FORM OF SUBSCRIPTION AGREEMENT
 
This subscription agreement (this “Subscription Agreement”) is dated November 1,
2007, by and between _____________________ (“Buyer”) and China Precision Steel,
Inc., a Colorado corporation (“Seller”), whereby the parties agree as follows:
 
1. Subscription.
 

 
a)
Buyer agrees to buy and the Seller agrees to sell and issue to Buyer
______________ shares of common stock, $.001 par value per share (the “Common
Stock”), of the Seller (the “Shares”) for a purchase price per Share of $6.75
(the “Purchase Price”), for an aggregate of $___________ (the “Aggregate
Purchase Price”), together with warrants to purchase ____________ shares of
Common Stock (the “Warrants”), at an exercise price of $8.45 per share, subject
to the terms and conditions set forth therein in the form attached hereto as
Exhibit A. The shares of Common Stock and Warrants to be issued to the Buyer are
hereinafter referred to as the “Securities”).

 

 
b)
The Securities and the shares of Common Stock underlying the Warrants (the
"Warrant Shares") have been registered on a Form S-3, File No. 333-143454, which
registration statement (the “Registration Statement”) has been declared
effective by the Securities and Exchange Commission, has remained effective
since such date and is effective on the date hereof.

 

 
c)
On November 6, 2007 (the “Closing Date”), subject to receipt by Tri-State Title
(the “Escrow Agent”) of the Aggregate Purchase Price, Seller shall authorize
Corporate Stock Transfer, Inc. (the “Transfer Agent”) to register the Securities
in the name or names as designated by Buyer and to deliver such Securities by
courier to the address designated by Buyer (the “Delivery Instructions”), in
each case as set forth on the signature page hereto. The Securities delivered on
the Closing Date shall be unlegended and free of any resale restrictions. Prior
to the Closing Date, the Buyer shall wire the Aggregate Purchase Price to the
Escrow Agent to hold in escrow pursuant to the wire instructions set forth on
the signature page hereto.

     

 
d)
Seller shall be entitled to receive the Aggregate Purchase Price from the Escrow
Agent only after the Escrow Agent has received written confirmation (which
confirmation may be electronic) from Buyer (the “Confirmation”) that (i) Buyer
has received the unlegended Securities from the Seller in accordance with the
Delivery Instructions and (ii) if such Securities have been delivered to Buyer’s
prime broker for deposit (the “Deposit”) with The Depository Trust Company
(“DTC”), that such Securities have been so deposited. Buyer shall use
commercially reasonable efforts to provide the Confirmation to the Escrow Agent
as promptly as practicable, but in no event later than three business days,
after receipt and, if applicable, the Deposit of the unlegended Securities (the
“Confirmation Date”). If (i) by 5:00 pm, New York time, on the Confirmation
Date, the Confirmation has not been received by Seller and Buyer has not
unreasonably objected in writing to Seller as to the form and substance of the
delivery of the unlegended Securities and (ii) Seller has otherwise received
written notice from the courier service that delivery has been effected in
accordance with Delivery Instructions, then Seller and the Placement Agent shall
be entitled to instruct the Escrow Agent to release the applicable Aggregate
Purchase Price.

 
2. Seller Representations, Warranties and Covenants. The Seller represents and
warrants that:
 
(a) It has full right, power and authority to enter into this Subscription
Agreement and to perform all of its obligations hereunder;

(b) This Subscription Agreement has been duly authorized and executed by and
constitutes a valid and binding agreement of the Seller enforceable in
accordance with its terms;

(c) The execution and delivery of this Subscription Agreement and the
consummation of the transactions contemplated hereby do not conflict with or
result in a breach of (i) the Seller’s certificate of incorporation or by-laws,
or (ii) any material agreement to which the Seller is a party or by which any of
its property or assets is bound;

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(d) Neither Seller nor any person acting on its behalf has provided Buyer or its
respective agents or counsel with any information that the Seller believes
constitutes material, non-public information except insofar as the existence and
terms of the proposed transactions contemplated hereby may constitute such
information. Seller covenants and agrees that neither it nor any person acting
on its behalf will provide Buyer or its agents or counsel with any information
that Seller believes constitutes material non-public information, unless prior
thereto Buyer shall have executed a written agreement regarding the
confidentiality of such information;

(e) Seller agrees to maintain the listing of the Common Stock upon each national
securities exchange and automated quotation system, if any, upon which its
shares of Common Stock are listed and shall maintain the effectiveness of the
Registration Statement, until the expiration of the Warrants. The Seller agrees
not to take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on each national securities exchange
and automated quotation system, if any, upon which its shares of Common Stock
are listed.

(f) Seller agrees that, if (i) all or any portion of the Warrants are exercised
at a time when there is either an effective registration statement covering the
issuance or resale of the Warrant Shares or (ii) the Warrants are exercised as a
“cashless exercise” (as defined in the Warrant), the shares of Common Stock to
be issued upon exercise of the Warrant shall be unlegended and free of resale
restrictions.

3. Buyer Representations, Warranties and Acknowledgments. The Buyer represents
and warrants that: (a) it has full right, power and authority to enter into this
Subscription Agreement and to perform all of its obligations hereunder; (b) this
Subscription Agreement has been duly authorized and executed by and constitutes
a valid and binding agreement of the Buyer enforceable in accordance with its
terms; (c) the execution and delivery of this Subscription Agreement and the
consummation of the transactions contemplated hereby do not conflict with or
result in a breach of (i) the Buyer’s certificate of incorporation or by-laws,
or (ii) any material agreement or any law or regulation to which the Buyer is a
party or by which any of its property or assets is bound; and (d) prior to the
execution hereof, Buyer has received in portable document format the Prospectus
Supplement, and the Base Prospectus, dated July 16, 2007, relating to the
Securities.
 
4. Seller Covenants. The Seller undertakes to the Buyer that:
 
(a) no later than 8:30 am, New York time, on the business day following the
execution of this Subscription Agreement, Seller will issue a press release and
file a current report on Form 8-K with the Securities and Exchange Commission
disclosing the transactions contemplated by this Subscription Agreement and the
Placement Agency Agreement; and

(b) no later than one business day following the Closing Date, Seller will issue
a press release and file a current report on Form 8-K with the Securities and
Exchange Commission disclosing the closing of the transactions contemplated by
this Subscription Agreement and the Placement Agency Agreement.

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5. Conditions to Closing. The obligations of the Buyer hereunder shall be
subject to (a) the accuracy of the representations and warranties on the part of
the Seller set forth herein and in the Placement Agency Agreement, dated as of
October 31, 2007, between the Seller and Roth Capital Partners, LLC (the
“Placement Agency Agreement”), in each case as of the date hereof and as of the
Closing Date as though then made, (b) the timely performance by the Seller of
its covenants and other obligations hereunder and under the Placement Agency
Agreement, and (iii) the satisfaction by the Seller of all additional conditions
as set forth in Section 5 of the Placement Agency Agreement.
 
6. Third-Party Beneficiary. Seller agrees that the Buyer shall be a third party
beneficiary of the representations, warranties and covenants given by the Seller
in the Placement Agency Agreement.
 
7. Miscellaneous.
 

 
a)
This Subscription Agreement constitutes the entire understanding and agreement
between the parties with respect to its subject matter and there are no
agreements or understandings with respect to the subject matter hereof which are
not contained in this Subscription Agreement. This Subscription Agreement may be
modified only in writing signed by the parties hereto.

 

 
b)
This Subscription Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and shall
become effective when counterparts have been signed by each party and delivered
to the other parties hereto, it being understood that all parties need not sign
the same counterpart. Execution may be made by delivery by facsimile.

 

 
c)
The provisions of this Subscription Agreement are severable and, in the event
that any court or officials of any regulatory agency of competent jurisdiction
shall determine that any one or more of the provisions or part of the provisions
contained in this Subscription shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Subscription Agreement and this Subscription Agreement shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent possible, so long as
such construction does not materially adversely effect the economic rights of
either party hereto.

 
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d)
All communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing and shall be mailed, hand delivered, sent by a
recognized overnight courier service such as Federal Express, or sent via
facsimile and confirmed by letter, to the party to whom it is addressed at the
following addresses or such other address as such party may advise the other in
writing:

 
To the Seller: as set forth on the signature page hereto.
 
To the Buyer: as set forth on the signature page hereto.
 
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
 

 
e)
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of laws.
To the extent determined by such court, the prevailing party shall reimburse the
other party for any reasonable legal fees and disbursements incurred in
enforcement of, or protection of any of its rights under this Agreement and the
Warrant.

 
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If the foregoing correctly sets forth our agreement, please confirm this by
signing and returning to us the duplicate copy of this letter.
 

        AGREED AND ACCEPTED:           SELLER:       CHINA PRECISION STEEL, INC.
 
   
   
    By:      

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Name:   Title: 

 
Address for Notice:
China Precision Steel, Inc.
8th Floor, Teda Building
87 Wing Lok Street
Sheung Wan, Hong Kong
Facsimile: +852-2854-1121
Attention: Company Secretary
 
With a copy to:
 
K&L Gates
One Lincoln Street
Boston, MA 02111
Facsimile: 1-617-261-3175
Attention: Barbara A. Jones/Amy Ling

Wire Instructions for Escrow Account:
 
Bank Name:
The Bank of New York
Bank Address:
1 Wall Street, New York, NY 10286
ABA Number:
021 000 018
Beneficiary:
Pershing LLC
Beneficiary A/C:
890 051238 5
Ultimate beneficiary:
Tri-State Title & Escrow, LLC
Ultimate A/C:
2S7-001214 (S not 5)
Bank Reference:
China Precision Steel

 
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        BUYER:  
   
   
    By:      

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Name:   Title:

Name, address and tax I.D. for registration of certificate(s):

Name: _______________________________________

Address: ______________________________________

______________________________________

______________________________________

Tax ID: _______________________________________

 
Facsimile:
Attention:
 
Delivery Instructions if Different from Above:
 
Name: _______________________________________

Address: _______________________________________

________________________________________

________________________________________

Attention: _______________________________________

Contact Telephone: ________________________________

Facsimile: ________________________________________

Email: _________________________________________
 
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EXHIBIT A
 
FORM OF WARRANT
 

 
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