Current Report — Form 8-K Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: 8-K Current Report HTML 750K
2: EX-2.1 Plan of Acquisition, Reorganization, Arrangement, HTML 214K Liquidation or Succession
3: EX-3.1 Articles of Incorporation/Organization or By-Laws HTML 9K
4: EX-3.2 Articles of Incorporation/Organization or By-Laws HTML 11K
5: EX-3.3 Articles of Incorporation/Organization or By-Laws HTML 8K
6: EX-4.1 Instrument Defining the Rights of Security Holders HTML 144K
7: EX-4.2 Instrument Defining the Rights of Security Holders HTML 78K
8: EX-10.1 Material Contract HTML 36K
17: EX-10.10 Material Contract HTML 95K
9: EX-10.2 Material Contract HTML 20K
10: EX-10.3 Material Contract HTML 20K
11: EX-10.4 Material Contract HTML 20K
12: EX-10.5 Material Contract HTML 83K
13: EX-10.6 Material Contract HTML 45K
14: EX-10.7 Material Contract HTML 42K
15: EX-10.8 Material Contract HTML 253K
16: EX-10.9 Material Contract HTML 103K
18: EX-99.1 Miscellaneous Exhibit HTML 12K
19: EX-99.2 Miscellaneous Exhibit HTML 610K
20: EX-99.3 Miscellaneous Exhibit HTML 11K
21: EX-99.4 Miscellaneous Exhibit HTML 24K
EX-2.1 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
This
Share Exchange Agreement, dated as of December 31, 2007 (this “Agreement”), is
made and entered into by and among the shareholders of Precious Sheen
Investments Limited, a British Virgin Islands company (“PSI”) and the
shareholders of PSI (each, a “PSI Shareholder,” collectively, the “PSI
Shareholders”) listed on Schedule
I
attached, on the one hand; and Energroup Holdings Corporation, a public
reporting Nevada corporation (OTCBB: EGHC.OB) (the “Company”), and Halter
Financial Investments L.P. a Texas limited partnership (the “Energroup
Shareholder”) on the other hand. PSI is a party to this agreement solely to make
representations and warranties as set forth herein.
RECITALS
WHEREAS,
Precious Sheen Investments Limited (PSI) owns 100% of Dalian Chuming Precious
Sheen Investments Consulting Co., Ltd. (“Chuming”), which is a wholly
foreign-owned enterprise (“WFOE”) under the laws of the Peoples’ Republic of
China (“PRC” or “China”);
WHEREAS,
Chuming has entered into a series of contractual arrangements with (i) Dalian
Chuming Processed Foods Company Ltd., (ii) Dalian Chuming Slaughter and
Packaging Pork Company Ltd., and (iii) Dalian Chuming Sales Company Ltd., each
of which are limited liability companies based in, and organized under the
laws
of, the PRC;
WHEREAS,
on December 17, 2007, the Board of Directors of the Company adopted resolutions
approving the Company’s acquisition of shares of PSI by means of a share
exchange with the PSI Shareholders, upon the terms and conditions hereinafter
set forth in this Agreement;
WHEREAS,
each PSI Shareholder owns the number of ordinary shares of PSI set forth
opposite such PSI Shareholder’s name in Column I on Schedule
I
attached
hereto (collectively, the “PSI Shares”);
WHEREAS,
the PSI Shareholders own, collectively, a number of ordinary shares of PSI
constituting 100% of the issued and outstanding share capital of PSI, and the
PSI Shareholders desire to sell and transfer their respective holdings of the
PSI Shares in exchange for shares of the Company pursuant to the terms and
conditions of this Agreement;
WHEREAS,
the Energroup Shareholder holds an amount of ordinary shares of the Company
which represents approximately 82% of the issued and outstanding share capital
of the Company;
WHEREAS,
the
Energroup Shareholder will enter into this Agreement for the purpose of making
certain representations, warranties, covenants, indemnifications and
agreements;
WHEREAS,
upon
consummation of the transactions contemplated by this Agreement, PSI would
become a 100% wholly-owned subsidiary of the Company, the former PSI
Shareholders immediately prior to closing would hold 97.55% of the issued and
outstanding shares of capital stock of the Company (the “Share Exchange”);
and
WHEREAS,
immediately following the Share Exchange transaction under this Agreement,
the
Company shall pursuant to a Securities Purchase Agreement dated an even date
herewith (the “Securities Purchase Agreement”) sell and issue 3,863,635 shares
of its common stock (the “Shares”) pursuant to a private placement of such
Shares made in reliance upon an exemption from registration under Regulation
D
of the Securities Act of 1933, as amended, for an aggregate purchase price
of US
$16,925,000 (the “Financing”).
AGREEMENT
NOW,
THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE
1
THE
TRANSACTION
1.1The
Transaction.
Upon
the terms and subject to the conditions hereof, at the Closing (as hereinafter
defined) the parties shall do the following:
(a)
The
PSI
Shareholders will sell, convey, assign, transfer and deliver to the Company
share certificates representing the PSI Shares held by each PSI Shareholder
as
set forth in column (1) of Schedule
I
hereto,
which in the aggregate shall constitute 100% of the issued and outstanding
shares of PSI, each accompanied by a properly executed and authenticated share
transfer form.
(b)
As
consideration for the acquisition of the PSI Shares, the Company will issue
to
each PSI Shareholder, in exchange for such PSI Shareholder’s pro rata portion of
the PSI Shares, the number of shares of common stock set forth opposite such
party’s name in Column (2) on Schedule I attached hereto (collectively, the
“Energroup Shares”).
(c)
The
Company shall consummate its US $17,000,000 common stock Financing pursuant
to
the Securities Purchase Agreement.
(d)
At
the
closing of the Share Exchange and Financing, the Company shall pay cash
consideration in the amount of US $450,000 out of the proceeds of the Financing
to Halter Financial Group, L.P., a Texas limited partnership, for consulting
services to be provided to the combined entities, to an account specified to
PSI
in writing by the Energroup Shareholder.
(e)
The
total
number of shares of common stock of the Company issued to the PSI Shareholders
and investors in the Financing, after consummation of the transactions under
this Agreement and the Securities Purchase Agreement shall equal 98.00% of
the
outstanding shares of the Company common stock at the time of Closing. For
example, if there are 422,756 shares of the Company common stock outstanding
immediately prior to the Closing, then there shall be 21,136,391 shares of
the
Company common stock issued and outstanding immediately following the closing
of
the Share Exchange and the Financing.
3
1.2Closing
Date.
The
closing of the Transaction (the “Closing”) shall take place as soon as
practicable upon signing of this Agreement, and prior to December 31, 2007,
or
on such other date as may be mutually agreed upon by the parties. Such date
is
referred to herein as the “Closing Date.”
1.3Taking
of Necessary Action; Further Action.
If, at
any time after the Closing, any further action is necessary or desirable to
carry out the purposes of this Agreement, the PSI Shareholders, PSI, the
Energroup Shareholders, and/or the Company (as applicable) will take all such
lawful and necessary action.
1.4Certain
Definitions.
The
following capitalized terms as used in this Agreement shall have the respective
definitions:
“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.
“knowledge”
shall
mean the actual knowledge of the officers, directors or advisors of the
referenced party.
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal, right
of participation or other restrictions of any kind.
“Material
Adverse Effect”
means
a
adverse effect on either referenced party or the combined entity resulting
from
the consummation of the transaction contemplated by this Agreement, or on the
financial condition, results of operations or business, before or after the
consummation of the transaction contemplated in this Agreement, which as a
whole
is or would be considered material to an investor in the securities of the
Company.
“Non-U.S.
Person”
means
any person who is not a U.S. Person or is deemed not to be a U.S. Person under
Rule 902(k)(2).
“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.
4
“Restricted
Period”
shall
have the meaning set forth in Section 3.4(b)(vi).
“Shares”
shall
mean the 3,863,635 shares of the Company common stock to be issued to one or
more investors at the Closing under the Securities Purchase Agreement.
“Subsidiary”
or
“Subsidiaries,”
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.
“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”
shall
mean this Agreement, the Securities Purchase Agreement, and any and all other
agreements entered into in connection with the Transaction.
“Transaction”
shall
mean the transactions contemplated by this Agreement, including the Share
Exchange and the Financing.
“U.S.
Person”as
defined in Regulation S means: (i) a natural person resident in the United
States; (ii) any partnership or corporation organized or incorporated under
the
laws of the United States; (iii) any estate of which any executor or
administrator is a U.S. Person; (iv) any trust of which any trustee is a U.S.
Person; (v) any agency or branch of a foreign entity located in the United
States; (vi) any nondiscretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. Person; (vii) any discretionary account or similar account (other
than
an estate or trust) held by a dealer or other fiduciary organized, incorporated
and (if an individual) resident in the United States; and (viii) a corporation
or partnership organized under the laws of any foreign jurisdiction and formed
by a U.S. Person principally for the purpose of investing in securities not
registered under the Securities Act, unless it is organized or incorporated,
owned, by accredited investors (as defined in Rule 501(a) under the Securities
Act) who are not natural persons, estates or trusts).
“United
States”
means
and includes the United States of America, its territories and possessions,
any
State of the United States, and the District of Columbia.
5
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF
PRECIOUS
SHEEN INVESTMENTS LIMITED
PSI
hereby represents and warrants to the Company and the Energroup Shareholder
as
follows:
2.1
Organization.
PSI has
been duly incorporated, validly exists as a company, and is in good standing
under the laws of its jurisdiction of incorporation, and has the requisite
power
to carry on its business as now conducted.
2.2
Capitalization.
The
authorized share capital of PSI consists of 10,000 ordinary shares, of which
at
the Closing, no more than 10,000 shares shall be issued and outstanding. All
of
the issued and outstanding share capital of PSI, as of the Closing, is duly
authorized, validly issued, fully paid, non-assessable and free of preemptive
rights. There are no voting trusts or any other agreements or understandings
with respect to the voting of PSI’s share capital. PSI owns 100% of the issued
and outstanding capital stock of Dalian Chuming Precious Sheen Investments
Consulting Co., Ltd., a wholly foreign owned enterprise formed in the PRC for
foreign investment purposes.
2.3
Certain
Corporate Matters.
PSI is
duly qualified to do business as a company and is in good standing under the
laws of the British Virgin Islands, and in each other jurisdiction in which
the
ownership of its property or the conduct of its business requires it to be
so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect on PSI’s financial condition, results of operations or business.
PSI has full corporate power and authority and all authorizations, licenses
and
permits necessary to carry on the business in which it is engaged and to own
and
use the properties owned and used by it.
2.4
Authority
Relative to this Agreement.
PSI has
the requisite power and authority to enter into this Agreement and to carry
out
its obligations hereunder. The execution, delivery and performance of this
Agreement by PSI and the consummation by PSI of the transactions contemplated
hereby have been duly authorized by the Board of Directors of PSI and no other
actions on the part of PSI are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by PSI and constitutes a valid and binding agreement
of
PSI, enforceable against PSI in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors’ rights generally or by general
principles of equity.
2.5
Consents
and Approvals; No Violations.
Except
for applicable requirements of federal securities laws and state securities
or
blue-sky laws, no filing with, and no permit, authorization, consent or approval
of, any third party, public body or authority is necessary for the consummation
by PSI of the transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by PSI nor the consummation by PSI of the
transactions contemplated hereby, nor compliance by PSI with any of the
provisions hereof, will (a) conflict with or result in any breach of any
provisions of the memorandum and articles of association of PSI, (b) result
in a
violation or breach of, or constitute (with or without due notice or lapse
of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument
or
obligation to which PSI is a party or by which they any of their respective
properties or assets may be bound or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to PSI, or any of its properties
or assets, except in the case of clauses (b) and (c) for violations, breaches
or
defaults which are not in the aggregate material to Energroup taken as a
whole.
6
2.6
Books
and Records.
The
books and records of PSI delivered to the Company prior to the Closing fully
and
fairly reflect the transactions to which PSI is a party or by which it or its
properties are bound and there shall be no material difference between the
unaudited financials of PSI given to the Company and the actual reviewed US
GAAP
results of PSI for the nine month period ended September 30, 2007.
2.7
Intellectual
Property.
PSI has
no knowledge of any claim that, or inquiry as to whether, any product, activity
or operation of PSI infringes upon or involves, or has resulted in the
infringement of, any trademarks, trade-names, service marks, patents, copyrights
or other proprietary rights of any other person, corporation or other entity;
and no proceedings have been instituted, are pending or are threatened.
2.8
Litigation.
PSI is
not subject to any judgment or order of any court or quasi-judicial or
administrative agency of any jurisdiction, domestic or foreign, nor is there
any
charge, complaint, lawsuit or governmental investigation pending against PSI.
PSI is not a plaintiff in any action, domestic or foreign, judicial or
administrative. There are no existing actions, suits, proceedings against or
investigations of PSI, and PSI knows of no basis for such actions, suits,
proceedings or investigations. There are no unsatisfied judgments, orders,
decrees or stipulations affecting PSI or to which PSI is a party.
2.9
Legal
Compliance.
To the
best knowledge of PSI, after due investigation, no claim has been filed against
PSI alleging a violation of any applicable laws and regulations of foreign,
federal, state and local governments and all agencies thereof. PSI holds all
of
the material permits, licenses, certificates or other authorizations of foreign,
federal, state or local governmental agencies required for the conduct of their
respective businesses as presently conducted.
2.10Material
Contracts.
PSI has
delivered to the Company copies of each of the material agreements of PSI not
made in the ordinary course of business. All of the foregoing material
agreements of PSI are referred to as the “Material Contracts.” The copies of
each of the Material Contracts delivered are accurate and complete. Each
Material Contract is in full force and effect and constitutes a legal, valid
and
binding obligation of, and is legally enforceable against, the respective
parties thereto. There is no material default with respect to any such Material
Contract which will give rise to liability in respect thereof on the part of
PSI
or the other parties thereto. No notice of default or similar notice has been
given or received by PSI under any of such Material Contracts.
2.11
Disclosure.
The
representations and warranties and statements of fact made by PSI in this
Agreement are, as applicable, accurate, correct and complete 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 and information contained herein not
false or misleading.
7
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE PSI SHAREHOLDERS
The
PSI
Shareholders hereby represent and warrant to the Company as
follows:
3.1Ownership
of the PSI Shares.
Each
PSI Shareholder owns, beneficially and of record, good and marketable title
to
the PSI Shares set forth opposite such PSI Shareholder’s name in Column (1) on
Schedule
I
attached
hereto, free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies, options or Shareholders’ agreements. Each PSI
Shareholder represents that such person has no right or claims whatsoever to
any
shares of PSI share capital, other than shares listed across such PSI
Shareholder on Schedule
I
and does
not have any options, warrants or any other instruments entitling such PSI
Shareholder to exercise to purchase or convert into share capital of PSI. At
the
Closing, the PSI Shareholders will convey to the Company good and marketable
title to the PSI Shares, free and clear of any security interests, liens,
adverse claims, encumbrances, equities, proxies, options, shareholders’
agreements or restrictions.
3.2
Authority
Relative to this Agreement.
This
Agreement has been duly and validly executed and delivered by each PSI
Shareholder and constitutes a valid and binding agreement of each PSI
Shareholder, enforceable against each PSI Shareholder in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency
or
other similar laws affecting the enforcement of creditors’ rights generally or
by general principles of equity.
3.3Restricted
Securities.
Each
PSI Shareholder acknowledges that upon Closing the Energroup Shares will not
be
registered pursuant to the Securities Act of 1933, as amended (the “Securities
Act”) or any applicable state securities laws, that the Energroup Shares will be
characterized as “restricted securities” under federal securities laws, and that
under such laws and applicable regulations the Energroup Shares cannot be sold
or otherwise disposed of without registration under the Securities Act or an
exemption therefrom. In this regard, each PSI Shareholder is familiar with
Rule
144 promulgated under the Securities Act, as currently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.4Status
of Shareholder.
Each of
the PSI Shareholders hereby makes the representations and warranties in either
paragraph (a) or (b) of this Section 3.4, as indicated on the signature page
of
such shareholder forming a part of this Agreement:
(a)Accredited
Investor Under Regulation D.
Such
PSI Shareholder is an “Accredited Investor” as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act, an excerpt of which is
included in the attached Annex A; or
(b)Non-U.S.
Person Under Regulation S.
Such
PSI Shareholder:
8
(i) is
not a
“U.S. person” as defined by Rule 902 of Regulation S promulgated under the
Securities Act of 1933 (the “Securities Act”), was not organized under the laws
of any U.S. jurisdiction, and was not formed for the purpose of investing in
securities not registered under the Securities Act;
(ii) at
the
time of Closing, the PSI Shareholder was located outside the United
States;
(iii) no
offer
of the Energroup Shares was made to the PSI Shareholder within the United
States;
(iv) the
PSI
Shareholder is either (a) acquiring the Energroup Shares for its own account
for
investment purposes and not with a view towards distribution, or (b) acting
as
agent for a principal that has signed this Agreement or has delivered
representations and warranties substantially similar to this Section
3.4(b);
(v) all
subsequent offers and sales of the Energroup Shares by the PSI Shareholder
will
be made outside the United States in compliance with Rule 903 of Rule 904 of
Regulation S, pursuant to registration of the Shares under the Securities Act,
or pursuant to an exemption from such registration; such PSI Shareholder
understands the conditions of the exemption from registration afforded by
section 4(l) of the Securities Act and acknowledges that there can be no
assurance that it will be able to rely on such exemption.
(vi)
such
PSI
Shareholder will not resell the Energroup Shares to U.S. Persons or within
the
United States until after the end of the one (1) year period commencing on
the
date of Closing (the “Restricted Period”);
(vii) such
PSI
Shareholder shall not and hereby agrees not to enter into any short sales with
respect to the common stock of the Company at any time after the execution
of
this Agreement by such PSI Shareholder and prior to the expiration of the
Restricted Period;
(viii)
such
PSI
Shareholder understands that the Energroup Shares are being offered and sold
to
it in reliance on specific provisions of federal and state securities laws
and
that the parties to this Agreement are relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understanding
of such PSI Shareholder set forth herein in order to determine the applicability
of such provisions. Accordingly, such PSI Shareholder agrees to notify the
Company of any events which would cause the representations and warranties
of
such PSI Shareholder to be untrue or breached at any time after the execution
of
this Agreement by such PSI Shareholder and prior to the expiration of the
Restricted Period;
(ix) in
the
event of resale of the Energroup Shares to non-U.S. Persons outside of the
U.S.
during the Restricted Period, such PSI Shareholder shall provide a written
confirmation or other written notice to any distributor, dealer, or person
receiving a selling concession, fee, or other remuneration in respect of the
Shares stating that such purchaser is subject to the same restrictions on offers
and sales that apply to the undersigned, and shall require that any such
purchase shall provide such written confirmation or other notice upon resale
during the Restricted Period;
9
(x)
such
PSI
Shareholder has not engaged, nor is it aware that any party has engaged, and
it
will not engage or cause any third party to engage in any “directed selling”
efforts (as such term is defined in Regulation S) in the United States with
respect to the Energroup Shares;
(xi)
such
PSI
Shareholder is not a “distributor” as such term is defined in Regulation S, and
it is not a “dealer” as such term is defined in the Securities Act;
(xii) such
PSI
Shareholder has not taken any action that would cause any of the parties to
this
Agreement to be subject to any claim for commission or other or remuneration
by
any broker, finder, or other person; and
(xiii)
such
PSI
Shareholder hereby represents that it has satisfied fully observed of the laws
of the jurisdiction in which it is located or domiciled, in connection with
the
acquisition of the Energroup Shares or this Agreement, including (i) the legal
requirements of the such PSI Shareholder’s jurisdiction for the purchase and
acquisition of the Energroup Shares, (ii) any foreign exchange restrictions
applicable to such purchase and acquisition, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, which may be relevant to the purchase, holding,
redemption, sale, or transfer of the Energroup Shares; and further, the PSI
Shareholder agrees to continue to comply with such laws as long as it shall
hold
the Energroup Shares.
3.5Investment
Risk.
Each
PSI Shareholder is able to bear the economic risk of acquiring the Energroup
Shares pursuant to the terms of this Agreement, including a complete loss of
such PSI Shareholder’s investment in the Energroup Shares.
3.6Restrictive
Legends.
Each
PSI Shareholder acknowledges that the certificate(s) representing such PSI
Shareholder’s pro rata portion of the Energroup Shares shall each conspicuously
set forth on the face or back thereof a legend in substantially the following
form, corresponding to the shareholder’s status as set forth in Section 3.4 and
the signature pages hereto:
REGULATION
D LEGEND:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”
10
REGULATION
S LEGEND:
“THE
SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S
PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT, OR PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION;
HEDGING TRANSACTIONS INVOLVING THE SHARES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF ENERGROUP
AND
THE ENERGROUP SHAREHOLDER
The
Company and the Energroup Shareholder hereby represent and warrant, jointly
and
severally, to PSI and the PSI Shareholders as of the date hereof and as of
the
Closing Date (unless otherwise indicated), as follows:
4.1General
Representations and Warranties of the Company and the Energroup
Shareholder.
The
Company and the Energroup Shareholder (referred to collectively as the
“Energroup Parties”) hereby jointly and severally make the following
representations and warranties to PSI and the PSI Shareholders:
(a)Subsidiaries.
The
Company does not have any direct or indirect Subsidiaries. All the issued and
outstanding shares of capital stock of the Company is 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.
(b)Organization
and Qualification.
The
Company 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. The Company is not in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company is duly qualified to conduct
its business and is 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.
11
(c)Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder. The execution and delivery of the Agreement
and the Securities Purchase Agreement, and the consummation by the Energroup
Parties of the transactions contemplated herein have been duly authorized by
all
necessary action on the part of each of the Energroup Parties and no further
action is required by any of them in connection with such authorization. The
execution of this Agreement has been (or upon delivery will have been) duly
executed by the Company and the Energroup Shareholder (as applicable) and,
when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company and the Energroup Shareholder, 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 this Agreement by the Energroup
Parties, and the consummation by the Energroup Parties, of the transactions
contemplated hereby do not and will not (i) conflict with or violate any
provision of the Company’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, or the Agreement, 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, or
agreement under which any property or asset of the Company 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 governmental
authority to which the Company is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company 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.
(e)Filings,
Consents and Approvals.
The
Energroup Parties are not 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 other federal, state, local or other governmental authority
or
other Person in connection with the execution, delivery and performance by
the
Energroup Parties, other than the filing of a current reports on Form 8-K to
report the transaction effected by this Agreement.
(f)Issuance
of the Energroup Shares.
The
Energroup Shares have been duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued, fully paid
and
nonassessable, free and clear of all Liens.
(g)Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company is specified in Schedule
4.1(g).
Except
as specified in Schedule
4.1(g),
no
securities of the Company 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 this
Agreement. Except as specified in Schedule
4.1(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 is or may
become bound to issue additional shares of common stock, or securities or rights
convertible or exchangeable into shares of common stock.
12
(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), (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 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 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.
(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) the Company
has not 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 financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its past or present
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its shareholders or purchased, redeemed or made
any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate. The Company does not have pending before the Commission any request
for confidential treatment of information. The Company has provided full
documentation and disclosure of all material changes described in this
subparagraph (j) to PSI and the PSI Shareholders prior to the Closing.
13
(k)Litigation.
There
is no Action which (i) adversely affects or challenges the legality, validity
or
enforceability of any of the Agreement 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. The Company is not, nor is any director or officer of the
Company (in his or her capacity as such), subject to 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 the Company or any of
its
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
of
its predecessors, 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 the Company. The Company does not have
any employment or labor contracts, agreements or other understandings with
any
Person.
(m)Indebtedness;
Compliance.
The
Company is not a party to any indenture, debt, capital lease obligation,
mortgage, loan or credit agreement by which it or any of its properties is
bound. The Company is not (i) 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
the Company 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) in violation of any
order of any court, arbitrator or governmental body, or (iii) in violation
(at
any prior time) 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 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.
(n)Regulatory
Permits.
The
Company possesses 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 the Company has not received any notice of proceedings relating
to
the revocation or modification of any such permits.
14
(o)Title
to Assets.
The
Company does not own any interest in real property, nor is the Company a party
to any real property lease.
(p)Patents
and Trademarks.
The
Company has 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.
(q)Insurance.
The
Company has no insurance policies of any kind in effect.
(r)Transactions
With Affiliates and Employees; Customers.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company, and to the knowledge of the Company, none of the employees of the
Company, is presently a party to any transaction with the Company, 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. The Energroup Parties do not owe any money or
other compensation to any of the respective officers or directors or
shareholders of the Company. The Company has no present obligations, agreements
or dealings with any past or present customer.
(s)Internal
Accounting Controls.
The
Company maintains 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 itself and designed
such disclosure controls and procedures to ensure that material information
relating to the Company 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
Company’s 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 of the Company’s internal
controls.
15
(t)Solvency.
Based
on the financial condition of the Company, as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the
Company’s
fair
saleable value of their respective assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’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 Company, and projected
capital requirements and capital availability thereof, and (iii) the current
cash flow of the Company, together with any proceeds that the Company would
receive (exclusing the proceeds from the Financing), were the Company to
liquidate all of its 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 Company
does
not intend to incur debts beyond its 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
4.1(u),
no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated under this Agreement.
(v)Certain
Registration Matters.
Assuming the accuracy of the representations and warranties of PSI and the
PSI
Shareholders set forth in Article 3 hereof, no registration under the Securities
Act is required for the offer and sale of the Energroup Shares by the Company
to
the PSI Shareholders under this Agreement. The Company is eligible to register
its common stock for resale by the investors acquiring shares under the
Securities Purchase Agreement under Form S-1 promulgated under the Securities
Act. Except as specified in Schedule
4.1(v),
the
Company has not 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.
16
(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 its common stock on the
Trading Market on which its common stock is currently listed or quoted. The
issuance of the Energroup Shares does not contravene the rules and regulations
of the Trading Market on which its common stock is currently listed or quoted,
and no approval of the shareholders of the Company thereunder is required for
the Company to issue and deliver the Energroup Shares to the PSI Shareholders
under this Agreement.
(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
PSI Shareholders as a result of such shareholders and the Company fulfilling
their obligations or exercising their rights under this Agreement.
(z)OFAC.
The
Company, nor any of its directors, officers, agents, employees, Affiliates
or
Persons acting on behalf of the Company, are not currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”).
(aa)Money
Laundering Laws.
The
operations of the Company 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 the Company with respect to the
Money Laundering Laws is pending or, to the best knowledge of the Company,
threatened.
(bb)Registration
Rights.
Except
for the registration rights provided to the Energroup Shareholder in connection
with the transaction contemplated under this Agreement, at the time of Closing
the Energroup Shareholder has no registration rights or agreement with the
Company to provide any similar rights.
4.2No
Liabilities.
Except
as otherwise disclosed in the Company’s Financial Statements or incurred in the
ordinary course of business after the quarter ended September 30, 2007 (the
financial statements of which were filed with the SEC along with the Company’s
quarterly report on Form 10-QSB on November 1, 2007), the Company has no other
undisclosed liabilities whatsoever, either direct or indirect, matured or
unmatured, accrued, absolute, contingent or otherwise. The Company and the
Energroup Shareholder represent that at the date of Closing, the Company shall
have no liabilities or obligations whatsoever, either direct or indirect,
matured or unmatured, accrued, absolute, contingent or otherwise.
17
4.3
Tax
Matters.
Except
as disclosed in Schedule 4.3:
(a)
The
Company has duly filed all material federal, state, local and foreign tax
returns required to be filed (if any) by or with respect to them with the
Internal Revenue Service or other applicable taxing authority, and no extensions
with respect to such tax returns have been requested or granted;
(b)
The
Company has paid, or adequately reserved against in the Company’s Financial
Statements, all material taxes due, or claimed by any taxing authority to be
due, from or with respect to them (if any);
(c)
To
the
best knowledge of the Company, there has been no material issue raised or
material adjustment proposed (and none is pending) by the Internal Revenue
Service or any other taxing authority in connection with any of the Company’s
tax returns;
(d)
No
waiver
or extension of any statute of limitations as to any material federal, state,
local or foreign tax matter has been given by or requested from the Company;
and
For
the
purposes of this Section
4.3,
a tax
is due (and must therefore either be paid or adequately reserved against in
the
Company’s Financial Statements) only on the last date payment of such tax can be
made without interest or penalties, whether such payment is due in respect
of
estimated taxes, withholding taxes, required tax credits or any other
tax.
4.4
Books
and Records.
The
books and records of the Company delivered to PSI and the PSI Shareholders
prior
to the Closing fully and fairly reflect the transactions to which the Company
is
a party or by which they or their properties are bound.
4.5
Other
Agreements.
The
Company has no material contracts, leases, arrangements or commitments (whether
oral or written). The Company is not a party to or bound by or affected by
any
contract, lease, arrangement or commitment (whether oral or written) relating
to: (a) the employment of any person; (b) collective bargaining with, or any
representation of any employees by, any labor union or association; (c) the
acquisition of services, supplies, equipment or other personal property; (d)
the
purchase or sale of real property; (e) distribution, agency or construction;
(f)
lease of real or personal property as lessor or lessee or sublessor or
sublessee; (g) lending or advancing of funds; (h) borrowing of funds or receipt
of credit; (i) incurring any obligation or liability; or (j) the sale of
personal property.
4.6No
SEC
or NASD Inquiries.
Neither
Energroup nor any of its past or present officers or directors is, or has ever
been, the subject of any formal or informal inquiry or investigation by the
SEC
or NASD.
4.7
Disclosure.
The
representations and warranties and statements of fact made by the Energroup
Parties in this Agreement are, as applicable, accurate, correct and complete
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 and information
contained herein not false or misleading.
18
ARTICLE
5
INDEMNIFICATION
5.1Energroup
Shareholder Indemnification.
For a
period of twenty four (24) months after the Closing, the Energroup Shareholder
(“Indemnifying Party”) agrees to indemnify PSI, the PSI Shareholders and each of
the officers, agents and directors of PSI or the PSI Shareholders (each an
“Indemnified Party”) against any loss, liability, claim, damage or expense
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) (each, a “Claim”) to which it
or they may become subject arising out of or based on either (i) any breach
of
or inaccuracy in any of the representations and warranties or covenants or
conditions made by the Company and/or the Energroup Shareholder herein in this
Agreement; or (ii) any and all liabilities arising out of or in connection
with:
(A) any of the assets of the Company prior to the Closing; or (B) the operations
of the Company prior to the Closing (the “Energroup Shareholders
Indemnification”). During the period of the Energroup Shareholders
Indemnification, if PSI or the PSI Shareholders shall become reasonably aware
of
any Claim covered by this Section 5.1, and while such Claim is unresolved,
PSI
shall have the right to issue stop transfer instructions to its transfer agent
with respect to the the Company shares held by the Indemnifying Party.
5.2Indemnification
Procedures.
If any
action shall be brought against any Indemnified Party in respect of which
indemnity may be sought pursuant to this Agreement, such Indemnified Party
shall
promptly notify the Indemnifying Party in writing, and the Indemnifying Party
shall have the right to assume the defense thereof with counsel of its own
choosing. Any Indemnified Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
except to the extent that the employment thereof has been specifically
authorized by the Indemnifying Party in writing, the Indemnifying Party has
failed after a reasonable period of time to assume such defense and to employ
counsel or in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of
the
Indemnifying Party and the position of such Indemnified Party. The Indemnifying
Party will not be liable to any Indemnified Party under this Article 5 for
any
settlement by an Indemnified Party effected without the Indemnifying Party’s
prior written consent, which shall not be unreasonably withheld or delayed;
or
to the extent, but only to the extent that a loss, claim, damage or liability
is
attributable to any Indemnified Party’s indemnification pursuant to this Article
5.
19
ARTICLE
6
COVENANTS
OF THE PARTIES
6.1
Corporate
Examinations and Investigations.
Prior
to the Closing, each party shall be entitled, through its employees and
representatives, to make such investigations and examinations of the books,
records and financial condition of PSI and the Company as each party may
request. In order that each party may have the full opportunity to do so, PSI
and the Company, the PSI Shareholders and the Energroup Shareholder shall
furnish each party and its representatives during such period with all such
information concerning the affairs of PSI or the Company as each party or its
representatives may reasonably request and cause PSI or the Company and their
respective officers, employees, consultants, agents, accountants and attorneys
to cooperate fully with each party’s representatives in connection with such
review and examination and to make full disclosure of all information and
documents requested by each party and/or its representatives. Any such
investigations and examinations shall be conducted at reasonable times and
under
reasonable circumstances, it being agreed that any examination of original
documents will be at each party’s premises, with copies thereof to be provided
to each party and/or its representatives upon request.
6.2Cooperation;
Consents.
Prior
to the Closing, each party shall cooperate with the other parties to the end
that the parties shall (i) in a timely manner make all necessary filings with,
and conduct negotiations with, all authorities and other persons the consent
or
approval of which, or the license or permit from which is required for the
consummation of the transactions contemplated by this Agreement and (ii) provide
to each other party such information as the other party may reasonably request
in order to enable it to prepare such filings and to conduct such
negotiations.
6.3Conduct
of Business.
Subject
to the provisions hereof, from the date hereof through the Closing, each party
hereto shall (i) conduct its business in the ordinary course and in such a
manner so that the representations and warranties contained herein shall
continue to be true and correct in all material respects as of the Closing
as if
made at and as of the Closing and (ii) not enter into any material transactions
or incur any material liability not required or specifically contemplated
hereby, without first obtaining the written consent of PSI and the holders
of a
majority of voting shares of PSI on the one hand and the Company and the holders
of a majority of voting stock of the Company common stock on the other hand.
Without the prior written consent of PSI, the PSI Shareholders, the Company
or
the Energroup Shareholder, except as required or specifically contemplated
hereby, each party shall not undertake or fail to undertake any action if such
action or failure would render any of said warranties and representations untrue
in any material respect as of the Closing.
6.4Litigation.
From
the date hereof through the Closing, each party hereto shall promptly notify
the
representative of the other parties of any lawsuits, claims, proceedings or
investigations which after the date hereof are threatened or commenced against
such party or any of its affiliates or any officer, director, employee,
consultant, agent or shareholder thereof, in their capacities as such, which,
if
decided adversely, could reasonably be expected to have a Material Adverse
Effect on the Company or PSI.
6.5Notice
of Default.
From
the date hereof through the Closing, each party hereto shall give to the
representative of the other parties prompt written notice of the occurrence
or
existence of any event, condition or circumstance occurring which would
constitute a violation or breach of this Agreement by such party or which would
render inaccurate in any material respect any of such party’s representations or
warranties herein.
20
6.7Bylaws.
If
necessary, the Company shall amend its Bylaws to permit the election and/or
appointment of additional new directors to the Company’s Board of Directors as
set forth in Section 7.1(a) below.
6.8Confidentiality;
Access to Information.
(a)Confidentiality.
Any
confidentiality agreement or letter of intent previously executed by the parties
shall be superseded in its entirety by the provisions of this Agreement. Each
party agrees to maintain in confidence any non-public information received
from
the other party, and to use such non-public information only for purposes of
consummating the transactions contemplated by this Agreement. Such
confidentiality obligations will not apply to (i) information which was known
to
the one party or their respective agents prior to receipt from the other party;
(ii) information which is or becomes generally known; (iii) information acquired
by a party or their respective agents from a third party who was not bound
to an
obligation of confidentiality; and (iv) disclosure required by law. In the
event
this Agreement is terminated as provided in Article 8 hereof, each party will
return or cause to be returned to the other all documents and other material
obtained from the other in connection with the Transaction contemplated
hereby.
(b)Access
to Information.
(i) PSI
will
afford the Company and its financial advisors, accountants, counsel and other
representatives reasonable access during normal business hours, upon reasonable
notice, to the properties, books, records and personnel of PSI during the period
prior to the Closing to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of PSI, as the Company may reasonably request. No
information or knowledge obtained by the Company in any investigation pursuant
to this Section 6.8 will affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to
consummate the Transaction.
(ii) The
Company will afford PSI and its financial advisors, underwriters, accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of the Company during the period prior to the Closing to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of the Company, as PSI may
reasonably request. No information or knowledge obtained by PSI in any
investigation pursuant to this Section 6.8 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Transaction.
21
6.9
Public
Disclosure.
Except
to the extent previously disclosed or to the extent the parties believe that
they are required by applicable law or regulation to make disclosure, prior
to
Closing, no party shall issue any statement or communication to the public
regarding the transaction contemplated herein without the consent of the other
party, which consent shall not be unreasonably withheld. To the extent a party
hereto believes it is required by law or regulation to make disclosure regarding
the Transaction, it shall, if possible, immediately notify the other party
prior
to such disclosure. Notwithstanding the foregoing, the parties hereto agree
that
the Company will prepare and file a Current Report on Form 8-K pursuant to
the
Exchange Act reasonably acceptable to PSI to report the execution of this
Agreement and that any party hereto may file any reports as required by the
Exchange Act including, without limitation, any reports on Schedule
13D.
6.12Reverse
Stock Split on a 4.6-to-1 Ratio.
The
Company shall undertake to prepare all documentation necessary in order to
effect a 4.6-to-1 reverse stock split of all of its common stock (“Reverse Stock
Split”), which shall become effective prior to the Closing. All documentation
for the Reverse Stock Split shall be reasonably acceptable to the PSI
Shareholders and counsel to PSI.
6.11Assistance
with Post-Closing SEC Reports and Inquiries.
Upon
the reasonable request of PSI, after the Closing Date, each Energroup
Shareholder shall use his reasonable best efforts to provide such information
available to it, including information, filings, reports, financial statements
or other circumstances of the Company occurring, reported or filed prior to
the
Closing, as may be necessary or required by the Company for the preparation
of
the post-Closing Date reports that the Company is required to file with the
SEC
to remain in compliance and current with its reporting requirements under the
Exchange Act, or filings required to address and resolve matters as may relate
to the period prior to the Closing and any SEC comments relating thereto or
any
SEC inquiry thereof.
6.12
Substitution
of Registration Rights.
The
Energroup Shareholder agrees to cause its registration rights that pre-exist
this Agreement, with respect to the Company shares it holds (i.e., the
registration rights it holds under the Stock Purchase Agreement dated May 3,2007 by and among the Energroup Shareholder, the Company, Stephen Fry, Thomas
Howells and Barry Richmond (“Halter SPA”)), to be modified and amended by a
written agreement with the Company such that:
(a)
the
Energroup Shareholder shall cancel and prospectively waive its piggy-back
registration rights set forth in Section 5(f)(ii) of the Halter SPA;
and
(b)
the
Energroup Shareholder shall covenant that it shall not exercise its demand
registration rights set forth in Section 5(f)(i) of the Halter SPA until such
time as all of the Registrable Securities (as defined in the Registration Rights
Agreement) held by the Investors a party thereto have been effectively
registered on an appropriate form of registration statement and declared
effective by the SEC.
22
ARTICLE
7
CONDITIONS
TO CLOSING
7.1
Conditions
to Obligations of PSI and the PSI Shareholders.
The
obligations of PSI and the PSI Shareholders under this Agreement shall be
subject to each of the following conditions:
(a)Closing
Deliveries.
At the
Closing, the Company and/or the Energroup Shareholder shall have delivered
or
caused to be delivered to PSI and the PSI Shareholders the
following:
(i)
written
resignations of all officers and directors of the Company in office immediately
prior to the Closing;
(ii)
resolutions
duly adopted by the Board of Directors of the Company approving the following
events or actions, as applicable:
a.
the
execution, delivery and performance of the
Agreement;
b.
the
Transaction and the terms thereof;
c.
adoption
of bylaws in the form agreed by the
parties;
d.
fixing
the number of authorized directors on the board of directors at seven
(7);
e.
the
appointment of the following individuals as directors to serve on
the the
Company board of directors (the “Chuming Directors”):
Shi
Huashan
Wang
Shu
Ma
Fengqin
Wang
Shuying
Matthew
Dillon
Wendy
Li
Nestor
Gounaris
f.
the
appointment of the following persons as officers of the Company,
with the
titles set forth opposite his name (the “Chuming Officers”):
23
Name
Position
Shi
Huashan
President,
Chief Executive Officer and Chairman of the Board
Wang
Shu
Chief
Financial Officer
Chen
Fuyuan
Chief
Operating Officer
Yan
Jinglu
Marketing
Director and General Manager of Sales Subsidiary
Chen
Shujie
Vice
General Manager –
Dalian
Chuming Sales Subsidiary
Cui
Zhiqiang
General
Manager – Dalian Chuming Foods Subsidiary
Ma
Yongjun
General
Manager – Dalian Chuming Meat Products Subsidiary
Sun
Qiuye
Vice
General Manager – Dalian Chuming Meat Products Subsidiary
Xu
Liqin
Finance
Director – Dalian Chuming Meat Products Subsidiary
Wang
Suping
General
Manager – Dalian Chuming Foods Subsidiary
Song
Deqi
Vice
General Manager – Dalian Chuming Foods Subsidiary
Ma
Fengqin
Vice
President
(iii)
a
certificate of good standing for the Company from its jurisdiction of
incorporation, dated not earlier than five (5) days prior to the Closing
Date;
(iv) an
instruction letter signed by the President of the Company addressed to the
Company’s transfer agent of record, in a form reasonably acceptable to PSI and
consistent with the terms of this Agreement, instructing the transfer agent
to
issue share certificates representing the Energroup Shares to be delivered
pursuant to this Agreement registered in the names set forth in Schedule
I;
(v)
the
Reverse Stock Split shall have been effectuated by the filing of the Amendment
to the Company’s Articles of Incorporation with the Secretary of State of
Nevada;
24
(v)
evidence
satisfactory to PSI of the satisfactory completion of the Reverse Stock Split,
including delivery by the Company of all documentation relating to the same,
and
delivery to the transfer agent of the Company of an instruction letter to
execute the Reverse Stock Split and a definitive shareholder ledger reflecting
the same;
(vi)
this
Agreement duly executed by the Company and the Energroup Shareholder;
(vii) all
corporate records, agreements, seals and any other information reasonably
requested by PSI’s representatives with respect to the Company; and
(viii)
such
other documents as PSI and/or the PSI Shareholders may reasonably request in
connection with the transactions contemplated hereby.
(b)Representations
and Warranties to be True.
The
representations and warranties of the Company and the Energroup Shareholder
herein contained shall be true in all material respects at the Closing with
the
same effect as though made at such time. The Company and the Energroup
Shareholder shall have performed in all material respects all obligations and
complied in all material respects with all covenants and conditions required
by
this Agreement to be performed or complied with by them at or prior to the
Closing.
(c)Transfer
of On-Going Business.
All
debts, payables, liabilities and obligations to the Company shareholders or
any
other third parties shall have been completely and definitively settled, and
satisfactory written evidence of said settlement shall have been furnished
to
PSI and its representatives.
(d)No
Assets and Liabilities.
At the
Closing, the Company shall have no liabilities, debts or payables (contingent
or
otherwise), no tax obligations, no material assets, and except as contemplated
in this Agreement, no material changes to its business or financial condition
shall have occurred since the date of this Agreement.
(e)SEC
Filings.
At the
Closing, the Company will be current in all SEC filings required by it to be
filed.
(f)Outstanding
Common Stock.
The
Company shall have at least 21,739,130 shares of its common stock authorized
and
shall have no more than 21,559,090 shares of its common stock issued and
outstanding immediately after issuance of the Shares pursuant to the Financing
and the Share Exchange.
(g)
Prior
Registration Rights.
The
Energroup Shareholder shall have presented evidence reasonably satisfactory
to
PSI or its representative, of the amendment and modification of its pre-existing
registration rights in compliance with Section 6.12.
25
7.2Conditions
to Obligations of the Company and the Energroup Shareholder.
The
obligations of the Company and the Energroup Shareholder under this Agreement
shall be subject to each of the following conditions:
(a)Closing
Deliveries.
On the
Closing Date, PSI and/or the PSI Shareholders shall have delivered to the
Company the following:
(i)
this
Agreement duly executed by PSI and the PSI Shareholders;
(ii)
share
certificates representing the PSI Shares to be delivered pursuant
to this
Agreement duly endorsed or accompanied by duly executed share transfer
forms;
(iii)
such
other documents as the Company may reasonably request in connection
with
the transactions contemplated
hereby.
(b)Representations
and Warranties True and Correct.
The
representations and warranties of PSI and the PSI Shareholders herein contained
shall be true in all material respects at the Closing with the same effect
as
though made at such time. PSI and the PSI Shareholders shall have performed
in
all material respects all obligations and complied in all material respects
with
all covenants and conditions required by this Agreement to be performed or
complied with by them at or prior to the Closing.
ARTICLE
8
SEC
FILING; TERMINATION
8.1 At
or
prior to Closing, the Company shall prepare the information statement required
by Rule 14f-1 promulgated under the Exchange Act (“14f-1 Information
Statement”), and the Company shall file the 14f-1 Information Statement with the
SEC and mail the same to each of the Company’s shareholders of record. Prior to
filing, the Company shall provide PSI and its counsel a reasonable opportunity
to review and comment on the 14f-1 Information Statement, which shall be in
a
form reasonably acceptable to said counsel.
8.2 This
Agreement may be terminated at any time prior to the Closing:
(a) by
mutual
written agreement of the Company and PSI;
(b) by
either
the Company or PSI if the Transaction shall not have been consummated for any
reason by December 31, 2007; provided, however, that the right to terminate
this
Agreement under this Section 8.2(b) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Transaction to occur on or before such date and such action
or
failure to act constitutes a breach of this Agreement;
26
(c) by
either
the Company or PSI if a governmental entity shall have issued an order, decree
or ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Transaction,
which order, decree, ruling or other action is final and non-appealable;
(d) by
PSI,
upon a material breach of any representation, warranty, covenant or agreement
on
the part of the Company set forth in this Agreement, or if any representation
or
warranty of the Company shall have become materially untrue, in either case
such
that the conditions set forth in Section 7.1 would not be satisfied as of the
time of such breach or as of the time such representation or warranty shall
have
become untrue, provided, that if such inaccuracy in the Company’s
representations and warranties or breach by the Company is curable by the
Company prior to the Closing Date, then PSI may not terminate this Agreement
under this Section 8.2(d) for thirty (30) days after delivery of written notice
from PSI to the Company of such breach, provided the Company continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that PSI may not terminate this Agreement pursuant to this Section
8.2(d) if it shall have materially breached this Agreement or if such breach
by
the Company is cured during such thirty (30) day period); or
(e) by
the
Company, upon a material breach of any representation, warranty, covenant or
agreement on the part of PSI or PSI Shareholders set forth in this Agreement,
or
if any representation or warranty of PSI or PSI Shareholders shall have become
materially untrue, in either case such that the conditions set forth in Section
7.2 would not be satisfied as of the time of such breach or as of the time
such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in PSI’s or PSI Shareholders' representations and warranties or
breach by PSI or PSI Shareholders is curable by PSI or PSI Shareholders prior
to
the Closing Date, then the Company may not terminate this Agreement under this
Section 8.2(e) for thirty (30) days after delivery of written notice from the
Company to PSI and PSI Shareholders of such breach, provided PSI and PSI
Shareholders continue to exercise commercially reasonable efforts to cure such
breach (it being understood that the Company may not terminate this Agreement
pursuant to this Section 8.2(e) if it shall have materially breached this
Agreement or if such breach by PSI or PSI Shareholders is cured during such
thirty (30) day period).
8.3Notice
of Termination; Effect of Termination.
Any
termination of this Agreement under Section 8.2 above will be effective
immediately upon (or, if the termination is pursuant to Section 8.2(d) or
Section 8.2(e) and the proviso therein is applicable, thirty (30) days after)
the delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
8.2, this Agreement shall be of no further force or effect and the Transaction
shall be abandoned, except as set forth in this Section 8.2, Section 8.3 and
Article 9 (General Provisions), each of which shall survive the termination
of
this Agreement.
27
ARTICLE
9
GENERAL
PROVISIONS
9.1
Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, sent by overnight
courier or mailed by registered or certified mail (postage prepaid and return
receipt requested) to the party to whom the same is so delivered, sent or mailed
at addresses set forth on the signature pages hereof (or at such other address
for a party as shall be specified by like notice).
9.2
Interpretation.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References to Sections and Articles refer to sections and articles of this
Agreement unless otherwise stated.
9.3
Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated and the parties shall negotiate in good faith to modify this
Agreement to preserve each party’s anticipated benefits under this
Agreement.
9.4
Miscellaneous.
This
Agreement (together with all other documents and instruments referred to
herein): (a) constitutes the entire agreement and supersedes all other prior
agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof; (b) except as expressly set forth herein,
is not intended to confer upon any other person any rights or remedies hereunder
and (c) shall not be assigned by operation of law or otherwise, except as may
be
mutually agreed upon by the parties hereto.
9.5Separate
Counsel.
Each
party hereby expressly acknowledges that it has been advised to seek its own
separate legal counsel for advice with respect to this Agreement, and that
no
counsel to any party hereto has acted or is acting as counsel to any other
party
hereto in connection with this Agreement.
9.6
Governing
Law.
This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of Nevada.
9.7
Counterparts
and Facsimile Signatures.
This
Agreement may be executed in two or more counterparts, which together shall
constitute a single agreement. This Agreement and any documents relating to
it
may be executed and transmitted to any other party by facsimile, which facsimile
shall be deemed to be, and utilized in all respects as, an original, wet-inked
manually executed document.
9.8Amendment.
This
Agreement may be amended, modified or supplemented only by an instrument in
writing executed by PSI, the Company, and holders of a majority of outstanding
voting shares of PSI and the holders of a majority of outstanding voting stock
of the Company; provided that, the consent of any PSI or the Company shareholder
that is a party to this Agreement shall be required if the amendment or
modification would disproportionately affect such shareholder (other than by
virtue of their ownership of PSI or the Company shares, as
applicable).
28
9.9Parties
In Interest.
Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto.
9.10Waiver.
No
waiver by any party of any default or breach by another party of any
representation, warranty, covenant or condition contained in this Agreement
shall be deemed to be a waiver of any subsequent default or breach by such
party
of the same or any other representation, warranty, covenant or condition. No
act, delay, omission or course of dealing on the part of any party in exercising
any right, power or remedy under this Agreement or at law or in equity shall
operate as a waiver thereof or otherwise prejudice any of such party’s rights,
powers and remedies. All remedies, whether at law or in equity, shall be
cumulative and the election of any one or more shall not constitute a waiver
of
the right to pursue other available remedies.
9.11Expenses.
At or
prior to the Closing, the parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers.
[Remainder
of Page Left Blank Intentionally]
29
IN
WITNESS WHEREOF, the parties have executed this Share Exchange Agreement as
of
the date first written above.
(Name
of Authorized Representative, if applicable)
(Title
of Authorized Representative, if applicable)
Shareholder
Address for Notices:
Fax:
Check
One:
The
PSI
Shareholder above hereby certifies that it is:
¨
an
“Accredited Investor” under Regulation D of the Securities Act (see
Section 3.4 and Annex A of this Agreement;
or
¨
a
Non-U.S. Person, that hereby confirms that the representations and
warranties in Section 3.4(b) of this Agreement are true and correct
as to
such PSI Shareholder, and hereby accepts and agrees to comply with
the
covenants in Section 3.4(b).
32
SCHEDULE
I
SHAREHOLDERS
Name
of PSI Shareholder
Percentage Interest in PSI
(2)
Energroup Shares Issued to PSI Shareholders
Percentage of Outstanding Energroup Shares Post-
Transaction
Shine
Gold Holdings Limited
63.45
%
10,690,668
50.58
%
Shiny
Snow Holdings Limited
11.57
%
1,948,890
9.22
%
Smart
Beat Limited
12.16
%
2,049,390
9.70
%
Hectrix
International Investment Holding Limited
5.39
%
908,866
4.30
%
Sunway
Classic Limited
1.22
%
211,364
1.00
%
Hunter
Wise Financial Group, LLC
2.51
%
422,727
2.00
%
Redwood
Capital, Inc.
2.54
%
428,095
2.03
%
Chief
Capital
1.13
%
190,000
0.90
%
TOTAL:
33
ANNEX
A
ACCREDITED
INVESTOR DEFINITION
Category
A
The
undersigned is an individual (not a partnership, corporation, etc.)
whose
individual net worth, or joint net worth with his or her spouse,
presently
exceeds $1,000,000.
Category
B
The
undersigned is an individual (not a partnership, corporation, etc.)
who
had an income in excess of $200,000 in each of the two most recent
years,
or joint income with his or her spouse in excess of $300,000 in
each of
those years (in each case including foreign income, tax exempt
income and
full amount of capital gains and losses but excluding any income
of other
family members and any unrealized capital appreciation) and has
a
reasonable expectation of reaching the same income level in the
current
year.
Category
C
The
undersigned is a director or executive officer of the Company which
is
issuing and selling the securities.
Category
D
The
undersigned is a bank; a savings and loan association; insurance
company;
registered investment company; registered business development
company;
licensed small business investment company (“SBIC”); or employee benefit
plan within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank, savings
and
loan association, insurance company or registered investment advisor,
or
(b) the plan has total assets in excess of $5,000,000 or (c) is
a self
directed plan with investment decisions made solely by persons
that are
accredited investors.
Category
E
The
undersigned is a private business development company as defined
in
section 202(a)(22) of the Investment Advisors Act of
1940.
Category
F
The
undersigned is either a corporation, partnership, Massachusetts
business
trust, or non-profit organization within the meaning of Section
501(c)(3)
of the Internal Revenue Code, in each case not formed for the specific
purpose of acquiring the Securities and with total assets in excess
of
$5,000,000.
The
undersigned is a trust with total assets in excess of $5,000,000,
not
formed for the specific purpose of acquiring the Securities, where
the
purchase is directed by a “sophisticated investor“ as defined in
Regulation 506(b)(2)(ii) under the Act.
Category
H
The
undersigned is an entity (other than a trust) in which all of the
equity
owners are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each equity owner
must
complete a separate copy of this Agreement.
