SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of ________,
2007 among China Housing and Land Development, Inc., a Nevada corporation (the
“Company”) and the purchasers identified on the signature page hereto (including
their successors and assigns, each a “Purchaser” and collectively, the
“Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 promulgated thereunder, the Company desires to
issue and sell to the Purchasers, and the Purchasers desire to purchase from the
Company, securities of the Company as more fully described in this Agreement.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
 
ARTICLE I.
DEFINITIONS
 
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Warrants (as defined herein), the Registration Rights
Agreement (as defined herein), and the Lock-up Agreement (as defined herein),
and (b) the following terms have the meanings indicated in this Section 1.1:
 
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
 
“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 under the
Securities Act. With respect to the Purchasers, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as any of the Purchasers will be deemed to be an Affiliate of such Purchaser.
 
“Baqiao” means that certain property acquired pursuant to that certain Shares
Transfer Agreement entered into on March 9, 2007, between the Company and the
shareholders of Xi’an New Land Development Co., Ltd.
 
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Investment
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.
 
“Commission” means the Securities and Exchange Commission.
 
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“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter have been reclassified or changed into.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock or other securities that entitle the holder to receive,
directly or indirectly, Common Stock.
 
“Company Counsel” means Baker & McKenzie, LLP.
 
“Disclosure Schedules” shall have the meaning ascribed to such term in Section
3.1.
 
“Effective Date” means the date that the initial Registration Statement filed by
the Company pursuant to the Registration Rights Agreement is first declared
effective by the Commission.
 
“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
“Excepted Issuance” shall have the meaning ascribed to such term in Section
4.2(a).
 
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
 
"Knowledge" means, with respect to any statement made to the knowledge of a
party, that the statement is based upon actual knowledge of the officers of such
party having responsibility for the matter or matters that are the subject of
the statement, after due inquiry.
 
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).
 
“Investment Amount” means, as to each Purchaser, the aggregate amount to be paid
for Shares and Warrants purchased hereunder as specified below each Purchaser’s
name on the signature page of this Agreement and next to the heading “Investment
Amount”, payable in United States Dollars and in immediately available funds.
 
“Lead Investor” means Lake Street Fund LP.
 
“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
“Lock-up Agreement” means the Lock-up Agreement, dated the date hereof, among
the Company and its directors, management and founding shareholders, as
specified in the Lock-up Agreement, in the form of Exhibit A attached hereto.
 
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“Make-Good Escrow” shall have the meaning assigned to such term in Section 4.20.
 
“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).
 
“Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).
 
“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.
 
“Placement Agent” means Cantor Fitzgerald & Co.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Public Float” means that the aggregate outstanding number of shares held by
investors not affiliated with the Company.
 
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchaser, in the form of Exhibit B
attached hereto.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Shares and Warrant Shares by the Purchasers as provided for in the Registration
Rights Agreement.
 
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
 
“Right of First Refusal Notice” shall have the meaning ascribed to such term in
Section 4.2(a).
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
 
“Securities” means the Shares, the Warrants and the Warrant Shares.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“SFO” shall have the meaning ascribed to such term in Section 4.18.
 
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“Shares” means the shares of Common Stock issued or issuable to the Purchasers
pursuant to this Agreement, par value $0.001 per share.
 
“Short Sales” shall include all “short sales” as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
 
“Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a).
 
“Subsequent Financings” shall have the meaning ascribed to such term in Section
4.2(a).
 
“Subsequent Financing Notice” shall have the meaning ascribed to such term in
Section 4.2(a).
 
“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.
 
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.
 
“Transaction Documents” means this Agreement, the Warrants, the Registration
Rights Agreement, the Lock-up Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
 
“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
the Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in good
faith by the Purchasers and reasonably acceptable to the Company.
 
“Warrants” means collectively the Common Stock purchase warrants, in the form of
Exhibit D delivered to each Purchaser at the Closing in accordance with Section
2.2(b) hereof, which Warrants shall be exercisable immediately and have a term
of exercise equal to five years.
 
“Warrant Call” shall have the meaning ascribed to such term in Section 4.22.
 
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.
 
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ARTICLE II.
PURCHASE AND SALE
 
2.1 Closing.
 
On the Closing Date, upon the terms and subject to the conditions set forth
herein, concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers agree to purchase
(i) 9,261,844 Shares at a price of $2.70 per Share and (ii) Warrants exercisable
into approximately 2,778,553 Shares, with an exercise price equal to the lower
of (a) $4.50 per Share and (b) $0.90 above the market VWAP of the last three
trading days prior to the Closing Date. The Warrants shall have a term of five
(5) years. The Purchasers shall deliver to the Company via wire transfer or
certified check immediately available funds equal to their applicable Investment
Amounts and the Company shall deliver to the Purchasers their respective Shares
and Warrants, pro rata with each Purchaser’s Investment Amount, as determined
pursuant to Section 2.2(a) and the other items set forth in Section 2.2 issuable
at the Closing. Upon satisfaction of the conditions set forth in Sections 2.2
and 2.3, the Closing shall occur at the offices of Baker & McKenzie LLP, 1114
Avenue of the Americas, New York, NY 10036, or such other location as the
parties shall mutually agree. The commission payable to the Placement Agent
shall be paid in full upon Closing.
 
2.2 Deliveries.
 
(a) On the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
 
(i) this Agreement duly executed by the Company;
 
(ii) a certificate evidencing a number of Shares equal to each Purchasers’
applicable Investment Amount registered in the name of the Purchaser, as
provided for in Schedule 2.2(a)(ii);
 
(iii) a Warrant registered in the name of the Purchaser exercisable into a
number of shares of Common Stock equal to 30% of the number of shares of Common
Stock purchased by each Purchaser hereunder, with the exercise price set forth
in Section 2.1 above, subject to adjustment therein;
 
(iv) the legal opinion of Company Counsel and/or Nevada counsel, in agreed form,
addressed to the Purchasers;
 
(v) the Registration Rights Agreement, as provided for in Exhibit B, duly
executed by the Company; and
 
(vi) a copy of the duly executed Lock-up Agreement, as set forth in Exhibit A.
 
(b) On the Closing Date, each of the Purchasers shall deliver or cause to be
delivered to the Company the following:
 
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(i) this Agreement duly executed by each of the Purchasers;
 
(ii) the Purchasers’ applicable Investment Amounts by wire transfer to the
account as specified in writing by the Company; and
 
(iii) the Registration Rights Agreement, duly executed by the Purchasers.
 
2.3 Closing Conditions.
 
(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:
 
(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchasers contained herein;
 
(ii) all obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed; and
 
(iii) the delivery by the Purchasers of the items set forth in Section 2.2(b) of
this Agreement.
 
(b) The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:
 
(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
 
(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
 
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
 
(iv) since the date of execution of this Agreement, no event or series of events
shall have occurred that reasonably could have or result in (i) an adverse
effect on the legality, validity or enforceability of any Transaction Document,
or (ii) a Material Adverse Effect;
 
(v) no statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the consummation
of any of the transactions contemplated by the Transaction Documents;
 
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(vi) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to the Closing), and, at
any time prior to the Closing Date, trading in securities generally as reported
by Bloomberg Financial Markets shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Purchasers, makes it impracticable
or inadvisable to purchase the Shares at the Closing; and
 
(vii) the delivery by the Company of the agreements entered into by the Company
in connection with its purchase of Baqiao.
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Purchasers
concurrently herewith (the “Disclosure Schedules”) which Disclosure Schedules
shall be deemed a part hereof, the Company hereby makes the representations and
warranties set forth below to the Purchasers.
 
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are
set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of
any Liens, and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities. If the
Company has no subsidiaries, then references in the Transaction Documents to the
Subsidiaries will be disregarded.
 
(b) Organization and Qualification. The Company and each of the Subsidiaries is
an entity 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
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct 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 (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
 
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(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, its board
of directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each Transaction Document has been (or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
 
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the other
transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually, or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
 
(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.6, (ii) the filing with the
Commission of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, (iii) filings required by
state securities laws in accordance with the requirements of the Registration
Rights Agreement, which when permitted, will be made prior to the Effectiveness
Date (as such term is defined in the Registration Rights Agreement), (iv) the
notice and/or application(s) to each applicable Trading Market for the issuance
and sale of the Shares, Warrants and the listing of the Shares and Warrant
Shares for trading thereon in the time and manner required thereby and (v) the
filing of Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the “Required Approvals”).
 
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(f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens other than restrictions on transfer provided for in the Transaction
Documents. The Warrant Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens. The Company has reserved from its duly authorized
capital stock the shares of Common Stock issuable pursuant to this Agreement and
the Warrants in order to issue the Shares and the Warrant Shares. The Securities
are not subject to any preemptive or similar rights to subscribe for or purchase
securities.
 
(g) Capitalization. Other than disclosed in the SEC Reports and as set forth on
Schedule 3.1(g), the Company has not issued any capital stock other than
pursuant to the exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees pursuant to
the Company’s employee stock purchase plan and pursuant to the conversion or
exercise of outstanding Common Stock Equivalents all as set forth on Schedule
3.1(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 the Transaction Documents. As of the date of this Agreement,
except as disclosed in the SEC Reports and as set forth in Schedule 3.1(g) and
as a result of the purchase and sale of the Warrants, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of the capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
its capital stock, or securities or rights convertible or exchangeable into
shares of Common Stock. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the Knowledge of the Company, between or among any of the Company’s
stockholders.
 
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(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents 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 two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received 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 the 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 United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. The Company maintains and will continue
to maintain a standard system of accounting established and administered in
accordance with GAAP and the applicable requirements of the Exchange Act.
 
(i) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has had or
that, individually, or in the aggregate, 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 and accrued expenses
incurred in the ordinary course of business consistent with past practice, (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, and (C) other liabilities that would not, individually or in the
aggregate, have a Material Adverse Effect, (iii) the Company has not altered its
method of accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders 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, except pursuant to existing
Company stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information. Except for the
issuance of the Securities contemplated by this Agreement or as set forth on
Schedule 3.1(i), no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made that has not been publicly disclosed 1 Trading Day prior
to the date that this representation is made.
 
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(j) Litigation. Other than as otherwise disclosed in Schedule 3.1(j), there is
no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the Knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could if there were an
unfavorable decision, individually, or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and
to the Knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.
None of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company, and neither the
Company or any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer, to the Knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
 
(k) 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
which could reasonably be expected to result in a Material Adverse Effect.
 
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(l) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except
in each case as could not, individually, or in the aggregate, have 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,
individually or in the aggregate, could not have or reasonably be expected to
result in a Material Adverse Effect.
 
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually, or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
 
(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in
all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except
for Liens described in Schedule 3.1(n) and Liens as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance.
 
(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights or similar rights 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 have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”). Neither the Company nor any
Subsidiary has received a notice (written or otherwise) that the Intellectual
Property Rights used by the Company or any Subsidiary violates or infringes upon
the rights of any Person. All such Intellectual Property Rights are enforceable
and do not violate or infringe the Intellectual Property Rights of others in any
respect that would, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect and, to the Knowledge of the Company, there
is no existing infringement by another Person of any of the Company's or the
Subsidiary's Intellectual Property Rights. The Company and its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expect to have a
Material Adverse Effect.
 
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(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Investment Amount.
To the best Knowledge of the Company, such insurance contracts and policies are
accurate and complete. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.
 
(q) Transactions With Affiliates and Employees. 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 or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the Knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner. In
particular, the Company is not an Affiliate of Xindadi and is not under common
control with Xindadi.
 
(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s most recently filed periodic report under the Exchange Act,
as the case may be, is being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the
date prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”). The Company presented in
its most recently filed periodic report under the Exchange Act 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 307(b) of Regulation S-K
under the Exchange Act) or, to the Knowledge of the Company, in other factors
that could significantly affect the Company’s internal controls.
 
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(s) Private Placement. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.
Except as described in Schedule 3.1(s), 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.
 
(t) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
 
(u) Registration Rights. Each Purchaser has the right to cause the Company to
effect the registration under the Securities Act of the Securities held by such
Purchaser, in accordance with the Registration Rights Agreement.
 
(v) Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its Knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the 24
months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. The issuance and sale of the Securities
under the Transaction Documents does not contravene the rules and regulations of
the Trading Market on which the Common Stock is currently listed or quoted, and
no approval of the stockholders of the Company thereunder is required for the
Company to issue and deliver to each Purchaser the Securities contemplated by
the Transaction Documents. As of the date hereof, the Company’s Common Stock is
listed on the OTC Bulletin Board.
 
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(w) Disclosure. The Company confirms that neither it nor any other Person acting
on its behalf has provided the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, nonpublic
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, furnished by or on behalf of the
Company with respect to the representations and warranties made herein are true
and correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that the Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
 
(x) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market on which any
of the securities of the Company are listed or designated.
 
(y) Solvency. Based on the financial condition of the Company as of the Closing
Date after giving effect to the receipt by the Company of the proceeds from the
sale of the Securities hereunder, (i) the Company’s cash and fair saleable value
of its assets in an orderly liquidation 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 its
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 the proceeds the Company would receive, were it to
liquidate all of its 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 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). The
Company has no Knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
 
(z) Tax Status.   Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no Knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
 
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(aa) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers.
 
(bb) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to its
accountants and lawyers.
 
(cc) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that the Purchasers are acting solely in the capacity of
arm’s length purchasers with respect to the Transaction Documents and the
transactions contemplated hereby. The Company further acknowledges that the
Purchasers are not acting as financial advisors or fiduciaries of the Company
(or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Purchasers or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to the Purchasers
that the Company’s decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
 
(dd) Acknowledgement Regarding Purchasers’ Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding, it is understood
and agreed by the Company (i) that the Purchasers have not been asked to agree,
nor have the Purchasers agreed, to desist from purchasing or selling, long
and/or short, securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by the
Purchasers, including Short Sales, and specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that the
Purchasers, and counter parties in “derivative” transactions to which the
Purchasers are a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that the Purchasers shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in
any “derivative” transaction. The Company further understands and acknowledges
that (a) the Purchasers may engage in hedging activities at various times during
the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable with respect
to Securities are being determined and (b) such hedging activities (if any)
could reduce the value of the existing stockholders' equity interests in the
Company at and after the time that the hedging activities are being conducted.
The Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
 
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(ee) Manipulation of Price. The Company has not, and to its Knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities (other than for the placement
agent’s placement of the Securities), or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
 
(ff) Press Releases. The press releases disseminated by the Company during the
two (2) years 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 not
misleading.
 
(gg) No Additional Agreements. The Company does not have any agreement or
understanding with the Purchasers with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.
 
3.2 Representations and Warranties of the Purchaser. The Purchasers hereby
represent and warrant as of the date hereof and as of the Closing Date to the
Company as follows:
 
(a) Organization; Authority. Each of the Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by each of the Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate or similar action on the part of each Purchaser. Each
Transaction Document to which each Purchaser is a party has been duly executed
by each Purchaser, and when delivered by each Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
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(b) Own Account. Each Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and warranty
not limiting each Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws) in violation of the Securities Act or any applicable
state securities law. Subject to the immediately preceding sentence, nothing
contained herein shall be deemed a representation or warranty by each Purchaser
to hold the Securities for any period of time. Each Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. None of the
Purchasers has any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
 
(c) Purchaser Status. At the time each Purchaser was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises any
Warrants it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. The Purchasers are not required to be registered as broker-dealers under
Section 15 of the Exchange Act.
 
(d) Experience of the Purchaser. Each Purchaser, either alone or together with
its representatives, has such Knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Each Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
 
(e) General Solicitation. Each Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
 
(f) Short Sales and Confidentiality Prior To The Date Hereof. Other than the
transaction contemplated hereunder, none of the Purchasers has, directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with any of the Purchasers, executed any disposition, including
Short Sales, in the securities of the Company during the period commencing from
the time that each Purchaser first received a term sheet from the Company or any
other Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof. Notwithstanding the foregoing, in the case that
any of the Purchasers is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser's assets and the
portfolio managers have no direct Knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other Persons
party to this Agreement, each Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).
 
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The Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1 Transfer Restrictions.
 
(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company or
to an affiliate of the Purchasers or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.
 
(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of a legend on any of the Securities in the following form:
 
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 
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The Company acknowledges and agrees that the Purchasers may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and, if required under the terms of such arrangement, each
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the expense of the Purchaser, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
 
(c) Certificates evidencing the Shares and Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof): (i) whenever
the Shares and Warrant Shares are registered for resale under the Securities
Act, or (ii) following any sale or transfer of such Shares or Warrant Shares
pursuant to Rule 144, or (iii) while such Shares or Warrant Shares are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue a standing legal opinion to the
Company’s transfer agent promptly after the Effective Date if required by the
Company’s transfer agent to effect the removal of the legend hereunder.
Following such time as restrictive legends are not required to be placed on
certificates representing the Shares or Warrant Shares, the Company will, no
later than three Trading Days following the delivery by the Purchaser to the
Company or the Company's transfer agent of (i) a certificate representing such
Shares or Warrant Shares containing a restrictive legend (endorsed or with stock
power attached, signatures guaranteed, and otherwise in form necessary to affect
reissuance and/ or transfer), or (ii) an Exercise Notice in the manner stated in
the Warrants to affect the exercise of such Warrant in accordance with its terms
(such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to the Purchaser a certificate representing such Shares or Warrant
Shares that is free from all restrictive and other legends. The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section
4.1(c). Certificates for Securities subject to legend removal hereunder shall be
transmitted by the transfer agent of the Company to the Purchaser by crediting
the account of the Purchaser’s prime broker with the Depository Trust Company
System.
 
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4.2 Right of First Refusal and Anti Dilution Provisions.
 
(a) Prior to the end of Fiscal Year 2008, the  Purchasers  shall have a right of
first refusal, to invest and to participate in any subsequent placements or
offerings of Common Stock,  except in connection with (i) full or partial
consideration in connection with a strategic merger,  acquisition, 
consolidation  or  purchase of  substantially  all of the securities  or assets
of  corporation  or other  entity  which  holders  of such securities  or debt
are not at any time granted  registration  rights,  (ii) the Company's issuance
of securities in connection with strategic license agreements and other 
partnering  arrangements  so long as such  issuances  are not for the purpose of
raising  capital which holders of such  securities or debt are not at any time
granted  registration  rights,  (iii) the Company's  issuance of Common Stock or
the issuances or grants of options to purchase Common Stock pursuant to stock
option plans and employee stock purchase plans  described on Schedule 4.2(a)
hereto,  (iv) as a result of the  exercise of Warrants  pursuant to this 
Agreement or any other Agreements or obligations entered into by the Company
prior to this Agreement,  (v) the payment of any liquidated  damages or other
damages  pursuant to the Transaction  Documents,  (vi) as a result of
underwritten offerings conducted by the Company and (vii) as has been  described
in the Reports or Other Written Information filed with the Commission not later
than three Business Days before the Closing Date  (collectively the foregoing
are “Excepted  Issuances”). The Purchasers shall be given prior written notice
of no less than fourteen (14) business days (the “Subsequent Financing Notice”)
prior to any such placements or offerings of Common Stock which are not Excepted
Issuances (“Subsequent Financings”). The  Purchaser  who decides to exercise its
rights pursuant to this Section shall provide a written notice to the Company
(the “Right of First Refusal Notice”) no later than seven (7) business days
following the receipt of the Subsequent Financing Notice, providing the amount
that such Purchaser is committed to invest. The Purchaser is deemed to have
waived its right of first refusal if the Company does not receive the Right of
First Refusal Notice by 5:00 p.m. (New York City time) on the seventh business
day of the Right of First Refusal Notice period. In the event such terms and 
conditions  are  modified  during the Subsequent Financing Notice period,  the
Purchasers shall be given prompt notice of such modification and shall have the
right  during  the  fourteen  (14)   business  days   following  the  notice  of
modification to exercise such right.
 
(b) Other than in connection with the Excepted Issuances and prior to the end of
fiscal year 2008, if the Company shall offer, issue or agree to issue any common
stock to any person or entity at a price per share which shall be less than the
price of the Shares, or less than the Warrant exercise price in respect of the
Warrant Shares, without the consent of each Purchaser, then the Company shall
issue, for each such occasion, additional shares of Common Stock to each
Purchaser so that the average per share purchase price of the Shares issued to
the Purchasers (of only the Common Stock or Warrant Shares still owned by the
Purchaser) is equal to such other lower price per share and the Warrant exercise
price shall automatically be adjusted as provided in the Warrants. The average
Purchase Price of the Shares and average exercise price in relation to the
Warrant Shares shall be calculated separately for the Shares and Warrant Shares.
The delivery to the Purchasers of the additional shares of Common Stock shall be
not later than the closing date of the transaction giving rise to the
requirement to issue additional shares of Common Stock. The Purchasers are
granted the registration rights described in the Registration Rights Agreement
in relation to such  additional  shares of Common Stock, except that the Filing
Date and Effective Date vis-a-vis such additional Shares shall be the
forty-fifth (45th) day after the closing date giving rise to the  requirement 
to issue the  additional  shares of Common Stock.
 
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4.3 Furnishing of Information. As long as the Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as the
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchaser to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
 
4.4 Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
 
4.5 Conversion and Exercise Procedures. The form of Notice of Exercise included
in the Warrants set forth the totality of the procedures required of the
Purchaser in order to exercise the Warrants. No additional legal opinion or
other information or instructions shall be required of the Purchaser to exercise
its Warrants. The Company shall honor exercises of the Warrants and shall
deliver Warrant Shares in accordance with the terms, conditions and time periods
set forth in the Transaction Documents.
 
4.6 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the
Trading Day following the execution of this Agreement, and by 9:00 a.m. (New
York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file an additional Current Report on Form 8-K to disclose the Closing. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchaser, or include the name of the Purchaser in any
filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of the Purchaser, except to
the extent such disclosure is required by law or Trading Market regulations.
 
4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company
or, to the Knowledge of the Company, any other Person that the Purchaser is an
“Acquiring Person” under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that the Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchaser. The Company shall conduct
its business in a manner so that it will not become subject to the Investment
Company Act.
 
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4.8 Non-Public Information. The Company covenants and agrees that neither it nor
any other Person acting on its behalf will provide the Purchaser or its agents
or counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto the Purchaser shall have executed a
written agreement regarding the confidentiality and use of such information. The
Company understands and confirms that the Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
 
4.9 Reimbursement. The Company shall reimburse the Lead Investor for legal fees
up to, but in no event more than, US$30,000.00, for the services of its counsel
retained in connection with the transactions contemplated by this Agreement.
 
4.10 Indemnification of Purchaser. Subject to the provisions of this Section
4.10 and in addition to the indemnity provided in the Registration Rights
Agreement, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls the Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents,
members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling person (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach, misrepresentation or inaccuracy of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted
against the Purchaser, or any of its respective Affiliates, by any stockholder
of the Company who is not an Affiliate of the Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a material breach of the Purchaser’s representations, warranties
or covenants under the Transaction Documents or any agreements or understandings
that the Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by the Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser 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 Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) 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 Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s material breach of
any of the representations, warranties, covenants or agreements made by the
Purchaser in this Agreement or in the other Transaction Documents.
 
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4.11 Equal Treatment. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents.
 
4.12 Form D. The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof,
promptly upon request of the Purchaser.
 
4.13 Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8) with the Commission with respect
to any securities of the Company.
 
4.14 Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing and trading of its Common Stock on the OTC Bulletin Board
(or another nationally recognized Trading Market). The Company further agrees,
if the Company applies to have the Common Stock traded on any other Trading
Market, it will include in such application the Shares and Warrant Shares, and
will take such other action as is necessary or desirable in the opinion of the
Purchaser to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will use best efforts
and take all action reasonably necessary to continue the listing and trading of
its Common Stock on the Trading Market on which the Common Stock is currently
listed or quoted and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of such Trading Market.
 
4.15 Form SB-2 and Form S-1 Eligibility. The Company is eligible to register the
resale of the Shares and the Warrant Shares by the Purchaser under Form SB-2 or
Form S-1 promulgated under the Securities Act and the Company hereby covenants
and agrees to use its best efforts to maintain its eligibility to use Form SB-2
until the Registration Statement covering the resale of the Shares and Warrant
Shares shall have been filed with, and declared effective by, the Commission. If
for any reason the Company is not eligible to register the resale of the Shares
and the Warrant Shares by the Purchaser under Form SB-2, the Company covenants
and agrees to register the resale of the Shares and Warrant Shares on Form S-1
promulgated under the Securities Act.
 
4.16 Registration Rights. The Company shall register the Shares and the shares
underlying the Warrants pursuant (“Registrable Securities”) to the terms set
forth in the Registration Rights Agreement within forty-five (45) days from the
Closing Date. If the Registrable Securities are not registered by six (6) months
after the Closing Date, the Company shall pay to each Purchaser an amount equal
to 1% per month of the aggregate Investment Amount paid by such Purchaser
pursuant to this Agreement. Such penalty shall not apply if delays in
registration are due to Commission comments or concerns for any reason relating
to or involving Rule 415 of the Securities Act or its interpretation. In the
event that the number of Shares and the shares underlying the Warrants to be
registered on the initial registration statement as permitted by the Commission
is less than the full amount of the Registrable Securities as a result of Rule
415 of the Securities Act or its interpretation, the Company shall file one or
more subsequent registration statements to register the rest of the Registrable
Securities until all Registrable Securities are registered, which shall be filed
within thirty (30) days from the day when the Company becomes qualified or
permitted by the Commission to file a new subsequent registration statement to
registered the rest of the Restrable Securities; provided that each of such
subsequent registration statement shall only register the number of Registrable
Securities as permitted under Rule 415 of the Securities Act or its
interpretation. Each Purchaser’s shares registered in the subsequent
registrations are on a pro rata basis. If a subsequent registration statement is
not filed by the deadline, damages equal to the amount of 1.0% of the remaining
unregistered principal amount shall be paid to the Purchaser on the first
business day after the deadline, and on each anniversary of said date (applied
on a daily pro rata basis) until such registration statement is filed.
 
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4.17 Board of Directors. The Company covenants and agrees that it will appoint
the requisite number of directors and of independent directors in order to
comply with Nasdaq Global Market listing requirements as soon as is reasonably
practicable following the date of this Agreement. The Company covenants and
agrees that, as soon as is reasonably practicable following the date of this
Agreement, the Lead Investor shall have the right to approve one (1) director to
serve on the Board of Directors of the Company as designated in writing by the
Lead Investor.
 
4.18 Senior Financial Officer. The Company covenants and agrees that, as soon as
is reasonably practicable following the date of this Agreement, it will retain
the services of a Senior Financial Officer, subject to the approval of the Lead
Investor (“SFO”), with experience in matters relating to public companies and
Commission compliance and requirements. Failure to appoint a SFO by March 30th,
2008 shall result in penalties to the Company in the form of 1% per month
additional shares of Common Stock based on the Shares already issued at the
Closing, to be issued and allocated among the Purchasers pro rata in accordance
with their applicable Investment Amounts.
 
4.19 Make-Good Obligation. In the event that the after-tax net income of the
Company during fiscal year 2007 is less than US$16,300,000.00, as reported in
the Company’s audited financial statements for fiscal year 2007, the Company
shall pay the Purchasers 510,000 management-held shares, held in Make-Good
Escrow as set forth in Section 4.20 below, to be distributed to the Purchasers
pro rata in accordance with their respective Investment Amounts. In the event
that the after-tax net income of the Company during fiscal year 2008 is less
than US$35,800,000.00, as reported in the Company’s audited financial statements
for fiscal year 2008, the Company shall pay the Purchasers either (i) 510,000
management-held Shares, if the after-tax net income of the Company during fiscal
year 2007 was equal to or greater than US$16,300,000.00, to be distributed pro
rata in accordance with each Purchaser’s respective Investment Amounts, or (ii)
510,000 newly issued Shares of Common Stock by the Company, if the after-tax net
income of the Company during fiscal year 2007 was less than US$16,300,000.00, as
reported in the Company’s audited financial statements for fiscal year 2007, and
the 510,000 management-held shares have already been distributed to the
Purchasers in accordance with this Section 4.19, to be distributed pro rata in
accordance with each Purchaser’s respective Investment Amount. The costs
associated with the make-good guarantee shall not be included as a cost towards
the determination of the after-tax net income for each year.
 
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4.20 Make-Good Escrow. In order to comply with the requirements of Section 4.19
above, the Company shall place in escrow 510,000 shares of Common Stock held by
management, (the “Make-Good Escrow”). The Make-Good Escrow agent shall be
appointed by the Lead Investor and the Company.
 
4.21 Public Company Activities. Beginning with the quarter ending in June, 2007,
the Company shall conduct conference calls on a quarterly basis. The management
of the Company shall visit the United States two times per annum to meet with
current and potential investors. The Company shall retain the services of a
reputable investor relations company.
 
4.22 Callable Warrants. If the VWAP of the Company’s Common Stock price for any
continuous period of twenty (20) days equals or exceeds 200% above the Warrants’
exercise price, the Company can send a call notice on the warrants to the
Purchasers for the mandatory exercise of the Warrants (the “Warrant Call”). The
Purchasers shall have sixty (60) calendar days notice for the Warrant Call. If
the Purchaser cannot exercise the Warrant within sixty (60) calendar days from
receipt of Warrant Call, the Warrant shall be cancelled, forfeited and avoided
by the Company. The Company may send a Warrant Call only after the Securities
shall have been registered for thirty (30) calendar days.
 
ARTICLE V. 
MISCELLANEOUS
 
5.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Shares.
 
5.2 Termination. This Agreement may be terminated prior to Closing:
 
(a) by written agreement of the Purchaser and the Company; and
 
(b) by the Company or the Purchaser upon written notice to the other, if the
Closing shall not have taken place by 6:30 p.m. Eastern time on May 15, 2007;
provided, that the right to terminate this Agreement under this Section shall
not be available to any Person whose failure to comply with its obligations
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such time.
 
Upon a termination in accordance with this Section, the Company and the
Purchaser shall not have any further obligation or liability (including as
arising from such termination) to the other except pursuant to Section 4.10.
 
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5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, discussions, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
 
5.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission)  at the facsimile
number set forth on the signature pages attached hereto prior to 5:30 p.m. (New
York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
 
5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
 
5.6 Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction Documents.
 
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. The Purchaser may assign any
or all of its rights under this Agreement to any Person to whom the Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the Purchaser.
 
5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.10 (as to each Purchaser
Party).
 
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5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
 
5.10 Survival. The representations, warranties, covenants and other agreements
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable for the applicable statue of
limitations.
 
5.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
 
5.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
 
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5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever the Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the case of a
rescission of exercise of a Warrant, the Purchaser shall be required to return
any shares of Common Stock subject to any such rescinded exercise notice.
 
5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
 
5.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchaser
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
 
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
5.17 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
 
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5.18 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
 
5.19 Limitation of Liability. Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of the Purchaser arising
directly or indirectly, under any Transaction Document of any and every nature
whatsoever shall be satisfied solely out of the assets of the Purchaser, and
that no trustee, officer, other investment vehicle or any other Affiliate of the
Purchaser or any investor, shareholder or holder of shares of beneficial
interest of the Purchaser shall be personally liable for any liabilities of the
Purchaser.
 
(Signature Pages Follow)
 
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
CHINA HOUSING AND LAND DEVELOPMENT, INC.
Address for Notice:
       
By:__________________________________________
Name:
Title:
             

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
 
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
 
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: ________________________________________________________
Signature of Authorized Signatory of Purchaser:
__________________________________
Name of Authorized Signatory:
____________________________________________________
Title of Authorized Signatory:
_____________________________________________________
Email Address of Purchaser:________________________________________________
 
Address for Notice of Purchaser:
 

 

 
Address for Delivery of Securities for Purchaser (if not same as above):
 

 

 
Investment Amount:
Warrant Shares:
EIN Number:
 
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Annex A
 
CLOSING STATEMENT
 
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the Purchaser shall purchase up to $25,100,000.00 of Shares and Warrants
from China Housing and Land Development, Inc. (the “Company”). All funds will be
wired into an escrow account maintained by Signature Bank, escrow agent to the
Company. All funds will be disbursed in accordance with this Closing Statement.

Disbursement Date: May 9, 2007
 

--------------------------------------------------------------------------------

 
I. PURCHASE PRICE
 
Gross Proceeds to be Received in Escrow
$
   
II. DISBURSEMENTS
 
 
$
 
$
 
$
 
$
 
$
   
Total Amount Disbursed:
$
           
WIRE INSTRUCTIONS:
 
 
To: _____________________________________
 
 
 
 
 
To: _____________________________________
 

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