, the Buyer shall diligently seek to
mitigate any Losses.

 

Section 8.02.     Obligations of the Buyer.

 

As consideration for the commitment of the Seller hereunder, subject to the
conditions and limitations set forth in this Article VIII, the Buyer agrees to
indemnify and hold harmless the Seller and each of their Affiliates (each a
“Seller Indemnified Person”) from and against any Loss to which a Seller
Indemnified Person becomes subject as a result of, or based upon or arising out
of, directly or indirectly: (a) any inaccuracy in or breach of any
representation or warranty made by the Buyer pursuant to Article VI of this
Agreement; or (b) any breach or nonperformance of any covenant made or to be
performed by the Buyer or, after the Closing, the Company, pursuant to this
Agreement.

 

Section 8.03.     Remedies.

 

Each party hereto acknowledges that irreparable damage would result if this
Agreement is not specifically enforced. Therefore, the rights and obligations of
the parties under this Agreement, including, without limitation, their
respective rights and obligations to sell and purchase the Stock and the rights
and obligations of the parties hereunder shall be enforceable by a decree of
specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Each party hereto agrees that monetary damages would not be adequate
compensation for any Loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense that a remedy at law
may be adequate in any action for specific performance hereunder.

 

 

 

 12 

 

 

 

 

Article IX.
GENERAL PROVISIONS

 

Section 9.01.     Amendments and Waivers.

 

Any term of this Agreement may be amended, supplemented or modified only with
the written consent of each of the Buyer and the Seller. The observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of: (a) the Buyer if such waiver is sought to be enforced against the
Buyer or the Company; or (b) the Seller if the waiver is sought to be enforced
against the Seller. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.

 

Section 9.02.     Successors and Assigns.

 

This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective legal representatives, successors, heirs,
executors and assigns. Neither this Agreement nor any rights or obligations
hereunder may be assigned or transferred without the prior written consent of
the other parties hereto, except that the Buyer may: (a) assign its rights under
this Agreement to any lender of the Buyer or the Company for collateral security
purposes; or (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for, and shall guarantee, the performance of all of its
obligations hereunder).

 

Section 9.03.     No Third Party Beneficiaries.

 

The rights created by this Agreement are solely for the benefit of the parties
hereto and their respective successors or permitted assigns, and no other Person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained; provided, however, that the provisions of Article VIII above
concerning indemnification and the provisions of Section 9.13 concerning the
release of the Released Claims by the Releasors are intended for the benefit and
burden of the parties specified therein, and their respective legal
representatives, successors, heirs, executors and assigns.

 

Section 9.04.     Choice of Law; Consent to Jurisdiction.

 

(a)       This Agreement shall be governed by and construed under and the rights
of the parties determined in accordance with the internal, substantive laws of
the State of Nevada (without reference to the choice of law provisions of the
State of Nevada or of any other jurisdiction that would result in the
application of the laws of any other jurisdiction).

 

(b)       Without limiting the other provisions of this Section 9.04(b), the
parties hereto agree that any legal proceeding by or against any party hereto or
with respect to or arising out of this Agreement shall be brought exclusively in
Clark County, Nevada. By execution and delivery of this Agreement, each party
hereto irrevocably and unconditionally submits to the exclusive jurisdiction of
such courts and to the appellate courts therefrom solely for the purposes of
disputes arising under this Agreement and not as a general submission to such
jurisdiction or with respect to any other dispute, matter or claim whatsoever.
The parties hereto irrevocably consent to the service of process out of any of
the aforementioned courts in any such action or proceeding by the delivery of
copies thereof by overnight courier to the address for such party to which
notices are deliverable hereunder. Any such service of process shall be
effective upon delivery. Nothing herein shall affect the right to serve process
in any other manner permitted by applicable Law. The parties hereto hereby waive
any right to stay or dismiss any action or proceeding under or in connection
with this Agreement brought before the foregoing courts on the basis of: (i) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason, or that it or any of its property is immune from the
above-described legal process; (ii) that such action or proceeding is brought in
an inconvenient forum, that venue for the action or proceeding is improper or
that this Agreement may not be enforced in or by such courts; or (iii) any other
defense that would hinder or delay the levy, execution or collection of any
amount to which any party hereto is entitled pursuant to any final judgment of
any court having jurisdiction.

 

 

 

 13 

 

 

 

 

Section 9.05.     WAIVER OF JURY TRIAL.

 

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.

 

Section 9.06.     Specific Performance.

 

The Seller agrees and acknowledges that irreparable damage would occur to the
Buyer in the event that any provision of this Agreement was not performed in
accordance with the terms hereof or in the event of any breach or threatened
breach of any provision of this Agreement by the Seller and that, therefore, the
Buyer shall be entitled to expedited and immediate: (a) specific performance of
the terms hereof; (b) injunctive relief to enjoin any breach or threatened
breach of any of the terms hereof; or (c) other appropriate equitable relief, in
each case in addition to any other remedy at law, in equity, by contract, or
otherwise and that in connection therewith the Buyer shall not be required or
compelled to post any bond or security in connection with any application or
petition for any such equitable remedy or relief it or they may seek.

 

Section 9.07.     Notices.

 

Unless otherwise specifically provided in this Agreement, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon the earlier of: (a) personal delivery to the party to be
notified; (b) actual receipt after deposit with the United States Post Office,
by certified mail, postage prepaid return receipt requested; (c) the actual
receipt after dispatch via nationally recognized overnight courier; or (d)
confirmation of transmission by electronic mail (provided such transmission is
also contemporaneously sent via one of the methods specified in clauses (a), (b)
or (c)), all addressed to the party to be notified at the address indicated for
such party below, or at such other address as such party may designate by five
business days’ advance written notice to the other parties. Notices should be
provided in accordance with this Section 9.07 at the following addresses:

 

 

 

 14 

 

 

 

 

If to the Seller, to:

 

Appliance Recycling Centers of America, Inc.

175 Jackson Ave. North, Suite 102

Minneapolis, MN 55343

E-mail: t.isaac@isaa.com

Attn: Tony Isaac, CEO

 

If to the Buyer or the Company, to:

 

ApplianceSmart Holdings LLC

c/o Live Ventures Incorporated

325 E. Warm Springs Road, Suite 102

Las Vegas, NV 89119

E-mail: j.isaac@isaac.com

Attn: Jon Isaac, President and CEO

 

Section 9.08.     Severability.

 

If one or more provisions of this Agreement shall be held invalid, illegal or
unenforceable, such provision shall, to the extent possible, be modified in such
manner as to be valid, legal and enforceable but so as to most nearly retain the
intent of the parties, and if such modification is not possible, such provision
shall be severed from this Agreement. In either case, the balance of this
Agreement shall be interpreted as if such provision were so modified or
excluded, as the case may be, and shall be enforceable in accordance with its
terms.

 

Section 9.09.     Entire Agreement.

 

This Agreement, together with the Company Disclosure Schedules hereto,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior understandings and agreements, whether
written or oral, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.

 

Section 9.10.     Construction.

 

The parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of such party’s (or its Representative’s) actual authorship of
any provision of this Agreement and the parties have agreed that no provision or
provisions of this Agreement can, may, or should be attributed to any particular
party. When a reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise indicated. Whenever the
words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation” whether or not
actually followed by such words. References to “or” shall be read, interpreted
and construed if the context permits as “and/or”. For purposes of this
Agreement, whenever the context requires: the singular number shall include the
plural, and vice versa; the masculine gender shall include the feminine and
neuter genders; the feminine gender shall include the masculine and neuter
genders; and the neuter gender shall include the masculine and feminine genders.

 

 

 

 

 15 

 

 

 

 

Section 9.11.     Titles and Subtitles.

 

The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.

 

Section 9.12.     Counterparts; Copies Sent by Facsimile or .PDF

 

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Delivery of facsimile or .pdf, or other electronic copies of
signature pages for this Agreement, other documents required by the Agreement,
and all certificates and other documents required to be delivered for Closing
shall be valid and treated for all purposes as delivery of the originals.

 

Section 9.13.     Release.

 

The consideration described in this Agreement represents the only payments and
consideration to be received by the Seller in exchange for the Stock owned by
the Seller and to be sold to the Buyer hereunder. In exchange for such
consideration, the Seller, for itself and its successors and assigns
(collectively, the “Releasors”), hereby forever fully and irrevocably releases
and discharges the Buyer, the Company and each of their respective predecessors,
successors, subsidiaries and Affiliates, managers, Representatives and agents
(collectively, the “Released Parties”) from any and all actions, suits, claims,
demands, debts, sums of money, accounts, reckonings, bonds, bills, covenants,
Contracts, controversies, promises, judgments, Liabilities or obligations of any
kind whatsoever in law or equity, or otherwise (including claims for damages,
costs, expenses, and attorneys’, brokers’ and accountants’ fees and expenses)
for additional payment or consideration in connection with the transactions
contemplated by this Agreement, as well as all other events, facts, conditions
or circumstances existing or arising prior to the Closing Date, which the
Releasors can, shall or may have against the Released Parties, and that now
exist or may hereafter accrue (collectively, the “Released Claims”); provided,
that the Released Claims shall not include claims arising under or otherwise
specifically available to the Releasors under this Agreement, any of the other
Transactional Documents or any of the transactions contemplated hereby,
indemnification or advancement of expenses arising under applicable Law or the
Organizational Documents, or rights, claims and actions arising out of or under
any insurance policies. The Releasors shall refrain from asserting any claim or
demand or commencing (or causing to be commenced) any Proceeding, in any court
or before any tribunal, against any Released Party based upon any Released
Claim.

 

(Remainder of this page intentionally left blank; signatures begin on the next
page.)

 

 

 

 16 

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement as
of the date first above written.

 

 

 

 

SELLER:

 

APPLIANCE RECYCLING CENTERS OF AMERICA, INC.

 

 

By: _/s/ Tony Isaac______________

Name: Tony Isaac

Title: Chief Executive Officer

         

COMPANY:

 

APPLIANCESMART, INC.

 

 

By: _/s/ Tony Isaac______________

Name: Tony Isaac

Title: Chief Executive Officer

         

buyer:

 

APPLIANCESMART HOLDINGS LLC

 

 

By: _/s/ Jon Isaac______________

Name: Jon Isaac

Title: President and Chief Executive Officer

 

 

 

 17