SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of August 22,
2008, between China BAK Battery, Inc., a Nevada corporation (the “Company”), and
each purchaser identified on the signature pages hereto (each, a “Purchaser” and
collectively, the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the “Securities Act”), the Company desires to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, desires 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 each Purchaser agree
as follows:
 
ARTICLE I.
DEFINITIONS
 
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings set
forth 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 405 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Board of Directors” means the board of directors of the Company.
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
“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 Subscription
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 be 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.
 
“Company Counsel” means Thelen Reid Brown Raysman & Steiner LLP.
 
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.
 
“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.

“Exchange Rate” shall have the meaning ascribed to such term in Section 5.19.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
 
“Governmental Body” shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental or administrative division, department, agency, commission,
instrumentality, official, organization, unit, body or entity) and any court or
other tribunal.
 
“Incorporated Documents” means the documents, if any, which may be incorporated
by reference in the Registration Statement, the Prospectus and any Prospectus
Supplement.
 
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(y).
 
“Indemnified Liabilities” shall have the meaning ascribed to such term in
Section 4.6.
 
“Insolvent” shall have the meaning ascribed to such term in Section 3.1(y).

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).
 
“Judgment Conversion Date” shall have the meaning ascribed to such term in
Section 5.20(a)(ii).
 

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“Judgment Currency” shall have the meaning ascribed to such term in Section
5.20(a).

“Legal Requirement” shall mean any federal state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Body (or under the authority of any
national securities exchange upon which the Common Stock is then listed or
traded). Reference to any Legal Requirement means such Legal Requirement as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, and reference to any section or other provision of any
Legal Requirement means that provision of such Legal Requirement from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other provision.
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
“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).
 
“PRC” means, for the purpose of this Agreement, the People’s Republic of China,
not including Taiwan, Hong Kong and Macau.
 
“Per Unit Purchase Price” equals $3.90, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.
 
“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.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
 
“Prospectus” means the base prospectus contained in the Registration Statement.
 
“Prospectus Supplement” means the supplement to the Prospectus complying with
Rule 424(b) of the Securities Act that is filed with the Commission and
delivered by the Company to each Purchaser at the Closing.
 
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.6.
 

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“Registration Statement” means the effective registration statement with
Commission file No. 333-151985 which registers the sale of the Shares, the
Warrants and the Warrant Shares to the Purchasers.
 
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
 
“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, and the rules and
regulations promulgated thereunder.
 
“Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.
 
“Short Sales” include, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Exchange Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts, calls,
swaps and similar arrangements (including on a total return basis), and sales
and other transactions through non-US broker dealers or foreign regulated
brokers. 
 
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.
 
“Subsidiary” means any entity in which the Company directly or indirectly, owns
capital stock or holds an equity or similar interest and shall, where
applicable, include any subsidiary of the Company formed or acquired after the
date hereof.

“Trading Day” means a day on which the principal Trading Market for the Common
Stock is open for trading.
 
“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 American
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange.
 
“Transaction Documents” means this Agreement, the Warrants and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
 

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“Transfer Agent” means Securities Transfer Corporation, the current transfer
agent of the Company, with a mailing address of 2591 Dallas Parkway, Suite 102,
Frisco, Texas 75034 and a facsimile number of (469) 633-0088, and any successor
transfer agent of the Company.
 
“Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable after the date hereof and have a term of sixty
days, in the form of Exhibit A attached hereto.
 
“Warrant Shares” means the shares of Common Stock issued or issuable upon
exercise of the Warrants.
 
ARTICLE II.
PURCHASE AND SALE
 
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions
set forth herein, the Company agrees to sell, and the Purchasers, severally and
not jointly, agree to purchase, up to an aggregate of $32,000,000 of Shares and
Warrants. Each Purchaser shall deliver to the Company, via wire transfer or a
certified check, immediately available funds equal to its Subscription Amount
and the Company shall deliver to each Purchaser its respective Shares and a
Warrant as determined pursuant to Section 2.2(a)(iii) and Section 2.2(a)(iv),
respectively, and the Company and each Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of Winston & Strawn LLP (counsel to Brean Murray, Carret &
Co., LLC ("BMC")), with an office located at 200 Park Avenue, New York, NY
10166, or such other location as the parties shall mutually agree.
 
2.2 Deliveries.
 
(a) On or prior to 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 legal opinion of Company Counsel in form and substance reasonably
acceptable to the Purchasers;
 
(iii) delivery via the Depository Trust Company Deposit Withdrawal Agent
Commission System (“DWAC”) Shares equal to such Purchaser’s Subscription Amount
divided by the Per Unit Purchase Price, registered in the name of such
Purchaser; and
 
(iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of such Purchaser’s Subscription
Amount divided by the Per Unit Purchase Price.
 
(v) the Prospectus and Prospectus Supplement (which may be delivered in
accordance with Rule 172 under the Securities Act).
 

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(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
 
(i) this Agreement duly executed by such Purchaser; and
 
(ii) such Purchaser’s Subscription Amount (less any amount contemplated in
Section 4.12) by wire transfer to the account as specified in writing by the
Company.
 
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 delivery by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement; and
 
(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 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) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
 
(v) no stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; no order preventing or
suspending the use of any Prospectus Supplement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; no order having the effect of ceasing or suspending the distribution
of the Securities or any other securities of the Company shall have been issued
by any securities commission, securities regulatory authority or stock exchange
and no proceedings for that purpose shall have been instituted or shall be
pending or, to the knowledge of the Company, contemplated by any securities
commission, securities regulatory authority or stock exchange; all requests for
additional information on the part of the Commission shall have been complied
with;
 
(vi) the Company shall have delivered a certificate of the Company, dated as of
the Closing Date and signed by the Chief Executive Officer and Chief Financial
Officer of the Company (which shall also be considered a representation and
warranty of the Company for purposes of this Agreement), to the effect that:
 

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(1) the representations and warranties of the Company in this Agreement are true
and correct, as if made on and as of such Closing Date, and the Company has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to such Closing Date;
 
(2) no stop order suspending the effectiveness of the Registration Statement or
the use of the Prospectus or any Prospectus Supplement has been issued and no
proceedings for that purpose have been instituted or are pending or, to the
Company’s knowledge, threatened under the Securities Act; no order having the
effect of ceasing or suspending the distribution of the Securities or any other
securities of the Company has been issued by any securities commission,
securities regulatory authority or stock exchange in the United States and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, contemplated by any securities commission, securities
regulatory authority or stock exchange in the United States;
 
(3)when the Registration Statement became effective, at the sale time, and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Incorporated Documents, if any, when such
documents became effective or were filed with the Commission, contained all
information required to be included therein by the Securities Act and the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, as the case may be, and in all material respects conformed to the
requirements of the Securities Act and the Exchange Act and the applicable rules
and regulations of the Commission thereunder, as the case may be, and the
Registration Statement and the Incorporated Documents did not and do not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading and,
since the effective date of the Registration Statement, there has occurred no
event required by the Securities Act and the rules and regulations of the
Commission thereunder to be set forth in the SEC Reports which has not been so
set forth;
 
(vii) 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, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. 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 each Purchaser, makes
it impracticable or inadvisable to purchase the Securities at the Closing.
 

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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or warranty otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:
 
(a) Subsidiaries. All of the Subsidiaries of the Company are set forth in the
SEC Reports. Except as disclosed in the SEC Reports, 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 of 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. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
 
(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 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 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.
 
(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 hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s 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 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 Legal Requirements.
 

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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities 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 Legal Requirement or other restriction of any court or Governmental Body
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 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 Body 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 4.2 of this Agreement, (ii) the filing with the
Commission of the Prospectus Supplement, and (iii) 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; Registration. 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 Liens arising as the result of a pledge of
the Securities by the Purchaser). The Warrant Shares, when issued in accordance
with the terms of the Warrants, will be validly issued, fully paid and
nonassessable, free and clear of all Liens other than restrictions on transfer
provided in the Transaction Documents (and other than Liens arising as the
result of a pledge of the Securities by the Purchaser). The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock issuable pursuant to this Agreement and the Warrants. The Company has
prepared and filed the Registration Statement in conformity with the
requirements of the Securities Act, which became effective on July 10, 2008 (the
“Effective Date”), including the Prospectus, and such amendments and supplements
thereto as may have been required to the date of this Agreement. The
Registration Statement is effective under the Securities Act and no stop order
preventing or suspending the effectiveness of the Registration Statement or
suspending or preventing the use of the Prospectus has been issued by the
Commission and no proceedings for that purpose have been instituted or, to the
knowledge of the Company, are threatened by the Commission. The Company proposes
to file the Prospectus Supplement with the Commission pursuant to Rule 424(b).
At the time the Registration Statement and any amendments thereto became
effective, at the date of this Agreement and at the Closing Date, the
Registration Statement and any amendments thereto conformed and will conform in
all material respects to the requirements of the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendments or supplements
thereto, at the time the Prospectus or any amendment or supplement thereto was
issued and at the Closing Date, conformed and will conform in all material
respects to the requirements of the Securities Act and did not and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
 
(g) Capitalization. The capitalization of the Company is as set forth in the SEC
Reports. Except as set forth in the SEC Reports, the Company has not issued any
capital stock since its most recently filed periodic report under the Exchange
Act, other than pursuant to the exercise of stock options under the Company’s
incentive plans, the issuance of shares of Common Stock pursuant to the
Company’s incentive plans and pursuant to the conversion or exercise of Common
Stock Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities or except as set forth in the SEC
Reports, there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents. 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 any of 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 approval or authorization of any stockholder or others,
or further approval by the Board of Directors is required for the issuance and
sale of the Securities. Except as disclosed in the SEC Reports, 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. Except as set forth in Schedule 3.1(h),
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company 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 or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
together with the Prospectus and the Prospectus Supplement, 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, as applicable, 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 Incorporated Documents, if any, when they became
effective or were filed with the Commission, as the case may be, conformed in
all material respects to the requirements of the Securities Act and the Exchange
Act, as applicable, and the applicable rules and regulations of the Commission
thereunder, and none of such documents contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any Prospectus Supplement, if
any, when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements of
the Securities Act and the Exchange Act, as applicable, and the applicable rules
and regulations of the Commission thereunder, and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading. The financial statements of the Company
included in the SEC Reports complied 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 except that unaudited financial statements may not contain
all footnotes required by GAAP, 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
year-end audit adjustments.
 

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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof or in the Prospectus Supplement, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (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 incentive 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 at least one Trading
Day prior to the date that this representation is made.
 
(j) Litigation. Except as disclosed in the SEC Reports, 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, have or reasonably be expected to result in a Material
Adverse Effect. Except as disclosed in the SEC Reports, 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, to the knowledge
of the Company, 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.
 

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(k) Labor Relations. No 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. Except as
disclosed in the SEC Reports, neither the Company nor 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 of the Company, 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 in favor of any third party, 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. and PRC Legal Requirements 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.
 
(l) Compliance. Except as disclosed on Schedule 3.1(l), 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 Body, including without limitation, all Legal
Requirements applicable to its business and all such laws that affect the
environment, except in each case as could not have or reasonably be expected to
result in a Material Adverse Effect.
 
(m) Regulatory Permits. Except as disclosed in the SEC Reports, 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 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. Except as disclosed in the SEC Reports, the Company and the
Subsidiaries have valid land use rights for all real property owned by them 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 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 and Liens for
the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Except as disclosed in the SEC Reports, any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in compliance.
 

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(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 and 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 have a Material Adverse
Effect (collectively, the “Intellectual Property Rights”). Except as disclosed
in the SEC Reports, neither the Company nor any Subsidiary has received a
written notice that any of the Intellectual Property Rights used by the Company
or any Subsidiary violates or infringes upon the intellectual property rights of
any Person. Except as disclosed in the SEC Reports, to the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights. 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 expected to have a Material Adverse Effect.
 
(p) Insurance. Except as set forth in the SEC Reports, the Company and the
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as the Company deems adequate
for the businesses in which the Company and the Subsidiaries are engaged,
including, but not limited to, directors and officers insurance. 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 of a value of $120,000 or greater with the Company or any of its
Subsidiaries which would be required to be reported under Item 404 of Regulation
S-K 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 other than for (i)
payment of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) other employee
benefits, including stock option agreements under any stock option plan of the
Company.
 

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(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 information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s 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 changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
 
(s) Certain Fees. Except as set forth in the Prospectus Supplement, no brokerage
or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 3.1(s) that may be due in
connection with the transactions contemplated by the Transaction Documents.
 
(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 of 1940,
as amended.
 
(u) Registration Rights. Except as disclosed in the SEC Reports, no Person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company.
 
(v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which 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 12 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; provided, the Company makes no warranty as to the future price of
its Common Stock and its impact on such listing or maintenance requirements.
 

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(w) Application of Takeover Protections. The Company and the Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s articles of incorporation (or similar charter documents) or
the laws of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, as a result of the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities.
 
(x) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any sales of any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.
 
(y) Indebtedness. 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). Neither the Company nor any of
its Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company and its Subsidiaries, individually and on a consolidated basis, are
not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3.1(y), "Insolvent" means, with respect to
any Person (i) the present fair saleable value of such Person's assets is less
than the amount required to pay such Person's total Indebtedness (as defined in
this Section 3.1(y)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted. Except as set forth on Schedule 3.1(y), the SEC
Reports set forth as of the respective dates thereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $50,000 due under leases
required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
 

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(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. There are
no transfer taxes or other similar fees or charges under any Legal Requirement
in the United States or any state or any political subdivision thereof, required
to be paid by the Company in connection with the execution and delivery of this
Agreement or the sale by the Company of the Securities. No stamp or other
issuance or transfer taxes or duties and no capital gains, income, withholding
or other taxes are payable by or on behalf of the Purchasers to the United
States or the PRC or any political subdivision or taxing authority thereof or
therein in connection with (A) the issuance of the Securities by the Company,
and (B) the consummation by the Company of any other transaction contemplated in
this Agreement or the performance by the Company of its obligations under this
Agreement.
 
(aa) Foreign Corrupt Practices. Neither the Company, nor any agent or other
person acting on behalf of the Company, has (i) directly or indirectly, used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
 
(bb) Accountants. The Company’s accountants are identified in the Prospectus or
Prospectus Supplement. Such accountants, who the Company expects will express
their opinion with respect to the financial statements to be included in the
Company’s Annual Report on Form 10-K for the year ending September 30, 2008, are
a registered public accounting firm as required by the Securities Act. 
 
(cc) Regulation M Compliance.  The Company has not, and 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, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid to
the Company’s placement agent in connection with the placement of the
Securities.
 

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(dd) U.S. Real Property Holding Corporation. The Company is not and has never
been a U.S. real property holding corporation within the meaning of Section 897
of the Internal Revenue Code of 1986, as amended, and the Company shall so
certify upon any Purchaser's request.
 
(ee) No Additional Agreements.  The Company does not have any agreement or
understanding with any Purchaser with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.
 
(ff) Other Representations and Warranties Relating to the Company and
Subsidiaries.
 
(i) All consents, approvals, authorizations or licenses requisite under PRC
Legal Requirements for the due and proper establishment and operation of the
Company and Subsidiaries have been duly obtained from the relevant PRC
Governmental Bodies and are in full force and effect; except where the failure
to obtain any such consent, approval, authorization or license or maintain the
same in full force and effect would not have, or be reasonably likely to result
in, a Material Adverse Effect.
 
(ii) Except as set forth on Schedule 3.1(ff)(ii), all filings and registrations
with the PRC Governmental Bodies required in respect of the Company and
Subsidiaries and their capital structure and operations including, without
limitation, the registration with the Ministry of Commerce, the China Securities
Regulatory Commission, the State Administration of Industry, or their respective
local divisions of Commerce, the State Administration of Foreign Exchange, tax
bureau and customs authorities have been duly completed in accordance with the
relevant PRC Legal Requirements, except where, the failure to complete such
filings and registrations does not, and would not, individually or in the
aggregate, have a Material Adverse Effect.
 
(iii) The Company and Subsidiaries have complied with all relevant PRC Legal
Requirements regarding the contribution and payment of its registered share
capital, the payment schedule of which has been approved by the relevant PRC
Governmental Bodies. There are no outstanding commitments made by the Company or
any Subsidiary (or any of their shareholders) to sell any equity interest in the
Company or any Subsidiary.
 
(iv) Neither the Company nor any Subsidiary has received any letter or notice
from any relevant PRC Governmental Body notifying it of revocation of any
licenses or qualifications issued to it or any subsidy granted to it by any PRC
Governmental Body for non-compliance with the terms thereof or with applicable
PRC Legal Requirements, or the lack of compliance or remedial actions in respect
of the activities carried out by the Company or any Subsidiary, except such
revocation as does not, and would not, individually or in the aggregate, have a
Material Adverse Effect.
 

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(v) The Company and Subsidiaries have conducted their business activities within
the permitted scope of business or have otherwise operated their business in
compliance with all relevant Legal Requirements and with all requisite licenses
and approvals granted by competent PRC Governmental Bodies other than such
non-compliance that do not, and would not, individually or in the aggregate,
have a Material Adverse Effect. As to licenses, approvals and government grants
and concessions requisite or material for the conduct of any material part of
the Company or Subsidiaries’ business which is subject to periodic renewal, the
Company has no knowledge of any reasons for which such requisite renewals will
not be granted by the relevant PRC Governmental Bodies.
 
(vi) With regard to employment and staff or labor, the Company and Subsidiaries
have complied with all applicable PRC Legal Requirements in all material
respects, including, without limitation, those pertaining to welfare funds,
social benefits, medical benefits, insurance, retirement benefits, pensions or
the like, other than such non-compliance that do not, and would not,
individually or in the aggregate, have a Material Adverse Effect.
 
(gg) Disclosure. Neither the Company nor any Person acting on its behalf has
provided any Purchaser or its respective agents or counsel with any information
that constitutes material, non-public information concerning the Company, the
Subsidiaries or their respective businesses, except insofar as the existence and
terms of the proposed transactions contemplated hereunder may constitute such
information. The Company understands and confirms that the 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 and its businesses and the transactions contemplated hereby,
furnished by or on behalf of the Company (including their representations and
warranties set forth in this Agreement and the disclosure set forth in any
diligence report or business plan provided by the Company or any Person acting
on the Company’s behalf) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
 
(hh) Acknowledgment Regarding Each Purchaser’s Purchase of the Securities. The
Company acknowledges and agrees that each Purchaser is acting solely in the
capacity of arm’s length purchaser with respect to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby, and
that no Purchaser is (i) an officer or director of the Company, (ii) an
“affiliate” of the Company (as defined in Rule 144 under the Securities Act
(including any successor rule, “Rule 144”)) or (iii) a “beneficial owner” of
more than 10% of the Common Stock (as defined for purposes of Rule 13d-3 of the
Exchange Act). The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the other Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a
Purchaser or any of its representatives or agents in connection with this
Agreement or the other Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser’s purchase of the
Shares. The Company further represents to each Purchaser that the Company’s
decision to enter into this Agreement and the other Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
 

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3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself
and for no other Purchaser, hereby represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:
 
(a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, 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 and delivery of this Agreement and performance by such Purchaser
of the transactions contemplated by this Agreement have been duly authorized by
all necessary corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such 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 Legal Requirements.
 
(b) Ordinary Course; Regulation M. Such Purchaser is acquiring the Shares and
Warrants hereunder in the ordinary course of its business. Such Purchaser has
complied with the provisions of Rule 105 of Regulation M in connection with the
purchase of the Shares and Warrants.
 
(c) Purchaser Status. At the time such Purchaser was offered the Shares and
Warrants, it was, and at the date hereof it is, 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. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.
 
(d) Experience of Such Purchaser. Such 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. Such 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.
 

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(e) Information. Such Purchaser and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by such Purchaser. Such Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Purchaser
or its advisors, if any, or its representatives shall modify, amend or affect
such Purchaser's right to rely on the Company's representations and warranties
contained herein.
 
(f) Certain Trading Activities. Such Purchaser has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, engaged in any purchase or sale in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the time that such Purchaser was first contacted by the
Company or any placement agent acting on behalf of the Company regarding this
investment in the Company. Such Purchaser covenants that neither it nor any
Person acting on its behalf or pursuant to any understanding with it will engage
in any purchase or sale in the securities of the Company (including Short Sales)
prior to the time that the transactions contemplated by this Agreement are
publicly disclosed pursuant to the Press Release (as defined below).
 
(g) No Governmental Review. Such Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
 
(h) Independent Investment Decision. Such Purchaser has independently evaluated
the merits of its decision to purchase the Securities pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the
advice of any other Purchaser’s business and/or legal counsel in making such
decision. Such Purchaser has not relied on the business or legal advice of BMC
or any of its agents, counsel or Affiliates in making its investment decision
hereunder, and confirms that none of such Persons has made any representations
or warranties to such Purchaser in connection with the transactions contemplated
by the Transaction Documents.
 
(i) Limited Ownership.  The purchase by such Purchaser of the Securities
issuable to it at the Closing will not result in such Purchaser (individually or
together with any other Person with whom such Purchaser has identified, or will
have identified, itself as part of a “group” in a public filing made with the
Commission involving the Company’s securities) acquiring, or obtaining the right
to acquire, in excess of 19.999% of the outstanding shares of Common Stock or
the voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred. Such Purchaser does not presently intend to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when
added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of 19.999% of the outstanding shares of Common
Stock or the voting power of the Company on a post transaction basis that
assumes that the Closing shall have occurred.
 

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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1 Integration. The Company shall not 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 for purposes of the rules and regulations of any Trading Market such
that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such
subsequent transaction.
 
4.2 Securities Laws Disclosure; Publicity. The Company shall, by 9:30 a.m. (New
York City time) on the Trading Day immediately following the date hereof, issue
a press release (the “Press Release”) disclosing the material terms of the
transactions contemplated hereby, and within 4 Trading Days file a Current
Report on Form 8-K, and shall attach this Agreement and the form of Warrant
thereto. The Company and each Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the filing of final Transaction Documents
(including signature pages thereto) with the Commission and (ii) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (ii).
 
4.3 Shareholder Rights Plan. No claim will be made or enforced by the Company
or, with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any 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 Purchasers,
provided that no Purchaser, together with its Affiliates, will beneficially hold
more than 15% of the Common Stock outstanding as of the Closing Date.
 

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4.4 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. From and after the filing of
the Press Release, no Purchaser shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of its respective officers, directors, employees or agents, that is not
disclosed in the Press Release. The Company shall not disclose the identity of
any Purchaser in any filing with the SEC except as required by the rules and
regulations of the SEC thereunder. The Company shall not, and shall cause each
of its Subsidiaries and its and each of their respective officers, directors,
employees and agents, not to, provide any Purchaser with any material, nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the Press Release without the express written consent of such
Purchaser. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser may notify the Company, and the Company shall
make public disclosure of such material nonpublic information within two (2)
Trading Days of such notification. The Company understands and confirms that
each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
 
4.5 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder as set forth in the Prospectus Supplement and not to redeem
any Common Stock or Common Stock Equivalents.
 

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4.6 Indemnification of Purchasers. Subject to the provisions of this Section
4.6, the Company will indemnify and hold each 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 such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
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 persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and out-of pocket expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation (the “Indemnified Liabilities”) that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach
of any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents, (b) any action
instituted against a Purchaser, or any of them or their respective Affiliates,
by any third party, with respect to any of the transactions contemplated by the
Transaction Documents (except to the extent such action is based upon conduct by
such Purchaser which constitutes fraud, gross negligence or willful misconduct),
(c) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A, Rule 430B and
Rule 430C under the Securities Act, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (d) upon any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus, any
Prospectus Supplement or any Incorporated Document (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. 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 reasonably acceptable to the Purchaser
Party. To the extent that a Purchaser Party fails to provide timely notice of a
claim for indemnity under this Section 4.6, and such failure materially
prejudices the Company’s ability to defend against such claim, then the Company
shall have no obligation under this Section 4.6 to indemnify the Purchaser Party
for the claim (or portion thereof) that was so affected. 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, in which case the Company shall be responsible for the reasonable fees
and expenses of no more than one such separate counsel. Legal counsel referred
to in the immediately proceeding sentence shall be selected by the Purchasers
holding at least a majority of the Shares issued and issuable hereunder. 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 conduct by such Purchaser which constitutes fraud, gross
negligence, or willful misconduct. The Company shall not, without the prior
written consent of the Purchaser Party, which consent shall not be unreasonably
withheld, conditioned or delayed, consent to entry of any judgment or enter into
any settlement or other compromise which (i) does not include as an
unconditional term thereof giving by the claimant or plaintiff to such Purchaser
Party of a release from all liability in respect to such Indemnified Liabilities
or litigation, (ii) requires any admission of wrongdoing by such Purchaser
Party, or (iii) obligates or requires a Purchaser Party to take, or refrain from
taking, any action. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Purchaser Party with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. The
indemnification required by this Section 4.6 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Liabilities are incurred. The indemnity
agreements contained herein shall be in addition to (x) any cause of action or
similar right of the Purchaser Party against the indemnifying party or others,
and (y) any liabilities the indemnifying party may be subject to pursuant to the
law.
 
4.7 Reservation of Common Stock. As of the date hereof, the Company has reserved
and the Company shall continue to reserve and keep available at all times, free
of preemptive rights, a sufficient number of shares of Common Stock for the
purpose of enabling the Company to issue Shares pursuant to this Agreement and
Warrant Shares pursuant to any exercise of the Warrants.
 

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4.8 Listing of Common Stock. The Company hereby agrees to maintain the listing
of the Common Stock on a Trading Market, and as soon as reasonably practicable
following the Closing (but not later than the Closing Date) to list all of the
Shares on such 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 all of the Shares, and will take such other action
as is reasonably necessary to cause all of the Shares to be listed on such other
Trading Market as promptly as possible. The Company shall continue the listing
and trading of its Common Stock on a Trading Market and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market.
 
4.9 Equal Treatment of Purchasers. 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. For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
 
4.10 Confidentiality After The Date Hereof. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until the time the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the Press Release as described in Section 4.2, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure Schedules. 
 
4.11 No Manipulation of Price.  The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
 
4.12 Variable Securities. For so long as any Warrants remain outstanding, the
Company shall not, in any manner, issue or sell any rights, warrants or options
to subscribe for or purchase Common Stock or directly or indirectly convertible
into or exchangeable or exercisable for Common Stock at a price which varies or
may vary with the market price of the Common Stock, including by way of one or
more reset(s) to any fixed price unless the conversion, exchange or exercise
price of any such security cannot be less than the then applicable Exercise
Price (as defined in the Warrants) with respect to the Common Stock into which
any Warrant is exercisable. This provision shall not prohibit the Company from
issuing or selling any securities that contain customary anti-dilution
provisions. 
 
4.13 Warrant Shares. If all or any portion of a Warrant is exercised at a time
when there is an effective registration statement to cover the issuance or
resale of the Warrant Shares or if the Warrant is exercised via cashless
exercise, the Warrant Shares issued pursuant to any such exercise shall be
issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the
Warrant Shares) is not effective or is not otherwise available for the sale or
resale of the Warrant Shares, the Company shall immediately notify the holders
of the Warrants in writing that such registration statement is not then
effective and thereafter shall promptly notify such holders when the
registration statement is effective again and available for the sale or resale
of the Warrant Shares. The Company shall use its best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants; provided, such obligation will terminate when all Warrant Shares may
be sold pursuant to Rule 144 or any successor.
 

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ARTICLE V.
MISCELLANEOUS
 
5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by written notice to
the other parties, if the Closing has not been consummated on or before the
tenth day following the date of this Agreement; provided, however, that no such
termination will affect the right of any party to sue for any breach by the
other party (or parties).
 
5.2 Fees and Expenses. At the Closing, the Company shall reimburse Empery Asset
Master Ltd. for its reasonable expenses incurred in connection with this
Agreement and the Transaction Documents, including, without limitation,
reasonable legal fees and expenses, up to a maximum of $10,000, which amount may
be withheld by such Purchaser from its Subscription Amount at the Closing. In
addition, (i) Hudson Bay Fund, LP may withhold $86,428 from its Subscription
Amount, (ii) Hudson Bay Overseas Fund, Ltd. may withhold $114,568 from its
Subscription Amount and (iii) any of Enable Growth Partners LP, Enable
Opportunity Partners LP and Pierce Diversified Strategy Master Fund LLC may
withhold $200,996, in the aggregate, from its Subscription Amount, all in
satisfaction of registration delay payments owed by the Company to each of them.
The Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for Persons engaged
by any Purchaser) relating to or arising out of the transactions contemplated
hereby, including, without limitation, any fees or commissions payable to the
Agent. The Company shall pay, and hold each Purchaser harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney's
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment. Except as expressly set forth in the Transaction Documents
to the contrary, 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 this Agreement. The Company shall pay all Transfer Agent fees,
stamp taxes and other taxes and duties levied in connection with the delivery of
any Securities to the Purchasers.
 
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, the Prospectus and the Prospectus Supplement, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
 

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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 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 or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers of at least a majority of the Securities still held
by the Purchasers or, in the case of a waiver, by the party against whom
enforcement of any such waived provision 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 any 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.
 
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 each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Purchasers.”
 
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 4.6, except that BMC is a third
party beneficiary of the representations and warranties of the Company contained
in this Agreement as if it was a party hereto. Accordingly, all representations
and warranties of the Company made to the Purchasers shall have also been deemed
to be made directly to BMC. Further, BMC is hereby accorded all of the benefits
of Section 4.6 as if it was a Purchaser Party, and all references to Purchaser
Parties shall be deemed to include BMC and its directors, officers,
shareholders, 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 persons.
 
5.9 Arbitration. Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach, termination or invalidity thereof, shall be
settled definitively and exclusively by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by a single
arbitrator appointed in accordance with said Rules. The arbitration shall take
place in New York, New York, United States of America. The language to be used
in the arbitral proceedings shall be English. The arbitrator shall apply the law
of the State of New York, United States of America, without regard for its
principles of conflict of laws. Judgment upon the award may be entered in any
court having jurisdiction thereof. If either party shall commence a Proceeding
to enforce any provisions of a Transaction Document, then the prevailing party
in such Proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. The
Company hereby appoints Thelen Reid Brown Raysman & Steiner LLP, with offices at
701 Eighth Street, N.W., Washington, D.C. 20001, as its agent for service of
process in New York. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.
 

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5.10 Survival. The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
 
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 or by e-mail delivery of a “.pdf” format data file, 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 or “.pdf” signature page were an original thereof.
 
5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
 
5.13 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 (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of an affidavit of loss or
presentation of other evidence reasonably satisfactory to the Company of such
loss, theft or destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
(including customary indemnity) associated with the issuance of such replacement
Securities.
 

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5.14 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
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
contained in the Transaction Documents and hereby agrees to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
 
5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a 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.
 
5.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. Winston & Strawn LLP does not represent any of the Purchasers, only
Brean Murray, Carret & Co., LLC. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.
 
5.17 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.
 
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.
 

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5.19 Currency. Unless otherwise indicated, all dollar amounts referred to in
this Agreement are in United States Dollars. All amounts owing under this
Agreement or any Transaction Document shall be paid in US dollars. All amounts
denominated in other currencies shall be converted in the US dollar equivalent
amount in accordance with the Exchange Rate on the date of calculation.
"Exchange Rate" means, in relation to any amount of currency to be converted
into US dollars pursuant to this Agreement, the US dollar exchange rate as
published in The Wall Street Journal on the relevant date of calculation.
 
5.20 Judgment Currency.
 
(a) If for the purpose of obtaining or enforcing judgment against the Company in
any court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 5.20 referred to
as the "Judgment Currency") an amount due in US Dollars under this Agreement,
the conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
 
(b) date of actual payment of the amount due, in the case of any proceeding in
the courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or
 
(i) the date on which the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section being hereinafter referred to as the
"Judgment Conversion Date").
 
(c) If in the case of any proceeding, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
 
(d) Any amount due from the Company under this provision shall be due as a
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this Agreement.
 
(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 BAK BATTERY, INC.
 
Address for Notice:
BAK Industrial Park
No. 1 BAK Street
Kuichong Town, Longgang District
Shenzhen, People’s Republic of China 518119
Attn: President
By:
   
Fax: 86-755-89770527 
 
Name:
Title:
         
With a copy to (which shall not constitute notice):
Thelen Reid Brown Raysman & Steiner LLP
701 8th Street NW
Washington, D.C. 20001
Facsimile: (202) 654-1804
Attn.: Louis A. Bevilacqua, Esq.
   

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

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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:________________________________________________
 
Fax Number of Purchaser: ________________________________________________
 
Address for Notice of Purchaser:

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

 
Subscription Amount: $_________________

Shares: _________________

Warrant Shares:    

EIN Number:

[PURCHASER SIGNATURE PAGES TO CHINA BAK BATTERY, INC. SECURITIES PURCHASE
AGREEMENT]
 

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