Document:

Unassociated Document

    Exhibit
      10.1

      EXECUTION
        COPY

       

       

    

    STOCK
      PURCHASE AGREEMENT
      dated as
      of March 13, 2008 (this "Agreement")
      among
WO
      HING LI (the
      "Seller"),
      and
HUDSON
      BAY FUND, LP,
      a
      Delaware limited partnership and HUDSON
      BAY OVERSEAS FUND,
      LTD., a
      company
      with limited liability organized under the laws of the Cayman Islands
      (collectively, the "Purchasers").

     

    WHEREAS,
      the
      Seller owns shares of Ordinary Stock, $0.001 par value per share (the
      "Ordinary
      Stock"),
      of
      China Precision Steel, Inc., a Delaware corporation (the "Company")
      and is
      the Chairman of the Board, Chief Executive Officer and President of the
      Company.

     

    WHEREAS,
      the
      Purchasers seek to purchase from the Seller, and the Seller seeks to sell to
      the
      Purchasers, up to Three Million, Five Hundred Twenty Four Thousand, Eight
      Hundred Ten (3,524,810) shares of Ordinary Stock currently owned by the Seller
      (the "Purchased
      Shares")
      in
      accordance with the terms of this Agreement.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and mutual benefits representations, warranties,
      conditions, covenants and agreements contained herein, the parties hereto hereby
      agree as set forth below.

     

    ARTICLE
      I

    PURCHASE AND
      SALE OF THE PURCHASED SHARES

     

    1.1  Purchase
      and Sale of Purchased Shares. 

     

    (a)
      Upon
      the terms and subject to the conditions set forth herein, on the third Trading
      Day (or such other date as is mutually agreed to by the Seller and the
      Purchasers) (the "Closing
      Date")
      following the satisfaction or waiver of all of the conditions set forth in
      Article IV of this Agreement and the earliest of (i) (the "First
      Trigger Event")
      the
      first time that the average of the Closing Bid Prices of the Ordinary Stock
      is
      at or above $6.234 (as adjusted for any stock dividend, stock split, stock
      combination, reclassification or similar transaction) for any five (5)
      consecutive Trading Days during the period beginning five (5) Trading Days
      prior
      to the date hereof and ending forty-five (45) Trading Days after the date hereof
      (which period may be extended for up to two (2) additional forty-five (45)
      Trading Day periods by the Seller by delivering a written notice to the
      Purchasers and thereafter by mutual agreement among the parties) (such period,
      as may be extended, the "Pricing
      Period"),
      (ii)
      (the "Second
      Trigger Event")
      if the
      average of the Closing Bid Prices of the Ordinary Stock has not been at or
      above
      $6.234 (as adjusted for any stock dividend, stock split, stock combination,
      reclassification or similar transaction) for five (5) consecutive Trading Days
      during the Pricing Period, upon delivery by the Purchasers of a written notice
      to the Seller of its election to purchase some or all of the Purchased Shares
      at
      a purchase price per share equal to $3.601 (as adjusted for any stock dividend,
      stock split, stock combination, reclassification or similar transaction), and
      (iii) (the "Third
      Trigger Event")
      for so
      long as the average of the Closing Bid Prices of the Ordinary Stock has not
      been
      at or above $6.234 (as adjusted for any stock dividend, stock split, stock
      combination, reclassification or similar transaction) for five (5) consecutive
      Trading Days during the Pricing Period, upon agreement between the Seller and
      the Purchasers as to the number of Purchased Shares to be sold by the Seller
      and
      purchased by each Purchaser and the per share purchase price for such shares.
      Upon the occurrence of (A) the First Trigger Event, the Seller shall sell to
      the
      Purchasers, and the Purchasers shall purchase from the Seller, the number of
      Purchased Shares set forth opposite each Purchaser's name on Schedule I, (B)
      the
      Second Trigger Event, the Seller shall sell to the Purchasers, and the
      Purchasers shall purchase from the Seller, the number of Purchased Shares
      specified in the written notice of the Purchasers or (C) the Third Trigger
      Event, the Seller shall sell to the Purchasers, and the Purchasers shall
      purchase from the Seller, the number of Purchased Shares mutually agreed by
      the
      Seller and the Purchasers (each, the "Closing").
      Notwithstanding the foregoing, in no event shall the Closing Date be earlier
      than three (3) Trading Days after the date hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)
      As
      used herein, "Closing
      Bid Price"
      means,
      for any security as of any date, the last closing bid price for such security
      on
      The NASDAQ Capital Market (the "Principal Market"), as reported by the Bloomberg
      Financial Markets ("Bloomberg"),
      or,
      if the Principal Market begins to operate on an extended hours basis and does
      not designate the closing bid price, then the last bid price of such security
      prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
      Principal Market is not the principal securities exchange or trading market
      for
      such security, the last closing bid price of such security on the principal
      securities exchange or trading market where such security is listed or traded
      as
      reported by Bloomberg, or if the foregoing do not apply, the last closing bid
      price of such security in the over-the-counter market on the electronic bulletin
      board for such security as reported by Bloomberg, or, if no closing bid price
      is
      reported for such security by Bloomberg, the average of the bid prices of any
      market makers for such security as reported in the "pink sheets" by Pink Sheets
      LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price
      cannot be calculated for a security on a particular date on any of the foregoing
      bases, the Closing Bid Price of such security on such date shall be the fair
      market value as mutually determined by the Seller and the Purchasers. All such
      determinations to be appropriately adjusted for any share dividend, share split,
      share combination or other similar transaction during the applicable calculation
      period.

     

    (c)
      As
      used herein, "Trading
      Day"
      means
      any day on which the Ordinary Stock is traded on the Principal Market, or,
      if
      the Principal Market is not the principal trading market for the Ordinary Stock,
      then on the principal securities exchange or securities market on which the
      Ordinary Stock is then traded; provided that "Trading Day" shall not include
      any
      day on which the Ordinary Stock is scheduled to trade on such exchange or market
      for less than 4.5 hours or any day that the Ordinary Stock is suspended from
      trading during the final hour of trading on such exchange or market (or if
      such
      exchange or market does not designate in advance the closing time of trading
      on
      such exchange or market, then during the hour ending at 4:00:00 p.m., New York
      Time).

     

    1.2  Purchase
      Price. 

     

    Upon
      the
      terms and subject to the conditions of this Agreement, at the Closing, each
      Purchaser shall pay to the Seller an aggregate amount equal to (a) in the case
      of the First Trigger Event, (1) the number of Purchased Shares set forth
      opposite such Purchaser's name on Schedule I multiplied
      by (2)
      77% of the average of the Closing Bid Prices during the five (5) consecutive
      Trading Days ending on the Closing Date, (b) in the case of the Second Trigger
      Event, the number of Purchased Shares specified by each Purchaser in the written
      notice is referred to therein multiplied
      by
      $3.601 (as adjusted for any stock dividend, stock split, stock combination,
      reclassification or similar transaction) and (c) in the case of the Third
      Trigger Event, the number of Purchased Shares mutually agreed upon, multiplied
      by the per share purchase price mutually agreed upon, by the Purchasers and
      the
      Seller (in each case, the "Purchase
      Price").

     

    
      
        
        

      

      
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    1.3  The
      Closing. 

     

    The
      Closing contemplated hereby shall take place at 10:00 a.m., EST time on the
      Closing Date. All actions taken at the Closing shall be deemed to have occurred
      simultaneously.

     

    ARTICLE
      II

    REPRESENTATIONS
      AND WARRANTIES OF THE SELLER

     

    The
      Seller represents and warrants to the Purchasers as of the date hereof as set
      forth below.

     

    2.1  Legal
      Capacity 

     

    The
      Seller has the legal capacity and right to execute, deliver, enter into,
      consummate and perform this Agreement.

     

    2.2  Title
      to Purchased Shares. 

     

    The
      Seller is the sole record and beneficial owner of the Purchased Shares to be
      sold by it pursuant to this Agreement and owns such shares free from all taxes,
      liens, claims, encumbrances and charges. There are no outstanding rights,
      options, subscriptions or other agreements or commitments obligating the Seller
      to sell or transfer the Purchased Shares and the Purchased Shares are not
      subject to any lock-up or other restriction on their transfer or on the ability
      of the Purchasers to sell or transfer the Purchased Shares (except that the
      Purchased Shares are restricted securities and may not be sold by the Purchasers
      except pursuant to a registration statement or an exemption from
      registration).

     

    2.3  Authority 

     

    The
      Seller has the requisite power and authority to execute and deliver this
      Agreement and to carry out and perform all of its obligations under the terms
      of
      this Agreement, including, without limitation, the full power and authority
      to
      sell and transfer such Purchased Shares. This Agreement has been duly executed
      and delivered by the Seller, and this Agreement constitutes the valid and
      legally binding obligation of the Seller enforceable against the Seller in
      accordance with its terms, except as such enforceability may be limited by
      general principles of equity or to applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation and other similar laws relating to,
      or
      affecting generally, the enforcement of applicable creditors' rights and
      remedies.

     

    2.4  Accredited
      Investor Status; Affiliate Status.

     

    The
      Seller is an "accredited investor" as that term is defined in Rule 501(a) of
      Regulation D under the Securities Act of 1933, as amended (the "Securities
      Act").
      The
      Seller is an "affiliate" of the Company, as such term is defined in Rule 144
      of
      the Securities Act.

     

    
      
        
        

      

      
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    2.5  Noncontravention. 

     

    The
      execution, delivery and performance by the Seller of this Agreement and the
      consummation by the Seller of the transactions contemplated hereby will not
      (a)
      conflict with, or constitute a default (or an event which 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 of, any agreement,
      indenture or instrument to which the Seller is a party, or (b) result in a
      violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws) applicable to the Seller, except for such
      conflicts, defaults, rights or violations which would not, individually or
      in
      the aggregate, reasonably be expected to have a material adverse effect on
      the
      ability of the Seller to perform its obligations hereunder.

     

    2.6  Consents. 

     

    Except
      for the approvals required to be obtained by Closing in accordance with Article
      IV, no consent, approval, permit, order, notification or authorization of,
      or
      any exemption from registration, declaration or filing with, any person
      (governmental or private) is required in connection with the execution, delivery
      and performance by the Seller of this Agreement or the consummation by the
      Seller of the transactions contemplated hereby.

     

    2.7  Seller
      Status.

     

    The
      Seller (a) is a sophisticated person with respect to the sale of the Purchased
      Shares; (b) has adequate information concerning the business and financial
      condition of the Company to make an informed decision regarding the sale of
      the
      Purchased Shares; and (c) has independently and without reliance upon the
      Purchasers, and based on such information as the Seller has deemed appropriate,
      made its own analysis and decision to enter into this Agreement, except that
      the
      Seller has relied upon the Purchasers' express representations, warranties
      and
      covenants in this Agreement. The Seller acknowledges that the Purchasers have
      not given the Seller any investment advice, credit information or opinion on
      whether the sale of the Purchased Shares is prudent.

     

    2.8  Absence
      of Litigation. 

     

    There
      is
      no action, suit, claim, proceeding, inquiry or investigation before or by any
      court, public board, government agency or self regulatory organization or body
      pending or, to the knowledge of the Seller, threatened against or affecting
      the
      Seller that could reasonably be expected to have a material adverse affect
      on
      the ability of the Seller to perform its obligations hereunder.

     

    2.9  No
      Brokers.

     

    Other
      than Primary Capital, LLC (the "Agent"),
      whose
      fees, in the amount of 2.5% of the Purchase Price, shall be paid by the Seller,
      directly from the Escrow Account when the assets in the Escrow Account are
      otherwise to be released to the Seller. The Seller has taken no action that
      would give rise to any claim by any person for brokerage commissions, finder's
      fees or similar payments relating to this Agreement or the transactions
      contemplated hereby.

     

    
      
        
        

      

      
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    2.10  Outstanding
      Amounts.

     

    The
      Seller has paid any and all amounts and charges due and owing to the Company
      with respect to the Purchased Shares and there are no unpaid amounts or charges
      claimed to be due to the Company from the Seller with respect to the Purchased
      Shares.

     

    2.11 Material
      Nonpublic Information.

     

    The
      Seller confirms that neither it, the Company nor any other person or entity
      acting on either of their behalf has provided any of the Purchasers or their
      respective agents or counsel with any information that constitutes or could
      reasonably be expected to constitute material, non-public information. The
      Seller further confirms that its is not selling the Purchase Shares hereunder
      on
      the basis of material non-public information. The Seller understands and
      confirms that each of the Purchasers will rely on the foregoing representations
      in effecting transactions in securities of the Company. 

     

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES OF THE PURCHASER

     

    Each
      Purchaser severally and not jointly, represents and warrants to the Seller
      as of
      the date hereof as set forth below.

     

    3.1  Organization
      and Existence. 

     

    Such
      Purchaser is an entity duly organized and validly existing under the laws of
      the
      jurisdiction of its formation.

     

    3.2  No
      Public Sale or Distribution. 

     

    Such
      Purchaser is acquiring the Purchased Shares in the ordinary course of business
      for its own account and not with a view towards, or for resale in connection
      with, the public sale or distribution thereof, except pursuant to sales
      registered or exempted under the Securities Act, and such Purchaser does not
      have a present arrangement to effect any distribution of the Purchased Shares
      to
      or through any person or entity; provided,
      however,
      that by
      making the representations herein, such Purchaser does not agree to hold any
      of
      the Purchased Shares for any minimum or other specific term and reserves the
      right to dispose of the Purchased Shares at any time in accordance with or
      pursuant to a registration statement or an exemption under the Securities
      Act.

     

    3.3  Accredited
      Investor Status.

     

    Such
      Purchaser is an "accredited investor" as that term is defined in Rule 501(a)
      of
      Regulation D under the Securities Act. 

     

    
      
        
        

      

      
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    3.4  Authority.

     

    Such
      Purchaser has all requisite power and authority to execute, deliver and perform
      its obligations under this Agreement. This Agreement has been duly and validly
      authorized, executed and delivered on behalf of such Purchaser and shall
      constitute the legal, valid and binding obligation of such Purchaser enforceable
      against it in accordance with its terms, except as such enforceability may
      be
      limited by general principles of equity or to applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation and other similar laws relating to,
      or
      affecting generally, the enforcement of applicable creditors' rights and
      remedies.

     

    3.5  Noncontravention.
      

     

    The
      execution, delivery and performance by such Purchaser of this Agreement and
      the
      consummation by such Purchaser of the transactions contemplated hereby will
      not
      (a) result in a violation of the organizational documents of such Purchaser,
      (b)
      conflict with, or constitute a default (or an event which 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 of, any agreement,
      indenture or instrument to which such Purchaser is a party, or (c) result in
      a
      violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws) applicable to such Purchaser, except in
      the
      case of clauses (b) and (c) above, for such conflicts, defaults, rights or
      violations which would not, individually or in the aggregate, reasonably be
      expected to have a material adverse effect on the ability of such Purchaser
      to
      perform its obligations hereunder.

     

    3.6  Purchaser
      Status.

     

    Such
      Purchaser (a) is a sophisticated person with respect to the sale of the
      Purchased Shares; (b) has adequate information concerning the business and
      financial condition of the Company to make an informed decision regarding the
      purchase of the Purchased Shares; and (c) has independently and without reliance
      upon the Seller, and based on such information as such Purchaser has deemed
      appropriate, made its own analysis and decision to enter into this Agreement,
      except that such Purchaser has relied upon the Seller's express representations,
      warranties and covenants in this Agreement. Such Purchaser acknowledges that
      the
      Seller has not given such Purchaser any investment advice, credit information
      or
      opinion on whether the purchase of the Purchased Shares is prudent.

     

    3.7  Absence
      of Litigation. 

     

    There
      is
      no action, suit, claim, proceeding, inquiry or investigation before or by any
      court, public board, government agency or self-regulatory organization or body
      pending or, to the knowledge of such Purchaser, threatened against or affecting
      such Purchaser that could reasonably be expected to have a material adverse
      affect on the ability of such Purchaser to perform its obligations
      hereunder.

     

    3.8  No
      Brokers.

     

    Such
      Purchaser has taken no action that would give rise to any claim by any person
      for brokerage commissions, finder's fees or similar payments relating to this
      Agreement or the transactions contemplated hereby.

     

    
      
        
        

      

      
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    ARTICLE
      IV

    CONDITIONS
      TO CLOSING

     

    4.1  Conditions
      to the Seller's Obligation to Sell.

     

    The
      obligation of the Seller hereunder to sell the Purchased Shares to the
      Purchasers on the Closing Date is subject to the satisfaction, on or before
      the
      Closing Date, of each of the following conditions, provided,
      that
      these conditions are for the Seller's sole benefit and may be waived by the
      Seller at any time in its sole discretion by providing the Purchasers with
      prior
      written notice thereof:

     

    (a) Such
      Purchaser shall have delivered (i) 90% of the Purchase Price to the Seller
      (less
      any amounts withheld by a Purchaser pursuant to Section 5.2) by wire transfer
      of
      immediately available funds pursuant to the wire instructions provided by the
      Seller and (ii) 10% of the Purchase Price to the Escrow Account (as defined
      below) by wire transfer of immediately available Funds pursuant to wire
      instructions provided by the Escrow Agent (as defined below).

     

    (b) The
      representations and warranties of the Purchasers shall be true and correct
      in
      all material respects as of the date when made and as of the Closing Date as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and the Purchasers shall have performed, satisfied
      and
      complied in all material respects with the covenants, agreements and conditions
      required by this Agreement to be performed, satisfied or complied with by the
      Purchasers at or prior to the Closing Date.

     

    (c) The
      First
      Trigger Event, the Second Trigger Event or the Third Trigger Event shall have
      occurred.

     

    4.2  Conditions
      to each Purchaser's Obligation to Purchase.

     

    The
      obligation of each Purchaser hereunder to purchase the Purchased Shares on
      the
      Closing Date is subject to the satisfaction, on or before the Closing Date,
      of
      each of the following conditions, provided,
      that
      these conditions are for each Purchaser's sole benefit and may be waived by
      such
      Purchaser at any time in its sole discretion by providing the Seller with prior
      written notice thereof:

     

    (a) The
      Seller shall have caused the Purchased Shares to be delivered to the Purchasers
      in the denominations and registered in the names requested by the
      Purchasers.

     

    (b) The
      representations and warranties of the Seller shall be true and correct in all
      material respects as of the date when made and as of the Closing Date as though
      made at that time (except for representations and warranties that speak as
      of a
      specific date), and the Seller shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Seller at
      or
      prior to the Closing Date.

     

    (c) The
      Seller shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Purchased
      Shares.

     

    
      
        
        

      

      
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    (d) The
      First
      Trigger Event, the Second Trigger Event or the Third Trigger Event shall have
      occurred and, with respect to the First Trigger Event, the average of the
      Closing Bid Prices of the Ordinary Stock shall have been at or above $6.234
      (as
      adjusted for any stock dividend, stock split, stock combination,
      reclassification or similar transaction) for the five (5) consecutive Trading
      Days ending on the Closing Date.

     

    ARTICLE
      V

    COVENANTS

     

    5.1  Disclosure
      of Transactions and Other Material Information. 

     

    The
      Seller shall cause the Company, on or before 9:00 a.m., New York City time,
      on
      the first Trading Day after the date of this Agreement, (A) to issue a press
      release (the "Press
      Release")
      reasonably acceptable to the Purchasers disclosing all material terms of the
      transactions contemplated hereby and (B) to file
      a
      Current Report on Form 8-K describing the terms of the transactions contemplated
      by this Agreement, the Escrow Agreement and the Registration Rights Agreement
      in
      the form required by the Securities Exchange Act of 1934, as amended (the
      "Exchange
      Act"),
      and
      attaching as exhibits to such filing (including all attachments, the
      "8-K
      Filing").
      From
      and after the issuance of the Press Release, no Purchaser shall be in possession
      of any material, nonpublic information received from the Seller or any person
      or
      entity acting on its behalf (including the Company, any of its subsidiaries
      or
      any of its respective officers, directors, employees or agents) that is not
      disclosed in the Press Release. The Seller shall not, and shall cause the
      Company and each of the Company's subsidiaries and each of their respective
      officers, directors, employees and agents, not to, provide the Purchasers with
      any material, nonpublic information regarding the Company or any of its
      subsidiaries from and after the filing of the Press Release without the express
      written consent of such Purchasers. If a Purchaser has, or believes it has,
      received any such material, nonpublic information regarding the Company or
      any
      of its subsidiaries from the Seller, the Company, any of its subsidiaries or
      any
      of the respective officers, directors, or agents, other than as requested in
      writing by such Purchaser, it may provide Seller and the Company with written
      notice thereof. The Seller shall cause the Company, within five (5) Trading
      Days
      of receipt of such notice, cause the Company to make public disclosure of such
      material, nonpublic information. Subject to the foregoing, neither the Seller,
      the Company, its subsidiaries nor any Purchaser shall issue any press releases
      or any other public statements with respect to the transactions contemplated
      hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior approval of any Purchaser,
      to
      make any press release or other public disclosure with respect to such
      transactions (i) in substantial conformity with the 8-K Filing and
      contemporaneously therewith and (ii) as is required by applicable law and
      regulations, including the applicable rules and regulations of the Principal
      Market (provided that in the case of clause (i) the Seller shall cause the
      Company to consult with each Purchaser in connection with any such press release
      or other public disclosure prior to its release). Without the prior written
      consent of any applicable Purchaser, neither the Company nor any of its
      subsidiaries or affiliates shall disclose the name of such Purchaser in any
      filing, announcement, release or otherwise, unless such disclosure is required
      by law or regulation.

     

    
      
        
        

      

      
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    5.2  Fees.
      

     

    The
      Seller shall reimburse Hudson
      Bay Fund LP
      (a
      Purchaser) or its designee(s) for all reasonable costs and expenses, incurred
      in
      connection with the transactions contemplated hereby (including all reasonable
      legal fees and disbursements in connection therewith, documentation and
      implementation of the transactions contemplated hereby and due diligence in
      connection therewith) in an amount not to exceed $25,000, which amount may
      be
      withheld by such Purchaser from its Purchase Price at the Closing. The Seller
      shall be responsible for the payment of any placement agent's fees, financial
      advisory fees, or broker's commissions (other than for Persons engaged by any
      Purchaser) relating to or arising out of the transactions contemplated hereby,
      including, without limitation, any fees or commissions payable to the Agent.
      The
      Seller shall pay, and hold each Purchaser harmless against, any liability,
      loss
      or expense (including, without limitation, reasonable attorney's fees and
      out-of-pocket expenses) arising in connection with any claim relating to any
      such payment.

     

    5.3  Escrow.

     

    Simultaneously,
      with the execution of this Agreement, the Seller, the Purchasers and Tri-State
      Title & Escrow, LLC, as escrow agent (the "Escrow
      Agent"),
      shall
      execute and deliver an escrow agreement, in the form attached hereto as
Exhibit
      A
      (the
      "Escrow
      Agreement"),
      pursuant to which the Seller shall, promptly, but in no event later than two
      (2)
      Trading Days after the date hereof, deliver the Purchased Shares (i) duly
      manually endorsed for transfer on the back of such certificate or on a stock
      power to be attached to such, in each case duly executed in the name that
      appears on the face of such certificate and (ii) including a Medallion Guarantee
      stamp placed below the signature on any accompanying stock power (unless such
      Medallion Guarantee is waived by the Company and Company's transfer agent).
      The
      Escrow Agreement will also contain provisions for 10% of the Purchase Price
      to
      be paid by the Purchasers to be delivered to the Escrow Agent at Closing to
      be
      held in an account (the "Escrow
      Account")
      pursuant to the terms of the Escrow Agreement.

     

    5.4  Best
      Efforts.
      

     

    Each
      party shall use its best efforts timely to satisfy each of the covenants and
      conditions to be satisfied by it as provided in Sections 4 and 5 of this
      Agreement.

    

    5.5 Registration
      Rights Agreement.

     

    Simultaneously,
      with the execution of this Agreement, the Seller and the Purchasers shall enter
      into the Registration Rights Agreement annexed hereto as Exhibit B (the "Registration
      Rights Agreement").

     

    5.6 Removal
      of Legends.

     

    The
      Seller shall cause the Company upon receipt of a representation letter from
      the
      Purchaser that it is not an "affiliate" of the Company for purposes of Rule
      144
      of the Securities Act, to remove all restrictive securities law legends on
      the
      Purchased Shares upon request of any Purchaser from and after the six month
      anniversary of the Closing Date, and shall cause the Company to take all steps
      necessary to facilitate the resale of the Purchased Shares by the Purchasers
      pursuant to Rule 144 under the Securities Act, including issuing all necessary
      legal opinions.

     

    
      
        
        

      

      
        -
          9
          -

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      VI

    MISCELLANEOUS
      PROVISIONS

     

    6.1  Securities
      Filings.

     

    The
      Seller shall make any filings with the Securities and Exchange Commission
      required to be filed by the Seller pursuant to the Securities Exchange Act
      of
      1934, as amended (the "Exchange
      Act")
      with
      respect sale of the Purchased Shares contemplated hereby within the time periods
      required for such filings under the Exchange Act.

     

    6.2  Governing
      Law; Jurisdiction; Jury Trial. 

     

    All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. The Seller hereby appoints Guzov Ofsink,
      LLC, 600 Madison Avenue, 14th Floor, New York, New York 10022, as its agent
      for
      service of process in New York. Nothing contained herein shall be deemed to
      limit in any way any right to serve process in any manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    6.3  Headings.
      

     

    The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    6.4  Severability.

     

    If
      any
      provision of this Agreement is prohibited by law or otherwise determined to
      be
      invalid or unenforceable by a court of competent jurisdiction, the provision
      that would otherwise be prohibited, invalid or unenforceable shall be deemed
      amended to apply to the broadest extent that it would be valid and enforceable,
      and the invalidity or unenforceability of such provision shall not affect the
      validity of the remaining provisions of this Agreement so long as this Agreement
      as so modified continues to express, without material change, the original
      intentions of the parties as to the subject matter hereof and the prohibited
      nature, invalidity or unenforceability of the provision(s) in question does
      not
      substantially impair the respective expectations or reciprocal obligations
      of
      the parties or the practical realization of the benefits that would otherwise
      be
      conferred upon the parties. The parties will endeavor in good faith negotiations
      to replace the prohibited, invalid or unenforceable provision(s) with a valid
      provision(s), the effect of which comes as close as possible to that of the
      prohibited, invalid or unenforceable provision(s).

     

    
      
        
        

      

      
        -
          10
          -

        
          

        

      

      
        
        

      

    

     

    6.5  Entire
      Agreement; Amendments.

     

    This
      Agreement supersedes all other prior oral or written agreements among the
      Purchasers and the Seller, their affiliates and persons acting on their behalf
      with respect to the matters discussed herein, and this Agreement and the
      instruments referenced herein contain the entire understanding of the parties
      with respect to the matters covered herein and therein and, except as
      specifically set forth herein or therein, neither the Seller nor the Purchasers
      makes any representation, warranty, covenant or undertaking with respect to
      such
      matters. No provision of this Agreement may be amended other than by an
      instrument in writing signed by the Seller and the Purchasers. No provision
      hereof may be waived other than by an instrument in writing signed by the party
      against whom enforcement is sought.

     

    6.6  Notices.

     

    Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (a) upon receipt, when delivered personally; (b) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (c) one business day after deposit with an overnight courier service, in
      each
      case properly addressed to the party to receive the same. The addresses and
      facsimile numbers for such communications shall be:

     

    If
      to the
      Seller:

     

    Wo
      Hing
      Li

    c/o
      China
      Precision Steel, Inc.

    8th
      Floor, Teda Building

    87
      Wing
      Lok Street

    Sheung
      Wan

    Hong
      Kong, The People's Republic of China

    Telephone:
      +852-2543-8223

    Facsimile:
      +021-59940382

    

    with
      a
      copy to (for information purposes only):

    

    Guzov
      Ofsink, LLC

    600
      Madison Avenue, 14th Floor

    New
      York,
      New York 10022

    Attention:
      Darren L. Ofsink, Esq.

    Telephone:
      (212) 371-8008

    Facsimile:
      (212) 688-7273

     

    
      
        
        

      

      
        -
          11
          -

        
          

        

      

      
        
        

      

    

    

    If
      to the
      Purchasers:

     

    Hudson
      Bay Fund LP

    120
      Broadway, 40th Floor

    New
      York,
      New York 10271

    Attention:
      Yoav Roth

    Telephone:
      (212) 571-1244

    Facsimile:
      (212) 571-1279

    

    Hudson
      Bay Overseas Fund LTD

    120
      Broadway, 40th
      Floor

    New
      York,
      NY 10271

    Attention:
      Yoav Roth

    Telephone:
      (212) 571-1244

    Facsimile:
      (212) 571-1279

    

    with
      a
      copy to (for information purposes only):

     

    Schulte
      Roth & Zabel LLP

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Attention:
      Eleazer Klein, Esq.

    Telephone:
      (212) 756-2000

    Facsimile:
      (212) 593-5955

     

    Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender's facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (a) or (c) above, respectively.

     

    6.7  Successors
      and Assigns.

     

    This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns. Neither the Seller nor the Purchasers
      shall assign this Agreement or any of their respective rights or obligations
      hereunder without the prior written consent of the other party.

     

    6.8  No
      Third Party Beneficiaries.

     

    This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person. 

     

    
      
        
        

      

      
        -
          12
          -

        
          

        

      

      
        
        

      

    

     

    6.9  Survival.

     

    Unless
      this Agreement is terminated by mutual consent of the Seller and the Purchasers,
      the representations and warranties of the Seller and the Purchasers contained
      in
      Articles II and III shall survive the Closing Date and the delivery of the
      Purchased Shares.

     

    6.10  Further
      Assurances.

     

    Each
      party shall use its commercially reasonable efforts to do and 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.

     

    6.11  No
      Strict Construction.

     

    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.

     

    [The
      remainder of the page is intentionally left blank]

     

     

    
      
        
        

      

      
        -
          13
          -

        
          

        

      

      
        
        

      

    

     

    

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

     

     

    
      	 	SELLER:
	 	 	 
	 	 
	 	 
              
	 	WO HING
              LI
	 	 	 
	 	 	 
	 	 	 
	 	PURCHASERS:
	 	 
	 	HUDSON BAY FUND,
              LP
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              Title:

            
	 	
               

            

    

    
      	 	 	 
	 	HUDSON
              BAY
              OVERSEAS FUND, LTD.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              Title:
                

            
	 	 

    

     

    
      
        
        

      

      
        -
          14
          -

        
          

        

      

      
        
        

      

    

     

    Schedule
      I

    

    Purchased
      Shares

    

    

    
      	
              Hudson
                Bay Fund, LP

            	
              1,515,668

            
	
              Hudson
                Bay Overseas Fund, Ltd.

            	
              2,009,142

            

    

     

     

    
      
        
        

      

      
        -
          15
          -

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

     

     

     

    
      
        
        

      

      
        -
          16
          -Unassociated Document

    Exhibit
      10.2
      EXECUTION
        COPY

      ESCROW
        AGREEMENT

      

      This
        Escrow Agreement, dated as of March 13, 2008 (this “Agreement”),
        is
        entered into by and among Wo Hing Li, (the “Escrowing
        Party”),
        Hudson Bay Fund, LP, a Delaware limited partnership and Hudson Bay Overseas
        Fund, Ltd., a
        company
        with limited liability organized under the laws of the Cayman Islands
        (collectively, the "Hudson"
        and
        together with the Escrowing Party sometimes referred to collectively as the
        "Parties")
        and
        Tri-State Title & Escrow, LLC (the “Escrow
        Agent”).
        The
        principal address of each party hereto is set forth on Exhibit
        A.
        

      

      WITNESSETH:

      

      WHEREAS,
        the Escrowing Party owns shares of Ordinary Stock, $0.001 par value per share
        (the "Ordinary
        Stock"),
        of
        China Precision Steel, Inc., a Delaware corporation (the "Company")
        and is
        the Chairman of the Board, Chief Executive Officer and President of the
        Company.

      

      WHEREAS,
        Hudson seeks to purchase from the Escrowing Party, and the Escrowing Party
        seeks
        to sell to Hudson, up to Three Million, Five Hundred Twenty Four Thousand,
        Eight
        Hundred Ten (3,524,810) shares of Ordinary Stock currently owned by the
        Escrowing Party (the "Purchased
        Shares")
        in
        reliance upon available exemptions from the registration requirements of
        the
        U.S. Securities Act of 1933, as amended (the “Act”)
        and
        pursuant to the Stock Purchase Agreement (the “Stock
        Purchase Agreement”)
        by and
        among the Escrowing Party and Hudson, in an aggregate amount as calculated
        in
        accordance with Section 1.2 of the Stock Purchase Agreement (the “Purchase
        Price”).
        Capitalized items, not defined herein, shall have the same meanings as set
        forth
        in the Securities Purchase Agreement; and

      

      WHEREAS,
        pursuant to the provisions of the Stock Purchase Agreement, the Escrowing
        Party
        has agreed to establish an escrow on the terms and conditions set forth in
        this
        Agreement; and 

       

      WHEREAS,
        upon the consummation of the transactions contemplated by the Stock Purchase
        Agreement, Hudson desires to deposit 10% of the Purchase Price (the
“Escrowed
        Funds”)
        with
        the Escrow Agent, to be held in escrow until written instructions are received
        by the Escrow Agent from Hudson, at which time the Escrow Agent will disburse
        the Escrowed Funds in accordance with such instructions (the “Closing”);
        and

      

      WHEREAS,
        Escrow Agent is willing to hold the Escrow Shares and the Escrowed Funds
        in
        escrow subject to the terms and conditions of this Agreement.

       

      NOW,
        THEREFORE, in consideration of the mutual promises herein contained and
        intending to be legally bound, the parties hereby agree as
        follows:

       

      1.
         Appointment
        of Escrow Agent.
        The
        Escrowing Party and Hudson hereby appoint Escrow Agent as escrow agent in
        accordance with the terms and conditions set forth herein and the Escrow
        Agent
        hereby accepts such appointment.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      2.
         Delivery
        of the Escrow Shares. 

       

      2.1 Not
        later
        than two (2) Trading Days after the execution of the Stock Purchase Agreement,
        the Escrowing Party will deliver or cause to be delivered certificates
        evidencing an aggregate of Three Million, Five Hundred Twenty Four Thousand,
        Eight Hundred Ten (3,524,810) shares of Ordinary Stock (as adjusted for any
        stock dividend, stock split, stock combination, reclassification or similar
        transaction) (the “Escrow
        Shares”)
        to the
        Escrow Agent at the address set forth on Exhibit
        A
        hereto.

       

      2.2 The
        Escrow Shares shall be delivered to the Escrow Agent (i) duly manually endorsed
        for transfer on the back of such certificate or on a stock power to be attached
        to such certificate, in each case duly executed in the name that appears
        on the
        face of such certificate and (ii) including a Medallion Guarantee stamp placed
        below the signature on any accompanying stock power (unless such Medallion
        Guarantee is waived by the Company and Company's transfer agent).

      

      3.
         Delivery
        of the Escrowed Funds. 

      

      3.1 Upon
        the
        consummation of the transactions contemplated by the Stock Purchase Agreement,
        Hudson will deliver the Escrowed Funds to the Escrow Agent’s account as
        follows:

       

      
        	 Bank Name:	 	 Cardinal Bank
	 Bank Address:	 	 8270 Greensboro Dr., McLean,
                VA
	 Account Name:	 	 Tri-State Title & Escrow,
                LLC
	 ABA Number:	 	 056 008 849
	 Account Number:	 	 5060024931

       

      3.2 Escrowed
        Funds shall be forwarded to the Escrow Agent by check or by wire transfer,
        together with the written account of the Purchase Price in the form attached
        hereto as Exhibit B (the “Purchase
        Price Information”),
        in
        accordance with the following:

      

      (a)
        Escrowed Funds to be deposited by check shall be made payable to “TRI-STATE
        TITLE & ESCROW, LLC” and shall be delivered to the Escrow Agent at the
        address set forth on Exhibit
        A
        hereto
        and shall be
        accompanied by the Purchase
        Price Information.
        The
        Escrow
        Agent shall, upon receipt of the Purchase Price Information, together with
        the
        Escrowed Funds, deposit the monies so received in the Escrow Account.

      

      (b)
        Escrowed Funds to be wired shall be wired to the account set forth in Section
        3.1 above and the Purchase Price Information shall be faxed or emailed to
        the
        Escrow Agent in accordance with the information provided on Exhibit
        A.

       

      
        
          
          

        

        
          -
            2 -

          
            

          

        

        
          
          

        

      

      

      3.3 Any
        checks which are received by the Escrow Agent that are made payable to a
        party
        other than the Escrow Agent shall be returned directly to the sender together
        with any documents delivered therewith. Simultaneously with each deposit,
        Hudson
        shall provide the Escrow Agent with the Purchase Price Information, including
        the name, address and taxpayer identification number of each Purchaser and
        the
        Purchase Price. The Escrow Agent is not obligated, and may refuse, to accept
        checks that are not accompanied by the Purchase Price Information containing
        the
        requisite information.

      

      3.4 In
        the
        event a wire transfer is received by the Escrow Agent and the Escrow Agent
        has
        not received Purchase Price Information, the Escrow Agent shall notify Hudson.
        If the Escrow Agent does not receive the Purchase Price Information from
        Hudson
        prior to close of business on the fifth business day (days other than a Saturday
        or Sunday or other day on which the Escrow Agent is not open for business
        in the
        State of Virginia) after notifying Hudson of receipt of said wire, the Escrow
        Agent shall return the funds to the sender.

      

      4.
         Escrow
        Agent to Hold and Release Escrow Shares.
        The
        Escrow Agent will hold and release the Escrow Shares received by it pursuant
        to
        the terms of this Escrow Agreement, as follows: 

      

      4.1 Upon
        receipt of written instructions from Hudson, the Escrow Agent shall immediately
        forward the Escrow Shares to the Company’s Transfer Agent for reissuance to
        Hudson as directed in such instructions. As used in this Agreement, “Transfer
        Agent” means Tri-State Title & Escrow, LLC, or such other entity hereafter
        retained by the Company as its stock transfer agent as specified in a writing
        from the Escrowing Party to the Escrow Agent and Hudson.

      

      4.2 This
        Agreement shall be of no further force or effect solely as to the Escrow
        Shares
        at such time as all of the Escrow Shares have been released. 

      

      4.3 In
        the
        event this Agreement, the Escrow Shares or the Escrow Agent becomes the subject
        of litigation, or if the Escrow Agent shall desire to do so for any other
        reason, the Parties hereby authorize the Escrow Agent, at its option, to
        deposit
        the Escrow Shares with the clerk of the court in which the litigation is
        pending, or a court of competent jurisdiction if no litigation is pending,
        and
        thereupon the Escrow Agent shall be fully relieved and discharged of any
        further
        responsibility with regard thereto. The Parties hereby also authorize the
        Escrow
        Agent, if it is threatened with litigation or if the Escrow Agent shall desire
        to do so for any other reason, to interplead all interested parties in any
        court
        of competent jurisdiction and to deposit the Escrow Shares with the clerk
        of
        that court and thereupon the Escrow Agent shall be fully relieved and discharged
        of any further responsibility hereunder to the parties from which they were
        received.

       

      
        
          
          

        

        
          -
            3 -

          
            

          

        

        
          
          

        

      

      

      5.
         Escrow
        Agent to Hold and Disburse Escrowed Funds.
        The
        Escrow Agent will hold and disburse the Escrowed Funds received by it pursuant
        to the terms of this Escrow Agreement, as follows: 

      

      5.1 Hudson
        may deliver written instructions to the Escrow Agent and the Escrowing Party
        instructing the Escrow Agent to release some or all of the Escrowed Funds
        to
        satisfy any payment obligations of the Escrowing Party to Hudson pursuant
        to the
        Stock Purchase Agreement and/or the Registration Rights Agreement. Upon receipt
        of written instructions from Hudson, in substantially the form of Exhibit
        C
        hereto,
        the Escrow Agent shall release the Escrowed Funds as directed in such
        instructions. 

      

      5.2 This
        Agreement shall terminate and be of no further force or effect as to the
        Escrowed Funds at such time as all of the Escrowed Funds have been disbursed.
        

      

      5.3 In
        the
        event this Agreement, the Escrowed Funds or the Escrow Agent becomes the
        subject
        of litigation, or if the Escrow Agent shall desire to do so for any other
        reason, the Parties hereby authorize the Escrow Agent, at its option, to
        deposit
        the Escrowed Funds with the clerk of the court in which the litigation is
        pending, or a court of competent jurisdiction if no litigation is pending,
        and
        thereupon the Escrow Agent shall be fully relieved and discharged of any
        further
        responsibility with regard thereto. The Parties hereby also authorize the
        Escrow
        Agent, if it is threatened with litigation or if the Escrow Agent shall desire
        to do so for any other reason, to interplead all interested parties in any
        court
        of competent jurisdiction and to deposit the Escrowed Funds with the clerk
        of
        that court and thereupon the Escrow Agent shall be fully relieved and discharged
        of any further responsibility hereunder to the parties from which they were
        received.

      

      6.
         Exculpation
        and Indemnification of Escrow Agent

      

      6.1
         The
        Escrow Agent shall have no duties or responsibilities other than those expressly
        set forth herein. The Escrow Agent shall have no duty to enforce any obligation
        of any person to make any payment or delivery, or to direct or cause any
        payment
        or delivery to be made (other than payments or deliveries set forth hereunder),
        or to enforce any obligation of any person to perform any other act. The
        Escrow
        Agent shall be under no liability to the other parties hereto or anyone else,
        by
        reason of any failure, on the part of any party hereto or any maker, guarantor,
        endorser or other signatory of a document or any other person, to perform
        such
        person’s obligations under any such document. Except for amendments to this
        Escrow Agreement referenced below, and except for written instructions given
        to
        the Escrow Agent by Hudson relating to the Escrowed Funds, the Escrow Agent
        shall not be obligated to recognize any other agreement by the Parties,
        notwithstanding that references hereto may be made herein and whether or
        not it
        has knowledge thereof. 

      

      6.2 Absent
        gross negligence, willful misconduct, bad faith or fraud by the Escrow Agent,
        the Escrow Agent shall not be liable to Parties or to anyone else for any
        action
        taken or omitted by it, or any action suffered by it to be taken or omitted,
        in
        good faith and acting upon any order, notice, demand, certificate, opinion
        or
        advice of counsel (including counsel chosen by the Escrow Agent), statement,
        instrument, report, or other paper or document (not only as to its due execution
        and the validity and effectiveness of its provisions, but also as to the
        truth
        and acceptability of any information therein contained), which is believed
        by
        the Escrow Agent to be genuine and to be signed or presented by the proper
        person or persons. The Escrow Agent shall not be bound by any of the terms
        thereof, unless evidenced by written notice delivered to the Escrow Agent
        signed
        by the proper party or parties and, if the duties or rights of the Escrow
        Agent
        are affected, unless it shall give its prior written consent
        thereto.

       

      
        
          
          

        

        
          -
            4 -

          
            

          

        

        
          
          

        

      

      

      6.3 Absent
        gross negligence, willful misconduct, bad faith or fraud by the Escrow Agent,
        the Escrow Agent shall not be responsible for the sufficiency or accuracy
        of the
        form, or of the execution, validity, value or genuineness of, any document
        or
        property received, held or delivered to it hereunder, or of any signature
        or
        endorsement thereon, or for any lack of endorsement thereon, or for any
        description therein; nor shall the Escrow Agent be responsible or liable
        to the
        Escrowing Party or to anyone else in any respect on account of the identity,
        authority or rights, of the person executing or delivering or purporting
        to
        execute or deliver any document or property or this Escrow Agreement. The
        Escrow
        Agent shall have no responsibility with respect to the use or application
        of the
        Escrowed Funds pursuant to the provisions hereof.

      

      6.4 The
        Escrow Agent shall have the right to assume, in the absence of written notice
        to
        the contrary from the proper person or persons, that a fact or an event,
        by
        reason of which an action would or might be taken by the Escrow Agent, does
        not
        exist or has not occurred, without incurring liability to the Escrowing Party
        or
        to anyone else for any action taken or omitted to be taken or omitted, in
        good
        faith and in the exercise of its own best judgment, in reliance upon such
        assumption.

      

      6.5 To
        the
        extent that the Escrow Agent becomes liable for the payment of taxes, including
        withholding taxes, in respect of income derived from the investment of the
        Escrowed Funds, or any payment made hereunder, the Escrow Agent may pay such
        taxes; and the Escrow Agent may withhold from any payment of the Escrowed
        Funds
        such amount as the Escrow Agent estimates to be sufficient to provide for
        the
        payment of such taxes not yet paid, and may use the sum withheld for that
        purpose. The Escrow Agent shall be indemnified and held harmless against
        any
        liability for taxes and for any penalties in respect of taxes, on such
        investment income or payments in the manner provided in Section 6.6

      

      6.6 The
        Escrow Agent will be indemnified and held harmless by the Escrowing Party
        from
        and against all expenses, including all counsel fees and disbursements, or
        loss
        suffered by the Escrow Agent in connection with any action, suit or proceedings
        involving any claim, or in connection with any claim or demand, which in
        any
        way, directly or indirectly, arises out of or relates to this Escrow Agreement,
        the services of the Escrow Agent hereunder, except for claims relating to
        gross
        negligence, willful misconduct, bad faith or fraud by Escrow Agent or breach
        of
        this Escrow Agreement by the Escrow Agent, or the monies or other property
        held
        by it hereunder. Promptly after the receipt by the Escrow Agent of notice
        of any
        demand or claim or the commencement of any action, suit or proceeding, the
        Escrow Agent shall, if a claim in respect thereof is to be made against the
        Escrowing Party, notify it thereof in writing, but the failure by the Escrow
        Agent to give such notice shall not relieve any such party from any liability
        which the Escrowing Party may have to the Escrow Agent hereunder.
        Notwithstanding any obligation to make payments and deliveries hereunder,
        the
        Escrow Agent may retain and hold for such time as it deems necessary such
        amount
        of monies or property as it shall, from time to time, in its sole discretion,
        seem sufficient to indemnify itself for any such loss or expense and for
        any
        amounts due it under Section 9. 

       

      
        
          
          

        

        
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            5 -

          
            

          

        

        
          
          

        

      

      

      6.7 For
        purposes hereof, the term “expense or loss” shall include all amounts paid or
        payable to satisfy any claim, demand or liability, or in settlement of any
        claim, demand, action, suit or proceeding settled with the express written
        consent of the Escrow Agent, and all costs and expenses, including, but not
        limited to, counsel fees and disbursements, paid or incurred in investigating
        or
        defending against any such claim, demand, action, suit or proceeding.

      

      7.
         Termination
        of Agreement and Resignation of Escrow Agent 

      

      7.1 This
        Escrow Agreement shall terminate upon release of all of the Escrow Shares
        and
        disbursement of all of the Escrowed Funds, provided that the rights of the
        Escrow Agent and the obligations of the Escrowing Party under Section 6 shall
        survive the termination hereof.

      

      7.2 The
        Escrow Agent may resign at any time and be discharged from its duties as
        Escrow
        Agent hereunder by giving the Escrowing Party at least five (5) business
        days
        written notice thereof (the “Notice
        Period”).
        As
        soon as practicable after its resignation, the Escrow Agent shall, if it
        receives a joint notice from the Parties within the Notice Period, turn over
        to
        a successor escrow agent appointed jointly by the Parties all Escrow Shares
        and
        all Escrowed Funds (less such amount as the Escrow Agent is entitled to retain
        pursuant to Section 9) upon presentation of the document appointing the new
        escrow agent and its acceptance thereof. If no new agent is so appointed
        within
        the Notice Period, the Escrow Agent shall return the Escrow Shares and the
        Escrowed Funds to the parties from which they were received without interest
        or
        deduction. 

      

      8.
         Form
        of Payments by Escrow Agent

      

      8.1 Any
        payments of the Escrowed Funds by the Escrow Agent pursuant to the terms
        of this
        Escrow Agreement shall be made by wire transfer unless directed to be made
        by
        check by the Escrowing Party.

      

      8.2
         All
        amounts referred to herein are expressed in United States Dollars and all
        payments by the Escrow Agent shall be made in such dollars.

      

      9. Compensation.
        Escrow
        Agent shall be entitled to the following compensation from the Escrowing
        Party:

       

      9.1 Documentation
        Fee:
        The
        Escrowing Party shall pay a documentation fee to the Escrow Agent of $4,000.00
        receipt of which is hereby acknowledged by Escrow Agent.

       

      
        
          
          

        

        
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            6 -

          
            

          

        

        
          
          

        

      

      

      9.2 Closing
        Fee:
        The
        Escrowing Party shall pay a fee of $500 to the Escrow Agent at Closing.

      

      9.3 Interest :
        During
        the term of this Agreement, the Escrowed Funds shall be invested in a money
        market deposit account, unless otherwise instructed in writing by the Parties
        and shall be acceptable to the Escrow Agent. The
        Escrowed Funds shall accrue interest (the “Accrued
        Interest”)
        at the
        available rate obtained by the Escrow Agent with respect to the period during
        which such funds are held in the Escrow Agent’s account set forth in Section 3.1
        above. In connection with a Closing, the Escrowing Party shall be paid Accrued
        Interest determined by multiplying the available rate obtained by the Escrow
        Agent by 0.5 per annum on the aggregate amount of Escrowed Funds in the Escrow
        Agent’s account on the date of such Closing; provided,
        that,
        the
        Escrowed Funds will have been held by the Escrow Agent for at least one (1)
        day
        (the “Accrual
        Period”).
        No
        Accrued Interest shall be paid to the Escrowing Party if the Escrowed Funds
        have
        been held by the Escrow Agent for a period of time less than the Accrual
        Period.

      

      10. Notices.
        All
        notices, requests, demands, and other communications provided herein shall
        be in
        writing, shall be delivered by hand or by first-class mail, shall be deemed
        given when received and shall be addressed to parties hereto at their respective
        addresses first set forth on Exhibit
        A
        hereto.

      

      11. Further
        Assurances. From
        time
        to time on and after the date hereof, the Escrowing Party shall deliver or
        cause
        to be delivered to the Escrow Agent such further documents and instruments
        and
        shall do and cause to be done such further acts as the Escrow Agent shall
        reasonably request (it being understood that the Escrow Agent shall have
        no
        obligation to make any such request) to carry out more effectively the
        provisions and purposes of this Escrow Agreement, to evidence compliance
        herewith or to assure itself that it is protected in acting
        hereunder.

      

      12. Consent
        to Service of Process .
        The
        Escrowing Party hereby irrevocably consents to the jurisdiction of the courts
        of
        the State of Virginia and of any Federal court located in such state in
        connection with any action, suit or proceedings arising out of or relating
        to
        this Escrow Agreement or any action taken or omitted hereunder, and waives
        personal service of any summons, complaint or other process and agrees that
        the
        service thereof may be made by certified or registered mail directed to it
        at
        the address listed on Exhibit A hereto.

      

      13. Miscellaneous

       

      13.1 This
        Escrow Agreement shall be construed without regard to any presumption or
        other
        rule requiring construction against the party causing such instrument to
        be
        drafted. The terms “hereby,” “hereof,” “hereunder,” and any similar terms, as
        used in this Escrow Agreement, refer to the Escrow Agreement in its entirety
        and
        not only to the particular portion of this Escrow Agreement where the term
        is
        used. The word “person” shall mean any natural person, partnership, corporation,
        government and any other form of business of legal entity. All words or terms
        used in this Escrow Agreement, regardless of the number or gender in which
        they
        were used, shall be deemed to include any other number and any other gender
        as
        the context may require. This Escrow Agreement shall not be admissible in
        evidence to construe the provisions of any prior agreement. 

       

      
        
          
          

        

        
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            7 -

          
            

          

        

        
          
          

        

      

      

      13.2 This
        Escrow Agreement and the rights and obligations hereunder of the Escrowing
        Party
        may not be assigned. This Escrow Agreement and the rights and obligations
        hereunder of the Escrow Agent may be assigned by the Escrow Agent, with the
        prior joint consent of the Parties. This Escrow Agreement shall be binding
        upon
        and inure to the benefit of each party’s respective successors, heirs and
        permitted assigns. No other person shall acquire or have any rights under
        or by
        virtue of this Escrow Agreement. This Escrow Agreement may not be changed
        orally
        or modified, amended or supplemented without an express written agreement
        executed by the Escrow Agent, the Escrowing Party and Hudson. This Escrow
        Agreement is intended to be for the sole benefit of the parties hereto and
        their
        respective successors, heirs and permitted assigns, and none of the provisions
        of this Escrow Agreement are intended to be, nor shall they be construed
        to be,
        for the benefit of any third person. The
        Parties further hereby waive any right to a trial by jury with respect to
        any
        lawsuit or judicial proceeding arising or relating to this Agreement. All
        signatures of the parties to this Agreement may be transmitted by facsimile,
        and
        such facsimile will, for all purposes, be deemed to be the original signature
        of
        such party whose signature it reproduces, and will be binding upon such
        party. A
        person
        who is not a party to this Agreement shall have no right to enforce any term
        of
        this Agreement. 

      

      13.3 This
        Escrow Agreement shall be governed by, and construed in accordance with,
        the
        internal laws of the State of Virginia. The representations and warranties
        contained in this Escrow Agreement shall survive the execution and delivery
        hereof and any investigations made by any party. The headings in this Escrow
        Agreement are for purposes of reference only and shall not limit or otherwise
        affect any of the terms thereof. 

      

      13.4 If
        any
        provision of this Agreement is prohibited by law or otherwise determined
        to be
        invalid or unenforceable by a court of competent jurisdiction, the provision
        that would otherwise be prohibited, invalid or unenforceable shall be deemed
        amended to apply to the broadest extent that it would be valid and enforceable,
        and the invalidity or unenforceability of such provision shall not affect
        the
        validity of the remaining provisions of this Agreement so long as this Agreement
        as so modified continues to express, without material change, the original
        intentions of the parties as to the subject matter hereof and the prohibited
        nature, invalidity or unenforceability of the provision(s) in question does
        not
        substantially impair the respective expectations or reciprocal obligations
        of
        the parties or the practical realization of the benefits that would otherwise
        be
        conferred upon the parties. The parties will endeavor in good faith negotiations
        to replace the prohibited, invalid or unenforceable provision(s) with a valid
        provision(s), the effect of which comes as close as possible to that of the
        prohibited, invalid or unenforceable provision(s).

       

      14.
         Execution
        of Counterparts This
        Escrow Agreement may be executed in a number of counterparts, by facsimile,
        each
        of which shall be deemed to be an original as of those whose signature appears
        thereon, and all of which shall together constitute one and the same instrument.
        This Escrow Agreement shall become binding when one or more of the counterparts
        hereof, individually or taken together, are signed by all the
        parties.

       

      
        
          
            
            

          

          
            -
              8 -

            
              

            

          

          
            
            

          

        

      IN
        WITNESS WHEREOF, the parties have executed and delivered this Escrow Agreement
        on the day and year first above written.

      

      ESCROW
        AGENT:

      

      TRI-STATE
        TITLE & ESCROW, LLC

      

      

      

      By:
        ______________________________

      Name:

      Title:

      

      

      

      

      

      _________________________________

      Wo
        Hing
        Li

      

      

      

      

      HUDSON
        BAY FUND, LP

      

      

      

      By:
        ______________________________

      Name:

      Title:

      

      

      

      HUDSON
        BAY OVERSEAS FUND, LTD.

      

      

      

      By:
        ______________________________

      Name:

      Title:

       

       

      
        
          
          

        

        
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            9 -

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A  

      PARTIES
        TO AGREEMENT

      

      Tri-State
        Title & Escrow, LLC

      360
        Main
        Street

      P.O.
        Box
        391 

      Washington,
        VA 22747

      (800)
        984-2155 

      Attention:
        Johnnie L. Zarecor

      

      Telephone:
        (540) 675-2155

      Fax: (540)
        675-2155

      Email
        escrow@tristatetitle.net

      

       

      Wo
        Hing
        Li

      c/o
        China
        Precision Steel, Inc.

      8th
        Floor, Teda Building

      87
        Wing
        Lok Street

      Sheung
        Wan

      Hong
        Kong, The People's Republic of China

      Telephone:
        +852-2543-8223

      Facsimile:
        +021-59940382

      

      

      Hudson
        Bay Fund, LP

      120
        Broadway, 40th Floor

      New
        York,
        New York 10271

      Telephone:
        212-571-1244

      Facsimile:
        212-571-1279

      Attention:
        Yoav Roth

      

      

      Hudson
        Bay Overseas Fund, Ltd.

      120
        Broadway, 40th Floor

      New
        York,
        New York 10271

      Telephone:
        212-571-1244

      Facsimile:
        212-571-1279

      Attention:
        Yoav Roth

       

      
        
          
          

        

        
          -
            10 -

          
            

          

        

        
          
          

        

      

      

      

      

      EXHIBIT
        B

      

        PURCHASE
        PRICE INFORMATION

       

       

      
        	 Name
                of Purchaser	 	 
	 	 	 
	 Address
                of Purchaser	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 Purchase
                Price (US$)	 	 
	 	 	 
	
                 Amount Submitted 

                 Herewith (US$) 

              	 	 
	 	 	 
	 Taxpayer
                ID Number 	 	 

      

      

       

      
        
          
          

        

        
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            11 -

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        C  

      

      DISBURSEMENT
        REQUEST

      

      Pursuant
        to that certain Escrow Agreement dated effective as of March __, 2008, among
        Wo
        Hing Li, (the “Escrowing
        Party”),
        Hudson Bay Fund, LP, a Delaware limited partnership and Hudson Bay Overseas
        Fund, Ltd., a
        company
        with limited liability organized under the laws of the Cayman Islands
        (collectively, the "Hudson")
        and
        Tri-State Title & Escrow, LLC (the “Escrow Agent”), Hudson hereby requests
        disbursement of funds in the amount and manner described below from account
        number 5060024931, styled Tri-State Title & Escrow, LLC Escrow
        Account.

      
         

        
          	 Please
                  disburse to:	 	 
	 	 	 
	 Amount
                  to disburse:	 	 
	 	 	 
	 Form
                  of distribution:	 	 
	 	 	 
	 Payee:	 	 
	
                  Name:

                	 	 
	
                  Address:

                	 	 
	
                  City/State

                	 	 
	
                  Zip:

                	 	 
	 	 	 
	 	 	 
	 	 	 
	 Statement of event or
                  condition which calls for this request for disbursement:
	 
	 

        

      

       

      
        
          
          

        

        
          -
            12 -

          
            

          

        

        
          
          

        

      

      

                  

      
        	 Date:
                	 	 
	
                
                  

                

              	
                HUDSON
                  BAY FUND, LP

                 

                 

              
	 	By:  	/s/ 
	 	
                

                Name:

                Title:

              
	 	 

      

       

      
        	 	 	 
	 	HUDSON BAY OVERSEAS FUND, LTD.
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                

                Name:

                Title:

              
	 	 

      

    

     

    
      
        
        

      

      
        -
          13 -

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