SHARE EXCHANGE AGREEMENT Between and Among Sports Source, Inc. and Kinfair Holdings Limited and Auto Chance International Limited Dated as of October 11, 2006
Between
and Among
Sports
Source, Inc.
and
Kinfair
Holdings Limited
and
Auto
Chance International Limited
Dated
as
of October 11, 2006
TABLE
OF CONTENTS
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PAGE
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ARTICLE
I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF KINFAIR
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1
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Section
1.01
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Organization
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1
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Section
1.02
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Capitalization
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2
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Section
1.03
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Subsidiaries
and Predecessor Corporations
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2
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Section
1.04
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Financial
Statements.
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2
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Section
1.05
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Information
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3
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|
Section
1.06
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Options
or Warrants
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3
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|
Section
1.07
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Absence
of Certain Changes or Events
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3
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|
Section
1.08
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Litigation
and Proceedings
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3
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|
Section
1.09
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Contracts.
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4
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Section
1.10
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No
Conflict With Other Instruments
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4
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Section
1.11
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Compliance
With Laws and Regulations
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4
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Section
1.12
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Approval
of Agreement
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4
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Section
1.13
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Valid
Obligation
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5
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ARTICLE
II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF SPORTS
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5
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Section
2.01
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Organization
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5
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Section
2.02
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Capitalization
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5
|
|
Section
2.03
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Subsidiaries
and Predecessor Corporations
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5
|
|
Section
2.04
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Financial
Statements.
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6
|
|
Section
2.05
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Information
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6
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|
Section
2.06
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Options
or Warrants
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7
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|
Section
2.07
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Absence
of Certain Changes or Events
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7
|
|
Section
2.08
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Litigation
and Proceedings
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7
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|
Section
2.09
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Contracts.
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7
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|
Section
2.10
|
No
Conflict With Other Instruments
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8
|
|
Section
2.11
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Compliance
With Laws and Regulations
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8
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|
Section
2.12
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Approval
of Agreement
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8
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|
Section
2.13
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Material
Transactions or Affiliations
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8
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Section
2.14
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Bank
Accounts; Power of Attorney
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9
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Section
2.15
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Valid
Obligation.
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9
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Section
2.16
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Filings.
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9
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ARTICLE
III PLAN OF EXCHANGE
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9
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Section
3.01
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The
Exchange.
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9
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Section
3.02
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Anti-Dilution
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10
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Section
3.03
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Closing
Events
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10
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Section
3.04
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Termination
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10
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i
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ARTICLE
IV SPECIAL COVENANTS
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10
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Section
4.01
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Access
to Properties and Records
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10
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Section
4.02
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Delivery
of Books and Records
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10
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Section
4.03
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Third
Party Consents and Certificates
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11
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Section
4.04
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Sports
Shareholder Meeting.
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11
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Section
4.05
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Cancellation
of Certain Shares of Sports Common Stock.
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11
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Section
4.06
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Designation
of Directors and Officer.
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11
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Section
4.07
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Exclusive
Dealing Rights.
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11
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Section
4.08
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Actions
Prior to Closing
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12
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Section
4.09
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Indemnification.
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13
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Section
4.10
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The
Acquisition of Sports Common Stock
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14
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Section
4.11
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Sales
of Securities Under Rule 144, If Applicable.
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15
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ARTICLE
V CONDITIONS PRECEDENT TO OBLIGATIONS OF SPORTS
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15
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Section
5.01
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Accuracy
of Representations and Performance of Covenants
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15
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Section
5.02
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Officer's
Certificate
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16
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Section
5.03
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Good
Standing
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16
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Section
5.04
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Approval
by Kinfair Shareholder
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16
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Section
5.05
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No
Governmental Prohibition
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16
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Section
5.06
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Consents
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16
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Section
5.07
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Other
Items.
|
16
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ARTICLE
VI CONDITIONS PRECEDENT TO OBLIGATIONS OF KINFAIR AND THE KINFAIR
SHAREHOLDER
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17
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|
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Section
6.01
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Accuracy
of Representations and Performance of Covenants
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17
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|
Section
6.02
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Officer's
Certificate
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17
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Section
6.03
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Good
Standing
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17
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Section
6.04
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No
Governmental Prohibition
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17
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|
Section
6.05
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Consents
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17
|
|
Section
6.06
|
Other
Items
|
18
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ARTICLE
VII MISCELLANEOUS
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18
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Section
7.01
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Brokers
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18
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Section
7.02
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Governing
Law
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18
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|
Section
7.03
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Notices
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18
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|
Section
7.04
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Attorney's
Fees
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19
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Section
7.05
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Confidentiality
|
19
|
|
Section
7.06
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Public
Announcements and Filings
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19
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Section
7.07
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Schedules;
Knowledge
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20
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Section
7.08
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Third
Party Beneficiaries
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20
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Section
7.09
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Expenses
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20
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Section
7.10
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Entire
Agreement
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20
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Section
7.11
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Survival;
Termination
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20
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Section
7.12
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Counterparts
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20
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Section
7.13
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Amendment
or Waiver
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20
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Section
7.14
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Best
Efforts
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21
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Exhibits
A. Suitability
Letter
B. Investment
Letter
ii
THIS
SHARE EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is
entered into as of this 11th
day of
October 2006, by and between SPORTS
SOURCE, INC.,
a
Delaware corporation (hereinafter referred to as "Sports"), with offices at
▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and KINFAIR
HOLDINGS LIMITED,
a Hong
Kong corporation (hereinafter referred to as "Kinfair") and AUTO
CHANCE INTERNATIONAL LIMITED
(the
“Shareholder”), upon the following premises:
Premises
WHEREAS,
Sports
is a publicly held corporation organized under the laws of the State of Delaware
with no significant operations;
WHEREAS,
Kinfair
is a privately held corporation organized under the laws of Hong
Kong;
WHEREAS,
Sports
agrees to acquire up to 100% of the issued and outstanding securities of Kinfair
in exchange for the issuance of certain shares of Sports (the "Exchange") and
the shareholder of Kinfair (the "Kinfair Shareholder") agrees to exchange his
shares of Kinfair on the terms described herein.
Agreement
NOW
THEREFORE,
on the
stated premises and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefits to the parties to
be
derived here from, and intending to be legally bound hereby, it is hereby agreed
as follows:
ARTICLE
I
REPRESENTATIONS,
COVENANTS, AND WARRANTIES OF KINFAIR
As
an
inducement to, and to obtain the reliance of Sports, except as set forth in
the
Kinfair Schedules, (as hereinafter defined), Kinfair represents and warrants
as
of the date hereof and as of the Closing Date, as defined below, as
follows:
Section
1.01 Organization. Kinfair
is a corporation duly organized, validly existing, and in good standing under
the laws of Hong Kong and has the corporate power and is duly authorized under
all applicable laws, regulations, ordinances, and orders of public authorities
to carry on its business in all material respects as it is now being conducted.
Included in the Kinfair Schedules are complete and correct copies of the
articles of incorporation, and bylaws of Kinfair (or their equivalent) as in
effect on the date hereof. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
violate any provision of Kinfair’s articles of incorporation or bylaws. Kinfair
has taken all actions required by law, its articles of incorporation, or
otherwise to authorize the execution and delivery of this Agreement. Kinfair
has
full power, authority, and legal right and has taken all action required by
law,
its articles of incorporation, and otherwise to consummate the transactions
herein contemplated.
Section
1.02 Capitalization. The
authorized capitalization of Kinfair consists of one shares of common stock,
par
value
of $1.00 per share. There is one (1) share of common stock currently issued
and
outstanding. The issued and outstanding share is legally issued, fully paid,
and
non-assessable and not issued in violation of the preemptive or other rights
of
any person.
Section
1.03 Subsidiaries
and Predecessor Corporations.
Except
as set forth in the Kinfair Schedules, Kinfair does not have any predecessor
corporation(s) or subsidiaries, and does not own, beneficially or of record,
any
shares of any other corporation. For purposes hereinafter, the term "Finfair"
also includes those subsidiaries set forth on the Kinfair
Schedules.
Section
1.04 Financial
Statements.
(a) Included
in the Finfair Schedules are (i) the audited balance sheets of Kinfair as of
March 31, 2005 and March 31, 2006 and the related audited statements of
operations, stockholders' equity and cash flows for the fiscal years ended
March
31, 2005 and March 31, 2006 together with the notes to such statements and
the
opinion of ▇▇▇▇▇▇▇▇ & Company, P.A., independent certified public
accountants.
(b) All
such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The
Kinfair balance sheets and true and accurate and present fairly as of their
respective dates the financial condition of Kinfair. As of the date of such
balance sheets, except as and to the extent reflected or reserved against
therein, Kinfair had no liabilities or obligations (absolute or contingent)
which should be reflected in the balance sheets or the notes thereto prepared
in
accordance with generally accepted accounting principles, and all assets
reflected therein are properly reported and present fairly the value of the
assets of Kinfair, in accordance with generally accepted accounting principles.
The statements of operations, stockholders' equity and cash flows reflect fairly
the information required to be set forth therein by generally accepted
accounting principles.
(c) Kinfair
has no liabilities with respect to the payment of any federal, state, county,
local or other taxes (including any deficiencies, interest or penalties), except
for taxes accrued but not yet due and payable.
(d) Kinfair
has timely filed all state, federal or local income and/or franchise tax returns
required to be filed by it from inception to the date hereof. Each of such
income tax returns reflects the taxes due for the period covered thereby, except
for amounts which, in the aggregate, are immaterial.
(e) All
of
Kinfair’s assets are reflected on its financial statements, and, except as set
forth in the Kinfair Schedules or the financial statements of Kinfair or the
notes thereto, Kinfair has no material liabilities, direct or indirect, matured
or unmatured, contingent or otherwise.
Section
1.05 Information.
The
information concerning Kinfair set forth in this Agreement and in the Kinfair
Schedules is complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading.
2
Section
1.06 Options
or Warrants.
There
are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued stock of Kinfair.
Section
1.07 Absence
of Certain Changes or Events.
Since
March 31, 2006:
(a) there
has
not been any material adverse change in the business, operations, properties,
assets, or condition (financial or otherwise) of Kinfair;
(b) Kinfair
has not (i) amended its articles of incorporation or bylaws; (ii) declared
or
made, or agreed to declare or make, any payment of dividends or distributions
of
any assets of any kind whatsoever to stockholders or purchased or redeemed,
or
agreed to purchase or redeem, any of its capital stock; (iii) made any material
change in its method of management, operation or accounting, (iv) entered into
any other material transaction other than sales in the ordinary course of its
business; or (v) made any increase in or adoption of any profit sharing, bonus,
deferred compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement made to, for, or with its officers, directors,
or
employees; and
(c) Kinfair
has not (i) granted or agreed to grant any options, warrants or other rights
for
its stocks, bonds or other corporate securities calling for the issuance
thereof, (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
as disclosed herein and except liabilities incurred in the ordinary course
of
business; (iii) sold or transferred, or agreed to sell or transfer, any of
its
assets, properties, or rights or canceled, or agreed to cancel, any debts or
claims; or (iv) issued, delivered, or agreed to issue or deliver any stock,
bonds or other corporate securities including debentures (whether authorized
and
unissued or held as treasury stock) except in connection with this
Agreement.
Section
1.08 Litigation
and Proceedings.
There
are no actions, suits, proceedings, or investigations pending or, to the
knowledge of Kinfair after reasonable investigation, threatened by or against
Kinfair or affecting Kinfair or its properties, at law or in equity, before
any
court or other governmental agency or instrumentality, domestic or foreign,
or
before any arbitrator of any kind. Kinfair does not have any knowledge of any
material default on its part with respect to any judgment, order, injunction,
decree, award, rule, or regulation of any court, arbitrator, or governmental
agency or instrumentality or of any circumstances which, after reasonable
investigation, would result in the discovery of such a default.
Section
1.09 Contracts.
(a) All
"material" contracts, agreements, franchises, license agreements, debt
instruments or other commitments to which Kinfair is a party or by which it
or
any of its assets, products, technology, or properties are bound other than
those incurred in the ordinary course of business are set forth on the Kinfair
Schedules. A "material" contract, agreement, franchise, license agreement,
debt
instrument or commitment is one which (i) will remain in effect for more than
six (6) months after the date of this Agreement or (ii) involves aggregate
obligations of at least fifty thousand dollars ($50,000);
3
(b) All
contracts, agreements, franchises, license agreements, and other commitments
to
which Kinfair is a party or by which its properties are bound and which are
material to the operations of Kinfair taken as a whole are valid and enforceable
by Kinfair in all respects, except as limited by bankruptcy and insolvency
laws
and by other laws affecting the rights of creditors generally; and
(c) Except
as
included or described in the Kinfair Schedules or reflected in the most recent
Kinfair balance sheet, Kinfair is not a party to any oral or written (i)
contract for the employment of any officer or employee; (ii) profit sharing,
bonus, deferred compensation, stock option, severance pay, pension benefit
or
retirement plan, (iii) agreement, contract, or indenture relating to the
borrowing of money, (iv) guaranty of any obligation; (vi) collective bargaining
agreement; or (vii) agreement with any present or former officer or director
of
Kinfair.
Section
1.10 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute a default under, or terminate, accelerate or modify
the
terms of any indenture, mortgage, deed of trust, or other material agreement,
or
instrument to which Kinfair is a party or to which any of its assets, properties
or operations are subject.
Section
1.11 Compliance
With Laws and Regulations.
To the
best of its knowledge, Kinfair has complied with all applicable statutes and
regulations of any federal, state, or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets, or condition
of
Kinfair or except to the extent that noncompliance would not result in the
occurrence of any material liability for Kinfair. This compliance includes,
but
is not limited to, the filing of all reports to date with federal and state
securities authorities.
Section
1.12 Approval
of Agreement.
The
Board of Directors of Kinfair has authorized the execution and delivery of
this
Agreement by Kinfair and has approved this Agreement and the transactions
contemplated hereby, and will recommend to the Kinfair Shareholder that the
Exchange be accepted by his.
Section
1.13 Valid
Obligation.
This
Agreement and all agreements and other documents executed by Kinfair in
connection herewith constitute the valid and binding obligation of Kinfair,
enforceable in accordance with its or their terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefore may be brought.
ARTICLE
II
REPRESENTATIONS,
COVENANTS, AND WARRANTIES OF SPORTS
As
an
inducement to, and to obtain the reliance of Kinfair and the Kinfair
Shareholder, except as set forth in the Sports Schedules (as hereinafter
defined), Sports represents and warrants, as of the date hereof and as of the
Closing Date, as follows:
4
Section
2.01 Organization.
Sports
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has the corporate power and is duly
authorized under all applicable laws, regulations, ordinances, and orders of
public authorities to carry on its business in all material respects as it
is
now being conducted. Included in the Sports Schedules are complete and correct
copies of the certificate of incorporation and bylaws of Sports as in effect
on
the date hereof. The execution and delivery of this Agreement does not, and
the
consummation of the transactions contemplated hereby will not, violate any
provision of Sports’s certificate of incorporation or bylaws. Sports has taken
all action required by law, its certificate of incorporation, its bylaws, or
otherwise to authorize the execution and delivery of this Agreement, and Sports
has full power, authority, and legal right and has taken all action required
by
law, its certificate of incorporation, bylaws, or otherwise to consummate the
transactions herein contemplated.
Section
2.02 Capitalization.
Sports's authorized capitalization consists of (a) 100,000,000 shares of common
stock, par value $.001 per share (“Sports Common Stock”), of which 18,840,000
shares are issued and outstanding, of which 3,240,000 have been registered
for
resale with the Securities and Exchange Commission pursuant to an effective
registration statement, and (b) 10,000,000 shares of preferred stock, par value
$.001 per share, none of which are issued and outstanding. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the preemptive or other rights of any
person.
Section
2.03 Subsidiaries
and Predecessor Corporations.
Sports
does not have any predecessor corporation(s), no subsidiaries, and does not
own,
beneficially or of record, any shares of any other corporation.
Section
2.04 Financial
Statements.
(a) Included
in the Sports Schedules are (i) the audited balance sheets of Sports as of
March
31, 2005 and the related audited statements of operations, stockholders' equity
and cash flows for December 31, 2005 together with the notes to such statements
and the opinion of ▇▇▇▇ & Company, P.A., independent certified public
accountants with respect thereto.
(b) Included
in the Sports Schedules are: (i) an unaudited balance sheets of March 31 and
June 30 2006 and the related unaudited statements of operations, stockholders’
equity and cash flows for the quarters ended on such dates and all such
financial statements have been reviewed by ▇▇▇▇ & Company, P.A.
(c) All
such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The
Sports balance sheets are true and accurate and present fairly as of their
respective dates the financial condition of Sports. As of the date of such
balance sheets, except as and to the extent reflected or reserved against
therein, Sports had no liabilities or obligations (absolute or contingent)
which
should be reflected in the balance sheets or the notes thereto prepared in
accordance with generally accepted accounting principles, and all assets
reflected therein are properly reported and present fairly the value of the
assets of Sports, in accordance with generally accepted accounting principles.
The statements of operations, stockholders' equity and cash flows reflect fairly
the information required to be set forth therein by generally accepted
accounting principles.
5
(d) Sports
has no liabilities with respect to the payment of any federal, state, county,
local or other taxes (including any deficiencies, interest or penalties), except
for taxes accrued but not yet due and payable.
(e) Sports
has timely filed all state, federal or local income and/or franchise tax returns
required to be filed by it from inception to the date hereof. Each of such
income tax returns reflects the taxes due for the period covered thereby, except
for amounts which, in the aggregate, are immaterial.
(f) All
of
Sports’s assets are reflected on its financial statements, and, except as set
forth in the Sports Schedules or the financial statements of Sports or the
notes
thereto, Sports has no material liabilities, direct or indirect, matured or
unmatured, contingent or otherwise.
Section
2.05 Information.
The
information concerning Sports set forth in this Agreement and the Sports
Schedules is complete and accurate in all material respects and does not contain
any untrue statements of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading.
Section
2.06 Options
or Warrants.
There
are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued stock of Sports.
Section
2.07 Absence
of Certain Changes or Events.
Since
the date of the most recent Sports balance sheet:
(a) There
has
not been any material adverse change in the business, operations, properties,
assets or condition (financial or otherwise) of Sports;
(b) Sports
has not (i) amended its certificate of incorporation or bylaws except as
required by this Agreement; (ii) declared or made, or agreed to declare or
make
any payment of dividends or distributions of any assets of any kind whatsoever
to stockholders or purchased or redeemed, or agreed to purchase or redeem,
any
of its capital stock; (iii) made any material change in its method of
management, operation or accounting; (iv) entered into any transactions or
agreements other than in the ordinary course of business; or (v) made any
increase in or adoption of any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment, or
arrangement, made to, for or with its officers, directors, or employees;
and
(c) Sports
has not (i) granted or agreed to grant any options, warrants, or other rights
for its stock, bonds, or other corporate securities calling for the issuance
thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) sold or
transferred, or agreed to sell or transfer, any of its assets, properties,
or
rights, or canceled, or agreed to cancel, any debts or claims; or (iv) issued,
delivered or agreed to issue or deliver, any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock), except in connection with this Agreement.
6
Section
2.08 Litigation
and Proceedings.
There
are no actions, suits, proceedings or investigations pending or, to the
knowledge of Sports after reasonable investigation, threatened by or against
Sports or affecting Sports or its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign,
or
before any arbitrator of any kind except as disclosed in the Sports Schedules.
Sports has no knowledge of any default on its part with respect to any judgment,
order, writ, injunction, decree, award, rule or regulation of any court,
arbitrator, or governmental agency or instrumentality or any circumstance which
after reasonable investigation would result in the discovery of such
default.
Section
2.09 Contracts.
(a) Sports
is
not a party to, and its assets, products, technology and properties are not
bound by, any contract, franchise, license agreement, agreement, debt instrument
or other commitments whether such agreement is in writing or oral.
(b) Sports
is
not a party to or bound by, and the properties of Sports are not subject to any
contract, agreement, other commitment or instrument; any charter or other
corporate restriction; or any judgment, order, writ, injunction, decree, or
award; and
(c) Sports
is
not a party to any oral or written (i) contract for the employment of any
officer or employee; (ii) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension benefit or retirement plan, (iii) agreement,
contract, or indenture relating to the borrowing of money, (iv) guaranty of
any
obligation, (vi) collective bargaining agreement; or (vii) agreement with any
present or former officer or director of Sports.
Section
2.10 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute a default under, or terminate, accelerate or modify
the
terms of, any indenture, mortgage, deed of trust, or other material agreement
or
instrument to which Sports is a party or to which any of its assets, properties
or operations are subject.
Section
2.11 Compliance
With Laws and Regulations.
To the
best of its knowledge, Sports has complied with all applicable statutes and
regulations of any federal, state, or other applicable governmental entity
or
agency thereof. This compliance includes, but is not limited to, the filing
of
all reports to date with federal and state securities authorities.
Section
2.12 Approval
of Agreement.
The
Board of Directors of Sports has authorized the execution and delivery of this
Agreement by Sports and has approved this Agreement and the transactions
contemplated hereby.
7
Section
2.13 Material
Transactions or Affiliations.
Except
as disclosed herein and in the Sports Schedules, there exists no contract,
agreement or arrangement between Sports and any predecessor and any person
who
was at the time of such contract, agreement or arrangement an officer, director,
or person owning of record or known by Sports to own beneficially, 5% or more
of
the issued and outstanding common stock of Sports and which is to be performed
in whole or in part after the date hereof or was entered into not more than
three years prior to the date hereof. Neither any officer, director, nor 5%
shareholder of Sports has, or has had since inception of Sports, any known
interest, direct or indirect, in any such transaction with Sports which was
material to the business of Sports. Sports has no commitment, whether written
or
oral, to lend any funds to, borrow any money from, or enter into any other
transaction with, any such affiliated person.
Section
2.14 Bank
Accounts; Power of Attorney.
Set
forth in the Sports Schedules is a true and complete list of (a) all accounts
with banks, money market mutual funds or securities or other financial
institutions maintained by Sports within the past twelve (12) months, the
account numbers thereof, and all persons authorized to sign or act on behalf
of
Sports, (b) all safe deposit boxes and other similar custodial arrangements
maintained by Sports within the past twelve (12) months, (c) the check ledger
for the last 12 months, and (d) the names of all persons holding powers of
attorney from Sports or who are otherwise authorized to act on behalf of Sports
with respect to any matter, other than its officers and directors, and a summary
of the terms of such powers or authorizations.
Section
2.15 Valid
Obligation. This
Agreement and all agreements and other documents executed by Sports in
connection herewith constitute the valid and binding obligation of Sports,
enforceable in accordance with its or their terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefore may be brought.
Section
2.16 Filings.
Sports
has timely filed all reports required to be filed by it under the Securities
Exchange Act of 1934, as amended.
ARTICLE
III
PLAN
OF EXCHANGE
Section
3.01 The
Exchange.
On
the
terms and subject to the conditions set forth in this Agreement, on the Closing
Date (as defined in Section 3.03), the Kinfair Shareholder who has elected
to
accept the exchange offer described herein (the "Accepting Shareholder") by
executing this Agreement, shall assign, transfer and deliver, free and clear
of
all liens, pledges, encumbrances, charges, restrictions or known claims of
any
kind, nature, or description, the number of shares of common stock of Kinfair
set forth on the Kinfair
Schedule attached hereto, constituting all of the shares of common stock
including voting power, of Kinfair held by such Shareholder; the objective
of
such Exchange being the acquisition by Sports of not less than 100% of the
issued and outstanding common stock,
in the
aggregate of Kinfair . In exchange for the transfer of such securities by the
Kinfair Shareholder, Sports shall issue to the Kinfair Shareholder 7,500,000
shares, representing 59.34% of total Sports Common Stock for each share of
Kinfair Common Stock held by the Kinfair Shareholder (the “Initial Shares”). In
the event the Exchange is consummated, as provided in Section 5.05, but less
than 100% of the common stock of Kinfair is delivered to Sports the number
of
Shares issuable by Sports to the Kinfair Shareholder as described above shall
be
reduced proportionately. At the Closing, the Kinfair Shareholder shall, on
surrender of his certificate or certificates representing his Kinfair shares
to
Sports or its registrar or transfer agent, be entitled to receive a certificate
or certificates evidencing his proportionate interest in the Initial Shares.
Upon consummation of the transaction contemplated herein, all of the shares
of
capital stock of Kinfair shall be held by Sports. Upon consummation of the
transaction contemplated herein (including, but not limited to, the cancellation
of the shares set forth in Section 4.05 below), there shall be 12,640,000 shares
of Sports Common Stock issued and outstanding.
8
Section
3.02 Anti-Dilution.
The
number of shares of Sports Common Stock issuable upon exchange pursuant to
Section 3.01 shall be appropriately adjusted to take into account any other
stock split, stock dividend, reverse stock split, recapitalization, or similar
change in the Sports Common Stock which may occur, other than the
recapitalization described in Section 4.14, (i) between the date of the
execution of this Agreement and the Closing Date, as to the Initial Shares,
and
(ii) between the date of the execution of this Agreement and the release
date.
Section
3.03 Closing
Events.
At the
Closing, Sports, Kinfair and the Accepting Shareholder shall execute,
acknowledge, and deliver (or shall ensure to be executed, acknowledged, and
delivered), any and all certificates, opinions, financial statements, schedules,
agreements, resolutions, rulings or other instruments required by this Agreement
to be so delivered at or prior to the Closing, together with such other items
as
may be reasonably requested by the parties hereto and their respective legal
counsel in order to effectuate or evidence the transactions contemplated hereby.
Section
3.04 Termination.
This
Agreement may be terminated by the Board of Directors of Kinfair or Kinfair
only
in the event that Sports or Kinfair do not meet the conditions precedent set
forth in Articles V and VI. If this Agreement is terminated pursuant this
section, this Agreement shall be of no further force or effect, and no
obligation, right or liability shall arise hereunder.
ARTICLE
IV
SPECIAL
COVENANTS
Section
4.01 Access
to Properties and Records.
Sports
and Kinfair will each afford to the officers and authorized representatives
of
the other full access to the properties, books and records of Sports or Kinfair
, as the case may be, in order that each may have a full opportunity to make
such reasonable investigation as it shall desire to make of the affairs of
the
other, and each will furnish the other with such additional financial and
operating data and other information as to the business and properties of Sports
or Kinfair , as the case may be, as the other shall from time to time reasonably
request. Without limiting the foregoing, as soon as practicable after the end
of
each fiscal quarter (and in any event through the last fiscal quarter prior
to
the Closing Date), each party shall provide the other with quarterly internally
prepared and unaudited financial statements.
Section
4.02 Delivery
of Books and Records.
At the
Closing, Kinfair shall deliver to Sports the originals of the corporate minute
books, books of account, contracts, records, and all other books or documents
of
Kinfair now in the possession of Kinfair or its representatives. Sports shall
deliver to Kinfair the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents of Sports now
in
the possession of Sports or its representatives.
9
Section
4.03 Third
Party Consents and Certificates.
Sports
and Kinfair agree to cooperate with each other in order to obtain any required
third party consents to this Agreement and the transactions herein
contemplated.
Section
4.04 Sports
Shareholder Meeting.
Sports
shall promptly call a special shareholders meeting to be held on or prior to
the
Closing Date at which meeting the shareholders of Sports shall be requested
to
approve, and Sports’s Board of Directors shall recommend approval of, the terms
of this Agreement and the name change described in Section 4.04 and such other
matters as shall require shareholder approval hereunder. In addition, Sports
shall promptly file with the SEC necessary disclosure statements required by
federal securities law. After achieving the requested vote, Sports shall
immediately file the Restated COI.
Section
4.05 Cancellation
of Certain Shares of Sports Common Stock.
Prior
to
the Closing Date, ▇▇▇▇▇ ▇▇▇▇▇, the principal shareholder and current officer
and
director will cancel a total number of 13,700,000 shares of Sports Common
Stock.
In
addition, in consideration for the cancellation of these shares, ▇▇▇▇▇ ▇▇▇▇▇
will be entitled to all funds remaining in the Sports bank account at Closing
as
well as the Sports website and domain name at ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.
Section
4.06 Designation
of Directors and Officer.
Upon
signing this Agreement, Sports shall increase its Board of Directors
to
six
(6) and Mr. ▇▇▇▇ ▇▇▇ ▇▇▇▇ will immediately be added to the Board of
Directors:
After
compliance with Rule 14F-1, promulgated under the Securities Exchange Act of
1934, as amended, the following directors will take the position of Director,
▇▇. ▇▇▇▇ Si Qiang ▇▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Mr. ▇▇. ▇▇▇ ▇▇▇▇ ▇▇ and Mr. ▇▇▇▇ ▇▇▇,
and
the existing director of Sports, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇, after the signing of this
Agreement, shall tender his resignation effective upon the expiration of the
time periods required under Rule 14F-1. In addition, upon the signing of this
Agreement, Sports shall immediately appoint as officers of Sports the following
persons: Mr.
▇▇▇▇
▇▇▇ Quan, as President and Mr. ▇▇ ▇▇▇▇ ▇▇▇, ▇▇. ▇▇ Peng and ▇▇. ▇▇▇▇ Xiang
Fu as
Vice President.
Section
4.07 Exclusive
Dealing Rights.
Until
5:00 P.M. New York City Time on October 11, 2006:
(a) In
recognition of the substantial time and effort which Sports has spent and will
continue to spend in investigating Kinfair and its business and in addressing
the matters related to the transactions contemplated herein, each of which
may
preempt or delay other management activities, neither Kinfair, nor any of its
officers, employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with or, except where
required by fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any corporation, partnership, person or other entity or group (other
than Sports and its directors, officers, employees, representatives and agents)
concerning any merger, sale of substantial assets, sale of shares of capital
stock, (including without limitation, any public or private offering of the
common stock of Kinfair) or similar transactions involving Kinfair(all such
transactions being referred to as "Kinfair Acquisition Transactions"), other
than activities related to financings. If Kinfair receives any proposal with
respect to a Kinfair Acquisition Transaction, it will immediately communicate
to
Sports the fact that it has received such proposal and the principal terms
thereof.
10
(b) In
recognition of the substantial time and effort which Kinfair has spent and
will
continue to spend in investigating Sports and its business and in addressing
the
matters related to the transactions contemplated herein, each of which may
preempt or delay other management activities, neither Sports, nor any of its
officers, employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with or, except where
required by fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any corporation, partnership, person or other entity or group (all
such transactions being referred to as "Sports Acquisition Transactions").
If
Sports receives any proposal with respect to a Sports Acquisition Transaction,
it will immediately communicate to Kinfair the fact that it has received such
proposal and the principal terms thereof.
Section
4.08 Actions
Prior to Closing.
(a) From
and
after the date of this Agreement until the Closing Date and except as set forth
in the Sports Schedules or Kinfair Schedules or as permitted or contemplated
by
this Agreement, Sports (subject to paragraph (d) below) and Kinfair
respectively, will each:
(i) carry
on
its business in substantially the same manner as it has heretofore;
(ii) maintain
and keep its properties in states of good repair and condition as at present,
except for depreciation due to ordinary wear and tear and damage due to
casualty;
(iii) maintain
in full force and effect insurance comparable in amount and in scope of coverage
to that now maintained by it;
(iv) perform
in all material respects all of its obligations under material contracts,
leases, and instruments relating to or affecting its assets, properties, and
business;
(v) use
its
best efforts to maintain and preserve its business organization intact, to
retain its key employees, and to maintain its relationship with its material
suppliers and customers; and
11
(vi) fully
comply with and perform in all material respects all obligations and duties
imposed on it by all federal and state laws and all rules, regulations, and
orders imposed by federal or state governmental authorities.
(b) From
and
after the date of this Agreement until the Closing Date, neither Sports nor
Kinfair will:
(i) make
any
changes in their articles or certificate of incorporation or bylaws except
as
contemplated by this Agreement including a name change;
(ii) take
any
action described in Section 1.07 in the case of Kinfair or in Section 2.07,
in
the case of Sports (all except as permitted therein or as disclosed in the
applicable party's schedules);
(iii) enter
into or amend any contract, agreement, or other instrument of any of the types
described in such party's schedules, except that a party may enter into or
amend
any contract, agreement, or other instrument in the ordinary course of business
involving the sale of goods or services; or
(iv) sell
any
assets or discontinue any operations, sell any shares of capital stock or
conduct any similar transactions other than in the ordinary course of
business.
Section
4.09 Indemnification.
(a) Finfair
hereby agrees to indemnify Sports and each of the officers, agents and directors
of Sports as of the date of execution of this Agreement against any loss,
liability, claim, damage, or expense (including, but not limited to, any and
all
expense whatsoever reasonably incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claim whatsoever)
(“Loss”), to which it or they may become subject arising out of or based on any
inaccuracy appearing in or misrepresentations made under Article I of this
Agreement. The indemnification provided for in this paragraph shall survive
the
Closing and consummation of the transactions contemplated hereby and termination
of this Agreement for one year following the Closing.
(b) The
Kinfair Shareholder, agrees to indemnify Sports and each of the officers, agents
and directors of Sports as of the date of execution of this Agreement against
any Loss, to which it or they may become subject arising out of or based on
any
inaccuracy appearing in or misrepresentations made under Article 3.01 of this
Agreement. The indemnification provided for in this paragraph shall survive
the
Closing and consummation of the transactions contemplated hereby and termination
of this Agreement for one year following the Closing.
(c) Sports
hereby agrees to indemnify Kinfair and each of the officers, agents, and
directors of Kinfair and the Kinfair Shareholder as of the date of execution
of
this Agreement against any Loss to which it or they may become subject arising
out of or based on any inaccuracy appearing in or misrepresentation made under
Article II of this Agreement. The indemnification provided for in this paragraph
shall survive the Closing and consummation of the transactions contemplated
hereby and termination of this Agreement for one year following the
Closing.
12
Section
4.10 The
Acquisition of Sports Common Stock.
Sports
and Kinfair understand and agree that the consummation of this Agreement
including the issuance of the Sports common stock to Kinfair Shareholder in
exchange for the Kinfair Shares as contemplated hereby constitutes the offer
and
sale of securities under the Securities Act and applicable state statutes.
Sports and Kinfair agree that such transactions shall be consummated in reliance
on exemptions from the registration and prospectus delivery requirements of
such
statutes, which depend, among other items, on the circumstances under which
such
securities are acquired.
(a) In
order
to provide documentation for reliance upon the exemptions from the registration
and prospectus delivery requirements for such transactions, each shareholder
of
Kinfair shall execute and deliver to Sports an Suitability Letter and an
Investment Representation Letter in substantially the same form as that attached
hereto as Exhibit
A
and
Exhibit
B,
respectively.
(b) In
connection with the transaction contemplated by this Agreement, Sports and
Kinfair shall each file, with the assistance of the other and their respective
legal counsel, such notices, applications, reports, or other instruments as
may
be deemed by them to be necessary or appropriate in an effort to document
reliance on such exemptions, and the appropriate regulatory authority in the
states where the shareholders of Kinfair reside unless an exemption requiring
no
filing is available in such jurisdictions, all to the extent and in the manner
as may be deemed by such parties to be appropriate.
(c) In
order
to more fully document reliance on the exemptions as provided herein, Kinfair,
the Kinfair Shareholder, and Sports shall execute and deliver to the other,
at
or prior to the Closing, such further letters of representation, acknowledgment,
suitability, or the like as Kinfair or Sports and their respective counsel
may
reasonably request in connection with reliance on exemptions from registration
under such securities laws.
(d) The
Kinfair Shareholder acknowledges that the basis for relying on exemptions from
registration or qualifications are factual, depending on the conduct of the
various parties, and that no legal opinion or other assurance will be required
or given to the effect that the transactions contemplated hereby are in fact
exempt from registration or qualification.
Section
4.11 Sales
of Securities Under Rule 144, If Applicable.
(a) Sports
will use its best efforts to at all times satisfy the current public information
requirements of Rule 144 promulgated under the Securities Act so that its
shareholders can sell restricted securities that have been held for one year
or
more or such other restricted period as required by Rule 144 as it is from
time
to time amended.
(b) Upon
being informed in writing by any person holding restricted stock of Sports
that
such person intends to sell any shares under rule 144 promulgated under the
Securities Act (including any rule adopted in substitution or replacement
thereof), Sports will certify in writing to such person that it is compliance
with Rule 144 current public information requirement to enable such person
to
sell such person’s restricted stock under Rule 144, as may be applicable under
the circumstances.
13
(c) If
any
certificate representing any such restricted stock is presented to Sports’s
transfer agent for registration or transfer in connection with any sales
theretofore made under Rule 144, provided such certificate is duly endorsed
for
transfer by the appropriate person(s) or accompanied by a separate stock power
duly executed by the appropriate person(s) in each case with reasonable
assurances that such endorsements are genuine and effective, and is accompanied
by a legal opinion that such transfer has complied with the requirements of
Rule
144, as the case may be, Sports will promptly instruct its transfer agent to
register such transfer and to issue one or more new certificates representing
such shares to the transferee and, if appropriate under the provisions of Rule
144, as the case may be, free of any stop transfer order or restrictive legend.
(d) This
Section 4.12 shall survive the closing of this Agreement for a period of two
(2)
years.
ARTICLE
V
CONDITIONS
PRECEDENT TO OBLIGATIONS OF SPORTS
The
obligations of Sports under this Agreement are subject to the satisfaction,
at
or before the Closing Date, of the following conditions:
Section
5.01 Accuracy
of Representations and Performance of Covenants.
The
representations and warranties made by Kinfair and Kinfair Shareholder in this
Agreement were true when made and shall be true at the Closing Date with the
same force and effect as if such representations and warranties were made at
and
as of the Closing Date (except for changes therein permitted by this Agreement).
Kinfair shall have performed or complied with all covenants and conditions
required by this Agreement to be performed or complied with by Kinfair prior
to
or at the Closing. Sports shall be furnished with a certificate, signed by
a
duly authorized executive officer of Kinfair and dated the Closing Date, to
the
foregoing effect.
Section
5.02 Officer's
Certificate.
Sports
shall have been furnished with a certificate dated the Closing Date and signed
by a duly authorized officer of Kinfair to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge
of
Kinfair threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement, or, to the
extent not disclosed in the Kinfair Schedules, by or against Kinfair, which
might result in any material adverse change in any of the assets, properties,
business, or operations of Kinfair.
Section
5.03 Good
Standing.
Sports
shall have received a certificate of good standing from The Companies’
Registries of Hong Kong, dated as of a date within ten days prior to the Closing
Date certifying that Kinfair is in good standing as a corporation in Hong Kong.
14
Section
5.04 Approval
by Kinfair Shareholder.
The
Exchange shall have been approved, and shares delivered in accordance with
Section 3.01, by the holders of not less than ninety-five percent (95%) of
the
outstanding common stock and preferred stock, including voting power, of
Kinfair, unless a lesser number is agreed to by Sports.
Section
5.05 No
Governmental Prohibition.
No
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order shall have been enacted, entered, promulgated
or
enforced by any court or governmental or regulatory authority or instrumentality
which prohibits the consummation of the transactions contemplated
hereby.
Section
5.06 Consents.
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Kinfair after the Closing
Date on the basis as presently operated shall have been obtained.
Section
5.07 Other
Items.
(a) Sports
shall have received a list containing the name, address, and number of shares
held by the Kinfair Shareholder as of the date of Closing, certified by an
executive officer of Kinfair as being true, complete and accurate;
and
(b) Sports
shall have received such further opinions, documents, certificates or
instruments relating to the transactions contemplated hereby as Sports may
reasonably request.
ARTICLE
VI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF KINFAIR
AND
THE KINFAIR SHAREHOLDER
The
obligations of Kinfair and the Kinfair Shareholder under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the following
conditions:
Section
6.01 Accuracy
of Representations and Performance of Covenants.
The
representations and warranties made by Sports in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Sports shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by
Sports.
Section
6.02 Officer's
Certificate.
Kinfair
shall have been furnished with certificates dated the Closing Date and signed
by
duly authorized executive officers of Sports, to the effect that no litigation,
proceeding, investigation or inquiry is pending, or to the best knowledge of
Sports threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Sports Schedules, by or against Sports, which might
result in any material adverse change in any of the assets, properties or
operations of Sports.
15
Section
6.03 Good
Standing.
Kinfair
shall have received a certificate of good standing from the Secretary of State
of Delaware or other appropriate office, dated as of a date within ten days
prior to the Closing Date certifying that Sports is in good standing as a
corporation in the State of Delaware and has filed all tax returns required
to
have been filed by it to date and has paid all taxes reported as due
thereon.
Section
6.04 No
Governmental Prohibition.
No
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order shall have been enacted, entered, promulgated
or
enforced by any court or governmental or regulatory authority or instrumentality
which prohibits the consummation of the transactions contemplated
hereby.
Section
6.05 Consents.
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Sports after the Closing
Date on the basis as presently operated shall have been obtained.
Section
6.06 Other
Items.
Kinfair
shall have received further opinions, documents, certificates, or instruments
relating to the transactions contemplated hereby as Kinfair may reasonably
request.
ARTICLE
VII
MISCELLANEOUS
Section
7.01 Brokers.
Sports
and Kinfair agree that, except as set out on Schedule 7.01 attached hereto,
there were no finders or brokers involved in bringing the parties together
or
who were instrumental in the negotiation, execution or consummation of this
Agreement. Sports and Kinfair each agree to indemnify the other against any
claim by any third person other than those described above for any commission,
brokerage, or finder's fee arising from the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.
Section
7.02 Governing
Law.
This
Agreement shall be governed by, enforced, and construed under and in accordance
with the laws of the United States of America and, with respect to the matters
of state law, with the laws of the State of New York. Venue for all matters
shall be in New York, New York, without giving effect to principles of conflicts
of law thereunder. Each of the parties (a) irrevocably consents and agrees
that
any legal or equitable action or proceedings arising under or in connection
with
this Agreement shall be brought exclusively in the federal courts of the United
States. By execution and delivery of this Agreement, each party hereto
irrevocably submits to and accepts, with respect to any such action or
proceeding, generally and unconditionally, the jurisdiction of the aforesaid
court, and irrevocably waives any and all rights such party may now or hereafter
have to object to such jurisdiction.
Section
7.03 Notices.
Any
notice or other communications required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered to it or sent
by
telecopy, overnight courier or registered mail or certified mail, postage
prepaid, addressed as follows:
16
| If to Kinfair, to: |
Mr.
▇▇▇▇ ▇▇▇ ▇▇▇▇
Luoshan
Xicheng Industrial District
Xinyang
County, Henan Province
P.R.China
Post
code: 464200
Tel:
(▇▇-▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇-▇▇▇) ▇▇▇-▇▇▇▇
|
||
| With copies to: |
▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
||
| If to Sports, to: |
▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
||
| With copies to: |
▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇
& ▇▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
|
or
such
other addresses as shall be furnished in writing by any party in the manner
for
giving notices hereunder, and any such notice or communication shall be deemed
to have been given (i) upon receipt, if personally delivered, (ii) on the day
after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three
(3)
days after mailing, if sent by registered or certified mail.
Section
7.04 Attorney's
Fees.
In the
event that either party institutes any action or suit to enforce this Agreement
or to secure relief from any default hereunder or breach hereof, the prevailing
party shall be reimbursed by the losing party for all costs, including
reasonable attorney's fees, incurred in connection therewith and in enforcing
or
collecting any judgment rendered therein.
Section
7.05 Confidentiality.
Each
party hereto agrees with the other that, unless and until the transactions
contemplated by this Agreement have been consummated, it and its representatives
will hold in strict confidence all data and information obtained with respect
to
another party or any subsidiary thereof from any representative, officer,
director or employee, or from any books or records or from personal inspection,
of such other party, and shall not use such data or information or disclose
the
same to others, except (i) to the extent such data or information is published,
is a matter of public knowledge, or is required by law to be published; or
(ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement. In the event
of
the termination of this Agreement, each party shall return to the other party
all documents and other materials obtained by it or on its behalf and shall
destroy all copies, digests, work papers, abstracts or other materials relating
thereto, and each party will continue to comply with the confidentiality
provisions set forth herein.
17
Section
7.06 Public
Announcements and Filings.
Unless
required by applicable law or regulatory authority, none of the parties will
issue any report, statement or press release to the general public, to the
trade, to the general trade or trade press, or to any third party (other than
its advisors and representatives in connection with the transactions
contemplated hereby) or file any document, relating to this Agreement and the
transactions contemplated hereby, except as may be mutually agreed by the
parties. Copies of any such filings, public announcements or disclosures,
including any announcements or disclosures mandated by law or regulatory
authorities, shall be delivered to each party at least one (1) business day
prior to the release thereof.
Section
7.07 Schedules;
Knowledge.
Each
party is presumed to have full knowledge of all information set forth in the
other party's schedules delivered pursuant to this Agreement.
Section
7.08 Third
Party Beneficiaries.
This
contract is strictly between Sports and Kinfair, and, except as specifically
provided, no director, officer, stockholder (other than the Kinfair
Shareholder), employee, agent, independent contractor or any other person or
entity shall be deemed to be a third party beneficiary of this
Agreement.
Section
7.09 Expenses.
Subject
to Section 7.04 above, whether or not the Exchange is consummated, each of
Sports and Kinfair will bear their own respective expenses, including legal,
accounting and professional fees, incurred in connection with the Exchange
or
any of the other transactions contemplated hereby.
Section
7.10 Entire
Agreement.
This
Agreement represents the entire agreement between the parties relating to the
subject matter thereof and supersedes all prior agreements, understandings
and
negotiations, written or oral, with respect to such subject matter.
Section
7.11 Survival;
Termination.
The
representations, warranties, and covenants of the respective parties shall
survive the Closing Date and the consummation of the transactions herein
contemplated for a period of two years.
Section
7.12 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original and all of which taken together shall be but a single
instrument.
Section
7.13 Amendment
or Waiver.
Every
right and remedy provided herein shall be cumulative with every other right
and
remedy, whether conferred herein, at law, or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the same or any other
default then, theretofore, or thereafter occurring or existing. At any time
prior to the Closing Date, this Agreement may by amended by a writing signed
by
all parties hereto, with respect to any of the terms contained herein, and
any
term or condition of this Agreement may be waived or the time for performance
may be extended by a writing signed by the party or parties for whose benefit
the provision is intended.
Section
7.14 Best
Efforts.
Subject
to the terms and conditions herein provided, each party shall use its best
efforts to perform or fulfill all conditions and obligations to be performed
or
fulfilled by it under this Agreement so that the transactions contemplated
hereby shall be consummated as soon as practicable. Each party also agrees
that
it shall use its best efforts to take, or cause to be taken, all actions and
to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective this Agreement
and the transactions contemplated herein.
18
IN
WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
be
executed by their respective officers, hereunto duly authorized, as of the
date
first-above written.
SPORTS
SOURCE, INC.
By:
/S/
▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇
Title:
President
KINFAIR
HOLDINGS LIMITED
By:
/S/
▇▇▇▇ ▇▇▇ Quan
Name:
▇▇▇▇ ▇▇▇ ▇▇▇▇
Title:
President
19
The
undersigned Shareholder of Kinfair hereby agree to participate in the Exchange
on the terms set forth above. Subject to Section 7.11 above, the undersigned
hereby represents and affirms that he has read each of the representations
and
warranties of Kinfair set out in Article I hereof and that, to the best of
his
knowledge, all of such representations and warranties are true and
correct.
AUTO
CHANCE INTERNATIONAL LIMITED
By:
/S/
▇▇▇▇ ▇▇▇ Dong
Name:
▇▇▇▇ ▇▇▇ Dong
Title:
Authorized representative
20
Exhibit
A
SUITABILITY
LETTER
TO: Sports
Source, Inc.
I
make
the following representations with the intent that they may be relied on by
Sports Source, Inc. (the "Company"), in determining my suitability as a
purchaser of securities of the Company (the "Shares").
2. I
have
had the opportunity to ask questions of, and receive answers and information,
from the officers of the Company and I deemed such information sufficient to
make an investment decision on the Company.
3. I
have
such knowledge and experience in business and financial matters that I am
capable of evaluating the Company, its business activities, and the risks and
merits of this prospective investment, and I
am
not
utilizing a purchaser representative (as defined in regulation D) in connection
with the evaluation of such risks and merits, except as set forth in paragraph
3.
4. I
shall
provide a separate written statement from each purchaser representative on
the
Purchaser Representative Acknowledgment form available from the Company in
which
is disclosed (i) the relationship of the purchaser representative with the
Company, if any, which has existed at any time during the previous two years,
and compensation received or to be received as a result of such relationship,
and (ii) the education, experience, and knowledge in financial and business
matters which enables the purchaser representative to evaluate the relative
merits and risks of an investment in the Company.
5. The
undersigned and the purchaser representatives listed above, if any, together
have such knowledge and experience in financial and business matters that they
are capable of evaluating the Company and the proposed activities thereof and
the merits and risks of this prospective investment.
6. I
have
adequate means of providing for my current needs and possible personal
contingencies and have no need in the foreseeable future for liquidity of an
investment in the Company.
7. Instructions:
Complete either (a) or (b) below, as applicable:
(a) FOR
ACCREDITED INVESTORS.
I
confirm that I am an "accredited investor" as defined under rule 501 of
regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), as checked below:
A-1
(i) Any
bank
as defined in section 3(a)(2) of the Securities Act or any savings and loan
association or other institution as defined in section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity; any
broker or dealer registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section 2(13) of the Securities
Act; any investment company registered under the Investment Company Act of
1940
or a business development company as defined in section 2(a)(48) of that Act;
any small business investment company licensed by the U. S. Small Business
Administration under section 301(c) or (d) of the Small Business Investment
Act
of 1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets
in
excess of $5,000,000; any employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision
is
made by a plan fiduciary, as defined in section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
o Yes o No
(ii) Any
private business development company as defined in section 302(a)(22) of the
Investment Advisers Act of 1940;
o Yes o No
(iii) Any
organization described in section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;
o Yes o No
(iv) Any
director, executive officer, or general partner of the issuer of the securities
being offered or sold, or any director, executive officer, or general partner
of
a general partner of that issuer;
o Yes o No
(v) Any
natural person whose individual net worth or joint net worth with that person's
spouse, at the time of his or her purchase exceeds $1,000,000;
o Yes o No
For
purposes of category (v), the term "net worth" means the excess of total assets
over total liabilities. In computing net worth for the purposes of category
(v)
above, the undersigned's principal residence must be valued either at (A) cost,
including the cost of improvements, net of current encumbrances upon the
property or (B) the appraised value of the property as determined upon a written
appraisal used by an institutional lender making a loan to the individual
secured by the property, including the cost of subsequent improvements, net
of
current encumbrances upon the property.
A-2
(vi) Any
natural person who had an individual income in excess of $200,000 in each of
the
two most recent years or joint income with that person's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching
the
same income level in the current year;
o Yes o No
In
determining income, the undersigned should add to his or her adjusted gross
income any amounts attributable to tax exempt income received, losses claimed
as
a limited partner in any limited partnership, deductions claimed for depletion,
contributions to an ▇▇▇ or ▇▇▇▇▇ retirement plan, alimony payments, and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
(vii) Any
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by
a
sophisticated person as described in section 230.506(b)(2)(ii); and
o Yes o No
(viii) Any
entity in which all of the equity owners are accredited investors.
o Yes o No
(b) FOR
NONACCREDITED INVESTORS.
I am
not
an
accredited investor.
The
following information is being provided here in lieu of furnishing a personal
financial statement.
(i) My
net
worth excluding principal residence, furnishings, and automobiles is at least
_____ times the total investment I intend to make in the Company;
(ii) My
annual
disposable income, after excluding all of my personal and family living expenses
and other cash requirements for current obligations, is such that the loss
of my
entire investment in the Company would not materially alter my standard of
living;
o Yes o No
(iii) Considering
the foregoing and all other relevant factors in my financial and personal
circumstances, I am able to bear the economic risk of an investment in the
Company.
o Yes o No
7. I
have
previously been advised that I would have an opportunity to review all the
pertinent facts concerning the Company, and to obtain any additional information
which I might request, to the extent possible or obtainable, without
unreasonable effort and expense, in order to verify the accuracy of the
information provided me.
A-3
8. I
have
personally communicated or been offered the opportunity to communicate with
executive officers of the Company to discuss the business and financial affairs
of the Company, its products and activities, and its plans for the future.
I
acknowledge that if I would like to further avail myself of the opportunity
to
ask additional questions of the Company, the Company will make arrangements
for
such an opportunity on request.
9. I
have
been advised that no accountant or attorney engaged by the Company is acting
as
my representative, accountant, or attorney.
10. I
will
hold title to my interest as follows:
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Community
Property
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o
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Separate
Property
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o
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Joint
Tenants, with Right of Survivorship
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o
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Tenants
in Common
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o
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Other
(Single Person, Trust, Etc., Please Indicate.)
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_________________________________
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11. I
am a
bona fide resident of the state of __________. The address below is my true
and
correct principal residence.
DATED
this ____ day of __________, 2006.
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Name
(Please Print)
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Name
of Joint Subscriber, If Any
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Signature
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Signature
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▇▇▇▇▇▇
▇▇▇▇▇▇▇
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▇▇▇▇▇▇
▇▇▇▇▇▇▇
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State, and Zip Code
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A-4
INVESTMENT
LETTER
Sports
Source, Inc.
Re: Purchase
of shares of Common Stock of Sports Source, Inc.
Gentlemen:
In
connection with the acquisition by the undersigned of shares of Common Stock
of
Sports Source, Inc.(the “Securities”), the undersigned represents that the
Securities are being acquired without a view to, or for, resale in connection
with any distribution of such Securities or any interest therein without
registration or other compliance under the Securities Act of 1933, as amended
(the "Securities Act"), and that the undersigned has no direct or indirect
participation in any such undertaking or in the underwriting of such an
undertaking.
The
undersigned understands that the Securities have not been registered, but are
being acquired by reason of a specific exemption under the Securities Act as
well as under certain state statutes for transactions by an issuer not involving
any public offering and that any disposition of the subject Securities may,
under certain circumstances, be inconsistent with this exemption and may make
the undersigned an "underwriter" within the meaning of the Securities Act.
It is
understood that the definition of an "underwriter" focuses on the concept of
"distribution" and that any subsequent disposition of the subject Securities
can
only be effected in transactions which are not considered distributions.
Generally, the term "distribution" is considered synonymous with "public
offering" or any other offer or sale involving general solicitation or general
advertising. Under present law, in determining whether a distribution occurs
when securities are sold into the public market, under certain circumstances
one
must consider the availability of public information regarding the issuer,
a
holding period for the securities sufficient to assure that the persons desiring
to sell the securities without registration first bear the economic risk of
their investment, and a limitation on the number of securities which the
stockholder is permitted to sell and on the manner of sale, thereby reducing
the
potential impact of the sale on the trading markets. These criteria are set
forth specifically in rule 144 promulgated under the Securities Act. After
one
year from the date the Securities are fully paid for and the subscription is
accepted by the issuer, all as calculated in accordance with rule 144(d), sales
of the Securities in reliance on rule 144 can only be made in limited amounts
in
accordance with the terms and conditions of that rule. After two year from
the
date the Securities are fully paid for, as calculated in accordance with rule
144(d), it can generally be sold without meeting these conditions provided
the
holder is not (and has not been for the preceding three months) an affiliate
of
the issuer.
B-1
Sports
Source, Inc.
Page
Two
The
undersigned acknowledges that the Securities must be held and may not be sold,
transferred, or otherwise disposed of for value unless it is subsequently
registered under the Securities Act or an exemption from such registration
is
available; the issuer is under no obligation to register the Securities under
the Securities Act or under section 12 of the Securities Exchange Act of 1934,
as amended, except as may be expressly agreed to by it in writing; if rule
144
is available, and no assurance is given that it will be, initially only routine
sales of such Securities in limited amounts can be made in reliance on rule
144
in accordance with the terms and conditions of that rule; the issuer is under
no
obligation to the undersigned to make rule 144 available, except as may be
expressly agreed to by it in writing; in the event rule 144 is not available,
compliance with regulation A or some other exemption may be required before
the
undersigned can sell, transfer, or otherwise dispose of such Securities without
registration under the Securities Act; the issuer's registrar and transfer
agent
will maintain a stop transfer order against the registration of transfer of
the
Securities; and the certificate representing the convertible promissory notes
and warrants composing the Securities will bear a legend in substantially the
following form so restricting the sale of such Securities.
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ARE "RESTRICTED
SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES
ACT.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.
The
issuer may refuse to register transfer of the Securities in the absence of
compliance with rule 144 unless the undersigned furnishes the issuer with a
"no-action" or interpretative letter from the Securities and Exchange Commission
or an opinion of counsel reasonably acceptable to the issuer stating that the
transfer is proper; further, unless such letter or opinion states that the
Securities are free of any restrictions under the Securities Act, the issuer
may
refuse to transfer the Securities to any transferee who does not furnish in
writing to the issuer the same representations and agree to the same conditions
with respect to such Securities as are set forth herein. The issuer may also
refuse to transfer the Securities if any circumstances are present reasonably
indicating that the transferee's representations are not accurate.
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Very
truly yours,
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Dated:
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(Subscriber)
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(Joint
Subscriber)
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B-2