1A L E K S E I V.

T A R A S O V
attorney and counselor at law 9894 Bissonnet, suite 631 Houston, Texas 77036 fax 832.623.6250 telephone 1.877.321.2637

Outgoing: 11/06/01/001 June 1, 2011 Via U.S. Mail and electronic transmission TO: William S. Hamblin, III Racing Solutions 301 Center Court Dr. Bridgeport, Texas 76426 Respected Mr. Hamblin, This demand letter is in reference to your breach of contract with Mr. Alexander Korenkov, a citizen of the Russian Federation. This letter is provided pursuant to Federal Rule of Evidence 408. Fed.R.Evid. 408. On YYYY, Racing Solutions entered into a written agreement with Mr. Korenkov to modify a Dodge Viper ACR vehicle by installing the Racing Solutions 1500 HP package, which included the following components: RSI 522 stroker engine, ported cylinder heads, RSI twin turbo system with front mounted intercooler, RSI Stage 2 fuel system, RSI twin disc clutch, RSI/AEM engine management system, upgraded axles, upgraded differential, GForce 6-speed transmission, and a Ron Davis aluminum radiator. Your company also undertook the task of performing any necessary research and development, as required, to complete the installation of the 1500 HP package on Mr. Korenkovs Viper ACR. In accordance with the agreement, the cost for the vehicle was set at USD 194 636.02. The contract was subsequently orally revised to provide for the installation of a 2000 HP package, although it was ultimately downgraded back to only a 1500 HP package. On around September 28, 2008, you took delivery of a new Dodge Viper VCR vehicle at your production facility. Subsequently, throughout the remaining months of 2008, 2009, 2010, and the start of 2011, you sent periodic e-mail messages to Mr. Korenkov to let him know the progress of work on installing the engine package. In particular, on April 29, 2009, you informed Mr. Korenkov that the transmission was being upgraded with new internals, that the rear differential was being rebuilt by Mark Williams Enterprises, and that a custom radiator with fan shrouds for cooling was being manufactured. You had also advised that your contracted machine shop was working on
U:\BlockSTORAGE\CaseFILE\Racing Solutions\2011.06.01 Demand Letter.doc

HAMBLIN, WILLIAM, III June 1, 2011 Pg. 2

constructing the engine and that the custom pistons have been ordered. On June 11, 2009, you indicated to Mr. Korenkov that the transmission for his vehicle was completed. On August 31, 2009, you sent a message to Mr. Korenkov advising him that the motor was almost complete. You actually received the engine around October 5, 2009. On October 16, 2009, you notified Mr. Korenkov of a revision in the pricing scheme, advising him that the total cost for the completion of work on the contract would be USD 352 495.36. On that same day you stated to Mr. Korenkov that the estimated date for the completion of all works on the car would be the middle of November of the same year. However, the car was not operational in November of 2009 because of design defects, and Racing Solutions was obligated to do further work to bring the vehicle to a working condition. Racing Solutions spent many months trying to remedy the problems with its original design of the vehicle. On September 1, 2010, you again notified Mr. Korenkov to the effect that the car will be ready within the next several days. On October 20, 2010, you wrote to Mr. Korenkov that Racing Solutions would make the delivery of the vehicle to Russia during the second week of November 2010. Misfortunately, the car was not ready for delivery. Instead, you notified Mr. Korenkov of an accident that took place on or around December 15, 2010, involving the malfunction of an oil pump rotor that broke into multiple pieces and caused damage to the engine. After that issue was resolved, you continued to work on the car for several months. Throughout the three-year period of time, when you were allegedly installing the upgrades on the car, you were asking for Mr. Korenkov to remit various amounts of money to Racing Solutions, and Mr. Korenkov complied with such requests. On April 25, 2011, you wrote to Mr. Korenkov that during your testing of the motors performance, you broke and bent some of the rods inside the engine, causing the engine to explode. You made a suggestion to Mr. Korenkov to build a new motor for the vehicle. On April 27, 2011, you instructed Mr. Korenkov to send you USD 54 000.00 to pay for rebuilding the motor and completing the vehicle. Mr. Korenkov declined to provide you with payment prior to the completion of all work. To date, Mr. Korenkov has paid you for your services a total of USD 326 622.00, yet all that you can provide to him is a broken car containing an exploded motor with the combined value of less than USD 60 000.00. To any detached factfinder or arbitrator, your course of dealing with Mr. Korenkov would present a clear case of gross overreaching, consumer rights violation, negligence, misrepresentation, fraud, and bad faith. In the instant case, Racing Solutions stands in breach of its contract with Mr. Korenkov. The essential elements of a breach of contract cause of action that must be proved are (a) the existence of a valid contract; (b) the plaintiffs performance or tender of performance according to the terms of the contract; () the defendants breached of the contract; and (d) the plaintiffs damages sustained as a result of the breach. Valero Marketing & Supply v. Kalama International, 51 S.W.3d 345, 351 (Tex.App.- Houston [1st Dist.] 2001, no pet.). In the instant matter, the existence of a
U:\BlockSTORAGE\CaseFILE\Racing Solutions\2011.06.01 Demand Letter.doc

HAMBLIN, WILLIAM, III June 1, 2011 Pg. 3

contract is indisputable. Mr. Korenkovs performance is evident, as he paid to Racing Solutions even more money than it requested in the original contract. For its part, Racing Solutions did not deliver the vehicle to Mr. Korenkov timely. Mr. Korenkovs refusal to send the additional USD 54 000.00 cannot be used to justify the non-performance of Racing Solutions. The provisions of the original contract purporting to grant Racing Solutions the right to adjust the price upward based on some future agreements of the parties are unenforceable. It is well settled law that when provisions in an agreement leave material matters open for future adjustment and agreement that never occur, such clauses and stipulations are not binding upon the parties and merely constitute an agreement to agree. Texas Oil Co. v. Tenneco Inc., 917 S.W.2d 826, 830 (Tex. App.--Houston [14th Dist.] 1994) (citing Restatement (2d) of Contracts 33(1) (1981)), revd on other grounds, 958 S.W.2d 178 (Tex. 1997). Racing Solutions is also liable to Mr. Korenkov for the tort of fraud by misrepresentation. Under the holding in such cases as Stone v. Lawyers Title Insurance, 554 S.W.2d 183, 185 (Tex. 1977), to prevail upon a cause of action for fraud by misrepresentation, a plaintiff must establish the following elements by a preponderance of the evidence: (a) a material representation was made to a person; (b) the material representation was false (c) when the material representation was made; (d) the speaker knew that the material representation was false, or made the material representation recklessly without any knowledge of its truth; (e) the speaker made the material representation with the intent that it should be acted upon by the person to whom the speaker made the representation; (f) the person to whom the material representation was made acted in reliance upon the representation; and (g) the person to whom the material representation was made suffered injury or damage. Racing Solutions deliberately misrepresented to Mr. Korenkov that the company was actively working on his car and that final delivery would be accomplished on certain designated dates in 2009, 2010, and 2010. Racing Solutions committed fraud because the companys managers never intended to honor the commitments that they took upon themselves after signing the contract with Mr. Korenkov. In fact, there are sufficient reasons to believe that Racing Solutions misrepresented to Mr. Korenkov the qualifications of its personnel, as none of the workers employed at the company at the time of contracting with Mr. Korenkov appear to have been competent enough for the job. Racing Solutions systematically engaged in misrepresenting its reputation to Mr. Korenkov, stating to him on one occasion that the company was pursuing the purchase of the Viper Brand from Chrysler and offering the automaker USD 42 million for the acquisition. The defective work of Racing Solutions serves as a ground for imposing on the company liability for negligence. To establish liability for negligence, a plaintiff must show that the defendant owed a legal duty to the plaintiff, the defendant breached that duty, and the breach was a proximate cause of the plaintiffs personal injury or property damages. D. Houston, Inc. v. Love, 92 S.W.3d 450, 454 (Tex.2002). Additionally, Racing Solution is liable to Mr. Korenkov for its grave breaches of the Texas Deceptive Trade Practices Act. Under Chapter 17 of the Texas Business & Commerce Code, to
U:\BlockSTORAGE\CaseFILE\Racing Solutions\2011.06.01 Demand Letter.doc

HAMBLIN, WILLIAM, III June 1, 2011 Pg. 4

prevail on a cause of action for a Deceptive Trade Practices Act violation, a plaintiff needs to demonstrate that he, as a consumer, detrimentally relied on the false, misleading, or deceptive act or artifice employed by the defendant and that actual injury resulted. Mr. Korenkov would qualify for such relief. Racing Solutions deliberately misrepresented completion dates, as well as other material aspects of the transaction in its effort to induce the customer to wire the company money. A number of clauses in the original contract between Racing Solutions and Mr. Korenkov, such as the provision ostensibly limiting the companys liability for the delay, are unenforceable because they are unconscionable, procedurally or substantively. Substantive unconscionability refers to contractual terms that are unreasonably or grossly favorable to one side and to which the disfavored party does not assent. 8 Williston on Contracts 18:14 (4th ed. 2009). Substantive unconscionability typically relates to contracts that are, in whole or in part, deemed to be oppressive, such as provisions that deprive one party of the benefit of the agreement or an adequate remedy for the other partys breach, provisions that bear no reasonable relation to the risk involved, provisions that are substantially disadvantageous to one party without producing a commensurate benefit to the other party, a great disparity between the cost and the selling price of the item that is the subject of the contract in absence of objective justification for such disparity. See Resource Management Co. v. Weston Ranch and Livestock Co., Inc., 706 P.2d 1028 (Utah 1985). Thus, it was incumbent upon Racing Solutions to supply the Dodge Viper VCR vehicle to Mr. Korenkov in a reasonable time without delays. Racing Solutions disclaimer of warranties, including the warranty of fitness for a particular purpose and the warranty of merchantability, contained in the contract is in all likelihood also going to be found unenforceable. In line with the provisions of Tex. Bus. & Com. Code 2.316 (2010), to disclaim the implied warranty of fitness, the seller must use a writing and must make the disclaimer conspicuous. The contract that Racing Solutions gave Mr. Korenkov for his signature did contain clauses relating to warranty disclaimers, however these provisions were deliberately offset in a considerably smaller font compared to the remainder of the document. The disclaimer also utilized confusing verbiage. On the one hand, the warranty section of the contract stated that the vehicle shall be warranted by the manufacturer, yet the disclaimer purported to say that there was no warranty of any kind on any Racing Solutions product. The inclusion of an inconspicuous and confusing disclaimer effectively renders it inoperable. Mr. Korenkov is flabbergasted by the utter lack of professionalism, negligence, and want of business ethic that Racing Solutions and its top managers, including you personally, Mr. Hamblin, have displayed when working on his project. Mr. Korenkov has paid the company significantly more money than what was provided for under the initial contract. What he has received in return are empty promises, and, at best, a carcass of a three-year-old car that is barely worth half the amount of money that Mr. Korenkov advanced to the dealership for purchasing the vehicle. Mr. Korenkov no longer wishes to engage in any discussions with Racing Solutions relative to the possibility of resurrecting the project and rebuilding the car. He feels, and rightfully so, that
U:\BlockSTORAGE\CaseFILE\Racing Solutions\2011.06.01 Demand Letter.doc

HAMBLIN, WILLIAM, III June 1, 2011 Pg. 5

he has been deceived in the most unseemly fashion. At this time, Mr. Korenkov is making preparations to file a legal case against Racing Solutions in a Texas court alleging, inter alia, fraud, misrepresentation, breach of contract, violations of the Deceptive Trade Practices Act, bad faith and negligence. This letter is to give you notice of Mr. Kornekovs position. In all, your company has three (3) weeks from the date of this letter to remit in care of my office the full sum to compensate Mr. Korenkov for his losses incurred on account of Racing Solutions breach. The total amount of damages as requested by Mr. Kornekov is $ 696 622.00. This amount has been computed in the following manner: Direct economic damages, less salvage value: Estimated mitigated incidental damages, including lost opportunities: Non-economic damages and emotional distress, intentionally and/or negligently inflicted: USD 326 622.00 USD 300 000.00 USD 70 000.00

Your failure to remit the full amount timely will lead to litigation against Racing Solutions for all of the causes of action enumerated above in this letter. In any litigation, all available costs, interest, and attorneys fees will also be claimed.

Sincerely, Aleksei V. Tarasov

/EBC

U:\BlockSTORAGE\CaseFILE\Racing Solutions\2011.06.01 Demand Letter.doc

HAMBLIN, WILLIAM, III June 1, 2011 Pg. 6

cc:

Mr. Alexander Korenkov

U:\BlockSTORAGE\CaseFILE\Racing Solutions\2011.06.01 Demand Letter.doc