Unassociated Document


    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of December 31, 2007, by and among Energroup
      Holdings Corporation, a Nevada corporation,
      and all
      predecessors thereof (collectively, the “Company”),
      Precious Sheen Investments Limited, a British Virgin Islands company
      (“PSI”),
      Dalian
      Precious Sheen Investments Consulting Co., Ltd., a company organized under
      the
      laws of the People’s Republic of China (“Chuming”),
      and
      the investors identified on the signature pages hereto (each, an “Investor”
      and
      collectively, the “Investors”).
      

     

    WHEREAS,
      the Company entered into a Share Exchange Agreement, dated December 31, 2007
      (the “Exchange
      Agreement”),
      with
      PSI and certain other parties named therein, pursuant to which the Company
      will,
      subject to the terms and conditions thereof, acquire all of the equity interest
      of PSI, in exchange for approximately 97.55% of the Common Stock (as defined
      below) on a fully diluted basis as of the time of the closing of the exchange
      under the Exchange Agreement and immediately prior to the Closing under this
      Agreement (the “Exchange”).

     

    WHEREAS,
      the closing of the Exchange is conditioned, among other things, on the
      consummation of the financing contemplated by this Agreement immediately
      thereafter.

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      exemptions from registration under the Securities Act (as defined below), the
      Company desires to issue and sell to each Investor, and each Investor, severally
      and not jointly, desires to purchase from the Company, shares of the Company’s
      Common Stock, as more fully described in this Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and the Investors agree as
      follows:

     

    ARTICLE
      1.

    DEFINITIONS

     

    1.1. Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms shall have the meanings indicated in this
      Section 1.1:

     

    “2008
      Annual
      Report”
      means
      the
      Annual Report on Form 10-K or 10-KSB (as applicable) of the Company for the
      fiscal year ending December 31, 2008, as filed with the Commission.

     

    “2008
      Guaranteed
      ATNI” has
      the
      meaning set forth in Section 4.11.

     

    “2008
      Make Good Shares” has
      the
      meaning set forth in Section 4.11.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “2009
      Annual
      Report”
      means
      the
      Annual Report on Form 10-K or 10-KSB (as applicable) of the Company for the
      fiscal year ending December 31, 2009, as filed with the Commission. 

     

    “2009
      Guaranteed
      ATNI” has
      the
      meaning set forth in Section 4.11.

     

    “2009
      Guaranteed
      EPS” has
      the
      meaning set forth in Section 4.11.

     

    “2009
      Make Good Shares” has
      the
      meaning set forth in Section 4.11. 

     

    “Action”
      means
      any action, suit, inquiry, notice of violation, proceeding (including any
      partial proceeding such as a deposition) or investigation pending or threatened
      in writing against or affecting the Company, any Subsidiary or any of their
      respective properties before or by any court, arbitrator, governmental or
      administrative agency, regulatory authority (federal, state, county, local
      or
      foreign), stock market, stock exchange or trading facility.

     

    “Affiliate”
      means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144.

     

    “Auditor
      Holdback Escrow Amount”
has
      the
      meaning set forth in Section 4.13(b).

     

    “Available
      Undersubscription Amount”
      has the
      meaning set forth in Section 4.12(c).

     

    “Basic
      Amount”
has
      the
      meaning set forth in Section 4.12(b).

     

    “Board
      Holdback Escrow Amount”
has
      the
      meaning set forth in Section 4.12.

     

    “Business
      Day”
      means
      any day except Saturday, Sunday and any day which is a federal legal holiday
      or
      a day on which banking institutions in the State of New York are authorized
      or
      required by law or other governmental action to close.

     

    “Buy-In”
      has
      the
      meaning set forth in Section 4.1(c).

     

    “CFO
      Holdback Escrow Amount”
has
      the
      meaning set forth in Section 4.15.

     

    “Chuming”
      has the
      meaning set forth in the recitals to this Agreement.

     

    “Chuming
      Founder”
      means
      Shi Huashan, a resident of the PRC.

     

    “Closing”
      means
      the closing of the purchase and sale of the Shares
      pursuant
      to Article II.

     

    “Closing
      Date”
      means
      the Business Day on which all of the conditions set forth in Sections 5.1 and
      5.2 hereof are satisfied, or such other date as the parties may
      agree.

     

    
      
        
        

      

      
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    "Closing
      Escrow Agreement"
      means
      the Closing Escrow Agreement, dated as of the date hereof, between the Company,
      the Investors party thereto and the escrow agent (the “Escrow
      Agent”)
      identified therein, in the form of Exhibit
      A
      hereto. 

     

    “Commission”
      means
      the United States Securities and Exchange Commission.

     

    “Common
      Stock”
      means
      the common stock of the Company, par value $0.001 per share, and any securities
      into which such common stock may hereafter be reclassified or for which it
      may
      be exchanged as a class.

     

    “Company”
      has
      the
      meaning set forth in the recitals to this Agreement.

     

    “Company
      Entities”
      means
      the Company, PSI, Chuming and all existing Subsidiaries of any such entities
      and
      any other entities which hereafter become Subsidiaries of any such
      entities.

     

    “Common
      Stock Equivalents”
      means
      any securities of the Company or any Subsidiary which entitle the holder thereof
      to acquire Common Stock at any time, including without limitation, any debt,
      preferred stock, rights, options, warrants or other instrument that is at any
      time convertible into or exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock or other securities that entitle the holder
      to
      receive, directly or indirectly, Common Stock.

     

    “Company
      U.S. Counsel”
      means
      Richardson & Patel, LLP.

     

    “Company
      Deliverables”
      has the
      meaning set forth in Section 2.2(a).

     

    “Disclosure
      Materials”
      has the
      meaning set forth in Section 3.1(h).

     

    “Effective
      Date”
      means
      the date that the Registration Statement required by Section 2(a) of the
      Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Evaluation
      Date” has
      the
      meaning set forth in Section 3.1(s).

     

    “Event”
      has
      the
      meaning set forth in Section 4.12.

     

    “Event
      Date” has
      the
      meaning set forth in Section 4.12.

     

    “Exchange”
      has the
      meaning set forth in the recitals to this Agreement.

     

    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended.

     

    “Exchange
      Agreement”
      has the
      meaning set forth in the recitals to this Agreement.

     

    “Existing
      Company Entity” or “Existing Company Entities”
      means
      the Company, PSI, Chuming and their respective Subsidiaries.

     

    “GAAP”
      means
      U.S. generally accepted accounting principles.

     

    
      
        
        

      

      
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    “Group”
      means
      Dalian Chuming Group Co., Ltd., a PRC corporation.

     

    “Holdback
      Escrow Agreement” means
      the
      Holdback Escrow Agreement, dated as of the date hereof, by and among the
      Company, the Investors and US Bank, N.A., in the form of Exhibit
      B
      hereto.

     

    “Indemnified
      Party”
      has the
      meaning set forth in Section 4.7.

     

    “Intellectual
      Property Rights”
      has the
      meaning set forth in Section 3.1(p).

     

    “Investment
      Amount”
      means,
      with respect to each Investor, the Investment Amount indicated on such
      Investor’s signature page to this Agreement.

     

    “Investor
      Deliverables”
      has the
      meaning set forth in Section 2.2(b).

     

    “IR
      Holdback Escrow Amount”
has
      the
      meaning set forth in Section 4.13(a).

     

    “Lead
      Investor Counsel”
      means Bryan
      Cave LLP, with an office located at 1290 Avenue of the Americas, New York,
      NY
      10104.

     

    “Lien”
      means
      any lien, charge, encumbrance, security interest, right of first refusal, right
      of participation or other restrictions of any kind.

     

    “Lockup
      Agreement”
      means
      the Lockup Agreement, dated as of the date hereof, by and between the Company
      and each person listed as a signatory thereto, in the form attached as
Exhibit
      C
      hereto.

     

    “Losses”
      means
      any loss, liability, obligation, claim, contingency, damage, cost or expense,
      including all judgments, amounts paid in settlements, court costs and reasonable
      attorneys’ fees and costs of investigation related thereto.

     

    “Make
      Good Escrow Agreement” means
      the
      Make Good Escrow Agreement, dated as of the date hereof, among the Company,
      US
      Bank, N.A., as agent, the escrow agent identified therein (the “Make
      Good Escrow Agent”),
      the
      Make Good Pledgor and the Investors, in the form of Exhibit
      D
      hereto.

     

    “Make
      Good Pledgor” means
      Shine Gold Holdings Limited, a company organized and existing under the laws
      of
      the British Virgin Islands. 

     

    “Material
      Adverse Effect”
      means
      any of (i) a material and adverse effect on the legality, validity or
      enforceability of any Transaction Document, (ii) a material and adverse effect
      on the results of operations, assets, prospects, business or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
      or (iii) an adverse impairment to the Company’s ability to perform on a timely
      basis its obligations under any Transaction Document.

     

    “Money
      Laundering Laws”
has
      the
      meaning set forth in Section 3.1(gg).

     

    
      
        
        

      

      
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    “New
      York Courts”
      means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    “Notice
      of Acceptance”
      has the
      meaning set forth in Section 4.12(c).

     

    “OFAC”
      has the
      meaning set forth in Section 3.1(ee).

     

    “Offer”
has
      the
      meaning set forth in Section 4.12(b).

     

    “Offer
      Notice”
has
      the
      meaning set forth in Section 4.12(b).

     

    “Offer
      Period”
      has the
      meaning set forth in Section 4.12(c).

     

    “Offered
      Securities”
has
      the
      meaning set forth in Section 4.12(b).

     

    “Outside
      Date”
      means
      the fifteenth calendar day (if such calendar day is a Trading Day and if not,
      then the first Trading Day following such fifteenth calendar day) following
      the
      date of this Agreement.

     

    “Per
      Share Purchase Price”
      equals
      $4.40.

     

    “Person”
      means an
      individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “Pinnacle”
      means
      Pinnacle China Fund, L.P.

     

    “PRC”
means
      the People’s Republic of China, not including Taiwan, Hong Kong and
      Macau.

     

    “Proceeding”
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

     

    “PSI”
      has the
      meaning set forth in the recitals to this Agreement.

     

    “PSI
      Financial Statements”
has
      the
      meaning set forth in Section 5.1(e).

     

    “Refused
      Securities”
      has the
      meaning set forth in Section 4.12(d).

     

    “Registration
      Rights Agreement”
      means
      the Registration Rights Agreement, dated as of the date hereof, among the
      Company and the Investors, in the form of Exhibit
      E
      hereto.

     

    “Registration
      Statement”
      means a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Investors of the
      Shares.

     

    
      
        
        

      

      
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    “Required
      Investors”
      means
      the Investors holding a majority in interest of the Shares offered and sold
      pursuant to this Agreement.

     

    “Rule
      144”
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “SEC
      Reports”
      has the
      meaning set forth in Section 3.1(h).

     

    “Securities
      Act”
      means
      the Securities Act of 1933, as amended.

     

    “Share
      Delivery Date”
      has the
      meaning set forth in Section 4.1(c).

     

    “Shares”
      means
      the shares of Common Stock being offered and sold to the Investors by the
      Company hereunder.

     

    “Short
      Sales”
      include,
      without limitation, all “short sales” as defined in Rule 200 promulgated under
      Regulation SHO under the Exchange Act and all types of direct and indirect
      stock
      pledges, forward sale contracts, options, puts, calls, swaps and similar
      arrangements (including on a total return basis), and sales and other
      transactions through non-US broker dealers or foreign regulated
      brokers.

     

    “Subsequent
      Placement”
has
      the
      meaning set forth in Section 4.12(a).

     

    “Subsequent
      Placement Agreement”
has
      the
      meaning set forth in Section 4.12(f).

     

    “Subsidiary”
      of any
      Person means any “subsidiary” as defined in Rule 1-02(x) of the Regulation S-X
      promulgated by the Commission under the Exchange Act of such Person. The term
      “Subsidiaries” shall be deemed to include PSI, Chuming and their respective
      subsidiaries as if the Exchange shall have been consummated as of the time
      of
      the execution of this Agreement, with the effect that all references to
      Subsidiaries of the Company in this Agreement shall also refer to PSI, Chuming
      and their respective subsidiaries.

     

    “Trading
      Day”
      means
      (i) a day on which the Common Stock is traded on a Trading Market or (ii) if
      the
      Common Stock is not quoted on any Trading Market, a day on which the Common
      Stock is quoted in the over-the-counter market as reported by the OTC Bulletin
      Board (or any similar organization or agency succeeding to its functions of
      reporting prices); provided, that in the event that the Common Stock is not
      listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall
      mean a Business Day.

     

    “Trading
      Market”
      means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
      or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
      on the date in question.

     

    “Transaction
      Documents”
      means
      this Agreement, the Registration Rights Agreement, the Closing Escrow Agreement,
      the Holdback Escrow Agreement, the Lockup Agreements, the Make Good Escrow
      Agreement and any other documents or agreements executed in connection with
      the
      transactions contemplated hereunder.

     

    
      
        
        

      

      
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    “Transfer
      Agent”
      means on
      the Closing Date, Western States Transfer and Registrar, the current transfer
      agent of the Company with a mailing address of 1911 Ryan Park Avenue, Sandy,
      Utah 84092 and a facsimile number of (801) 523-8947, and any successor transfer
      agent of the Company.

    


    “Trigger
      Date”
has
      the
      meaning set forth in Section 4.12(a).

     

    “Undersubscription
      Amount”
has
      the
      meaning set forth in Section 4.12(b).

     

    ARTICLE
      2.

    PURCHASE
      AND SALE

     

    2.1. Closing.
      Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, the Shares representing
      such Investor’s Investment Amount, calculated as the quotient of such Investor’s
      Investment Amount divided by the Per Share Purchase Price. The Closing shall
      take place at the offices of Lead Investor Counsel on the Closing Date or at
      such other location or time as the parties may agree.

     

    2.2. Closing
      Deliveries.
      (a)
      At the
      Closing, the Company shall deliver or cause to be delivered to each Investor
      the
      following (the “Company
      Deliverables”):

     

    (i) to
      the
      Transfer Agent and Investors, an irrevocable letter of instruction executed
      and
      delivered by the CEO of the Company instructing the Company’s Transfer Agent to
      cause share certificates to be issued to the Investors representing that number
      of aggregate Shares to be issued and sold at Closing to such Investor,
      determined under Section 2.1(a), registered in the name of each such
      Investor;

     

    (ii) upon
      an
      Investors request, faxed copies of the share certificates to be issued to such
      Investor referenced in Section 2.2(i) above in a form acceptable to such
      Investor, with originals of said share certificates sent directly by the
      Transfer Agent by overnight courier on the Closing Date to the Investors in
      accordance with the Delivery Instructions set forth on each Investor’s signature
      page hereto; 

     

    (iii) the
      Closing Escrow Agreement, duly executed by all parties thereto;

     

    (iv) the
      Holdback Escrow Agreement, duly executed by the Company and the Escrow
      Agent;

     

    (v) the
      Make
      Good Escrow Agreement, duly executed by all parties thereto;

     

    (vi) the
      legal
      opinion of Company U.S. Counsel, in agreed form, addressed to the Investors;
      

     

    
      
        
        

      

      
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    (vii) the
      legal
      opinion of special British Virgin Islands counsel to PSI, in agreed form,
      addressed to the Investors;

     

    (viii) the
      legal
      opinion of Global Law Office, special PRC counsel to Chuming, in agreed form,
      addressed to the Investors (the “PRC
      Legal Opinion”);
      

     

    (ix) the
      Registration Rights Agreement, duly executed by the Company;

     

    (vi) Lockup
      Agreements, duly executed by the Company and each officer of the Company and
      each member of the board of directors of the Company.

     

    (b) At
      the
      Closing, each Investor shall deliver or cause to be delivered the following
      (collectively, the “Investors
      Deliverables”):

     

    (i) to
      the
      Escrow Agent for deposit and disbursement in accordance with the Closing Escrow
      Agreement, its Investment Amount, in United States dollars and in immediately
      available funds, by wire transfer to an account designated in writing by the
      Company for such purpose;

     

    (ii) to
      the
      Company, the Holdback Escrow Agreement, duly executed by such
      Investor;

     

    (iii) to
      the
      Company, the Registration Rights Agreement, duly executed by such Investor;
      and

     

    (iv) to
      the
      Company, the Make Good Escrow Agreement, duly executed by such
      Investor.

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1. Representations
      and Warranties of the Company.
      The
      Company, PSI and Chuming hereby jointly and severally make the following
      representations and warranties to each Investor:

     

    (a) Subsidiaries.
      None of
      the Existing Company Entities have any direct or indirect Subsidiaries other
      than as specified in Schedule
      3.1(a).
      Except
      as disclosed in Schedule
      3.1(a),
      (i) the
      Company owns, directly or indirectly, all of the capital stock or share capital
      (as applicable) of each other Existing Company Entity, and each other Existing
      Company Entity owns, directly or indirectly, all of the capital stock or share
      capital (as applicable) of its respective Subsidiaries, in each case free and
      clear of any and all Liens, and (ii) all the issued and outstanding shares
      of
      capital stock or share capital (as applicable) of each Existing Company Entity
      and each Subsidiary are validly issued and are fully paid, non-assessable and
      free of preemptive and similar rights. As of the Closing, the Company shall
      own
      100% of the share capital of PSI, free and clear of all Liens. Group has agreed
      with the Existing company Entities that neither it nor its Affiliates shall
      engage, directly or indirectly, alone or with others, as a corporation or other
      legal entity, stockholder, consultant or otherwise in a business that competes
      with the respective business, as such businesses are being conducted as of
      the
      Closing Date or are projected to be conducted in accordance with the Disclosure
      Materials, of any Existing Company Entity and/or any Affiliates thereof, other
      than as a stockholder or supplier of any such Existing Company Entity and/or
      any
      Affiliates thereof.

     

    
      
        
        

      

      
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    (b) Organization
      and Qualification.
      Each
      Existing Company Entity is duly incorporated or otherwise organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation or organization (as applicable), with the requisite power and
      authority to own and use its respective properties and assets and to carry
      on
      its respective business as currently conducted and as to be conducted as
      specified in the Exchange Agreement and Current Report on Form 8-K to be filed
      in accordance with Section 4.5 herein. No Existing Company Entity is in
      violation of any of the provisions of its respective certificate or articles
      of
      incorporation, bylaws or other organizational or charter documents. Each
      Existing Company Entity is duly qualified to conduct its respective businesses
      and are in good standing as a foreign corporation or other entity in each
      jurisdiction in which the nature of the business conducted or property owned
      by
      it makes such qualification necessary, except where the failure to be so
      qualified or in good standing, as the case may be, could not, individually
      or in
      the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (c) Authorization;
      Enforcement.
      Each
      Existing Company Entity which is or is to become party to any Transaction
      Document has the requisite corporate power and authority to enter into and
      to
      consummate the transactions contemplated by each such Transaction Document
      to
      which it is a party and otherwise to carry out its obligations thereunder.
      The
      execution and delivery of each of the Transaction Documents by each Existing
      Company Entity to be party thereto and the consummation by each of them of
      the
      transactions contemplated thereby have been duly authorized by all necessary
      action on the part of such Existing Company Entity, and no further action is
      required by any of them in connection with such authorization. Each Transaction
      Document has been (or upon delivery will have been) duly executed by the
      Company, each other Existing Company Entity required to execute the same and
      each Subsidiary (to the extent any of them is a party thereto) and, when
      delivered in accordance with the terms hereof, will constitute the valid and
      binding obligation of the Company, such Existing Company Entity and such
      Subsidiary, enforceable against each in accordance with its terms, except as
      such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      and each other Existing Company Entity and Subsidiary (to the extent a party
      thereto) and the consummation by the Company, and such other Existing Company
      Entities and Subsidiaries, of the transactions contemplated thereby do not
      and
      will not (i) conflict with or violate any provision of the Company’s, such
      Existing Entity’s or any Subsidiary’s certificate or articles of incorporation,
      memorandum and articles of association, bylaws or other organizational or
      charter documents, or (ii) conflict with, or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, or
      give
      to others any rights of termination, amendment, acceleration or cancellation
      (with or without notice, lapse of time or both) of, any agreement, credit
      facility, debt or other instrument (evidencing an Existing Company Entity or
      Subsidiary debt or otherwise) or other understanding to which any Existing
      Company Entity or any Subsidiary is a party or by which any property or asset
      of
      the Company or any Subsidiary is bound or affected, or (iii) result in a
      violation of any law, rule, regulation, order, judgment, injunction, decree
      or
      other restriction of any United States or PRC court or governmental authority
      to
      which the Company or a Subsidiary is subject (including federal and state
      securities laws and regulations), or by which any property or asset of the
      Company or a Subsidiary is bound or affected; except in the case of each of
      clauses (ii) and (iii), such as could not, individually or in the aggregate,
      have or reasonably be expected to result in a Material Adverse Effect.


     

    
      
        
        

      

      
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    (e) Filings,
      Consents and Approvals.
      No
      Existing Company Entity is required to obtain any consent, waiver, authorization
      or order of, give any notice to, or make any filing or registration with, any
      United States or PRC court or other federal, state, local or other governmental
      authority or other Person in connection with the execution, delivery and
      performance by the Company and each Subsidiary to the extent a party thereto
      of
      the Transaction Documents, other than (i) the filing with the Commission of
      one
      or more Registration Statements in accordance with the requirements of the
      Registration Rights Agreement, (ii) filings required by state securities laws,
      (iii) the filing of a Notice of Sale of Securities on Form D with the Commission
      under Regulation D of the Securities Act, (iv) the filings required in
      accordance with Section 4.5, and current reports on Form 8-K in connection
      with
      any amendments to or material subsequent events under this Agreement and related
      agreements, including a release of shares under the Make Good Escrow Agreement,
      (v) filings, consents and approvals required by the rules and regulations of
      the
      applicable Trading Market and (vi) those that have been made or obtained prior
      to the date of this Agreement. 

     

    (f) Issuance
      of the Shares.
      The
      Shares have been duly authorized and, when issued and paid for in accordance
      with the Transaction Documents, will be duly and validly issued, fully paid
      and
      nonassessable, free and clear of all Liens. The Company has reserved from its
      duly authorized capital stock the shares of Common Stock issuable pursuant
      to
      this Agreement in order to issue the Shares. 

     

    (g) Capitalization.
      The
      number of shares and type of all authorized, issued and outstanding capital
      stock of the Company, and all shares of Common Stock reserved for issuance
      under
      the Company’s various option and incentive plans, is specified in Schedule
      3.1(g).
      Except
      as specified in Schedule
      3.1(g),
      no
      securities of any Existing Company Entity are entitled to preemptive or similar
      rights, and no Person has any right of first refusal, preemptive right, right
      of
      participation, or any similar right to participate in the transactions
      contemplated by the Transaction Documents. Except as specified in Schedule
      3.1(g),
      there
      are no outstanding options, warrants, scrip rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities, rights
      or
      obligations convertible into or exchangeable for, or giving any Person any
      right
      to subscribe for or acquire, any shares of Common Stock, or contracts,
      commitments, understandings or arrangements by which the Company or any
      Subsidiary is or may become bound to issue additional shares of Common Stock,
      or
      securities or rights convertible or exchangeable into shares of Common Stock.
      The issue and sale of the Shares hereunder will not, immediately or with the
      passage of time, obligate the Company or any Subsidiary to issue shares of
      Common Stock or other securities to any Person (other than the Investors) and
      will not result in a right of any holder of Company or Subsidiary securities
      to
      adjust the exercise, conversion, exchange or reset price under such securities.
      Except as set forth in Schedule
      3.1(g),
      no
      Existing Company Entity has issued any capital stock or share capital in a
      private placement transaction, including, without limitation, in a transaction
      commonly referred to in the PRC as a “1 1⁄2 transaction.”

     

    
      
        
        

      

      
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    (h) SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the twelve months preceding the date hereof (or such shorter period as
      the
      Company was required by law to file such reports), including, for this purpose,
      the current report on Form 8-K that is being filed by the Company on or about
      the date hereof to disclose the transactions contemplated hereby and by the
      Exchange Agreement (the foregoing materials being collectively referred to
      herein as the “SEC
      Reports”
      and,
      together with the Schedules to this Agreement (if any), the “Disclosure
      Materials”)
      on a
      timely basis or has timely filed a valid extension of such time of filing and
      has filed any such SEC Reports prior to the expiration of any such extension.
      As
      of their respective dates, the SEC Reports complied in all material respects
      with the requirements of the Securities Act and the Exchange Act and the rules
      and regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company and
      each
      Subsidiary included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with GAAP applied on
      a
      consistent basis during the periods involved, except as may be otherwise
      specified in such financial statements or the notes thereto, and fairly present
      in all material respects the financial position of the Company and its
      consolidated Subsidiaries as of and for the dates thereof and the results of
      operations and cash flows for the periods then ended, subject, in the case
      of
      unaudited statements, to normal, immaterial, year-end audit adjustments. The
      PSI
      Financial Statements comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing. The PSI Financial Statements have
      been prepared in accordance with GAAP applied on a consistent basis during
      the
      periods involved, except as may be otherwise specified in such financial
      statements or the notes thereto, and fairly present in all material respects
      the
      financial position of PSI and its consolidated Subsidiaries as of and for the
      dates thereof and the results of operations and cash flows for the periods
      then
      ended, subject, in the case of unaudited statements, to normal, immaterial,
      year-end audit adjustments.

     

    (i) Press
      Releases.
      The
      press releases disseminated by the Company during the twelve months preceding
      the date of this Agreement taken as a whole do not contain any untrue statement
      of a material fact or omit to state a material fact required to be stated
      therein or necessary in order to make the statements therein, in light of the
      circumstances under which they were made and when made, not
      misleading.

     

    
      
        
        

      

      
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    (j) Material
      Changes.
      Except
      as
      specifically disclosed in the SEC Reports, since September 30, 2007 (i) there
      has been no event, occurrence or development that has had or that could
      reasonably be expected to result in a Material Adverse Effect, (ii) no Existing
      Company Entity has incurred any liabilities (contingent or otherwise) other
      than
      (A) trade payables, accrued expenses and other liabilities incurred in the
      ordinary course of business consistent with past practice and (B) liabilities
      not required to be reflected in the Company’s or its Subsidiaries’ financial
      statements pursuant to GAAP or required to be disclosed in filings made with
      the
      Commission, (iii) no Existing Company Entity has altered its method of
      accounting or the identity of its auditors, (iv) no Existing Company Entity
      has
      declared or made any dividend or distribution of cash or other property to
      its
      stockholders or shareholders or purchased, redeemed or made any agreements
      to
      purchase or redeem any shares of its capital stock or share capital, and (v)
      no
      Existing Company Entity has issued any equity securities to any officer,
      director or Affiliate, except pursuant to existing Company stock or share option
      plans. The Company does not have pending before the Commission any request
      for
      confidential treatment of information. 

     

    (k) Litigation.
      There
      is no Action which (i) adversely affects or challenges the legality, validity
      or
      enforceability of any of the Transaction Documents or the Shares or (ii) except
      as specifically disclosed in the SEC Reports, could, if there were an
      unfavorable decision, individually or in the aggregate, have or reasonably
      be
      expected to result in a Material Adverse Effect. No Existing Company Entity,
      nor
      any director or officer thereof (in his or her capacity as such), is or has
      been
      the subject of any Action involving a claim of violation of or liability under
      federal or state securities laws or a claim of breach of fiduciary duty, except
      as specifically disclosed in the SEC Reports. There has not been, and to the
      knowledge of the Company, there is not pending any investigation by the
      Commission involving any Existing Company Entity or any of their respective
      current or former directors or officers (in his or her capacity as such). The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

     

    (l) Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of any Existing Company Entity. No Existing
      Company Entity has any employment or labor contracts, agreements or other
      understandings with any Person. 

     

    (m) Indebtedness;
      Compliance.
      Except
      as disclosed on Schedule
      3.1(m),
      no
      Existing Company Entity is a party to any indenture, debt, capital lease
      obligations, mortgage, loan or credit agreement by which it or any of its
      properties is bound. No Existing Company Entity (i) is in default under or
      in
      violation of (and no event has occurred that has not been waived that, with
      notice or lapse of time or both, would result in a default by such Existing
      Company Entity under), nor has any Existing Company Entity received notice
      of a
      claim that it is in default under or that it is in violation of, any indenture,
      loan or credit agreement or any other agreement or instrument to which it is
      a
      party or by which it or
      any of
      its properties is bound (whether
      or not such default or violation has been waived), (ii) is in violation of
      any
      order of any court, arbitrator or governmental body, or (iii) is or has been
      in
      violation of any statute, rule or regulation of any governmental authority,
      including without limitation all foreign, federal, state and local laws relating
      to taxes, environmental protection, occupational health and safety, product
      quality and safety and employment and labor matters, except in each case as
      could not, individually or in the aggregate, have or reasonably be expected
      to
      result in a Material Adverse Effect. The Exchange Agreement complies with all
      applicable laws, rules and regulations of the United States and the PRC. The
      Company is in compliance with all effective requirements of the Sarbanes-Oxley
      Act of 2002, as amended, and the rules and regulations thereunder that are
      applicable to it, except where such noncompliance could not have or reasonably
      be expected to result in a Material Adverse Effect.

     

    
      
        
        

      

      
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    (n) Regulatory
      Permits.
      The
      Existing Company Entities possess all certificates, authorizations and permits
      issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect, and no Existing Company Entity has received any notice
      of proceedings relating to the revocation or modification of any such
      permits.

     

    (o) Title
      to Assets.
      The
      Existing Company Entities have valid land use rights for all real property
      that
      is material to their respective businesses and good and marketable title in
      all
      personal property owned by them that is material to their respective businesses,
      in each case free and clear of all Liens, except for Liens as do not materially
      affect the value of such property and do not materially interfere with the
      use
      made and proposed to be made of such property by such Existing Company Entity.
      Any real property and facilities held under lease by any Existing Company Entity
      are held by them under valid, subsisting and enforceable leases of which such
      Existing Company Entity is in compliance, except as could not, individually
      or
      in the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (p) Patents
      and Trademarks.
      Schedule
      3.1(p)
      to this
      Agreement contains a complete and accurate list of the Intellectual Property
      Rights (defined below) held and owned by the Existing Company Entities,
      including agreements under which the Existing Company Entities are granted
      world-wide, irrevocable, exclusive, royalty-free licenses on all Intellectual
      Property Rights for which it is not currently the registered owner. Such
      agreements together with the agreements referenced in Schedule
      3.1(p)
      are
      collectively the “Intellectual
      Property Right Licensing Agreements.”
The
      Existing Company Entities have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      copyrights, licenses and other similar rights that are necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports and which the failure to so have could, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse Effect
      (collectively, the “Intellectual
      Property Rights”).
      No
      Existing Company Entity has received a written notice that the Intellectual
      Property Rights used by any of them violates or infringes upon the rights of
      any
      Person. Except as set forth in the SEC Reports, to the knowledge of the Company,
      all such Intellectual Property Rights are enforceable and there is no existing
      infringement by another Person of any of the Intellectual Property Rights.
      No
      former or current employee, no former or current consultant, and no third-party
      joint developer of any Existing Company Entity has any Intellectual Property
      Rights made, developed, conceived, created or written by the aforesaid employee
      or consultant during the period of his or her retention by such Existing Company
      Entity which can be asserted against any Existing Company Entity. The Existing
      Company Entities will take such action as may be required, including making
      and maintaining the filings set forth in Schedule
      3.1(p)
      as
      applicable, in order to maintain such rights as necessary or material for use
      in
      connection with their respective businesses as described in the SEC Reports
      and
      which the failure to so have could, individually or in the aggregate, have
      or
      reasonably be expected to result in a Material Adverse Effect.

     

    
      
        
        

      

      
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    (q) Insurance.
      Each
      Existing Company Entity is insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which it is engaged. The Company has no
      reason to believe that it or any Existing Company Entity will not be able to
      renew its existing respective insurance coverage as and when such coverage
      expires or to obtain similar coverage from similar insurers as may be necessary
      to continue its business on terms consistent with market for the Company’s and
      such other Existing Company Entity’s respective lines of business.

     

    (r) Transactions
      With Affiliates and Employees; Customers.
      Except
      as set forth in the SEC Reports, none of the officers or directors of any
      Existing Company Entity, and, to the knowledge of the Company, none of the
      employees of any Existing Company Entity, is presently a party to any
      transaction with any Existing Company Entity (other than for services as
      employees, officers and directors), including any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing for
      rental of real or personal property to or from, or otherwise requiring payments
      to or from any officer, director or such employee or, to the knowledge of the
      Company, any entity in which any officer, director, or any such employee has
      a
      substantial interest or is an officer, director, trustee or partner. None of
      the
      Existing Companies owes any money or other compensation to any of their
      respective officers or directors or shareholders, except to extent of ordinary
      course compensation arrangements specified in Schedule
      3.1(r).
      No
      material customer of any Existing Company Entity has indicated their intention
      to diminish their relationship with such Existing Company Entity and no Existing
      Company Entity has any knowledge from which it could reasonably conclude that
      any such customer relationship may be adversely affected.

     

    (s) Internal
      Accounting Controls.
      The
      Existing Company Entities maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization, and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. The Company has established disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) for the Company Entities and designed such disclosure controls and
      procedures to ensure that material information relating to the Company Entities
      is made known to the certifying officers by others within those entities,
      particularly during the period in which the Company’s Form 10-KSB or 10-QSB, as
      the case may be, is being prepared. The Company’s certifying officers have
      evaluated the effectiveness of the Company’s controls and procedures in
      accordance with Item 307 of Regulation S-B under the Exchange Act for the
      Company’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation
      Date”).
      The
      Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
      conclusions of the certifying officers about the effectiveness of the disclosure
      controls and procedures based on their evaluations as of the Evaluation Date.
      Since the Evaluation Date, there have been no significant changes in the
      Existing Company Entities’ internal controls (as such term is defined in Item
      308(c) of Regulation S-B under the Exchange Act) or, to the Company’s knowledge,
      in other factors that could significantly affect any Company Entity’s internal
      controls.

     

    
      
        
        

      

      
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    (t) Solvency.
      Based
      on the financial condition of the Company, including the Existing Company
      Entities, as of the Closing Date (and assuming that the Closing shall have
      occurred), (i) the Existing
      Company Entity’s
      fair
      saleable value of their respective assets exceeds the amount that will be
      required to be paid on or in respect of the Existing Company Entity’s existing
      debts and other liabilities (including known contingent liabilities) as they
      mature, (ii) the Existing Company Entity’s assets do not constitute unreasonably
      small capital to carry on their respective business for the current fiscal
      year
      as now conducted and as proposed to be conducted including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Existing Company Entities, and projected capital requirements
      and capital availability thereof, and (iii) the current cash flow of the
      Existing Company Entities, together with the proceeds the Existing Company
      Entities would receive, were they to liquidate all of their respective assets,
      after taking into account all anticipated uses of the cash, would be sufficient
      to pay all amounts on or in respect of its debt when such amounts are required
      to be paid. The Existing Company Entities do not intend to incur debts beyond
      their respective ability to pay such debts as they mature (taking into account
      the timing and amounts of cash to be payable on or in respect of its
      debt).

     

    (u) Certain
      Fees.
      Except
      as described in Schedule
      3.1(u),
      no
      brokerage or finder’s fees or commissions are or will be payable by any Existing
      Company Entity to any broker, financial advisor or consultant, finder, placement
      agent, investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement. The Investors shall have no obligation with
      respect to any fees or with respect to any claims (other than such fees or
      commissions owed by an Investor pursuant to written agreements executed by
      such
      Investor which fees or commissions shall be the sole responsibility of such
      Investor) made by or on behalf of other Persons for fees of a type contemplated
      in this Section that may be due in connection with the transactions contemplated
      by this Agreement.

     

    (v) Certain
      Registration Matters.
      Assuming the accuracy of the Investors’ representations and warranties set forth
      in Section 3.2(b)-(e), no registration under the Securities Act is required
      for
      the offer and sale of the Shares by the Company to the Investors under the
      Transaction Documents. The Company is eligible to register its Common Stock
      for
      resale by the Investors under Form S-1 promulgated under the Securities Act.
      Except as specified in Schedule
      3.1(v),
      no
      Existing Company Entity has granted or agreed to grant to any Person any rights
      (including “piggy-back” registration rights) to have any securities of the
      Company registered with the Commission or any other governmental authority
      that
      have not been satisfied.

     

    (w) Listing
      and Maintenance Requirements.
      Except
      as specified in the SEC Reports, the Company has not, in the two years preceding
      the date hereof, received notice from any Trading Market to the effect that
      the
      Company is not in compliance with the listing or maintenance requirements
      thereof. The Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with the listing and
      maintenance requirements for continued listing of the Common Stock on the
      Trading Market on which the Common Stock is currently listed or quoted. The
      issuance and sale of the Shares under the Transaction Documents does not
      contravene the rules and regulations of the Trading Market on which the Common
      Stock is currently listed or quoted, and no approval of the stockholders of
      the
      Company thereunder is required for the Company to issue and deliver to the
      Investors the Shares as contemplated by the Transaction Documents.

     

    
      
        
        

      

      
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    (x) Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately following the
      Closing will not have become, an “investment company” within the meaning of the
      Investment Company Act of 1940, as amended.

     

    (y) Application
      of Takeover Protections.
      The
      Company has taken all necessary action, if any, in order to render inapplicable
      any control share acquisition, business combination, poison pill (including
      any
      distribution under a rights agreement) or other similar anti-takeover provision
      under the Company’s Articles of Incorporation (or similar charter documents) or
      the laws of its state of incorporation that is or could become applicable to
      the
      Investors as a result of the Investors and the Company fulfilling their
      obligations or exercising their rights under the Transaction Documents,
      including, without limitation, the Company’s issuance of the Shares and the
      Investors’ ownership of the Shares. 

     

    (z) No
      Additional Agreements.
      No
      Existing Company Entity has any agreement or understanding with any Investor
      with respect to the transactions contemplated by the Transaction Documents
      other
      than as specified in the Transaction Documents.

     

    (aa) Consultation
      with Auditors.
      The
      Company has consulted its independent auditors concerning the accounting
      treatment of the transactions contemplated by the Transaction Documents, and
      in
      connection therewith has furnished such auditors complete copies of the
      Transaction Documents.

     

    (bb) Make
      Good Shares.
      Make
      Good Pledgor is the sole record and beneficial owner of the 2007 Make Good
      Shares and 2008 Make Good Shares, and holds such shares free and clear of all
      Liens.

     

    (cc) Foreign
      Corrupt Practices Act.
      No
      Existing Company Entity, nor to the knowledge of the Company, any agent or
      other
      person acting on behalf of any Existing Company Entity, has, directly or
      indirectly, (i) used any funds, or will use any proceeds from the sale of the
      Shares, for unlawful contributions, gifts, entertainment or other unlawful
      expenses related to foreign or domestic political activity, (ii) made any
      unlawful payment to foreign or domestic government officials or employees or
      to
      any foreign or domestic political parties or campaigns from corporate funds,
      (iii) failed to disclose fully any contribution made by the Company or any
      Subsidiary (or made by any Person acting on their behalf of which the Company
      is
      aware) which is in violation of law, or (iv) has violated in any material
      respect any provision of the Foreign Corrupt Practices Act of 1977, as amended,
      and the rules and regulations thereunder.

     

    (dd) PFIC.
      No
      Existing Company Entity is or intends to become a “passive foreign investment
      company” within the meaning of Section 1297 of the U.S. Internal Revenue Code of
      1986, as amended.

     

    (ee) OFAC.
      No
      Existing Company Entity nor, to the knowledge of the Company, any director,
      officer, agent, employee, Affiliate or Person acting on behalf of any Existing
      Company Entity, is currently subject to any U.S. sanctions administered by
      the
      Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the sale of
      the
      Shares, or lend, contribute or otherwise make available such proceeds to any
      Subsidiary, joint venture partner or other Person or entity, towards any sales
      or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
      sanctioned by OFAC or for the purpose of financing the activities of any Person
      currently subject to any U.S. sanctions administered by OFAC.

     

    
      
        
        

      

      
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    (ff) Money
      Laundering Laws.
      The
      operations of each Existing Company Entity are and have been conducted at all
      times in compliance with the money laundering statutes of applicable
      jurisdictions, the rules and regulations thereunder and any related or similar
      rules, regulations or guidelines, issued, administered or enforced by any
      applicable governmental agency (collectively, the “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving any Existing Company Entity with
      respect to the Money Laundering Laws is pending or, to the best knowledge of
      the
      Company, threatened.

     

    (gg) Other
      Representations and Warranties Relating to Chuming.
      

     

    (i) All
      material consents, approvals, authorizations or licenses requisite under PRC
      law
      for the due and proper establishment and operation of Chuming have been duly
      obtained from the relevant PRC governmental authorities and are in full force
      and effect. 

     

    (ii) All
      filings and registrations with the PRC governmental authorities required in
      respect of Chuming and its capital structure and operations including, without
      limitation, the registration with the Ministry of Commerce, the China Securities
      Regulatory Commission, the State Administration of Industry and Commerce, the
      State Administration for Foreign Exchange, tax bureau and customs authorities
      have been duly completed in accordance with the relevant PRC rules and
      regulations, except where, the failure to complete such filings and
      registrations does not, and would not, individually or in the aggregate, have
      a
      Material Adverse Effect.

     

    (iii) Chuming
      has complied with all relevant PRC laws and regulations regarding the
      contribution and payment of its registered share capital, the payment schedule
      of which has been approved by the relevant PRC governmental authorities. There
      are no outstanding rights of, or commitments made by the Company or any
      Subsidiary to sell any equity interest in Chuming.

     

    (iv) Chuming
      is not in receipt of any letter or notice from any relevant PRC governmental
      or
      quasi-governmental authority notifying it of revocation of any licenses or
      qualifications issued to it or any subsidy granted to it by any PRC governmental
      authority for non-compliance with the terms thereof or with applicable PRC
      laws,
      or the need for compliance or remedial actions in respect of the activities
      carried out by Chuming, except such revocation does not, and would not,
      individually or in the aggregate, have a Material Adverse Effect.

     

    (v) Chuming
      has conducted its business activities within the permitted scope of business
      or
      has otherwise operated its business in compliance with all relevant legal
      requirements and with all requisite licenses and approvals granted by competent
      PRC governmental authorities other than such non-compliance that do not, and
      would not, individually or in the aggregate, have a Material Adverse Effect.
      As
      to licenses, approvals and government grants and concessions requisite or
      material for the conduct of any part of Chuming’s business which is subject to
      periodic renewal, the Company has no knowledge of any grounds on which such
      requisite renewals will not be granted by the relevant PRC governmental
      authorities.

     

    
      
        
        

      

      
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    (vi) With
      regard to employment and staff or labor, Chuming has complied with all
      applicable PRC laws and regulations in all material respects, including without
      limitation, laws and regulations pertaining to welfare funds, social benefits,
      medical benefits, insurance, retirement benefits, pensions or the like, other
      than such non-compliance that do not, and would not, individually or in the
      aggregate, have a Material Adverse Effect.

     

    (hh) Disclosure.
      Neither
      any Company Entity nor any Person acting on its behalf has provided any Investor
      or its respective agents or counsel with any information that any Company Entity
      believes constitutes material, non-public information concerning the Company,
      the Subsidiaries or their respective businesses, except insofar as the existence
      and terms of the proposed transactions contemplated hereunder may constitute
      such information. The Company understands and confirms that the Investors will
      rely on the foregoing representations and covenants in effecting transactions
      in
      securities of the Company. All disclosure provided to the Investors regarding
      the Company Entities and their respective businesses and the transactions
      contemplated hereby, furnished by or on behalf of the Company Entities
      (including their respective representations and warranties set forth in this
      Agreement) are true and correct and do not contain any untrue statement of
      a
      material fact or omit to state any material fact necessary in order to make
      the
      statements made therein, in light of the circumstances under which they were
      made, not misleading.

     

    3.2. Representations
      and Warranties of the Investors.
      Each
      Investor hereby, for itself and for no other Investor, represents and warrants
      to the Company as follows:

     

    (a) Organization;
      Authority.
      Such
      Investor is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the applicable Transaction Documents and otherwise
      to carry out its obligations thereunder. The execution, delivery and performance
      by such Investor of the transactions contemplated by this Agreement has been
      duly authorized by all necessary corporate or, if such Investor is not a
      corporation, such partnership, limited liability company or other applicable
      like action, on the part of such Investor. Each of this Agreement and the
      Registration Rights Agreement has been duly executed by such Investor, and
      when
      delivered by such Investor in accordance with the terms hereof, will constitute
      the valid and legally binding obligation of such Investor, enforceable against
      it in accordance with its terms, except as such enforceability may be limited
      by
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
      application.

     

    (b) Investment
      Intent.
      Such
      Investor is acquiring the Shares as principal for its own account for investment
      purposes only and not with a view to or for distributing or reselling such
      Shares or any part thereof, without prejudice, however, to such Investor’s right
      at all times to sell or otherwise dispose of all or any part of such Shares
      in
      compliance with applicable federal and state securities laws. Subject to the
      immediately preceding sentence, nothing contained herein shall be deemed a
      representation or warranty by such Investor to hold the Shares for any period
      of
      time. Such Investor is acquiring the Shares hereunder in the ordinary course
      of
      its business. Such Investor does not have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the
      Shares.

     

    
      
        
        

      

      
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    (c) Investor
      Status.
      At the
      time such Investor was offered the Shares, it was, and at the date hereof it
      is,
      an “accredited investor” as defined in Rule 501(a) under the Securities Act.
      Such Investor is not a registered broker-dealer under Section 15 of the Exchange
      Act.

     

    (d) General
      Solicitation.
      Such
      Investor is not purchasing the Shares as a result of any advertisement, article,
      notice or other communication regarding the Shares published in any newspaper,
      magazine or similar media or broadcast over television or radio or presented
      at
      any seminar or any other general solicitation or general
      advertisement.

     

    (e) Access
      to Information.
      Such
      Investor acknowledges that it has reviewed the Disclosure Materials and has
      been
      afforded (i) the opportunity to ask such questions as it has deemed necessary
      of, and to receive answers from, representatives of the Company concerning
      the
      terms and conditions of the offering of the Shares and the merits and risks
      of
      investing in the Shares; (ii) access to information about the Company and the
      Subsidiaries and their respective financial condition, results of operations,
      business, properties, management and prospects sufficient to enable it to
      evaluate its investment; and (iii) the opportunity to obtain such additional
      information that the Company possesses or can acquire without unreasonable
      effort or expense that is necessary to make an informed investment decision
      with
      respect to the investment. Neither such inquiries nor any other investigation
      conducted by or on behalf of such Investor or its representatives or counsel
      shall modify, amend or affect such Investor’s right to rely on the truth,
      accuracy and completeness of the Disclosure Materials and the Company’s
      representations and warranties contained in the Transaction
      Documents.

     

    (f) Certain
      Trading Activities.
      Such
      Investor has not directly or indirectly, nor has any Person acting on behalf
      of
      or pursuant to any understanding with such Investor, engaged in any transactions
      in the securities of the Company (including, without limitations, any Short
      Sales involving the Company’s securities) since the earlier to occur of (1) the
      time that such Investor was first contacted by the Company regarding an
      investment in the Company and (2) the 30th
      day
      prior to the date of this Agreement. Such Investor covenants that neither it
      nor
      any Person acting on its behalf or pursuant to any understanding with it will
      engage in any transactions in the securities of the Company (including Short
      Sales) prior to the time that the transactions contemplated by this Agreement
      are publicly disclosed.

     

    (g) Independent
      Investment Decision.
      Such
      Investor has independently evaluated the merits of its decision to purchase
      the
      Shares pursuant to the Transaction Documents, and such Investor confirms that
      it
      has not relied on the advice of any other Investor’s business and/or legal
      counsel in making such decision. Such Investor has not relied on the business
      or
      legal advice of the Company or any of its agents, counsel or Affiliates in
      making its investment decision hereunder.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    The
      Company Entities acknowledge and agree that no Investor has made or makes any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.2.

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1.
      (a)
      Shares
      may only be disposed of in compliance with state and federal securities laws.
      In
      connection with any transfer of the Shares other than pursuant to an effective
      registration statement, to the Company, to an Affiliate of an Investor or in
      connection with a pledge as contemplated in Section 4.1(b), the Company may
      require the transferor thereof to provide to the Company an opinion of counsel
      selected by the transferor, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Shares under the Securities
      Act.

     

    (b) Certificates
      evidencing Securities (as defined in Section 4.1(c)) will contain the following
      legend, until such time as they are not required under Section
      4.1(c):

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
      ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT SECURED BY SUCH SECURITIES.

     

    The
      Company acknowledges and agrees that an Investor may from time to time pledge,
      and/or grant a security interest in some or all of the Securities pursuant
      to a
      bona fide margin agreement in connection with a bona fide margin account and,
      if
      required under the terms of such agreement or account, such Investor may
      transfer pledged or secured Shares to the pledgees or secured parties. Such
      a
      pledge or transfer would not be subject to approval or consent of the Company
      and no legal opinion of legal counsel to the pledgee, secured party or pledgor
      shall be required in connection with the pledge, but such legal opinion may
      be
      required in connection with a subsequent transfer following default by the
      Investor transferee of the pledge. No notice shall be required of such pledge.
      At the appropriate Investor’s expense, the Company will execute and deliver such
      reasonable documentation as a pledgee or secured party of Securities may
      reasonably request in connection with a pledge or transfer thereof including
      the
      preparation and filing of any required prospectus supplement under Rule
      424(b)(3) of the Securities Act or other applicable provision of the Securities
      Act to appropriately amend the list of selling stockholders thereunder. Except
      as otherwise provided in Section 4.1(c), any Securities subject to a pledge
      or
      security interest as contemplated by this Section 4.1(b) shall continue to
      bear
      the legend set forth in this Section 4.1(b) and be subject to the restrictions
      on transfer set forth in Section 4.1(a).

     

    
      
        
        

      

      
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    (c) Certificates
      evidencing Shares and Make Good Shares, if ever Make Good Shares are due to
      be
      delivered to Investors or their transferees pursuant to the Transaction
      Documents (collectively with the Shares, the “Securities”),
      shall
      not contain any legend (including the legend set forth in Section 4.1(b)):
      (i)
      while a registration statement (including the Registration Statement) covering
      such Securities is then effective, or (ii) following a sale or transfer of
      such
      Securities pursuant to Rule 144 (assuming the transferee is not an Affiliate
      of
      the Company), or (iii) while such Securities are eligible for sale by the
      selling Investor without volume restrictions under Rule 144. The Company agrees
      that following the Effective Date or such other time as legends are no longer
      required to be set forth on certificates representing Securities under this
      Section 4.1(c), it will, no longer than three Trading Days following the
      delivery by an Investor to the Company or the Transfer Agent of a certificate
      representing such Securities containing a restrictive legend, deliver or cause
      to be delivered to such investor Securities which are free of all restrictive
      and other legends. If the Company is then eligible, certificates for Securities
      subject to legend removal hereunder shall be transmitted by the Transfer to
      an
      Investor by crediting the prime brokerage account of such Investor with the
      Depository Trust Company System as directed by such Investor. If an Investor
      shall make a sale or transfer of Securities either (x) pursuant to Rule 144
      or
      (y) pursuant to a registration statement and in each case shall have delivered
      to the Company or the Company’s transfer agent the certificate representing the
      applicable Securities containing a restrictive legend which are the subject
      of
      such sale or transfer and a representation letter in customary form (the
      date
      of such sale or transfer and Securities delivery being the “Share
      Delivery Date”)
      and (1)
      the Company shall fail to deliver or cause to be delivered to such Investor
      a
      certificate representing such Securities that is free from all restrictive
      or
      other legends by the third Trading Day following the Share Delivery Date and
      (2)
      following such third Trading Day after the Share Delivery Date and prior to
      the
      time such Securities are received free from restrictive legends, the Investor,
      or any third party on behalf of such Investor, purchases (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Investor of such Securities (a "Buy-In"),
      then,
      in addition to any other rights available to the Investor under the Transaction
      Documents and applicable law, the Company shall pay in cash to the Investor
      (for
      costs incurred either directly by such Investor or on behalf of a third party)
      the amount by which the total purchase price paid for Common Stock as a result
      of the Buy-In (including brokerage commissions, if any) exceed the proceeds
      received by such Investor as a result of the sale to which such Buy-In relates.
      The Investor shall provide the Company written notice indicating the amounts
      payable to the Investor in respect of the Buy-In. The Company may not make
      any
      notation on its records or give instructions to any transfer agent of the
      Company that enlarge the restrictions on transfer set forth in this
      Section.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    4.2. Furnishing
      of Information.
      As long
      as any Investor owns any Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. As long as any Investor owns Securities, if the
      Company is not required to file reports pursuant to such laws, it will prepare
      and furnish to the Investors and make publicly available in accordance with
      Rule
      144(c) such information as is required for the Investors to sell the Securities
      under Rule 144. The Company further covenants that it will take such further
      action as any holder of Securities may reasonably request, all to the extent
      required from time to time to enable such Person to sell the Securities without
      registration under the Securities Act within the limitation of the exemptions
      provided by Rule 144.

     

    4.3. Integration.
      The
      Company shall not, and shall use its best efforts to ensure that no Affiliate
      of
      the Company shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Shares in a manner
      that would require the registration under the Securities Act of the sale of
      the
      Shares to the Investors, or that would be integrated with the offer or sale
      of
      the Shares for purposes of the rules and regulations of any Trading Market
      in a
      manner that would require stockholder approval of the sale of the Shares to
      the
      Investors.

     

    4.4. Subsequent
      Registrations.
      The
      Company may not file any registration statement (other than on Form S-8) with
      the Commission with respect to any securities of the Company prior to the time
      that all Shares are registered pursuant to one or more effective Registration
      Statement(s), and the prospectuses forming a portion of such Registration
      Statement(s) is available for the resale of all Shares.

     

    4.5. Securities
      Laws Disclosure; Publicity.
      By 9:00
      a.m. (New York time) on the Trading Day following the Closing Date, the Company
      shall issue a press release disclosing the transactions contemplated hereby
      and
      the Closing (including, without limitation, details with respect to the make
      good provision and thresholds contained in Section 4.11 herein). On the Trading
      Day following the Closing Date the Company will file a Current Report on Form
      8-K disclosing the material terms of the Transaction Documents, including
      details with respect to the make good provision and thresholds contained in
      Section 4.11 herein (and attach as exhibits thereto the Transaction Documents)
      and the Closing. The Company shall make the foregoing disclosure such that
      following such disclosure, the Investors shall no longer be in possession of
      any
      material, non-public information with respect to the Company. In addition,
      the
      Company will make such other filings and notices in the manner and time required
      by the Commission and the Trading Market on which the Common Stock is listed.
      Notwithstanding the foregoing, the Company shall not publicly disclose the
      name
      of any Investor, or include the name of any Investor in any filing with the
      Commission (other than the Registration Statement and any exhibits to filings
      made in respect of this transaction in accordance with periodic filing
      requirements under the Exchange Act) or any regulatory agency or Trading Market,
      without the prior written consent of such Investor, except to the extent such
      disclosure is required by law or Trading Market regulations.

     

    4.6. Limitation
      on Issuance of Future Priced Securities.
      During
      the six months following the Closing Date, the Company shall not issue any
      “Future Priced Securities” as such term is described by NASD
      IM-4350-1.

     

    
      
        
        

      

      
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    4.7. Indemnification
      of Investors.
      In
      addition to the indemnity provided in the Registration Rights Agreement, the
      Company Entities will indemnify and hold the Investors and their directors,
      officers, shareholders, partners, employees and agents (each, an “Indemnified
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation (collectively, “Losses”)
      that
      any such Indemnified Party may suffer or incur as a result of or relating to
      any
      misrepresentation, breach or inaccuracy of any representation, warranty,
      covenant or agreement made by any Company Entities in any Transaction Document.
      In addition to the indemnity contained herein, the Company will reimburse each
      Indemnified Party for its reasonable legal and other expenses incurred in
      connection with actual Losses claimed pursuant to this Section 4.7 (including
      the cost of any investigation, preparation and travel in connection therewith),
      and such expenses shall be paid to the Indemnified Party, as incurred, within
      ten Trading Days of written notice thereof to the Indemnifying Party;
provided,
      that
      the Indemnified Party shall promptly reimburse the Indemnifying Party for that
      portion of such fees and expenses applicable to such actions for which such
      Indemnified Party is judicially determined not to be entitled to indemnification
      hereunder. Except as otherwise set forth herein, the mechanics and procedures
      with respect to the rights and obligations under this Section 4.7 shall be
      the
      same as those set forth in Section 5 of the Registration Rights
      Agreement.

     

    4.8. Non-Public
      Information.
      The
      Company covenants and agrees that neither it, any Company Entity nor any other
      Person acting on its or their behalf will provide any Investor or its agents
      or
      counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto such Investor shall have executed
      a
      written agreement regarding the confidentiality and use of such information.
      The
      Company understands and confirms that each Investor shall be relying on the
      foregoing representations in effecting transactions in securities of the
      Company.

     

    4.9. Listing
      of Shares.
      The
      Company agrees, (i) if the Company applies to have the Common Stock traded
      on
      any other Trading Market, it will include in such application the Shares, and
      will take such other action as is necessary or desirable to cause the Shares
      to
      be listed on such other Trading Market as promptly as possible, and (ii) the
      Company will take all action reasonably necessary to continue the listing and
      trading of its Common Stock on a Trading Market and will comply in all material
      respects with the Company’s reporting, filing and other obligations under the
      bylaws or rules of the Trading Market.

     

    4.10. Use
      of
      Proceeds.
      The
      Company will use the net proceeds from the sale of the Shares hereunder for
      working capital purposes and not for the satisfaction of any portion of the
      Company’s debt (other than payment of trade payables and accrued expenses in the
      ordinary course of the Company’s business and consistent with prior practices),
      or to redeem any Common Stock or Common Stock Equivalents.

     

    4.11. Make
      Good Shares. 

     

    (a) The
      Make
      Good Pledgor
      agrees
      that: 

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    (i) In
      the
      event that the Company’s audited after tax net income, calculated in accordance
      with GAAP and reported in the 2008 Annual Report is less than $15,900,000,
      subject to the adjustments permitted under this Section 4.11(a) (the
“2008
      Guaranteed ATNI”),
      the
      Make Good Pledgor will
      transfer (in accordance with the Make Good Escrow Agreement) to the Investors
      on
      a pro-rata basis (determined by dividing each Investor’s Investment Amount by
      the aggregate of all Investment Amounts delivered to the Company by the
      Investors hereunder) for no additional consideration other than payment of
      their
      respective Investment Amount paid at Closing, 1,931,818
      shares of Common Stock (as
      equitably adjusted for any stock splits, stock combinations, stock dividends
      or
      similar transactions)
      (the
“2008
      Make Good Shares”).
      

     

    (ii) In
      the
      event that either (i) the earnings per share of the Company, calculated in
      accordance with GAAP and reported in the 2009 Annual Report is less than $0.99
      on a fully diluted basis (as equitably adjusted for any stock splits, stock
      combinations, stock dividends or similar transactions), subject to the
      adjustments permitted under this Section 4.11(a) (the “2009
      Guaranteed EPS”)
      or
      (ii) the Company’s audited after tax net income, calculated in accordance with
      GAAP and reported in the 2009 Annual Report is less than $20,900,000,
      subject
      to the adjustments permitted under this Section 4.11(a) (the “2009
      Guaranteed ATNI”),
      the
      Make Good Pledgor will transfer (in accordance with the Make Good Escrow
      Agreement) to the Investors on a pro rata basis (determined by dividing each
      Investor’s Investment Amount by the aggregate of all Investment Amounts
      delivered to the Company by the Investors hereunder) for no additional
      consideration other than payment of their respective Investment Amount paid
      at
      Closing, 1,931,818 shares of Common Stock (as
      equitably adjusted for any stock splits, stock combinations, stock dividends
      or
      similar transactions)
      (the
“2009
      Make Good Shares”).
      

     

    (iii) In
      the
      event that the audited after tax net income of the Company, calculated in
      accordance with GAAP and reported in the 2008 Annual Report is equal to or
      greater than the 2008 Guaranteed ATNI,
      no
      transfer of the 2008 Make Good Shares shall be required by the Make Good Pledgor
      to the Investors and such 2008 Make Good Shares shall be returned to the Make
      Good Pledgor in accordance with the Make Good Escrow Agreement. 

     

    (iv) In
      the
      event that (i) the earnings per share of the Company, calculated in accordance
      with GAAP and reported in the 2009
      Annual Report is
      equal to
      or greater than the 2009 Guaranteed EPS and (ii) the audited after tax net
      income of the Company, calculated in accordance with GAAP and reported in the
      2009 Annual Report is equal to or greater than the 2009 Guaranteed
      ATNI,
      no
      transfer of the 2009 Make Good Shares shall be required by the Make Good Pledgor
      to the Investors and such 2009 Make Good Shares shall be returned to the Make
      Good Pledgor in accordance with the Make Good Escrow Agreement. 

     

    (v) Any
      such
      transfer of the 2008 Make Good Shares or the 2009 Make Good Shares shall be
      made
      to the Investors or the Make Good Pledgor, as applicable, within 10
      Business
      Days after
      the date
which
      the
      2008
      Annual Report or 2009 Annual Report, as applicable, is filed with the
      Commission. 

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (vi) Notwithstanding anything
      to the contrary contained herein, in the event that the release of the
      2008 Make Good Shares or the 2009 Make Good Shares to the Investors or the
      Make
      Good Pledgor is deemed to be an expense or deduction from revenues/income of
      the
      Company for the applicable year, under GAAP, then such expense or deduction
      shall be excluded for purposes of determining whether or not the 2008
      Guaranteed ATNI, 2009 Guaranteed ATNI, or 2009 Guaranteed EPS, as the case
      may
      be, has been achieved by the Company. Notwithstanding anything to the
      contrary contained herein, any direct or indirect tax breaks, tax holidays,
      tax
      credits or similar tax benefit(s), compensation, grant or any other remuneration
      or deduction granted by any governmental authority or body which benefits any
      of
      the Company Entities shall be excluded for purposes of determining whether
      or not the 2008 Guaranteed ATNI, 2009 Guaranteed ATNI, or 2009 Guaranteed EPS,
      as the case may be, has been achieved by the Company.

     

    (b) In
      connection with the foregoing,
      the Make
      Good Pledgor
      agrees
      that within three Trading Days following the Closing, the
      Make
      Good Pledgor will
      deposit all potential 2008 Make Good Shares and 2009 Make Good Shares into
      escrow in accordance with the Make Good Escrow Agreement along with bank
      signature stamped stock powers executed in blank (or such other signed
      instrument of transfer acceptable to the Company’s transfer agent), and the
      handling and disposition of the 2008 Make Good Shares and 2009 Make Good Shares
      shall be governed by this Section 4.11 and the Make Good Escrow
      Agreement.
      The Make
      Good Pledgor
      hereby
      agrees that their obligation to transfer shares of Common Stock to Investors
      pursuant to this Section 4.11 and the Make Good Escrow Agreement shall continue
      to run to the benefit of each Investor even if such Investor shall have
      transferred or sold all or any portion of its Shares, and that each Investor
      shall have the right to assign its rights to receive all or any such shares
      of
      Common Stock to other Persons in conjunction with negotiated sales or transfers
      of any of its Shares.

     

    (c) The
      Company covenants and agrees that upon any transfer of 2008 Make Good Shares
      or
      2009 Make Good Shares to the Investors in accordance with the Make Good Escrow
      Agreement, the Company shall promptly instruct its transfer agent to reissue
      such 2008 Make Good Shares or 2009 Make Good Shares in the applicable Investor’s
      name and deliver the same as directed by such Investor.

     

    (d) If
      within
      ten (10) days following the Closing, the
      Make
      Good Pledgor shall
      not
      have deposited all potential 2008 Make Good Shares and 2009 Make Good Shares
      into escrow in accordance with the Make Good Escrow Agreement along with bank
      signature stamped stock powers executed in blank (or such other signed
      instrument of transfer acceptable to the Company’s transfer agent), then, upon
      written demand from an Investor, the Company shall promptly, and in any event
      within thirty (30) days from the date of such written demand, pay to that
      Investor, as liquidated damages, an amount equal to that Investor’s entire
      Investment Amount without interest thereon. In exchange for such payment, the
      Investor shall return to the Company for cancellation the certificates
      evidencing the Shares acquired by the Investor under the Agreement.

     

    (e) If
      any
      term or provision of this Section 4.11 is in contradiction of or conflicts
      with
      any term or provision of the Make Good Escrow Agreement, the terms of the Make
      Good Escrow Agreement shall control. 

     

    
      
        
        

      

      
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    4.12. Right
      of First Refusal. 

     

    (a) From
      the
      date hereof until the one year anniversary of the Effective Date (plus one
      additional day for each Trading Day following the Effective Date of any
      Registration Statement during which either (1) the Registration Statement
      is not effective or (2) the prospectus forming a portion of the
      Registration Statement is not available for the resale of all Registrable
      Securities (as defined in the Registration Rights Agreement)) (the "Trigger
      Date"),
      the
      Company will not, directly or indirectly, offer, sell, grant any option to
      purchase, or otherwise dispose of (or announce any offer, sale, grant or any
      option to purchase or other disposition of) any of its or its Subsidiaries'
      equity or equity equivalent securities, including, without limitation, any
      debt,
      preferred stock or other instrument or security that is, at any time during
      its
      life and under any circumstances, convertible into or exchangeable or
      exercisable for shares of Common Stock or Common Stock Equivalents (any such
      offer, sale, grant, disposition or announcement being referred to as a
      "Subsequent
      Placement")
      unless
      the Company shall have first complied with this Section 4.12. 

     

    (b) The
      Company shall deliver to each Investor hereunder a written notice
      (the "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (v) identify and describe the
      Offered Securities, (w) include the final form of documents and agreements
      governing the Subsequent Placement, (x) specify the price and other terms
      upon which the Offered Securities are to be issued, sold or exchanged, and
      the
      number or amount of the Offered Securities to be issued, sold or exchanged,
      (y) identify the persons or entities (if known) to which or with which the
      Offered Securities are to be offered, issued, sold or exchanged and (z) offer
      to
      issue and sell to or exchange with such Investors all of the Offered Securities,
      allocated among such Investors (a) based on such Investor's pro rata portion
      of
      the total Investment Amount hereunder (the "Basic
      Amount"),
      and
      (b) with respect to each Investor that elects to purchase its Basic Amount,
      any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Investors as such Investor shall indicate it will purchase or acquire
      should the other Investors subscribe for less than their Basic Amounts (the
      "Undersubscription
      Amount"),
      which
      process shall be repeated until the Investors shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    (c) To
      accept
      an Offer, in whole or in part, such Investor must deliver a written notice
      to
      the Company prior to the end of the fifth Business Day after such Investor's
      receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Investor's Basic Amount that such Investor
      elects to purchase and, if such Investor shall elect to purchase all of its
      Basic Amount, the Undersubscription Amount, if any, that such Investor elects
      to
      purchase (in either case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Investors are less than the total of
      all
      of the Basic Amounts, then each Investor who has set forth an Undersubscription
      Amount in its Notice of Acceptance shall be entitled to purchase, in addition
      to
      the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Investor who has subscribed for any Undersubscription Amount shall be entitled
      to purchase only that portion of the Available Undersubscription Amount as
      the
      Basic Amount of such Investor bears to the total Basic Amounts of all Investors
      that have subscribed for Undersubscription Amounts, subject to rounding by
      the
      Company to the extent its deems reasonably necessary.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    (d) The
      Company shall have twenty Business Days from the expiration of the Offer Period
      above to (i) offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by the
      Investors (the "Refused
      Securities"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement (as defined below), and (b) either (x) the consummation of the
      transactions contemplated by such Subsequent Placement Agreement or (y) the
      termination of such Subsequent Placement Agreement, which shall be filed with
      the Commission on a Current Report on Form 8-K with such Subsequent Placement
      Agreement and any documents contemplated therein filed as exhibits thereto.
      If
      no disclosure has been made by the Company by the end of the twenty Business
      Day
      period referred to in this subsection (d), the Subsequent Placement shall be
      deemed to have been abandoned and the Investors shall no longer be deemed to
      be
      in possession of any non-public information with respect to the
      Company.

     

    (e) In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in this Section
      4.12), then each Investor may, at its sole option and in its sole discretion,
      reduce the number or amount of the Offered Securities specified in its Notice
      of
      Acceptance to an amount that shall be not less than the number or amount of
      the
      Offered Securities that such Investor elected to purchase pursuant to Section
      4.12(c) above multiplied by a fraction, (i) the numerator of which shall be
      the
      number or amount of Offered Securities the Company actually proposes to issue,
      sell or exchange (including Offered Securities to be issued or sold to Investors
      pursuant to Section 4.12(c) above prior to such reduction) and (ii) the
      denominator of which shall be the original amount of the Offered Securities.
      In
      the event that any Investor so elects to reduce the number or amount of Offered
      Securities specified in its Notice of Acceptance, the Company may not issue,
      sell or exchange more than the reduced number or amount of the Offered
      Securities unless and until such securities have again been offered to the
      Investors in accordance with Section 4.12(b) above.

     

    (f) Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Investors shall acquire from the Company, and the Company shall
      issue to the Investors, the number or amount of Offered Securities specified
      in
      the Notices of Acceptance, as reduced pursuant to Section 4.12(e) above if
      the
      Investors have so elected, upon the terms and conditions specified in the Offer.
      The purchase by the Investors of any Offered Securities is subject in all cases
      to the preparation, execution and delivery by the Company and the Investors
      of a
      purchase agreement relating to such Offered Securities reasonably satisfactory
      in form and substance to the Investors and their respective counsel (such
      agreement, the “Subsequent
      Placement Agreement”).

     

    (g) Any
      Offered Securities not acquired by the Investors or other persons in accordance
      with Section 4.12(f) above may not be issued, sold or exchanged until they
      are
      again offered to the Investors under the procedures specified in this
      Agreement.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (h) In
      exchange for the Company’s willingness to agree to these procedures, each
      Investor hereby irrevocably agrees that it will hold in strict confidence any
      and all Offer Notices, the information contained therein, and the fact that
      the
      Company is contemplating a Subsequent Placement, until such time as the Company
      is obligated to make the disclosures required by Section 4.12(d), or unless
      it
      notifies the Company in writing that it no longer desires to receive Offer
      Notices. 

     

    (i) The
      rights contained in this Section shall not apply to the issuance and sale by
      the
      Company of (i) shares of Common Stock or Common Stock Equivalents to employees,
      officers, or directors of the Company, as compensation for their services to
      the
      Company or any of its direct or indirect Subsidiaries pursuant
      to arrangements approved by the Board of Directors of the Company,
      (ii)
      shares of Common Stock or Common Stock Equivalents issued and sold in any
      underwritten public offering (which shall not include an equity line of credit
      or similar financing arrangement) resulting in net proceeds to the Company
      of in
      excess of $10,000,000, (iii) shares of Common Stock or Common Stock Equivalents
      issued as consideration for the acquisition of another company or business
      in
      which none of the shareholders of the Company have in excess of a 10% ownership
      interest, and where the primary purpose is not to raise capital for the Company
      or any Subsidiary, which acquisition has been approved by the Board of Directors
      of the Company, or (iv) shares of Common Stock or Common Stock Equivalents
      issued to non-Affiliates in connection with services rendered to the Company
      pursuant to arrangements approved by the Board of Directors of the
      Company.

     

    4.13. Liquidated
      Damages for Governmental Rescission of Restructuring Transaction. If any
      governmental agency in the PRC challenges or otherwise takes any action that
      adversely affects (a) the transactions contemplated by the Exchange Agreement
      or
      (b) the formation or restructuring of the Existing Company Entities as set
      forth
      in the PRC Legal Opinion, and the Company cannot undo such governmental action
      or otherwise address the material adverse effect to the reasonable satisfaction
      of the Investors within sixty (60) days of the occurrence of such governmental
      action, then, upon written demand from an Investor, the Company shall promptly,
      and in any event within thirty (30) days from the date of such written demand,
      pay to that Investor, as liquidated damages, an amount equal to that Investor’s
      entire Investment Amount without interest thereon. As a condition to the receipt
      of such payment, the Investor shall return to the Company for cancellation
      the
      certificates evidencing the Shares acquired by the Investor under the
      Agreement.

     

    4.14. Closing
      Escrow Holdback. The Company and Investors agree pursuant to the Closing
      Escrow Agreement to establish a Closing Escrow, into which an amount equal
      to
      $4,250,000 out of the Investment Amount (“Total
      Holdback Amount”)
      shall
      be deposited into escrow and held back as follows, to be released to the Company
      if and when the following conditions are satisfied: 

     

    (a) Independent
      Board of Directors.
      The
      Company covenants and agrees that no later than 120 days following the Closing
      Date, the Board of Directors of the Company shall be comprised of a minimum
      of
      six members, a majority of which shall be “independent directors” as such term
      is defined in NASDAQ Marketplace Rule 4200(a)(15). Subject to the provisions
      of
      this Section 4.14(a), the
      Company agrees that $2,000,000 (the “Board
      Holdback Escrow Amount”)
      of
      out of
      the Total Holdback Amount delivered to the Escrow Agent
      shall
      remain in escrow post Closing pursuant to the Closing Escrow Agreement until
      such time as the Company complies with the obligations set forth in this Section
      4.14(a). 

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (b) Chief
      Financial Officer.
      No
      later than ninety (90) days following the Closing Date, the Company will hire
      a
      chief financial officer who is a certified public accountant or possesses
      experience such that he or she can reasonably serve as a chief financial
      officer, fluent in English and an expert in (i) United States generally accepted
      accounting principles and (ii) auditing procedures and compliance for United
      States public companies. The
      Company shall enter into an employment agreement with the CFO for a term of
      no
      less than two years. Should the CFO be dismissed at any time prior to two years
      from the Closing Date, the Company shall replace the CFO with a Chief Financial
      Officer who fits the criteria set forth herein as soon as practicable.
By
      9:00
      a.m. (New York time) on the second Trading Day following the hiring of such
      chief financial officer, the Company will file a Current Report on Form 8-K
      disclosing the information required by Item 5.02 of Form 8-K. Subject to the
      provisions of this Section 4.14(b), the
      Company agrees that $1,500,000 (the “CFO
      Holdback Escrow Amount”)
      out
      of
      the
      Total Holdback Amount
      delivered to the Escrow Agent
      shall
      remain in escrow post Closing pursuant to the Closing Escrow Agreement until
      such time as the Company complies with the obligations set forth in this Section
      4.14(b).

     

    (c) Investor
      Relations.
      By the
      thirtieth day following the Closing Date, the Company shall have hired Hayden
      Communications as it’s investor relations firm. The
      Company agrees that $250,000 (the
      “IR
      Holdback Amount”)
      out of
      the Total Holdback Amount shall remain in escrow post Closing pursuant to the
      Closing Escrow Agreement until such time as the Company complies with the
      obligations set forth in this Section 4.14(c). 

     

    (d) Independent
      Public Accountant.
      The
      Company covenants and agrees that no later than 120 days following the Closing
      Date, the Company shall hire and retain one of the following auditing firms
      as
      its independent public accountant of record: Moore Stephens International,
      Horwath International, BDO Seidman, LLP, Weinberg & Company, or other such
      auditor as may be agreed between the Company and a majority in interest of
      the
      Investors. Subject to the provisions of this Section 4.14(d), the
      Company agrees that $500,000 (the “Audit
      Firm Holdback Escrow Amount”)
      out
      of
      the
      Total Holdback Amount
      delivered to the Escrow Agent
      shall
      remain in escrow post Closing pursuant to the Closing Escrow Agreement until
      such time as the Company complies with the obligations set forth in this Section
      4.14(d). 

     

    (e) Liquidated
      Damages for Failure to Appoint Independent Board and CFO.
      If for
      any or no reason whatsoever, the Company fails to satisfy the requirements
      in
      Sections 4.14(a) or 4.14(b) within the time periods specified therein, and
      the
      Escrow Agent does not receive the joint written notice contemplated
      in the
      Closing Escrow Agreement from the Company and Pinnacle China Fund relating
      to
      either the release of: (i) the Board Holdback Escrow Amount on or prior to
      120
      calendar days following the Closing Date or (ii) CFO Holdback Escrow Amount
      on
      or prior to 90 calendar days following the Closing Date (each such failure
      or
      breach being referred to as an “Event,”
      and for
      purposes of this section the date such Event occurs being referred to as
“Event
      Date”),
      then
      in addition to any other rights the Investors may have hereunder or under
      applicable law, on each such Event Date and on each monthly anniversary of
      such
      Event Date (if the applicable Event shall not have been cured by such date)
      until the applicable Event is cured, the Escrow Agent will deliver and pay
      to
      each Investor by wire transfer an amount in immediately available funds, as
      partial liquidated damages and not as a penalty, equal to 0.5% of such
      Investor’s Investment Amount. The partial liquidated damages shall apply on a
      daily pro-rata basis for any portion of a month prior to the cure of an Event.
      In no event will the Company be liable for partial liquidated damages in excess
      of 0.5% of the aggregate Investment Amount of the Investors in any 30-day period
      in respect of any single Event (it being understood that if the Company suffers
      an Event relating to its failure to comply with this Section 4.14(a)
      and an
      Event relating to its failure to comply with Section 4.14(b) in a 30-day period
      it will be responsible for 1% of liquidated damages in a 30-day period). It
      is
      further understood that the partial liquidated damages contemplated hereby
      are
      limited to the Board Holdback Escrow Amount as to that Event and the CFO
      Holdback Escrow Amount as to that Event; provided,
      that
      the Investors are entitled to all other remedies available under applicable
      law.
      On any Event Date, the Company will deliver to each Investor a written notice
      which shall set forth the relevant Event. If
      any
      term or provision of this Section 4.14 as to the Board Holdback Escrow Amount,
      CFO Escrow Holdback Amount, IR Holdback Amount or Audit Firm Holdback Escrow
      Amount and/or partial liquidated damages is in contradiction of or conflicts
      with any term or provision of the Holdback Escrow Agreement relating thereto,
      the terms of the Holdback Escrow Agreement shall control.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    4.15. Further
      Assurances. The Company will, and will cause all of the Company Entities and
      their management to, use their best efforts to satisfy all of the closing
      conditions under Section 5.1, and will not take any action which could frustrate
      or delay the satisfaction of such conditions. In addition, either prior to
      or
      following the Closing, the Chuming Founders and each Company Entity signatory
      hereto will, and will cause each other Company Entity and its management to,
      perform, or cause to be done and performed, all such further acts and things,
      and shall execute and deliver all such other agreements, certificates,
      instruments and documents, as any other party may reasonably request in order
      to
      carry out the intent and accomplish the purposes of this Agreement and the
      consummation of the transactions contemplated hereby.

     

    ARTICLE
      5.

    CONDITIONS
      PRECEDENT TO CLOSING

     

    5.1. Conditions
      Precedent to the Obligations of the Investors to Purchase Shares.
      The
      obligation of each Investor to acquire Shares at the Closing is subject to
      the
      satisfaction or waiver by such Investor, at or before the Closing, of each
      of
      the following conditions:

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of the Company contained herein shall be true
      and
      correct in all material respects as of the date when made and as of the Closing
      as though made on and as of such date;

     

    (b) Performance.
      The
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by it at or prior to
      the
      Closing;

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents;

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (d) Adverse
      Changes.
      Since
      the date of execution of this Agreement, no event or series of events shall
      have
      occurred that reasonably could have or result in a Material Adverse Effect
      or a
      material adverse change with respect to the Company and its
      Subsidiaries;

     

    (e) Intellectual
      Property Rights.
      The
      WOFE shall provide to the Investors evidence acceptable to the Investors that
      all Intellectual Property Rights are either (i) validly owned by the WOFE or
      (ii) subject to valid and binding Intellectual Property Right Licensing
      Agreements which may not be terminated for any reason until any such
      Intellectual Property Right covered thereby is validly owned by the
      WOFE.

     

    (f) PSI
      Financial Statements.
      PSI
      shall
      have completed and delivered audited consolidated financial statements for
      the
      fiscal years ended December 31, 2005 and 2006 to the Company and the Investors
      and shall have received an audit report from an independent audit firm that
      is
      registered with the Public Company Accounting Oversight Board relating to the
      fiscal years ended December 31, 2005 and 2006, a copy of which shall be promptly
      provided to the Investors (collectively, the “PSI
      Financial Statements”);
      

     

    (g) PRC
      and BVI Opinions.
      The
      Company shall have delivered to the Investors, and the Investors shall be able
      to rely upon, the legal opinions that the Company shall have received from
      its
      legal counsel in the PRC (which, among other things, shall confirm the legality
      under applicable PRC law of the restructuring being effected with PSI in
      connection with the Exchange) and in the British Virgin Islands, with such
      legal
      opinions being in a form acceptable to the Investors in their sole
      discretion;

     

    (h) Exchange
      Agreement Form 8-K.
      Concurrently with or immediately prior to the Closing, the Company shall have
      acquired all of the outstanding capital stock of PSI pursuant to the Exchange
      Agreement, and the Company shall provide the Investors with the Current Report
      on Form 8-K to be filed in accordance with the Exchange Agreement, containing
      the audited financial statements of PSI and other required disclosure with
      respect to PSI; 

     

    (i) [Reserved] 

     

    (j) Closing
      Officer’s Certificate.
      At the
      Closing, the Company shall have delivered to each Investor an officer’s
      certificate to the effect that each of the conditions specified in Sections
      5.1(a) - 5.1(d) are satisfied in all respects;

     

    (k) Company
      Deliverables.
      The
      Company shall have delivered the Company Deliverables in accordance with Section
      2.2(a); and

     

    (l) Termination.
      This
      Agreement shall not have been terminated as to such Investor in accordance
      with
      Section 6.5.

     

    5.2. Conditions
      Precedent to the Obligations of the Company to Sell Shares.
      The
      obligation of the Company to sell Shares at the Closing is subject to the
      satisfaction or waiver by the Company, at or before the Closing, of each of
      the
      following conditions:

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of each Investor contained herein shall be true
      and correct in all material respects as of the date when made and as of the
      Closing Date as though made on and as of such date;

     

    (b) Performance.
      Each
      Investor shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by such Investor at or
      prior to the Closing;

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents;

     

    (d) Investors
      Deliverables.
      Each
      Investor shall have delivered its Investors Deliverables in accordance with
      Section 2.2(b); and

     

    (e) Termination.
      This
      Agreement shall not have been terminated as to such Investor in accordance
      with
      Section 6.5.

     

    ARTICLE
      6.

    MISCELLANEOUS

     

    6.1. Fees
      and Expenses.
      At the
      Closing, the Company shall pay to Bryan Cave LLP $75,000 as reimbursement of
      Pinnacle for its legal fees in connection with the Transaction Documents
      (Pinnacle may deduct such amount from the Investment Amount deliverable to
      the
      Company at Closing), it being understood that Bryan Cave LLP has only rendered
      legal advice to Pinnacle, and not to the Company or any other Investor in
      connection with the transactions contemplated hereby, and that each of the
      Company and the other Investors has relied for such matters on the advice of
      its
      own respective counsel. Except as specified in the immediately preceding
      sentence and as described in Section 6.4, each party shall pay the fees and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of the Transaction Documents.
      The Company shall pay all stamp and other taxes and duties levied in connection
      with the sale of the Shares.

     

    6.2. Entire
      Agreement.
      The
      Transaction Documents, together with the Exhibits and Schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements, understandings, discussions and
      representations, oral or written, with respect to such matters, which the
      parties acknowledge have been merged into such documents, exhibits and
      schedules.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    6.3. Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b)
      the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 6:30 p.m. (New York City time)
      on
      any Trading Day, or (c) upon actual receipt by the party to whom such notice
      is
      required to be given, if sent by any means other than facsimile transmission.
      The address for such notices and communications shall be as
      follows:

     

    
      	
              If
                to the Company:

            	
              Energroup
                Holdings Corp.

            
	 	
              No.
                9, Xin Yi Street, Ganjingzi District

            
	 	
              Dalian
                City, Liaoning Province

            
	 	
              PRC
                116039

            
	 	
              Facsimile:
                +86 411 867 166 90

            
	 	
              Attn.:
                President

            
	 	 
	
              With
                a copy to:

            	
              Richardson
                & Patel, LLP

            
	 	
              Murdock
                Plaza 

            
	 	
              10900
                Wilshire Boulevard, Suite 500 

            
	 	
              Los
                Angeles, California 90024

            
	 	
              Facsimile:
                (310) 208-1154

            
	 	
              Attn.:
                Kevin K. Leung, Esq.

            
	 	 
	
              If
                to an Investor:

            	
              To
                the address set forth under such Investor’s name on the signature pages
                hereof;

            
	 	 
	
              With
                a copy to

            	
              Bryan
                Cave LLP

            
	
              Lead
                Investor Counsel:

            	
              1290
                Avenue of the Americas 

            
	 	
              New
                York, New York 10104

            
	 	
              Facsimile:
                (212) 541-4630

            
	 	
              Attn.:
                Eric L. Cohen, Esq.

            


    

     

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

     

    6.4. Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the Company and the Investors holding a majority of the
      Shares. No waiver of any default with respect to any provision, condition or
      requirement of this Agreement shall be deemed to be a continuing waiver in
      the
      future or a waiver of any subsequent default or a waiver of any other provision,
      condition or requirement hereof, nor shall any delay or omission of either
      party
      to exercise any right hereunder in any manner impair the exercise of any such
      right. No consideration shall be offered or paid to any Investor to amend or
      consent to a waiver or modification of any provision of any Transaction Document
      unless the same consideration is also offered to all Investors who then hold
      Shares. The Company shall pay for any fees, including attorney’s fees, incurred
      by an Investor in connection with any requests for amendments or waivers to
      a
      Transaction Document.

     

    6.5. Termination.
      This
      Agreement may be terminated prior to Closing:

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (a) by
      written agreement of the Investors and the Company; and

     

    (b) by
      an
      Investor (as to itself but no other Investor) upon written notice to the
      Company, if the Closing shall not have taken place by 6:30 p.m. Eastern time
      on
      the Outside Date; provided, that the right to terminate this Agreement under
      this Section 6.5(b) shall not be available to any Person whose failure to
      comply with its obligations under this Agreement has been the cause of or
      resulted in the failure of the Closing to occur on or before such
      time.

     

    In
      the
      event of a termination pursuant to Section 6.5(a) upon delivery of a joint
      written notice from the Company and the Investors to the Escrow Agent or in
      the
      event of a termination pursuant to Section 6.5(b) upon delivery of written
      notice by an Investor to the Escrow Agent, such Investor shall have the right
      to
      a return of up to its entire Investment Amount deposited with the Escrow Agent
      pursuant to Section 2.2(b)(i), without interest or deduction. The Company
      covenants and agrees to cooperate with such Investor in obtaining the return
      of
      its Investment Amount, and shall not communicate any instructions to the
      contrary to the Escrow Agent.

     

    In
      the
      event of a termination pursuant to this Section, the Company shall promptly
      notify all non-terminating Investors. Upon a termination in accordance with
      this
      Section 6.5, the Company and the terminating Investor(s) shall not have any
      further obligation or liability (including as arising from such termination)
      to
      the other and no Investor will have any liability to any other Investor under
      the Transaction Documents as a result therefrom.

     

    6.6. Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party. This Agreement shall be
      construed as if drafted jointly by the parties, and no presumption or burden
      of
      proof shall arise favoring or disfavoring any party by virtue of the authorship
      of any provisions of this Agreement or any of the Transaction
      Documents.

     

    6.7. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the Investors. Any Investor may assign any or all of its rights
      under
      this Agreement to any Person to whom such Investor assigns or transfers any
      Shares, provided such transferee agrees in writing to be bound, with respect
      to
      the transferred Shares, by the provisions hereof that apply to the
“Investors.”

     

    6.8. No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.7 (as to each Indemnified Party).

     

    
      
        
        

      

      
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    6.9. Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and any other Transaction Documents (whether
      brought against a party hereto or its respective Affiliates, employees or
      agents) shall be commenced exclusively in the New York Courts. Each party hereto
      hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein (including with respect
      to the enforcement of the any of the Transaction Documents), and hereby
      irrevocably waives, and agrees not to assert in any Proceeding, any claim that
      it is not personally subject to the jurisdiction of any such New York Court,
      or
      that such Proceeding has been commenced in an improper or inconvenient forum.
      Each party hereto hereby irrevocably waives personal service of process and
      consents to process being served in any such Proceeding by mailing a copy
      thereof via registered or certified mail or overnight delivery (with evidence
      of
      delivery) to such party at the address in effect for notices to it under this
      Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      Each party hereto hereby irrevocably waives, to the fullest extent permitted
      by
      applicable law, any and all right to trial by jury in any legal proceeding
      arising out of or relating to this Agreement or the transactions contemplated
      hereby. If either party shall commence a Proceeding to enforce any provisions
      of
      a Transaction Document, then the prevailing party in such Proceeding shall
      be
      reimbursed by the other party for its reasonable attorneys’ fees and other costs
      and expenses incurred with the investigation, preparation and prosecution of
      such Proceeding.

     

    6.10. Survival.
      The
      representations, warranties, agreements and covenants contained herein shall
      survive the Closing and the delivery of the Shares.

     

    6.11. Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    6.12. Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    6.13. Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Investor
      exercises a right, election, demand or option under a Transaction Document
      and
      the Company does not timely perform its related obligations within the periods
      therein provided, then such Investor may rescind or withdraw, in its sole
      discretion from time to time upon written notice to the Company, any relevant
      notice, demand or election in whole or in part without prejudice to its future
      actions and rights.

     

    
      
        
        

      

      
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    6.14. Replacement
      of Shares.
      If any
      certificate or instrument evidencing any Shares is mutilated, lost, stolen
      or
      destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement Shares.
      If a
      replacement certificate or instrument evidencing any Shares is requested due
      to
      a mutilation thereof, the Company may require delivery of such mutilated
      certificate or instrument as a condition precedent to any issuance of a
      replacement.

     

    6.15. Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Investors and the Company will
      be entitled to specific performance under the Transaction Documents. The parties
      agree that monetary damages may not be adequate compensation for any loss
      incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

    6.16. Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to any Investor pursuant
      to
      any Transaction Document or an Investor enforces or exercises its rights
      thereunder, and such payment or payments or the proceeds of such enforcement
      or
      exercise or any part thereof are subsequently invalidated, declared to be
      fraudulent or preferential, set aside, recovered from, disgorged by or are
      required to be refunded, repaid or otherwise restored to the Company, a trustee,
      receiver or any other person under any law (including, without limitation,
      any
      bankruptcy law, state or federal law, common law or equitable cause of action),
      then to the extent of any such restoration the obligation or part thereof
      originally intended to be satisfied shall be revived and continued in full
      force
      and effect as if such payment had not been made or such enforcement or setoff
      had not occurred.

     

    6.17. Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Shares pursuant to the Transaction Documents has been made by such
      Investor independently of any other Investor. Nothing contained herein or in
      any
      Transaction Document, and no action taken by any Investor pursuant thereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated by the Transaction Documents.
      Each
      Investor acknowledges that no other Investor has acted as agent for such
      Investor in connection with making its investment hereunder and that no Investor
      will be acting as agent of such Investor in connection with monitoring its
      investment in the Shares or enforcing its rights under the Transaction
      Documents. Each Investor shall be entitled to independently protect and enforce
      its rights, including without limitation the rights arising out of this
      Agreement or out of the other Transaction Documents, and it shall not be
      necessary for any other Investor to be joined as an additional party in any
      proceeding for such purpose. The Company acknowledges that each of the Investors
      has been provided with the same Transaction Documents for the purpose of closing
      a transaction with multiple Investors and not because it was required or
      requested to do so by any Investor.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    6.18. Limitation
      of Liability.
      Notwithstanding anything herein to the contrary, the Company acknowledges and
      agrees that the liability of an Investor arising directly or indirectly, under
      any Transaction Document of any and every nature whatsoever shall be satisfied
      solely out of the assets of such Investor, and that no trustee, officer, other
      investment vehicle or any other Affiliate of such Investor or any investor,
      shareholder or holder of shares of beneficial interest of such a Investor shall
      be personally liable for any liabilities of such Investor.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

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      PAGES FOLLOW]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    
      	
              ENERGROUP
                HOLDINGS CORPORATION

            
	 
	
              By:

            	 	
            
	 	
              Name:
                Shi Huashan

            
	 	
              Title:
                President and Chief Executive Officer

            
	 	 


    

     

    
      	
              PRECIOUS
                SHEEN INVESTMENTS LIMITED

            
	 
	
              By:

            	 	
            
	 	
              Name:
                Shi Huashan

            
	 	
              Title:
                Director

            
	 	 


    

     

    
      	
              DALIAN
                CHUMING PRECIOUS SHEEN INVESTMENTS CONSULTING
                CO., LTD.

            


    

     

    
      	
              By:

            	 	
            
	 	
              Name:
                Shi Huashan

            
	 	
              Title:
                General Manager

            


    

     

    
      	
              Only
                as to Sections 3.1(bb), 4.11 and Article 6 herein:

            
	 	 
	
              SHINE
                GOLD HOLDINGS LIMITED

            
	 	 
	
              By:

            	 	
            
	 	
              Name:
                Chong Shun

            
	 	
              Title:
                Director

            


    

     

    
      	
              Only
                as to Sections 4.15 and Article 6 herein:

            
	 	
            
	
              Mr.
                Shi Huashan, an individual

            


    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR INVESTORS FOLLOWS]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    
      	
              INVESTORS:

            
	 	 
	
              Name
                of Investor:

            
	 	 
	 	 
	
              By:

            	
               

            
	 	
              Name:

            
	 	
              Title:

            


    

     

    
      	
              Investment Amount:    $

            	 


    

     

    
      	
              Tax ID No.:

            	 


    

    


    
      	
              ADDRESS
                FOR NOTICE

            	 


    

     

    
      	
              c/o:

            	 


    

     

    
      	
              Street:

            	 


    

     

    
      	
              City/State/Zip:

            	 


    

     

    
      	
              Attention:

            	 


    

     

    
      	
              Tel:

            	 


    

     

    
      	
              Fax:

            	 


    

    


    
      	
              DELIVERY
                INSTRUCTIONS

            	 
	
              (if
                different from above)

            	 


    

     

    
      	
              c/o:

            	 


    

     

    
      	
              Street:

            	 


    

     

    
      	
              City/State/Zip:

            	 


    

     

    
      	
              Attention:

            	 


    

     

    
      	
              Tel:

            	 


    

    


    
      
        
        

      

      
        39