Exhibit 10.1
 
ShengdaTech, Inc.
 
$130,000,000
 
6.5% Senior Convertible Notes due 2015
 
PURCHASE AGREEMENT

December 9, 2010

Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(as Representative of the Initial Purchasers)

Ladies & Gentlemen:
 
ShengdaTech, Inc., a Nevada corporation (the “Company”), proposes to issue and
sell to Morgan Stanley & Co. Incorporated and the other initial purchasers named
on Schedule I to this Agreement (the “Initial Purchasers”), for whom Morgan
Stanley & Co. Incorporated is acting as Representative (the “Representative”),
$130,000,000 in aggregate principal amount of 6.5% Senior Convertible Notes due
2015 (the “Notes”), subject to the terms and conditions set forth herein.
 
1.           The Transaction.  Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers,
severally and not jointly, the Notes which are convertible into the common
stock, $0.00001 par value per share, of the Company (the “Common Stock”).  The
Notes are to be issued under an Indenture between the Company and The Bank of
New York Mellon, as trustee (the “Trustee”) (the “Indenture”).
 
The amount of the Notes to be purchased by each of the several Initial
Purchasers are set forth opposite their names on Schedule I hereto.
 
In connection with the sale of the Notes, the Company has prepared a preliminary
offering memorandum, dated December 9, 2010 (the “Preliminary Offering
Memorandum”), and has prepared a final offering memorandum, dated the date
hereof (the “Offering Memorandum”), each setting forth information regarding the
Company, the subsidiaries listed on Schedule II hereto (the “Subsidiaries”), the
Notes, the terms of the Offering and the transactions contemplated by the
Transaction Documents (as defined below).  Any references herein to the
Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to
include, in each case, all amendments and supplements thereto and any
information and/or documents incorporated by reference therein.  The Company
hereby confirms that it has authorized the use of the Disclosure Package (as
defined below) and the Offering Memorandum in connection with the offering and
resale of the Notes by the Initial Purchasers.
 
 
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The Company understands that the Initial Purchasers propose to make an offering
of the Notes (the “Exempt Resales”) only on the terms and in the manner set
forth in the Disclosure Package and the Offering Memorandum, as amended or
supplemented, and the terms hereof as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered, solely to
persons whom the Initial Purchasers reasonably believe to be “qualified
institutional buyers” (each, a “QIB”) as defined in Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”), as such rule may be
amended from time to time (“Rule 144A”) in transactions under Rule 144A.  The
Initial Purchasers will offer the Notes to such QIBs initially at a price equal
to 100% of the principal amount thereof.  Such price may be changed by the
Initial Purchasers at any time without notice.
 
The Notes are convertible in accordance with their terms and the terms of the
Indenture into Common Stock (except for any cash in lieu of fractional shares)
at an initial conversion rate of 164.6904 shares of Common Stock per $1,000
principal amount of Notes.
 
This Agreement, the Notes and the Indenture are hereinafter referred to
collectively as the “Transaction Documents.”  
 
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Disclosure Package, and if not defined therein, in
the Indenture.
 
2.           Representations and Warranties of the Company.  The Company
represents and warrants to, and agree with, each of the Initial Purchasers that:
 
(a)           (i) The Preliminary Offering Memorandum as of its date did not,
(ii) the Preliminary Offering Memorandum, as supplemented by the information
listed in Schedule III hereto (the “Pricing Supplement”) (the Preliminary
Offering Memorandum and the Pricing Supplement taken together, the “Disclosure
Package”), as of the Applicable Time (as defined below) does not, (iii) the
Offering Memorandum as of its date does not, and as of the Closing Date will
not, and (iv) any supplement or amendment to any of the documents referenced in
clauses (i) through (iii) above does not and will not, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  Notwithstanding the foregoing, the
representations and warranties contained in this paragraph shall not apply to
statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto, including the
Pricing Supplement) made in reliance upon and in conformity with Initial
Purchaser Information (as such term is defined in Section 11 hereof).  For
purposes of this Agreement, the “Applicable Time” means time of first sale on
the date of this Agreement.
 
(b)           The Disclosure Package and the Offering Memorandum have been or
will be prepared by the Company for use by the Initial Purchasers in connection
with the offering of the Notes.
 
 
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(c)           The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Disclosure Package and the Offering
Memorandum and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, (any such
effect being a “Material Adverse Effect”).  All constitutive documents of the
Company comply with the requirements of applicable laws of the jurisdiction of
its incorporation and are in full force and effect.
 
(d)           Each of the Company’s Subsidiaries has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Disclosure Package
and the Offering Memorandum and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect.  The Company has no subsidiaries or controlled
affiliates other than the Subsidiaries.  All of the equity interests in each
Subsidiary have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly through Subsidiaries by the
Company, free and clear of all liens, encumbrances, equities or claims.
 
(e)           The Notes have been duly and validly authorized by the Company for
issuance and sale to the Initial Purchasers pursuant to this Agreement and, when
executed by the Company and authenticated by the Trustee in accordance with the
provisions of the Indenture and when delivered to and paid for by the Initial
Purchasers in accordance with the terms hereof and thereof, will be duly and
validly executed, issued and delivered and will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be limited
by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to or affecting
creditors’ rights generally and (ii) general principles of equity.  The Notes
will conform in all material respects to the descriptions thereof in the
Disclosure Package and the Offering Memorandum.  On the Closing Date, the Notes
will be in the form contemplated by the Indenture.
 
(f)           The Indenture has been duly and validly authorized by the Company
and, when duly executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee), will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors’ rights generally and
(ii) general principles of equity.  The Indenture conforms in all material
respects to the description thereof in the Disclosure Package and the Offering
Memorandum.  On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
“Trust Indenture Act”), and the rules and regulations of the Commission
applicable to an indenture that is qualified thereunder.
 
 
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(g)           This Agreement has been duly and validly authorized, executed and
delivered by the Company.
 
(h)           The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its Subsidiaries that is material to the Company and its Subsidiaries, taken
as a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any Subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under the Transaction Documents, the distribution of the Preliminary Offering
Memorandum and the Offering Memorandum or the consummation of the transactions
contemplated by the Transaction Documents, except such as may be required by the
securities or blue sky laws of the various states in connection with the offer
and sale of the Notes.
 
(i)           None of (i) the execution, delivery and performance by the Company
of this Agreement and consummation of the transactions contemplated by the
Transaction Documents, and (ii) the issuance and sale of the Notes will give
rise to a right to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach of any term or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under, or require any consent or waiver under, or
result in the execution or imposition of any lien, charge or encumbrance upon
any properties or assets of the Company or any Subsidiary pursuant to the terms
of, any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any Subsidiary is a party or by which either the Company or
any Subsidiary or any of their properties or businesses is bound, or any
franchise, license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or any Subsidiary or violate any provision of the
charter or by-laws of the Company or any  Subsidiary, except for such consents
or waivers which have already been obtained and are in full force and effect.
 
(j)           The Company has authorized and outstanding capital stock as set
forth under the caption “Capitalization” in the Disclosure Package and the
Offering Memorandum.  All of the issued and outstanding shares of Common Stock
of the Company have been duly and validly issued and are fully paid and
nonassessable.  There are no statutory preemptive or other similar rights to
subscribe for or to purchase or acquire any shares of Common Stock of the
Company or any of the Subsidiaries or any such rights pursuant to its charter or
by-laws or any agreement or instrument to or by which the Company or any of the
Subsidiaries is a party or bound.  Except as disclosed in the Disclosure Package
and the Offering Memorandum, there is no outstanding option, warrant or other
right calling for the issuance of, and there is no commitment, plan or
arrangement to issue, any share of the Common Stock of the Company or any of the
Subsidiaries or any security convertible into, or exercisable or exchangeable
for, such stock.
 
(k)           There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and the Subsidiaries, taken as a whole, from that set forth in the
Disclosure Package and the Offering Memorandum.
 
 
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(l)           The Company does not have any current plans to undertake any
acquisition that would require disclosure under Rule 3-05 of Regulation S-X or
any other material acquisition.  The Company has not entered into any memorandum
of understanding, letter of intent, agreement or commitment relating to any
potential acquisition.‬‪
 
(m)           There are no legal or governmental proceedings pending or
threatened to which the Company or any of its Subsidiaries is a party or to
which any of the properties of the Company or any of its Subsidiaries is
subject, which would have a Material Adverse Effect, or would materially
adversely affect the power or ability of the Company to perform its obligations
under this Agreement or to consummate the transactions contemplated by the
Disclosure Package and the Offering Memorandum.
 
(n)           The Company is not, and, after giving effect to the offering and
sale of the Notes and the application of the proceeds thereof as described in
the Disclosure Package and the Offering Memorandum, will not be, required to
register as an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.
 
(o)           The relevant subsidiaries of the Company which were incorporated
outside the United States, are not expected to be “passive foreign investment
companies” within the meaning of Section 1297 of the United States Internal
Revenue Code of 1986 for the current taxable year and any foreseeable future
taxable years.
 
(p)           Neither the Company nor any of the Subsidiaries is in breach or
violation of any provision of applicable law or its respective constitutive
documents, or in default under, nor has any event occurred which, with notice,
lapse of time or both, would result in any breach or violation of, constitute a
default under or give the holder of any indebtedness (or a person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of
all or a part of such indebtedness under any agreement or other instrument
binding upon the Company or any of the Subsidiaries that is material to the
Company and the Subsidiaries, taken as a whole, or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the Company
or any of the Subsidiaries.
 
(q)           The Company and its Subsidiaries (i) are in compliance with any
and all applicable foreign, United States federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a Material Adverse Effect.
 
 
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(r)           There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would have a
Material Adverse Effect.  The Company is not responsible for any costs or
liabilities (including, without limitation, any expenditures required for
clean-up, land reclamation or compliance with Environmental Laws) with respect
to Shandong Bangsheng Chemical Co., Ltd.
 
(s)           There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company.
 
(t)           Neither the Company nor any of its Subsidiaries or affiliates, nor
any director, officer or employee, nor, to the Company’s best knowledge, any
agent or representative of the Company or of any of its Subsidiaries or
affiliates, has taken or will take any action in furtherance of an offer,
payment, promise to pay, or authorization or approval of the payment or giving
of money, property, gifts or anything else of value, directly or indirectly, to
any “government official” (including any officer or employee of a government or
government-owned or controlled entity or of a public international organization,
or any person acting in an official capacity for or on behalf of any of the
foregoing, or any political party or party official or candidate for political
office) to influence official action or secure an improper advantage; and the
Company and its Subsidiaries and affiliates have conducted their businesses in
compliance with applicable anti-corruption laws and have instituted and
maintained and will continue to maintain policies and procedures designed to
promote and achieve compliance with such laws and with the representation and
warranty contained herein.
 
(u)           The operations of the Company and its Subsidiaries are and have
been conducted at all times in material compliance with all applicable financial
recordkeeping and reporting requirements, including those of the Bank Secrecy
Act, as amended by Title III of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of
jurisdictions where the Company and its Subsidiaries conduct business, the rules
and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Anti-Money Laundering Laws”), and no action, suit or
proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its Subsidiaries with respect to
the Anti-Money Laundering Laws is pending or, to the best knowledge of the
Company, threatened.
 
(v)       (i)  The Company represents that neither the Company nor any of its
Subsidiaries (collectively, the “Entity”), nor any director, officer or
employee, nor, to the Company’s best knowledge, any agent, affiliate or
representative of the Company or of any of its Subsidiaries, is an individual or
entity (“Person”) that is, or is owned or controlled by a Person that is:
 

 
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(A)           the subject of any sanctions administered or enforced by the U.S.
Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the United
Nations Security Council (“UNSC”), the European Union (“EU”), Her Majesty’s
Treasury (“HMT”), or other relevant sanctions authority (collectively,
“Sanctions”), nor
 
(B)           located, organized or resident in a country or territory that is
the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba,
Iran, North Korea, Sudan and Syria).
 
(ii)  The Entity represents and covenants that it will not, directly or
indirectly, use the proceeds of the offering, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other
Person:
 
(A)  to fund or facilitate any activities or business of or with any Person or
in any country or territory that, at the time of such funding or facilitation,
is the subject of Sanctions; or
 
(B)  in any other manner that will result in a violation of Sanctions by any
Person (including any Person participating in the offering, whether as
underwriter, advisor, investor or otherwise).
 
(iii)  The Entity represents and covenants that for the past five years, it has
not knowingly engaged in, is not now knowingly engaged in, and will not engage
in, any dealings or transactions with any Person, or in any country or
territory, that at the time of the dealing or transaction is or was the subject
of Sanctions.
 
(w)          Subsequent to the respective dates as of which information is given
in each of the Preliminary Offering Memorandum, the Disclosure Package and the
Offering Memorandum, (i) the Company and its Subsidiaries have not incurred any
material liability or obligation, direct or contingent, nor entered into any
material transaction; (ii) the Company has not purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or distribution
of any kind on its capital stock; and (iii) there has not been any material
change in the capital stock, short-term debt or long-term debt of the Company
and its Subsidiaries.
 
(x)           The Company and its Subsidiaries have good and valid title to all
real property and good and valid title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, taken as
a whole, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Disclosure Package and the Offering
Memorandum or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries; and any real property and buildings held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries, in each case except as described
in the Disclosure Package and the Offering Memorandum.
 
 
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(y)           The Company and its Subsidiaries own or possess, or can acquire on
reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them, and neither the Company nor
any of its Subsidiaries has received any written notice of infringement of or
conflict with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
 
(z)           Each of the Company and the Subsidiaries has full power, authority
and legal right to enter into, execute, assume, deliver and perform its
obligations under each of the contracts and agreements referred to or described
in the Disclosure Package and the Offering Memorandum to which it is a party
(the “Disclosed Contracts”), and has authorized, executed and delivered each of
the Disclosed Contracts, and, assuming due authorization, execution and delivery
by the other parties thereto, the Disclosed Contracts constitute valid, legal
and binding obligations of the Company or such Subsidiary, enforceable against
it in accordance with the terms thereof, subject, in each case as to
enforceability, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles. Neither the Company nor any
of the Subsidiaries has sent or received any communication regarding termination
of, or intent not to renew, any of the Disclosed Contracts, and no such
termination or non-renewal has been threatened by the Company or any of the
Subsidiaries or, to the best knowledge of the Company after due inquiry, any
other party to any such contract or agreement.
 
(aa)         No material labor dispute with the employees of the Company or any
of its Subsidiaries exists or, to the knowledge of the Company, is imminent; and
the Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers, manufacturers or
contractors that could have a Material Adverse Effect.
 
(bb)        The Company and each of its Subsidiaries are insured by insurers
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which they are engaged; neither the Company nor any of its
Subsidiaries has been refused any insurance coverage sought or applied for; and
neither the Company nor any of its Subsidiaries 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 at a cost that would not have a Material
Adverse Effect.
 
(cc)         The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, and neither the Company nor
any of its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
 
 
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(dd)         Each of the Company and its Subsidiaries has filed all U.S.
federal, state, local and foreign tax returns required to be filed through the
date of this Agreement or have requested extensions thereof (except where the
failure to file would not, individually or in the aggregate, have a Material
Adverse Effect) and have paid all taxes required to be paid thereon (except for
cases in which the failure to file or pay would not have a Material Adverse
Effect, or, except as currently being contested in good faith and for which
reserves required by U.S. GAAP have been created in the financial statements of
the Company), and no tax deficiency has been determined adversely to the Company
or any of its Subsidiaries which has had (nor does the Company nor any of its
Subsidiaries have any notice or knowledge of any tax deficiency which could
reasonably be expected to be determined adversely to the Company or its
Subsidiaries and which could reasonably be expected to have) a Material Adverse
Effect. All local and national governmental tax holidays, exemptions, waivers,
financial subsidies, and other local and national tax relief, concessions and
preferential treatment enjoyed by the Company or any of the Subsidiaries in the
People’s Republic of China (the “PRC”) as described in the Disclosure Package
and the Offering Memorandum are valid, binding and enforceable and do not
violate any laws, regulations, rules, orders, decrees, guidelines, judicial
interpretations, notices or other legislation of the PRC.
 
(ee)          Except as described in the Disclosure Package and the Offering
Memorandum, no Subsidiary is currently prohibited, directly or indirectly, from
paying any dividends to the Company, from making any other distribution on such
Subsidiary’s capital stock, from repaying to the Company any loans or advances
to such Subsidiary from the Company or from transferring any of such
Subsidiary’s property or assets to the Company or any other Subsidiary of the
Company.
 
(ff)           KPMG and Hansen, Barnett & Maxwell, P.C., whose reports on the
consolidated financial statements of the Company and the Subsidiaries are
included in the Disclosure Package and the Offering Memorandum, are independent
registered public accountants as required by the Securities Act and by the rules
of the Public Company Accounting Oversight Board.
 
(gg)         The financial statements, together with the related notes and
schedules thereto, included in the Disclosure Package and the Offering
Memorandum present fairly the consolidated financial position of the Company and
the Subsidiaries as of the dates indicated and the consolidated results of
operations, cash flows and changes in shareholders’ equity of the Company for
the periods specified and have been prepared in compliance as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the related rules and regulations adopted by the Commission and in
conformity with United States GAAP applied on a consistent basis during the
periods involved; the other financial and statistical data contained in the
Disclosure Package and the Offering Memorandum are accurately and fairly
presented and prepared on a basis consistent with the financial statements and
books and records of the Company; and the Company and the Subsidiaries do not
have any material outstanding guarantees, liabilities or obligations, direct or
contingent (including any off-balance sheet obligations) not described in the
Disclosure Package and the Offering Memorandum.
 
 
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(hh)         The section entitled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Disclosure Package and the
Offering Memorandum accurately and fully describes (i) accounting policies that
the Company believes are the most important in the portrayal of the Company’s
financial condition and results of operations and that require management’s most
difficult, subjective or complex judgments, (ii) judgments and uncertainties
affecting the application of critical accounting policies and (iii) the
likelihood that materially different amounts would be reported under different
conditions or using different assumptions and an explanation thereof. The
Company’s directors and management have reviewed and agreed with the selection,
application and disclosure of the Company’s critical accounting policies as
described in the Disclosure Package and the Offering Memorandum and have
consulted with its independent accountants with regards to such disclosure.
 
(ii)           The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the Securities Exchange
Act of 1934, as amended (together with the rules and regulations of the
Securities & Exchange Commission (the “Commission”) promulgated thereunder, the
“Exchange Act”)), which: (i) are designed to ensure that material information
relating to the Company is made known to the Company’s principal executive
officer and its principal financial officer by others within the Company,
particularly during the periods in which the periodic reports required under the
Exchange Act are required to be prepared; (ii) provide for the periodic
evaluation of the effectiveness of such disclosure controls and procedures at
the end of the periods in which the periodic reports are required to be
prepared; and (iii) are effective in all material respects to perform the
functions for which they were established.
 
(jj)           Except as described in the Disclosure Package and the Offering
Memorandum, based on the evaluation of its disclosure controls and procedures,
the Company is not aware of (i) any material weakness or significant deficiency
in the design or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize and report financial data or any
material weaknesses in internal controls; (ii) any matter which could result in
a restatement of the Company’s financial statements for any annual or interim
period during the current fiscal year or prior fiscal years; or (iii) any fraud
that involves management or other employees of the Company who have a role in
the Company’s internal controls.  Since the end of the Company’s most recent
audited fiscal year, there has been no change in the Company’s internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
 
(kk)          There is and has been no material failure on the part of the
Company or, to the best of its knowledge, any of the Company’s directors or
officers, in their capacities as such, to comply with any provisions of the
Sarbanes-Oxley Act of 2002 and the rules and regulations in connection therewith
(the “Sarbanes-Oxley Act”), including Section 402 relating to loans and Sections
302 and 906 relating to certifications, and with the corporate governance
requirements under applicable NASDAQ regulations.  The Company has implemented
internal audit policies and procedures that are effective to ensure compliance
with the Sarbanes-Oxley Act or the corporate governance rules of NASDAQ in all
material respects.
 
(ll)           None of the Auditors has been engaged by the Company to perform
any “prohibited activities” (as defined in Section 10A of the Exchange Act).
 
 
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(mm)       Except as described in the Disclosure Package and the Offering
Memorandum, there are no off-balance sheet arrangements (as defined in Item 303
of Regulation S-K) that have or are reasonably likely to have a Material Adverse
Effect.
 
(nn)         The Disclosure Package and the Offering Memorandum fairly and
accurately describe all material trends, demands, commitments and events known
to the Company, and uncertainties, and the potential effects thereof, that the
Company believes would be materially affect its liquidity and are reasonably
likely to occur.
 
(oo)         Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with U.S. 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.
 
(pp)         There are no material relationships or transactions between the
Company or any of the Subsidiaries and their respective 10% or greater
shareholders, affiliates, directors or officers or any affiliates or members of
the immediate families of such persons that are not disclosed in the Disclosure
Package and the Offering Memorandum.
 
(qq)         The Company has not sold, issued or distributed any shares of
Common Stock during the six-month period preceding the date hereof, including
any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities
Act, other than shares issued pursuant to employee benefit plans, qualified
stock option plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.
 
(rr)           Any third-party statistical and market-related data included the
Disclosure Package and the Offering Memorandum are based on or derived from
sources that the Company believes to be reliable and accurate.
 
(ss)          Each “forward-looking statement” (within the meaning of Section
27A of the Securities Act or Section 21E of the Exchange Act) contained in the
Disclosure Package and the Offering Memorandum, has been made or reaffirmed with
a reasonable basis and in good faith.
 
(tt)           The statements in the Disclosure Package and the Offering
Memorandum under the headings “Risk Factors” and “Taxation” insofar as such
statements summarize legal matters, agreements, documents or proceedings
discussed therein, are accurate, complete and fair summaries of such matters
described therein in all material respects.
 
(uu)         The shares of the Common Stock have been duly authorized for
listing on the NASDAQ Global Select Market.
 
 
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(vv)         The Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or the listing of the Common Stock on the NASDAQ Global Select Market, nor
has the Company received any written notification that the Commission or the
NASDAQ Global Select Market is contemplating terminating such registration or
listing.
 
(ww)        There are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the Company
or any Initial Purchaser for a brokerage commission, finder’s fee or other like
payment in connection with this offering.
 
(xx)           Neither the Company nor any of the Subsidiaries nor any of their
respective directors, officers, affiliates or controlling persons has taken,
directly or indirectly, any action designed, or which has constituted or would
reasonably be expected to cause or result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Notes or the Common Stock issuable upon conversion thereof.
 
(yy)          No transaction, stamp, capital or other issuance, registration,
transaction, transfer or withholding taxes or duties are payable in the PRC, the
British Virgin Islands or the State of Nevada by or on behalf of the Initial
Purchasers to any PRC, British Virgin Islands or the State of Nevada taxing
authority in connection with (i) the issuance, sale and delivery of the Notes by
the Company, (ii) the purchase from the Company of the Notes by the Initial
Purchasers, (C) the execution and delivery of this Agreement.
 
(zz)           Each of the Company and its Subsidiaries has taken all necessary
steps to comply with, and to ensure compliance by all of the Company’s direct or
indirect shareholders and option holders who are PRC residents with any
applicable rules and regulations of the State Administration of Foreign Exchange
of the PRC (the “SAFE Rules and Regulations”), including, without limitation,
requiring each shareholder and option holder that is, or is directly or
indirectly owned or controlled by, a PRC resident to complete any registration
and other procedures required under applicable SAFE Rules and Regulations.
 
(aaa)        The Company is aware of, and has been advised as to, the content of
the Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors jointly promulgated on August 8, 2006 by the Ministry of Commerce, the
State Assets Supervision and Administration Commission, the State Administration
of Taxation, the State Administration of Industry and Commerce, the China
Securities Regulatory Commission (“CSRC”) and the State Administration of
Foreign Exchange of the PRC (the “M&A Rules”), in particular the relevant
provisions thereof that purport to require offshore special purpose vehicles
controlled directly or indirectly by PRC-incorporated companies or PRC residents
and established for the purpose of obtaining a stock exchange listing outside of
the PRC to obtain the approval of the CSRC prior to the listing and trading of
their securities on any stock exchange located outside of the PRC. The Company
has received legal advice specifically with respect to the M&A Rules from its
PRC counsel and the Company understands such legal advice. In addition, the
Company has communicated such legal advice in full to each of its directors and
each such director has confirmed that he or she understands such legal advice.
 
 
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(bbb)       The issuance and sale of the Notes and the consummation of the
transactions contemplated by this Agreement, the Disclosure Package and the
Offering Memorandum are not and will not be, as of the date hereof and on the
Closing Date, affected by the M&A Rules or any official clarifications,
guidance, interpretations or implementation rules in connection with or related
to the M&A Rules, including the guidance and notices issued by the CSRC on
September 8 and September 21, 2006 (together with the M&A Rules, the “M&A Rules
and Related Clarifications”).
 
(ccc)        The M&A Rules and Related Clarifications do not require the Company
to obtain the approval of the CSRC prior to the issuance and sale of the Notes,
or the consummation of the transactions contemplated by this Agreement, the
Disclosure Package and the Offering Memorandum.
 
(ddd)       The statements set forth in the Disclosure Package and the Offering
Memorandum under the heading “Risk Factors—Risks Related to This Offering—If the
China Securities Regulatory Commission, or CSRC, or another PRC regulatory
agency determines that its approval was required in connection with this
offering, we may become subject to penalties.” are fair and accurate summaries
of the matters described therein, and nothing has been omitted from such
summaries that would make them misleading in any material respect.
 
(eee)        The Disclosure Package and the Offering Memorandum and any
preliminary offering memorandum comply, and any amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Disclosure Package, the Offering Memorandum or any
preliminary offering memorandum, as amended or supplemented, if applicable, are
distributed.
 
(fff)          The choice of the laws of the State of New York as the governing
law of this Agreement is a valid choice of law under the laws of the State of
Nevada, the British Virgin Islands and the PRC and will be honored by courts in
the State of Nevada, the British Virgin Islands and the PRC. The Company has the
power to submit, and pursuant to Section 19 of this Agreement, has legally,
validly, effectively and irrevocably submitted, to the personal jurisdiction of
each New York Court (as defined in Section 19), and the Company has the power to
designate, appoint and authorize, and pursuant to Section 19 of this Agreement,
has legally, validly, effectively and irrevocably designated, appointed and
authorized, the Authorized Agent (as defined in Section 19 hereof) for service
of process, in each case, in any action arising out of or relating to this
Agreement or the transactions contemplated hereby, and service of process
effected on such Authorized Agent will be effective to confer valid personal
jurisdiction over the Company as provided in Section 19 hereof.
 
(ggg)       None of the Company, any of the Subsidiaries or any of their
respective properties, assets or revenues has any right of immunity, under the
laws of the State of Nevada, the British Virgin Islands, the PRC or the State of
New York, from any legal action, suit or proceeding, the giving of any relief in
any such legal action, suit or proceeding, set-off or counterclaim, the
jurisdiction of any the State of Nevada, the British Virgin Islands, PRC, New
York or United States federal court, service of process, attachment upon or
prior to judgment, or attachment in aid of execution of judgment, or execution
of a judgment, or other legal process or proceeding for the giving of any relief
or for the enforcement of a judgment, in any such court, with respect to its
obligations, liabilities or any other matter under or arising out of or in
connection with this Agreement; and, to the extent that the Company, any of the
Subsidiaries or any of their respective properties, assets or revenues may have
or may hereafter become entitled to any such right of immunity in any such court
in which proceedings may at any time be commenced, each of the Company and the
Subsidiaries waives or will waive such right to the extent permitted by law and
has consented to such relief and enforcement as provided in Section 19 of this
Agreement.
 
 
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(hhh)       Except as described in the Disclosure Package and the Offering
Memorandum, any final judgment for a fixed sum of money rendered by a New York
Court having jurisdiction under its own domestic laws in respect of any suit,
action or proceeding against the Company based upon this Agreement would be
recognized and enforced by (A) the State of Nevada courts without re-examining
the merits of the case under the common law doctrine of obligation; and (B) PRC
courts, subject to compliance with relevant civil procedural requirements under
the PRC Civil Procedures Law. It is not necessary that this Agreement, the
Disclosure Package, the Offering Memorandum or any other document be filed or
recorded with any court or other authority in the State of Nevada, the British
Virgin Islands or the PRC.
 
(iii)          The Notes are eligible for resale pursuant to Rule 144A and will
not be, at Closing Time, of the same class as securities listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated interdealer quotation system.
 
(jjj)           None of the Company or any Subsidiary or any of their respective
affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act)
or representatives directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of any “security” (as
defined in the Securities Act) which is or could be integrated with the sale of
the Notes in a manner that would require the registration under the Securities
Act of the Notes or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
in connection with the offer and sale of the Notes or in connection with Exempt
Resales of the Notes, or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.  Assuming the accuracy of the
Initial Purchasers’ representations and warranties set forth in Section 3
hereof, neither (i) the offer and sale of the Notes to the Initial Purchasers in
the manner contemplated by this Agreement, the Disclosure Package and the
Offering Memorandum nor (ii) the Exempt Resales require registration under the
Securities Act. The Indenture does not require qualification under the Trust
Indenture Act.  No securities of the same class as the Notes have been issued
and sold by the Company or any Subsidiary within the six-month period
immediately prior to the date hereof.
 
(kkk)        Neither of the Company nor any of its Subsidiaries has any material
obligation to provide union, medical, health, disability, housing, welfare,
retirement, death or other employee benefits to any of the present or past
employees of the Company or any of its Subsidiaries, or to any other person and
each of the Company and its Subsidiaries has complied in all material respects
with all employment, labor and similar laws applicable to it and has made all
such union and welfare contributions for its employees as required by law.
 
(lll)           Each director and executive officer of the Company and each
stockholder of the Company listed on Schedule IV hereto has delivered to the
Initial Purchasers his enforceable written lock-up agreement in the form
attached to this Agreement as Exhibit A hereto (“Lock-Up Agreement”).
 
 
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(mmm)     Upon the Issuance and delivery of the Notes in accordance with this
Agreement and the Indenture, the Notes will be convertible at the option of the
holder thereof into shares of the Common Stock in accordance with the terms of
the Notes and the Indenture; the Common Stock issuable upon conversion of the
Notes have been duly authorized and reserved and, when issued upon conversion of
the Notes, will be validly issued, fully paid and non-assessable; and the
issuance of the Common Stock will not be subject to any preemptive or similar
rights.
 
(nnn)       Neither the Company nor any of the Company’s Subsidiaries has
distributed or, prior to the later to occur of (i) the Closing Date and (ii)
completion of the distribution of the Notes, will distribute any material in
connection with the offering and sale of the Notes other than the Disclosure
Package or the Offering Memorandum.
 
Any certificate signed by or on behalf of the Company and delivered to the
Initial Purchasers shall be deemed to be a representation and warranty by the
Company to the Initial Purchasers as to the matters covered thereby.
 
The Company acknowledges that the Initial Purchasers and, for purposes of the
opinions to be delivered to the Initial Purchasers pursuant to Section 10
hereof, counsel for the Company and counsel for the Initial Purchasers, will
rely upon the accuracy and truth of the foregoing representations and hereby
consent to such reliance.
 
3.           Representations and Warranties of the Initial Purchasers.  Each
Initial Purchaser, severally and not jointly, represents, warrants and covenants
to the Company and agrees that:
 
(a)           Such Initial Purchaser is a QIB and an accredited investor within
the meanings of Rule 501(a) of the Securities Act, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Notes.
 
(b)           (i) It will not solicit offers for, or offer or sell, such Notes
by any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act and
(ii) it will solicit offers for such Notes only from, and will offer such Notes
only to, persons that it reasonably believes to be QIBs.  In purchasing such
Notes, the QIBs are deemed to have represented and agreed as provided in the
Offering Memorandum under the caption “Transfer Restrictions.”
 
4.           Purchase, Sale and Delivery.  On the basis of the representations,
warranties, covenants and agreements contained in this Agreement, and subject to
its terms and conditions:
 
(a)           The Company agrees to issue and sell to the several Initial
Purchasers, and each of the Initial Purchasers agrees, severally and not
jointly, to purchase from the Company, at a purchase price of 95.0% of the
principal amount thereof (the “Initial Price”), the aggregate amount of the
Notes.
 
 
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(b)           Payment of the purchase price for, and delivery of, the Notes
shall be made to the Company at 10:00 a.m., New York City time, on the third
business day following the date of this Agreement or at such time on such other
date, not later than ten (10) business days after the date of this Agreement, as
shall be agreed upon by the Company and the Representative (such time and date
of delivery and payment are called the "Closing Date”).
 
(c)           Payment for the Notes shall be made to the Company in Federal or
other funds immediately available in New York City (same day), against delivery
of the Notes to the Representative for the respective accounts of the Initial
Purchasers.
 
(d)           On the Closing Date, the Company will deliver to the Initial
Purchasers, in such denomination or denominations and registered in such name or
names as the Representative requests upon notice to the Company at least 24
hours prior to such Closing Date, one or more Notes in definitive form,
registered in such names and in such denominations as the Initial Purchasers
shall request, having an aggregate amount corresponding to the aggregate
principal amount of the Notes sold pursuant to Exempt Resales to QIBs (the
“Definitive Notes”) against payment of the purchase price therefor by wire
transfer of same-day funds to the account of the Company, previously designated
by it in writing.  The Definitive Notes shall be made available to the Initial
Purchasers for inspection not later than 5:00 p.m., New York City time, on the
business day immediately preceding the Closing Date.
 
5.           Offering by Initial Purchasers.  The Initial Purchasers propose to
make an offering of the Notes at the price and upon the terms set forth in the
Offering Memorandum as soon as practicable after this Agreement is entered into
and as, in the judgment of the Initial Purchasers, is advisable.
 
6.           Agreements of the Company.  The Company covenants and agrees with
the Initial Purchasers that:
 
(a)           The Company shall advise the Initial Purchasers promptly and, if
requested by the Representative, confirm such advice in writing, (i) of the
issuance by any state securities commission or other regulatory authority of any
stop order or order suspending the qualification or exemption from qualification
of any Notes for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority and (ii) of the happening of any event that makes any
statement of a material fact made in the Disclosure Package or the Offering
Memorandum untrue or that requires the making of any additions to or changes in
the Disclosure Package or the Offering Memorandum in order to make the
Disclosure Package or the Offering Memorandum not misleading in the light of the
circumstances existing at the time it is delivered to a QIB.  The Company shall
use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of any Notes under
any state securities or blue sky laws and, if at any time any state securities
commission or other regulatory authority issues an order suspending the
qualification or exemption from qualification of any Notes under any state
securities or blue sky laws, the Company shall use its best effort to obtain the
withdrawal or lifting of such order at the earliest possible time.
 
 
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(b)           If the Disclosure Package is being used to solicit offers to buy
the Notes at a time when the Offering Memorandum is not yet available to
prospective purchasers and any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Disclosure Package in order
to make the statements therein, in the light of the circumstances at the time it
is delivered to a QIB, not misleading, or if, in the opinion of counsel for the
Initial Purchasers, it is necessary to amend or supplement the Disclosure
Package to comply with applicable law, the Company shall prepare and furnish, at
its own expense, to the Initial Purchasers and to any dealer upon request,
either amendments or supplements to the Disclosure Package so that the
statements in the Disclosure Package as so amended or supplemented will not, in
the light of the circumstances at the time it is delivered to a QIB, be
misleading or so that the Disclosure Package, as amended or supplemented, will
comply with applicable law.
 
(c)           The Company shall, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers, and to those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum, the Disclosure Package and the Offering
Memorandum, and any amendments or supplements thereto, as the Initial Purchasers
may reasonably request.  The Company consents to the use of the Preliminary
Offering Memorandum, the Disclosure Package and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchasers in connection with Exempt Resales.
 
(d)           The Company will not amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum or any other document used in connection
with the offer and sale of the Notes or any amendment or supplement thereto
during such period as, in the opinion of counsel for the Initial Purchasers, the
Preliminary Offering Memorandum or the Offering Memorandum is required by law to
be delivered in connection with Exempt Resales and in connection with
market-making activities of the Initial Purchasers for so long as any Notes are
outstanding unless the Initial Purchasers shall previously have been advised
thereof and furnished a copy for a reasonable period of time prior to the
proposed amendment or supplement and as to which the Initial Purchasers shall
have given their consent, which consent shall not be unreasonably withheld.  The
Company shall promptly, upon the request of the Initial Purchasers or counsel
for the Initial Purchasers, make any amendment or supplement to the Preliminary
Offering Memorandum or the Offering Memorandum or any other document used in
connection with the offer and sale of the Notes that may be necessary or
advisable in connection with such Exempt Resales or such market making
activities.
 
 
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(e)           If, during such period after the date hereof and prior to the date
on which all of the Notes shall have been sold by the Initial Purchasers, any
event shall occur as a result of which, it is necessary or advisable, in the
opinion of counsel for the Initial Purchasers, to amend or supplement the
Preliminary Offering Memorandum or the Offering Memorandum or any other document
used in connection with the offer and sale of the Notes in order to make such
Preliminary Offering Memorandum or Offering Memorandum or such other document
not misleading in the light of the circumstances existing at the time it is
delivered to a QIB, or if for any other reason it shall be necessary or
advisable to amend or supplement the Preliminary Offering Memorandum or the
Offering Memorandum or such other document to comply with applicable laws, rules
or regulations, the Company shall (subject to Section 6(d) hereof) forthwith
amend or supplement such Preliminary Offering Memorandum or Offering Memorandum
or such other document at its own expense so that, as so amended or
supplemented, such Preliminary Offering Memorandum or Offering Memorandum or
such other document will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein
not misleading or so that such Preliminary Offering Memorandum or Offering
Memorandum or such other document will comply with all applicable laws, rules or
regulations; if, during the period referred to in 6(d) above, the Company
proposes to file with the Commission an Exchange Act report that is incorporated
by reference into the Offering Memorandum, a reasonable time prior to the
proposed filing, the Company shall furnishes a copy of such Exchange Act report
to the Initial Purchasers for review and comment, and shall not file such
document with the Commission until the Initial Purchasers have been afforded the
opportunity to review and comment and the Initial Purchasers have not reasonably
objected to the filing of such Exchange Act report.
 
(f)           The Company shall cooperate with the Initial Purchasers and
counsel for the Initial Purchasers in connection with the qualification or
registration of the Notes for offering and sale under the securities or blue sky
laws of such jurisdictions as the Representative may designate and shall
continue such qualifications in effect for as long as may be necessary to
complete the Exempt Resales; provided, however, that in connection therewith the
Company shall not be required to qualify as a foreign corporation where it is
not now so qualified or to execute a general consent to service of process in
any jurisdiction or to take any other action that would subject it to general
service of process or to taxation in respect of doing business in any
jurisdiction in which it is not otherwise subject, in each case, other than as
to matters and transactions relating to the Preliminary Offering Memorandum, the
Offering Memorandum or Exempt Resales.
 
(g)           The Company shall apply the net proceeds from the sale of the
Notes in the manner set forth under “Use of Proceeds” in the Disclosure Package
and the Offering Memorandum; and not to invest, or otherwise use the proceeds
received by the Company from its sale of the Notes in such a manner (i) as would
require any of the Company and its Subsidiaries to register as an investment
company under the 1940 Act, or (ii) that would result in the Company being not
in compliance with any applicable laws, rules and regulations of the State
Administration of Foreign Exchange of the PRC.
 
(h)           The Company will indemnify and hold harmless the trustee and the
Initial Purchasers against any documentary, stamp or similar issue tax,
including any interest and penalties, on the creation, issue and sale of the
Notes to the Initial Purchasers and on the execution and delivery of this
Agreement.  All payments to be made by the Company hereunder shall be made
without withholding or deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless the Company is compelled
by law to deduct or withhold such taxes, duties or charges.  In that event, the
Company shall pay such additional amounts as may be necessary in order that the
net amounts received after such withholding or deduction shall equal the amounts
that would have been received if no withholding or deduction had been made.
 
(i)           The Company shall not voluntarily claim, and shall actively resist
any attempts to claim, the benefit of any usury laws against the holders of any
Notes.
 
 
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(j)           The Company shall do and perform all things required or necessary
to be done and performed under this Agreement prior to or after the Closing Date
and to satisfy all conditions precedent to the delivery of the Notes.
 
(k)           None of the Company or any of its “affiliates” (as defined in Rule
144 under the Securities Act) will sell, offer for sale, solicit offers to buy
or otherwise negotiate in respect of any “security” (as defined in the
Securities Act) that could be integrated with the sale of the Notes in a manner
that would require the registration under the Securities Act of the sale to the
Initial Purchasers or the QIBs of the Notes or to take any other action that
would result in the Exempt Resales not being exempt from registration under the
Securities Act.
 
(l)            For so long as any of the Notes remain outstanding and are
“restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, for the benefit of holders from time to time of Notes, the
Company will furnish at its expense, upon request, to any holder or beneficial
owner of Notes and prospective purchasers of the Notes, information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to
and in compliance with Section 13 or 15(d) of the Exchange Act.
 
(m)           The Company shall comply with all of the agreements set forth in
the representation letters to DTC relating to the approval of the Notes by DTC
for “book-entry” transfer.
 
(n)           The Company shall (i) permit the Notes to be included for
quotation on The PORTAL Market and (ii) permit the Notes to be eligible for
clearance and settlement through DTC.
 
(o)           During the period of three years from the Closing Date, the
Company shall deliver without charge to the Initial Purchasers (i) as soon as
available, copies of each report and other communication (financial or
otherwise) of the Company mailed to the Trustee of the holders of the Notes,
stockholders or any national securities exchange on which any class of
securities of the Company may be listed (including without limitation, press
releases) other than materials filed with the Commission and (ii) from time to
time such other information concerning the Company and the Subsidiaries as the
Initial Purchasers may reasonably request.
 
(p)           The Company shall make generally available to the Company’s
security holders and to the Representative as soon as practicable an earnings
statement covering a period of at least twelve months beginning with the first
fiscal quarter of the Company occurring after the date of this Agreement which
shall satisfy the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
 
(q)           The Company shall not take, directly or indirectly, any action
which constitutes or is designed to cause or result in, or which could
reasonably be expected to constitute, cause or result in, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Notes or the Common Stock issuable upon conversion thereof, or
take any action prohibited by Regulation M under the Exchange Act, in connection
with the distribution of the Notes contemplated hereby.  The Company will not
distribute any (i) preliminary offering memorandum, including, without
limitation, the Preliminary Offering Memorandum, (ii) offering memorandum,
including, without limitation, the Offering Memorandum or (iii) other offering
material in connection with the offering and sale of the Notes.
 
 
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(r)           For so long as the Notes constitute “restricted” securities within
the meaning of Rule 144(a)(3) under the Securities Act, the Company shall not,
and shall not permit any Subsidiary to, solicit any offer to buy or offer to
sell the Notes by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act.
 
(s)           During the period of one year from the Closing Date, without the
prior written consent of the Initial Purchasers, the Company shall not, and
shall not permit any of its “affiliates” (as defined in Rule 144 under the
Securities Act) to, resell any of the Notes or Common Stock issuable upon
conversion of the Notes that constitute “restricted securities” under Rule 144
that have been reacquired by any of them.
 
(t)           Prior to the Closing Date, the Company shall not issue any press
release or other communications, directly or indirectly, or hold any press
conference with respect to the issuance of the Notes, the Company or any of its
Subsidiaries, the properties, business, results of operations, condition
(financial or otherwise), affairs or prospects of the Company or any of its
Subsidiaries, without the prior consent of the Initial Purchasers.  In such
instance, the Company shall furnish a copy of any such release or communication
to the Initial Purchasers for review and comment a reasonable time prior to its
contemplated release.
 
(u)           None of the Company, its affiliates or any person acting on its or
their behalf (other than the Initial Purchasers) will engage in any directed
selling efforts (as that term is defined in Regulation S) with respect to the
Notes, and the Company and its affiliates and each person acting on its or their
behalf (other than the Initial Purchasers) will comply with the offering
restrictions requirement of Regulation S.
 
(v)           Without the prior consent of the Initial Purchasers, the Company
shall not make any offer relating to the Notes using any written communication
(as defined in Rule 405 under the Securities Act) that constitutes an offer to
sell or a solicitation of an offer to buy the Notes other than the Preliminary
Offering Memorandum or the Offering Memorandum (the “Additional Written Offering
Communication”); if at any time following issuance of a Additional Written
Offering Communication any event occurred or occurs as a result of which such
Additional Written Offering Communication would conflict with the information in
the Disclosure Package or the Offering Memorandum or would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances then
prevailing, not misleading, the Company will give prompt notice thereof to the
Initial Purchasers and, if requested by the Initial Purchasers, will prepare and
furnish without charge to the Initial Purchasers an Additional Written Offering
Communication or other document which will correct such conflict, statement or
omission.
 
(w)           The Company, during the time prior to completion of the
distribution of Notes by the Initial Purchasers, will file all reports and other
documents required to be filed with the Commission pursuant to Sections 13, 14
or 15 of the Exchange Act within the time periods required by the Exchange Act
and the regulations promulgated thereunder.
 
 
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(x)           The Company shall reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligations to issue shares of its Common Stock upon
conversion of the Notes.
 
(y)           The Company shall comply with the SAFE Rules and Regulations, and
shall use best efforts to cause its directors, officers, option holders and
shareholders that are, or that are directly or indirectly owned or controlled
by, PRC residents or PRC citizens, to comply with the SAFE Rules and Regulations
applicable to them in connection with the Company, including without limitation,
requiring each shareholder, option holder, director and officer that is, or is
directly or indirectly owned or controlled by, a PRC resident or PRC citizen to
complete any registration and other procedures required under applicable SAFE
Rules and Regulations.
 
(z)           The Company also agrees that, without the prior written consent of
the Representative on behalf of the Initial Purchasers, it will not, during the
period ending 90 days after the date of the Final Memorandum, (1) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
the Common Stock or any securities convertible into or exercisable or
exchangeable for the Common Stock or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of the Common
Stock or such other securities, in cash or otherwise or (3) file any
registration statement with the Commission relating to the offering of any
shares of the Common Stock or any securities convertible into or exercisable or
exchangeable for the Common Stock.  The foregoing sentence shall not apply to
(a) the sale of the Notes under this Agreement, or (b) the issuance by the
Company of any shares of the Common Stock upon the exercise of an option or
warrant or the conversion of the Notes or any other security outstanding on the
date hereof of which the Initial Purchasers have been advised in writing.
Notwithstanding the foregoing, if (1) during the last 17 days of the 90-day
restricted period the Company issues an earnings release or material news or a
material event relating to the Company occurs; or (2) prior to the expiration of
the 90-day restricted period, the Company announces that it will release
earnings results during the 16-day period beginning on the last day of the
90-day period, the restrictions imposed by this agreement shall continue to
apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event.  The
Company shall promptly notify the Representative of any earnings release, news
or event that may give rise to an extension of the initial 90-day restricted
period.  The Company also agrees that, without the prior written consent of the
Representative on behalf of the Initial Purchasers, it will not, during the
period beginning on the date hereof and continuing to and including the Closing
Date, offer, sell, contract to sell or otherwise dispose of any debt securities
of the Company or warrants to purchase debt securities of the Company
substantially similar to the Notes (other than the sale of the Notes under this
Agreement).
 
 
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7.           Expenses.  Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company’s
counsel and the Auditors in connection with the issuance and sale of the Notes
and all other fees or expenses in connection with the preparation of the
Preliminary Offering Memorandum, the Disclosure Package, the Offering
Memorandum, any Additional Written Offering Communications prepared by or on
behalf of, used by, or referred to by the Company and any amendments and
supplements to any of the foregoing, including all printing costs associated
therewith, and the delivering of copies thereof to the Initial Purchasers, (ii)
all costs and expenses related to the transfer and delivery of the Notes to the
Initial Purchasers, and resale of the Notes by the Initial Purchasers, including
any transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or legal investment memorandum in connection with the
offer and sale of the Notes under state securities laws and all expenses in
connection with the qualification of the Notes for offer and sale under state
securities laws as provided in Section 6(f) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Initial Purchasers in
connection with such qualification and in connection with the Blue Sky or legal
investment memorandum, (iv) any fees charged by rating agencies for the rating
of the Notes, (v) the fees and expenses, if any, incurred in connection with the
admission of the Notes for trading in PORTAL or any appropriate market system,
(vi) the costs and charges of the Trustee including the fees and expenses of its
counsel, the paying agent and any transfer agent, registrar or depositary, (vii)
the cost of the preparation, issuance and delivery of the Notes, (viii) the
costs and expenses of the Company relating to investor presentations on any
“road show” undertaken in connection with the marketing of the offering of the
Notes, including, without limitation, expenses associated with the preparation
or dissemination of any electronic road show, expenses associated with
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, (ix) the
negotiation, preparation, printing, typing, filing, reproduction, execution and
delivery of this Agreement and of the other Transaction Documents, any amendment
or supplement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith and with the Exempt Resales; and (x) all other cost and expenses
incident to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section.  It is understood,
however, that except as provided in this Section, Section 9, and Section 13(c),
the Initial Purchasers will pay all of their costs and expenses, including,
without limitation, fees and disbursements of their counsel, and any advertising
expenses connected with any offers they may make.
 
8.           Indemnification.
 
(a)           The Company agrees to indemnify and hold harmless each Initial
Purchaser, each person, if any, who controls any Initial Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, and each affiliate of any Initial Purchaser within the meaning of Rule 405
under the Securities Act from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum, the Disclosure
Package, any Additional Written Offering Communication prepared by or on behalf
of, used by, or referred to by the Company, or the Offering Memorandum or any
amendment or supplement thereto, or caused by any omission or alleged omission
to state therein a material fact necessary to make the statements therein in the
light of the circumstances under which they were made not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through you expressly for use therein.
 
 
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(b)           Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Initial Purchaser, but only
with reference to information relating to such Initial Purchaser furnished to
the Company in writing by such Initial Purchaser through you expressly for use
in the Preliminary Offering Memorandum, the Disclosure Package, any additional
written offering communication prepared by or on behalf of, used by or referred
to by the Company, or the Offering Memorandum or any amendment or supplement
thereto.
 
(c)           In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the “indemnified party”)
shall promptly notify the person against whom such indemnity may be sought (the
“indemnifying party”) in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Representative, in the case of parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.  Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement.  No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
 
 
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9.           Contribution.
 
(a)           To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Notes or (ii) if the allocation provided
by clause 9(a)(i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause 9(a)(i) above but also the relative fault of the Company on the one hand
and of the Initial Purchasers on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand in connection with the offering of the Notes shall
be deemed to be in the same respective proportions as the net proceeds from the
offering of the Notes (before deducting expenses) received by the Company and
the total discounts and commissions received by the Initial Purchasers bear to
the aggregate offering price of the Notes. The relative fault of the Company on
the one hand and of the Initial Purchasers on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Initial
Purchasers and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Initial
Purchasers’ respective obligations to contribute pursuant to this Section 9 are
several in proportion to the respective principal amount of Notes they have
purchased hereunder, and not joint.
 
(b)           The Company and the Initial Purchasers agree that it would not be
just or equitable if contribution pursuant to Section 9(a) were determined by
pro rata allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 9(a). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 9(a) shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 9, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Notes resold by it in
the initial placement of such Notes were offered to investors exceeds the amount
of any damages that such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in Section 8 and this Section 9 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
 
 
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10.          Conditions of Initial Purchasers’ Obligations.  The obligations of
the Initial Purchasers to purchase and pay for the Notes, as provided herein,
are subject to the following conditions:
 
(a)           All of the representations and warranties of the Company contained
in this Agreement and any certificates delivered pursuant to this Agreement
shall be true and correct on the date hereof and on the Closing Date with the
same force and effect as if made on and as of the date hereof and the Closing
Date, respectively.  The Company shall have complied with all of the agreements,
or performed all of its obligations and satisfied all conditions to be complied
with, performed or satisfied hereunder at or prior to the Closing Date.
 
(b)           No stop order suspending the qualification or exemption from
qualification of the Notes in any jurisdiction referred to in Section 6(f)
hereof shall have been issued and no proceeding for that purpose shall have been
commenced or shall be pending or threatened.
 
(c)           None of the issuance and sale of the Notes pursuant to this
Agreement or any of the transactions contemplated by any of the other
Transaction Documents shall be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued; and there
shall not have been any legal action, statute, order, rule, regulation, decree
or other administrative proceeding enacted, instituted, adopted, issued or
threatened against the Company or against any Initial Purchasers relating to the
issuance of the Notes or the Initial Purchasers’ activities in connection
therewith or any other transactions contemplated by this Agreement or the
Offering Memorandum, or the other Transaction Documents.  No action, suit or
proceeding shall have been commenced and be pending against or affecting or, to
the best of the Company’s knowledge, threatened against, the Company or any
Subsidiary before any court or arbitrator or any governmental body, agency or
official that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect; and no
stop order shall have been issued preventing the use of the Preliminary Offering
Memorandum, any Additional Written Offering Communication, the Offering
Memorandum, or any amendment or supplement thereto.
 
 
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(d)           Since the respective dates as of which information is given in the
Disclosure Package, (i) there shall not have occurred any change, or any
development involving a prospective change, in or affecting the general affairs,
management, business, condition (financial or other), properties, prospects,
results of operations, capital stock, or long-term debt, or a material increase
in the short-term debt, of the Company or any of the Subsidiaries, not
contemplated by the Disclosure Package and the Offering Memorandum that is, in
the sole judgment of the Representative, so material and adverse as to make it
impracticable or inadvisable to proceed with the offering of the Notes on the
terms and in the manner contemplated by the Transaction Documents, (ii) no
dividend or distribution of any kind shall have been declared, paid or made by
the Company or any of the Subsidiaries on any class of its capital stock, other
than as disclosed in the Disclosure Package and the Offering Memorandum, (iii)
none of the Company or any of the Subsidiaries shall have incurred any liability
or obligation, direct or contingent, that is material, individually or in the
aggregate, to the Company and the Subsidiaries, taken as a whole, and that is
required to be disclosed on a balance sheet or notes thereto in accordance with
U.S. GAAP and is not disclosed on the latest balance sheet or notes thereto
included in the Disclosure Package and the Offering Memorandum and (iv) there
shall not have occurred any event or development relating to or involving the
Company or any of the Subsidiaries, or any of their respective officers or
directors that makes any statement made in the Disclosure Package or the
Offering Memorandum untrue or that, in the opinion of the Company and its
counsel or the Initial Purchasers and their counsel, require the making of any
addition to or change in the Disclosure Package or the Offering Memorandum in
order to state a material fact required by any applicable law, rule or
regulation to be stated therein or necessary in order to make the statements
made therein not misleading.
 
(e)           On or after the date hereof (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall there have been any
announcement of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
downgrading, or with negative implications, or direction not determined of, any
rating of the Company or any securities of the Company (including, without
limitation, the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain direction)
by any “nationally recognized statistical rating organization” as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act, (ii) there
shall not have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of the Company or
any securities of the Company by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the Notes
were marketed.
 
(f)           At the Closing Date and after giving effect to the consummation of
the transactions contemplated by the Transaction Documents, there exists no
Default or Event of Default (as defined in the Indenture).
 
(g)           The Initial Purchasers shall have received certificates, dated the
Closing Date, signed by the chief executive officer and the chief financial
officer of the Company, in form and substance satisfactory to the
Representative, confirming, as of the Closing Date, the matters set forth in
paragraphs (a), (b), (c), (d) and (e) of this Section 10 and that, as of such
Closing Date, the Company has complied with all of the agreements and satisfied
all of the conditions on its part to be performed or satisfied hereunder.
 
(h)           The Initial Purchasers shall have received a certificate, dated
the date hereof and the Closing Date, signed by the chief financial officer of
the Company, to the effect set forth in Exhibit B hereto.
 
(i)           The Initial Purchasers shall have received on the Closing Date:
 
 
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(i)           an opinion and letter, dated the Closing Date, in form and
substance satisfactory to the Initial Purchasers, of Cadwalader, Wickersham &
Taft LLP, United States counsel for the Company, to the effect set forth in
Exhibit C-1 hereto.
 
(ii)          an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, of Lionel Sawyer & Collins, the State of
Nevada counsel for the Company, to the effect set forth in Exhibit C-2 hereto.
 
(iii)         an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, of Maples and Calder, British Virgin
Islands counsel for the Company, to the effect set forth in Exhibit C-3 hereto.
 
(iv)         an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, of C&I Partners, PRC counsel for the
Company, addressed to the Company with express consent to the release to the
Initial Purchasers, to the effect set forth in Exhibit C-4 hereto.
 
(v)          an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, of King & Wood, PRC counsel for the
Initial Purchasers.
 
(vi)         an opinion and letter, dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers, of Shearman &
Sterling LLP, counsel for the Initial Purchasers.
 
(vii)        an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, of Emmet, Marvin & Martin, LLP, counsel
for the Trustee.
 
The opinions described in paragraphs (h)(i) through (h)(iv) above shall be
rendered to the Initial Purchasers at the request of the Company and shall so
state therein.
 
(j)           KPMG and Hansen, Barnett & Maxwell, P.C. (the “Auditors”), the
independent registered public accounting firms for the Company, shall deliver to
the Initial Purchasers: (i) simultaneously with the execution of this Agreement
a signed letter from the Auditors addressed to the Initial Purchasers and dated
the date of this Agreement, in form and substance reasonably satisfactory to the
Representative and counsel for the Initial Purchasers, containing statements and
information of the type ordinarily included in accountants’ “comfort letters” to
initial purchasers with respect to the financial statements and certain
financial information contained in the Preliminary Offering Memorandum, and (ii)
on the Closing Date, a signed letter from the Auditors addressed to the Initial
Purchasers and dated the date of such Closing Date(s), in form and substance
reasonably satisfactory to the Representative and Shearman & Sterling LLP,
counsel for the Initial Purchasers, containing statements and information of the
type ordinarily included in accountants’ “comfort letters” to underwriters with
respect to the financial statements and certain financial information contained
in the Offering Memorandum.
 
 
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(k)           The Initial Purchasers shall have been furnished with such
information, certificates and documents, in addition to those set forth above,
as they may reasonably require for the purpose of enabling them to review or
pass upon the matters referred to in this Section 10 and in order to evidence
the accuracy, completeness or satisfaction in all material respects of any of
the representations, warranties or conditions herein contained.
 
(l)           The Company and the Trustee shall have entered into the Indenture
and the Initial Purchasers shall have received counterparts, conformed as
executed, thereof and the Notes shall have been duly executed and delivered by
the Company, and the Notes shall have been duly authenticated by the Trustee.
 
(m)          The Notes shall have been approved for trading on The PORTAL
Market.
 
(n)           Each of the Transaction Documents and each other agreement or
instrument executed in connection with the transactions contemplated thereby
shall be reasonably satisfactory in form and substance to the Initial Purchasers
and shall have been executed and delivered by all the respective parties thereto
and shall be in full force and effect, and there shall have been no material
amendments, alterations, modifications or waivers of any provision thereof since
the date of this Agreement.
 
(o)           All proceedings taken in connection with the issuance of the Notes
and the transactions contemplated by this Agreement, the other Transaction
Documents and all documents and papers relating thereto shall be reasonably
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers.  The Initial Purchasers and counsel for the Initial Purchasers shall
have received copies of such papers and documents as they may reasonably request
in connection therewith, all in form and substance reasonably satisfactory to
them.
 
(p)           On or prior to the Closing Date, the Initial Purchasers shall have
received a lock up agreement substantially in the form attached hereto as
Exhibit A signed by the Company’s Officers, Directors and those shareholders
listed on Schedule IV hereto.
 
11.           Initial Purchaser Information.  The Company acknowledge that the
names of the Initial Purchasers set forth on the cover page and under the
heading “Plan of Distribution” in the Preliminary Offering Memorandum and the
Offering Memorandum constitute the only written information relating to the
Initial Purchasers furnished to the Company by or on behalf of the Initial
Purchasers expressly for use in the Preliminary Offering Memorandum, the
Disclosure Package and the Offering Memorandum, for purposes of Sections 2(a),
8(a) and 8(b) hereof (the “Initial Purchaser Information”).
 
12.           Survival of Representations and Agreements.  The indemnity and
contribution provisions contained in Sections 8 and 9 and the representations,
warranties and other statements of the Company contained in this Agreement shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any Initial
Purchaser, any person controlling any Initial Purchaser or any affiliate of any
Initial Purchaser or by or on behalf of the Company, its officers or directors
or any person controlling the Company and (iii) acceptance of and payment for
any of the Notes.
 
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13.           Effective Date of Agreement; Termination.
 
(a)           This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
 
(b)           This Agreement may be terminated in the sole discretion of the
Initial Purchasers by notice to the Company from the Representative, without
liability (other than with respect to Sections 8 and 9 hereof) on the Initial
Purchasers’ part to the Company in the event that the Company has failed,
refused or been unable to perform or satisfy any condition on their respective
parts to be performed or satisfied hereunder on or prior to the Closing Date, or
if:
 
(i)           there has occurred any material adverse change in the securities
markets or any event, act or occurrence that has materially disrupted, or in the
opinion of the Initial Purchasers, will in the future materially disrupt, the
securities markets or there shall be such a material adverse change in general
financial, political or economic conditions or the effect of international
conditions on the financial markets, in the judgment of the Initial Purchasers,
inadvisable or impracticable to market the Notes or enforce contracts for the
sale of the Notes;
 
(ii)          there has occurred any outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets, in the judgment of the Initial Purchasers, inadvisable or impracticable
to market the Notes or enforce contracts for the sale of the Notes;
 
(iii)         trading in any securities of the Company has been suspended or
materially limited on any exchange or in any over-the-counter market;
 
(iv)         a banking moratorium has been declared by United States federal,
New York State, Hong Kong or the PRC authorities or government authorities of
other relevant foreign country;
 
(v)          trading generally has been suspended or materially limited on, or
by, as the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Market, the Chicago Board of Options Exchange, the
Chicago Mercantile Exchange or the Chicago Board of Trade, the Hong Kong Stock
Exchange or other relevant exchanges; or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required by any of said exchanges or by order of the Commission, the
Financial Industry Regulatory Authority or other regulatory body or governmental
authority having jurisdiction;
 
(vi)         there has been a material disruption in securities settlement,
payment or clearance services in the United States or other relevant
jurisdiction;
 
(vii)        in the judgment of the Initial Purchasers, there has been since the
time of the execution of the Purchase Agreement or since the respective dates as
of which information is given in the Disclosure Package, any material adverse
change in the assets, properties, condition (financial or otherwise), or in the
results or operations, business affairs or business prospects or cash flows of
the Company and its Subsidiaries, taken as a whole, whether or not arising in
the ordinary course of business; or
 
 
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(viii)       any debt securities of the Company shall have been downgraded or
placed on any “watch list” for possible downgrading by any “nationally
recognized statistical rating organization” as defined for purposes of Rule
436(g) under the Securities Act.
 
(c)           If this Agreement shall be terminated by the Initial Purchasers,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Initial Purchasers or such
Initial Purchasers as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Initial Purchasers
in connection with this Agreement or the offering contemplated hereunder.
 
14.           Substitution of Initial Purchasers.   If, on the Closing Date, any
one or more of the Initial Purchasers shall fail or refuse to purchase Notes
that it or they have agreed to purchase hereunder on such date, and the
principal amount of Notes which such defaulting Initial Purchaser or Initial
Purchasers agreed but failed or refused to purchase is not more than one-tenth
of the principal amount of Notes to be purchased on such date, the other Initial
Purchasers shall be obligated severally in the proportions that the principal
amount of Notes set forth opposite their respective names in Schedule I bears to
the principal amount of Notes set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as the
Representative may specify, to purchase the Notes which such defaulting Initial
Purchaser or Initial Purchasers agreed but failed or refused to purchase on such
date; provided that in no event shall the principal amount of Notes that any
Initial Purchaser has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 14 by an amount in excess of one-ninth of such
principal amount of Notes without the written consent of such Initial Purchaser.
If, on the Closing Date, any Initial Purchaser or Initial Purchasers shall fail
or refuse to purchase Notes which it or they have agreed to purchase hereunder
on such date and the principal amount of Notes with respect to which such
default occurs is more than one-tenth of the principal amount of Notes to be
purchased on such date, and arrangements satisfactory to you and the Company for
the purchase of such Notes are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of any non-defaulting
Initial Purchaser or of the Company. In any such case either the Representative
or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Disclosure Package, the Final Memorandum or in any other documents or
arrangements may be effected.
 
15.           Notices.  All communications hereunder shall be in writing and, if
sent to the Initial Purchasers, shall be hand-delivered, mailed by first-class
mail, couriered by next-day air courier or faxed and confirmed in writing to
Morgan Stanley & Co. Incorporated at 1585 Broadway, New York, New York 10036 to
the attention of Head of Capital Markets, and with a copy to the Legal
Department.  If sent to the Company, shall be mailed, delivered, couriered or
faxed and confirmed in writing to ShengdaTech, Inc., Youth Pioneer Park, Tai’an
Economic and Technological Development Zone, Tai’an City, Shangdong Province
271000, PRC, Attention:  Xiangzhi Chen, and with a copy to Cadwalader,
Wickersham & Taft LLP, 2301 China Central Place Tower 2, No. 79 Jianguo Road,
Beijing 100025, PRC, Attention:  Jiannan Zhang, Esq.
 
 
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16.           Successors.  This Agreement shall inure to the benefit of, and
shall be binding upon, the Initial Purchasers, the Company and their respective
successors, legal representatives and assigns, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of, or
by virtue of, this Agreement or any provision herein contained; this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person except that (i) the indemnities of the Company contained in Section 8
hereof shall also be for the benefit of the controlling persons and agents
referred to in Sections 8 and 9 hereof and (ii) the indemnities of the Initial
Purchasers contained in Section 8 hereof shall also be for the benefit of the
directors of the Company, and its officers, employees and agents and any
controlling person or persons referred to in Sections 8 and 9 hereof.  No
purchaser of Notes from the Initial Purchasers will be deemed a successor, legal
representative or assign because of such purchase.
 
17.           No Waiver; Modifications in Writing.  No failure or delay on the
part of the Company or the Initial Purchasers in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy.  The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the Company or the Initial Purchasers
at law or in equity or otherwise.  No waiver of or consent to any departure by
the Company or the Initial Purchasers from any provision of this Agreement shall
be effective unless signed in writing by the party entitled to the benefit
thereof; provided that notice of any such waiver shall be given to each party
hereto as set forth above.  Except as otherwise provided herein, no amendment,
modification or termination of any provision of this Agreement shall be
effective unless signed in writing by or on behalf of the Company and the
Initial Purchasers.  Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Initial Purchasers from the
terms of any provision of this Agreement shall be effective only in the specific
instance and for the specific purpose for which made or given.  Except where
notice is specifically required by this Agreement, no notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.
 
18.           Entire Agreement.  This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements, understandings and
arrangements, oral or written, among the parties hereto with respect to the
subject matter hereof.
 
 
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19.           Applicable Law; Waiver of Jury Trial.  THE VALIDITY AND
INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.  TIME IS OF THE ESSENCE IN THIS AGREEMENT.  The Company irrevocably
(a) submits to the jurisdiction of any court of the State of New York or the
United State District Court for the Southern District of the State of New York
(each a “New York Court”) for the purpose of any suit, action, or other
proceeding arising out of this Agreement, or any of the Transaction Documents
and the Offering Memorandum (each, a “Proceeding”), (b) agrees that all claims
in respect of any Proceeding may be heard and determined in any such court, (c)
waives, to the fullest extent permitted by law, any immunity from jurisdiction
of any such court or from any legal process therein, (d) agrees not to commence
any Proceeding other than in such courts, and (e) waives, to the fullest extent
permitted by law, any claim that such Proceeding is brought in an inconvenient
forum.  The Company hereby irrevocably designates CT Corporation System Inc, 111
Eighth Avenue, New York, NY 10011 (the “Authorized Agent”) as agent upon whom
process against the Company may be served.  THE COMPANY (ON BEHALF OF ITSELF
AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY
HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THE
TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION
DOCUMENTS, THE DISCLOSURE PACKAGE AND THE OFFERING MEMORANDUM.
 
20.           Judgment Currency.  If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due hereunder into any currency other
than United States dollars, the parties hereto agree, to the fullest extent
permitted by law, that the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the relevant party or parties could
purchase United States dollars with such other currency in The City of New York
on the business day preceding that on which final judgment is given. The
obligation of each party hereto with respect to any sum due from it to any other
party hereto or any person controlling any such other party shall,
notwithstanding any judgment in a currency other than United States dollars, not
be discharged until the first business day following receipt by such other party
or controlling person of any sum in such other currency, and only to the extent
that such other party or controlling person may in accordance with normal
banking procedures purchase United States dollars with such other currency. If
the United States dollars so purchased are less than the sum originally due to
such other party or controlling person hereunder, the first-mentioned party
agrees as a separate obligation and notwithstanding any such judgment, to
indemnify such other party or controlling person against such loss. If the
United States dollars so purchased are greater than the sum originally due to
such other party or controlling person hereunder, such other party or
controlling person agrees to pay to the first-mentioned party an amount equal to
the excess of the United States dollars so purchased over the sum originally due
to such other party or controlling person hereunder.
 
21.           Foreign Taxes.  All payments made by the Company under this
Agreement will be made without withholding or deduction for or on account of any
present or future taxes, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of the PRC or the British Virgin
Islands or any political subdivision or any taxing authority thereof or therein
unless the Company is or becomes required by law to withhold or deduct such
taxes, duties, assessments or other governmental charges.  In such event, the
Company shall pay such additional amounts as will result, after such withholding
or deduction, in the receipt by the Initial Purchasers and each person
controlling the Initial Purchasers, as the case may be, of the amounts that
would otherwise have been receivable in respect thereof, except to the extent
such taxes, duties, assessments or other governmental charges are imposed or
levied by reason of such Initial Purchasers’ or controlling person’s being
connected with the PRC or the British Virgin Islands other than by reason of its
being an Initial Purchasers or a person controlling an Initial Purchasers under
this Agreement.
 
 
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22.           Contractual Relationship.  The Company acknowledges and agrees
that each of the Initial Purchasers has acted and is acting solely in the
capacity of a principal in an arm’s length transaction between the Company, on
the one hand, and the Initial Purchasers, on the other hand, with respect to the
offering of Notes contemplated hereby (including in connection with determining
the terms of the offering) and not as a financial advisor, agent or fiduciary to
the Company or any other person.  Additionally, the Company acknowledges and
agrees that the Initial Purchasers have not and will not advise the Company or
any other person as to any legal, tax, investment, accounting or regulatory
matters in any jurisdiction.  The Company has consulted with its own advisors
concerning such matters and shall be responsible for making its own independent
investigation and appraisal of the transactions contemplated hereby, and the
Initial Purchasers shall have no responsibility or liability to the Company or
any other person with respect thereto, whether arising prior to or after the
date hereof.  Any review by the Initial Purchasers of the Company, the
transactions contemplated hereby or other matters relating to such transactions
have been and will be performed solely for the benefit of the Initial Purchasers
and shall not be on behalf of the Company.  The Company agrees that it will not
claim that the Initial Purchasers, or any of them, has rendered advisory
services of any nature or respect, or owes a fiduciary duty to the Company or
any other person in connection with any such transaction or the process leading
thereto.
 
23.           Partial Unenforceability.  The invalidity or unenforceability of
any section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph or provision hereof.
 
24.           Headings.  The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
 
25.           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.  Delivery of
a signed counterpart of this Agreement by facsimile transmission shall
constitute valid and sufficient delivery thereof.
 
[Signature page follows]
 
 
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Very truly yours,
   
ShengdaTech, Inc.
   
By:
Xiangzhi Chen
 
Name: Xiangzhi Chen
 
Title: Chairman & CEO

 
 
34

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Accepted and agreed to as of
the date first above written:

morgan Stanley & Co. Incorporated

acting on behalf of itself
and as the representative of the several initial
purchasers named in schedule I hereto.

By: 
MORGAN STANLEY & CO. INCORPORATED
     
   /s/ John D. Tyree
 
Name: John D. Tyree
 
Title: Managing Director

 
 
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Schedule I
 
Initial Purchasers
 
Name
 
Aggregate
Amount of the
Notes to be
Purchased
         
Morgan Stanley & Co. Incorporated
  $ 109,200,000  
Oppenheimer & Co. Inc.
  $ 13,000,000  
Brean Murray, Carret & Co., LLC
  $ 4,550,000  
Global Hunter Securities, LLC
  $ 3,250,000                      
Total
  $ 130,000,000  

 
 
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Schedule II
 
Subsidiaries
 
Faith Boom Limited
 
Shandong Haize Nanomaterials Co., Ltd.
 
Shaanxi Haize Nanomaterials Co., Ltd.
 
Shandong Bangsheng Chemical Co., Ltd.
 
Zibo Jiaze Nanomaterials Co., Ltd.
 
Anhui Yuanzhong Nanomaterials Co., Ltd.
 
 
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Schedule III

Pricing term sheet dated December 9, 2010
to Preliminary Offering Memorandum dated December 9, 2010
(the “Preliminary Offering Memorandum”)
 
ShengdaTech, Inc.
$130,000,000
6.50% Senior Convertible Notes due 2015
 
The information in this pricing term sheet relates only to the offering of
$130,000,000 aggregate principal amount of 6.50% Senior Convertible Notes due
2015 by ShengdaTech, Inc. and should be read together with the Preliminary
Offering Memorandum and supersedes the information in the Preliminary Offering
Memorandum to the extent inconsistent with the information in the Preliminary
Offering Memorandum.  Terms used in this pricing term sheet but not defined
herein have the respective meanings given to them in the Preliminary Offering
Memorandum.
 
Issuer:
 
ShengdaTech, Inc.
     
Ticker/Exchange for Shares:
 
SDTH/NASDAQ Global Select Market (“NASDAQ”).
     
Title of Securities:
 
6.50% Senior Convertible Notes due 2015.
     
Aggregate Principal Amount Offered:
 
$130,000,000 aggregate principal amount of notes.
     
Net Proceeds of the Offering:
 
Approximately $123.5 million, after deducting the initial purchasers’ discounts
and commissions.
     
Use of Proceeds:
 
The Issuer intends to use the net proceeds from this offering for the following
purposes: (1) approximately $67 million for the repurchase of a portion of the
Notes due 2018; and (2) the remainder to finance its NPCC production capacity
expansion, research and development activities and other working capital
requirements.
     
Maturity:
 
The notes will mature on December 15, 2015, unless earlier redeemed or purchased
by the Issuer or converted.
     
Annual Interest Rate:
 
6.50% per annum.

 
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Interest Payment Dates:
 
Interest will accrue from December 14, 2010, and will be payable semiannually in
arrears on June 15 and December 15 of each year, beginning on June 15, 2011.
     
Issue Price:
 
100%, plus accrued interest, if any, from December 14, 2010.
     
Closing Sale Price per Share:
 
$5.06 on NASDAQ as of December 9, 2010.
     
Conversion Premium:
 
Approximately 20% above the Closing Sale Price.
     
Initial Conversion Price:
 
Approximately $6.07 per share.
     
Initial Conversion Rate:
 
164.6904 shares per $1,000 principal amount of notes.
     
Sole Bookrunner:
 
Morgan Stanley & Co. Incorporated.
     
Trade Date:
 
December 10, 2010.
     
Expected Settlement Date:
 
December 14, 2010.
     
CUSIP Number:
 
823213 AD5.
     
Adjustment to Conversion Rate Upon a Make-Whole Change of Control:
 
If and only to the extent a holder elects to convert its notes in connection
with a make-whole change in control, the conversion rate will, under certain
circumstances, be increased by an additional number of shares that will be
determined by reference to the following table:

 
Common Stock Price ($)
   
Effective Date
    5.06       5.50       6.00       6.50       7.00       7.50       8.00      
8.50       9.00       9.50       10.00       12.50       15.00       20.00  
12/14/2010
    32.9381       31,1284       24.4983       19.4906       15.6349      
12.6091       10.1962       8.2523       6.6644       5.3564       4.2787      
1.1063       0.0739       0.0000  
12/15/2011
    32.9381       29.7433       23.1875       18.2889       14.5558      
11.6578       9.3746       7.5484       6.0686       4.8592       3.8628      
0.9657       0.0512       0.0000  
12/15/2012
    32.9381       27.1397       20.7863       16.1390       12.6767      
10.0451       8.0094       6.4060       5.1204       4.0797       3.2285      
0.7679       0.0252       0.0000  
12/15/2013
    32.9381       25.2572       18.4103       13.6550       10.3131       7.9189
      6.1661       4.8481       3.8280       3.0231       2.3748       0.5244  
    0.0049       0.0000  
12/15/2014
    32.9381       21.9006       14.1810       9.3397       6.3646       4.5302  
    3.3696       2.5950       2.0395       1.6171       1.2781       0.2591    
  0.0000       0.0000  
12/15/2015
    32.9381       17.1278       1.9763       0.0000       0.0000       0.0000  
    0.0000       0.0000       0.0000       0.0000       0.0000       0.0000    
  0.0000       0.0000  

The exact common stock price and effective date may not be set forth in the
table, in which case, if the common stock price is between two price amounts in
the table or the effective date is between two effective dates in the table, the
number of additional shares will be determined by a straight-line interpolation
between the number of additional shares set forth for the higher and lower
common stock price amounts and the two effective dates, as applicable, based on
a 365-day year.  If the common stock price:
 
 
39

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·
is greater than $20.00 per share, subject to adjustment, the conversion rate
will not be increased; and

 
 
·
is less than $5.06 per share, subject to adjustment, the conversion rate will
not be increased.

 
Notwithstanding the foregoing, in no event will the conversion rate exceed
197.6285 shares per $1,000 principal amount of notes, subject to adjustments in
the same manner as the conversion rate.
 
This communication is intended for the sole use of the person to whom it is
provided by the sender.  This material is confidential and is for your
information only and is not intended to be used by anyone other than you.  This
information does not purport to be a complete description of the notes or the
offering.
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy securities nor shall there be any sale of these securities in
any state in which such solicitation or sale would be unlawful prior to
registration or qualification of these securities under the laws of any such
state.

Neither the notes nor any issuable upon conversion of the notes, have been
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or the securities laws of any jurisdiction.  Unless they are registered, the
notes and any shares issuable upon conversion of the notes may be offered only
in transactions that are exempt from registration under the Securities Act and
the securities laws of any other jurisdiction.  Accordingly, the notes are being
offered and sold only to “qualified institutional buyers” (as defined in
Rule 144A under the Securities Act).  For further details about eligible
offerees and resale restrictions, see the section of the Preliminary Offering
Memorandum captioned “Transfer Restrictions.”

A copy of the final offering memorandum for the offering of the notes may be
obtained by contacting:  Morgan Stanley & Co. Incorporated, 1585 Broadway, New
York, New York 10036, Attention: Syndicate Department.

ANY DISCLAIMER OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS
COMMUNICATION AND SHOULD BE DISREGARDED.  SUCH DISCLAIMERS OR OTHER NOTICES WERE
AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA
BLOOMBERG OR ANOTHER EMAIL SYSTEM.
 
 
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Schedule IV
 
Persons Party to Lock Up Agreement
 
Xiangzhi Chen
 
Fanying Kong
 
Anhui Guo
 
Dongquan Zhang
 
A. Carl Mudd
 
Sheldon B. Saidman
 
Lei Du
 
Yong Zhao
 
Gongbo Wang
 
Zhen Chen
 
 
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Exhibit A
 
Form Lock Up Agreement
 
_____________, 2010
 
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

As the Representative of the several Initial Purchasers
named in the Purchase Agreement

Ladies and Gentlemen:
 
The undersigned understands that Morgan Stanley & Co. Incorporated (“Morgan
Stanley”) proposes to enter into a Purchase Agreement (the “Purchase Agreement”)
with ShengdaTech, Inc., a Nevada corporation (the “Company”), providing for the
offering (the “Offering”) by the several initial purchasers as set forth in
Schedule I of the Purchase Agreement (the “Initial Purchasers”), of $130 million
principal amount of 6.5% Senior Convertible Notes due 2015 of the Company (the
“Securities”).  The Securities will be convertible into shares of the common
stock, $0.00001 par value per share, of the Company (the “Common Stock”).
 
To induce the Initial Purchasers that may participate in the Offering to
continue their efforts in connection with the Offering, the undersigned hereby
agrees that, without the prior written consent of Morgan Stanley on behalf of
the Initial Purchasers, it will not, during the period commencing on the date
hereof and ending 90 days after the date of the final offering memorandum
relating to the Offering (the “Final Memorandum”), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock beneficially owned (as such term is used in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), by the undersigned or
any other securities so owned convertible into or exercisable or exchangeable
for Common Stock or (2) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) transactions
relating to shares of Common Stock or other securities acquired in open market
transactions after the completion of the Offering, provided that no filing under
Section 16(a) of the Exchange Act shall be required or shall be voluntarily made
in connection with subsequent sales of Common Stock or other securities acquired
in such open market transactions, (b) transfers of shares of Common Stock or any
security convertible into Common Stock as a bona fide gift, or (c) distributions
of shares of Common Stock or any security convertible into Common Stock to
limited partners or stockholders of the undersigned; provided that in the case
of any transfer or distribution pursuant to clause (b) or (c), (i) each donee or
distributee shall sign and deliver a lock-up letter substantially in the form of
this letter and (ii) no filing under Section 16(a) of the Exchange Act,
reporting a reduction in beneficial ownership of shares of Common Stock, shall
be required or shall be voluntarily made during the restricted period referred
to in the foregoing sentence. In addition, the undersigned agrees that, without
the prior written consent of Morgan Stanley on behalf of the Initial Purchasers,
it will not, during the period commencing on the date hereof and ending 90 days
after the date of the Final Memorandum, make any demand for or exercise any
right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
undersigned’s shares of Common Stock except in compliance with the foregoing
restrictions.
 
 
1

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If:
 
(1)           during the last 17 days of the restricted period the Company
issues an earnings release or material news or a material event relating to the
Company occurs; or
 
(2)           prior to the expiration of the restricted period, the Company
announces that it will release earnings results during the 16-day period
beginning on the last day of the restricted period;
 
the restrictions imposed by this agreement shall continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings
release or the occurrence of the material news or material event.
 
The undersigned shall not engage in any transaction that may be restricted by
this agreement during the 34-day period beginning on the last day of the initial
restricted period unless the undersigned requests and receives prior written
confirmation from the Company or you that the restrictions imposed by this
agreement have expired.
 
The undersigned understands that the Company and the Initial Purchasers are
relying upon this agreement in proceeding toward consummation of the
Offering.  The undersigned further understands that this agreement is
irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.
 
Whether or not the Offering actually occurs depends on a number of factors,
including market conditions.  Any Offering will only be made pursuant to a
Purchase Agreement, the terms of which are subject to negotiation between the
Company and the Initial Purchasers.
 
Yours very truly,
    Name:

 
 
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Exhibit B
 
Shengdatech, Inc.
 
Chief Financial Officer’s Certificate
 
December 9, 2010
 
The undersigned, Anhui Guo, does hereby certify that as Chief Financial Officer
of ShengdaTech, Inc., a company incorporated in the State of Nevada of the
United States (the “Company”) and that in such capacities is duly authorized to
execute and deliver this Chief Financial Officer’s Certificate AND HEREBY
REPRESENTS AND CERTIFIES ON BEHALF OF THE COMPANY THAT:
 
The items circled and identified in Annex A to this certificate, which are
included in the Preliminary Offering Memorandum, have been derived from the
Company's accounting and operating records, and that I have no reason to believe
that such data is not in agreement with the data generated from the Company’s
accounting and operating records.
 
Capitalized terms used herein and not otherwise defined have the respective
meanings assigned to them in the Purchase Agreement dated as of December 9, 2010
among the Company and the Initial Purchasers.
 
[END OF PAGE]
 
 
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                      IN WITNESS WHEREOF, I have signed this Chief Financial
Officer’s Certificate as of the date first written above.
 

 
SHENGDATECH, INC.
                   
Name:  
Anhui Guo
   
Title:
Chief Financial Officer
 

 
2

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Exhibit C-1
 
Form of Opinion of Company United States Counsel
 
Terms not otherwise defined shall have the respective meanings given thereto in
the actual opinion of such counsel.
 
(i)           The Indenture when duly authorized, executed and delivered by the
Company, and (assuming the due authorization, execution and delivery of the
Indenture by the Trustee) will constitute a legal, valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, receivership or other laws relating to or affecting
creditors’ rights generally, and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity), and except
that the enforcement of rights with respect to provisions purporting to waive or
limit rights to trial by jury, oral amendments to written agreements or rights
of set-off may be limited by applicable law or considerations of public policy.
 
(ii)          The Indenture conforms in all material respects with the
requirements of the Trust Indenture Act of 1939, as amended and the rules and
regulations of the Commission applicable to an indenture that is qualified
thereunder.
 
(iii)         The Notes when duly authorized and executed by the Company and
when duly authenticated and delivered by the Trustee in the manner contemplated
in the Indenture and paid for by, and sold to, the Initial Purchasers pursuant
to the Agreement, will be legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture and the Registration Rights Agreement,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, receivership or other laws relating to or affecting creditors’
rights generally, and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and will be validly
issued and outstanding and entitled to the benefits provided by the Indenture.
 
(iv)         The Registration Rights Agreement when duly authorized, executed
and delivered by the Company (assuming the due authorization, execution and
delivery of Registration Rights Agreement by the Initial Purchasers),
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium,
receivership or other laws relating to or affecting creditors’ rights generally,
and to general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity), and except that the enforcement of rights
with respect to (a) indemnification and contribution obligations and provisions,
and (b) purporting to waive or limit rights to trial by jury, oral amendments to
written agreements or rights of set-off may be limited by applicable law or
considerations of public policy.
 
 
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(v)          The issuance of the notes to be issued by the Company pursuant to
the terms of the Registration Rights Agreement in exchange for the Notes (the
“Exchange Notes”) when duly authorized by the Company and, when duly executed,
authenticated, issued and delivered as contemplated by the Registration Rights
Agreement, will be legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, receivership or other laws relating to or affecting creditors’
rights generally, and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and will be validly
issued and outstanding and entitled to the benefits provided by the Indenture.
 
(vi)         The Notes when duly issued and delivered in accordance with the
Agreement and the Indenture, the Notes will be convertible at the option of the
holder thereof for shares of Common Stock in accordance with the terms of the
Notes and the Indenture.
 
(vii)        Each of the Indenture, the Notes, the Registration Rights Agreement
and the Common Stock conform in all material respects to the descriptions
thereof contained in the Disclosure Package and the Offering Memorandum (as
supplemented by the Supplement dated May 28, 2008).
 
(viii)       The statements in the Offering Memorandum under the captions,
“Benefit Plan Investor Considerations”, “Description of Notes,” and “Plan of
Distribution,” insofar as such statements constitute summaries of documents
referred to therein or matters of law, are accurate in all material respects.
 
(ix)          The statements made in the Offering Memorandum under the heading
“Taxation - Certain U.S. Federal Income Tax Considerations” to the extent such
statements summarize material U.S. federal income tax consequences of the
purchase, beneficial ownership and disposition of the Notes and the beneficial
ownership and disposition of Common Stock received upon conversion of the Notes
to the holders thereof described therein, are correct in all material respects.
 
(x)           To our knowledge, the Company is not in default in the performance
of any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument identified on Schedule A attached hereto, which the
Company has represented lists all material agreements and instruments governed
by the laws of the State of New York to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of its properties is subject which default would,
individually or in the aggregate, have a material adverse effect on the
business, properties, assets, results of operation or condition (financial or
otherwise) of the Company and its subsidiaries taken as a whole (a “Material
Adverse Effect”).
 
(xi)          The execution, delivery and performance by the Company of each of
the Transaction Documents to which the Company is a party, and the compliance by
the Company with the provisions thereof (a) will not breach or result in a
violation of, or default under any indenture, mortgage, deed of trust, agreement
or instrument identified on Schedule A attached hereto, and (b) will not violate
any Applicable Laws.
 
 
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(xii)         The (a) execution, delivery and performance by the Company of the
Transaction Documents to which the Company is a party, and the compliance by the
Company with the provisions thereof and the (b) issuance and sale of the Notes,
the issuance and delivery of the Exchange Notes and the issuance and delivery of
the Common Stock upon conversion of the Notes do not and will not give rise to a
right to terminate or accelerate the due date of any payment due under, or
conflict with or result in the breach of any term or provision of, or constitute
a default (or any event which with notice or lapse of time, or both, would
constitute a default) under, or require consent or waiver under, or result in
the execution or imposition of any lien, charge, claim, security interest or
encumbrance upon any properties or assets of the Company pursuant to the terms
of, any indenture, mortgage, deed trust, note or other agreement or instrument
identified on Schedule A attached hereto, or to our knowledge, any Applicable
Law or order of any Governmental Authorities applicable to the Company of which
we are aware.
 
(xiii)        No Governmental Approval is required for the issuance and sale of
the Notes, the execution and delivery by the Company of the Transaction
Documents to which it is a party, the consummation by the Company of the
transactions contemplated thereby or the performance by the Company of their
obligations thereunder, except for such as may be required under state
securities or blue sky laws in connection with the purchase and distribution of
the Notes.
 
(xiv)        Assuming the accuracy of the representations and warranties in the
Agreement and compliance with the terms and provisions of the Indenture, the
Registration Rights Agreement and the Agreement, it is not necessary in
connection with the offer and sale of the Notes by the Company to the Initial
Purchasers or by the Initial Purchasers to the first purchasers of the Notes
from the Initial Purchasers under the circumstances contemplated by the
Agreement, the Indenture and the Transaction Documents, to register the Notes
under the Securities Act of 1933, as amended, and no qualification of the
Indenture under the Trust Indenture Act, is required for the offer, sale and
initial resale of the Securities by the Initial Purchasers in the manner
contemplated by the Agreement.
 
(xv)         The Offering Memorandum, as of its date and (when read together
with the 8-Ks) as of the date hereof, each amendment or supplement thereto dated
subsequent to the date of the Offering Memorandum but prior to or as of the date
hereof (except for the financial statements and related notes, schedules and
other financial data included therein, as to which we express no opinion), as of
the date hereof, contains the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Securities Act.
 
(xvi)        When the Notes are issued and delivered pursuant to the Agreement,
no Notes will be of the same class (within the meaning of Rule 144A) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a United
States automated interdealer quotation system.
 
(xvii)       The Company is not, and after giving effect to the sale of the
Notes and the application of the net proceeds thereof as described in the
Disclosure Package and the Offering Memorandum will not be, required to register
as an “investment company” under the Investment Company Act and is not and will
not be an entity “controlled” by an “investment company” within the meaning of
the Investment Company Act.
 
 
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(xviii)      To our knowledge, there are no holders of securities of the Company
who, by reason of the execution by the Company of the Agreement or any other
Transaction Document to which it is a party or the consummation by the Company
of the transactions contemplated thereby, have the right to request or demand
that the Company register under the Securities Act securities held by them.
 
(xix)         Under the laws of the State of New York relating to submission to
personal jurisdiction, the Company has, validly and irrevocably submitted to the
personal jurisdiction of any state or federal court located in the Borough of
Manhattan, The City of New York, New York (each a “New York Court”) in any
action arising out of or relating to the Agreement, the Indenture and the
Registration Rights Agreement, has, to the extent permitted by law, validly and
irrevocably waived objections to the laying of venue and any claim of
inconvenient forum as set forth in the Agreement, the Indenture and the
Registration Rights Agreement, and has validly and irrevocably appointed CT
Corporation System as its authorized agent for the purpose described in the
Agreement, the Indenture and the Registration Rights Agreement; and service of
process effected on such agent in the manner set forth in the Agreement, the
Indenture and the Registration Rights Agreement, will be effective under the
laws of the State of New York to confer valid personal jurisdiction over the
Company in a New York Court.
 
 
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Exhibit C-2
 
Form of Opinion of Company State of Nevada Counsel
 
Terms not otherwise defined shall have the respective meanings given thereto in
the actual opinion of such counsel.
 
(i)          The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Nevada.
 
(ii)         The Company has all requisite corporate power and authority to own,
lease and operate its properties in Nevada and to conduct its business in Nevada
as described in the Disclosure Package and Offering Memorandum, to enter into
and perform its obligations under the Transaction Documents, and to issue and
sell the Notes in accordance with the terms of the Purchase Agreement.
 
(iii)        The authorized, issued and outstanding common stock of the Company
is as set forth in the Disclosure Package and Offering Memorandum under the
caption “Capitalization.” All of the outstanding shares of common stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable and, to the best of our knowledge, none of them was issued in
violation of any preemptive or other similar right.  The Notes have been duly
authorized for issuance and sale in accordance with the Purchase Agreement and,
when issued and delivered by the Company pursuant thereto, and upon conversion
of the Notes in accordance with the terms of the Purchase Agreement, the Shares
will be validly issued, fully paid and nonassessable, and no holder of the Notes
or Shares is or will be subject to personal liability solely by reason of being
such a holder.  Except as disclosed in the Disclosure Package and Offering
Memorandum, there are no preemptive or other rights to subscribe for or to
purchase or any restriction upon the voting or transfer of any securities of the
Company pursuant to Chapter 78 of the Nevada Revised Statutes, the Company’s
Articles of Incorporation or Bylaws or, to the best of our knowledge, any
agreements or other instruments to which the Company is a party or by which it
is bound. To the best of our knowledge, except as disclosed in the Disclosure
Package and Offering Memorandum, there is no outstanding option, warrant or
other right calling for the issuance of, and no commitment, plan or arrangement
to issue, any share of common stock of the Company or any security convertible
into, exercisable for, or exchangeable for common stock of the Company. The form
of certificate used to evidence the Company's common stock complies in all
material respects with all applicable statutory requirements, and with any
applicable requirements of the Articles of Incorporation or Bylaws of the
Company.  To the best of our knowledge, there are no persons with registration
rights or other similar rights to have any securities of the Company registered
pursuant to the Offering Memorandum or otherwise registered by the Company under
the Securities Act.
 
(iv)        All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of the
Transaction Documents and the issuance and sale of the Notes.  The Transaction
Documents have been duly and validly authorized, executed and delivered by the
Company.
 
 
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(v)         Neither the execution, delivery and performance of the Transaction
Documents by the Company, nor the consummation of any of the transactions
contemplated thereby (including, without limitation, the issuance and sale by
the Company of the Notes and the issuance of the Shares upon conversion of the
Notes) will (a) result in a violation of the Company’s Articles of Incorporation
or Bylaws, (b) result in a violation of Nevada law or any rule or regulation
that has been issued pursuant to Nevada law by any Nevada governmental agency or
body having jurisdiction over the Company, or (c) to the best of our knowledge,
give rise to a right to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach of any term or provision of, or
constitute a breach of or default (or any event which with notice or lapse of
time, or both, would constitute a default) under, or require consent or waiver
under, or result in the execution or imposition of any lien, charge, claim,
security interest or encumbrance upon any properties or assets of the Company
pursuant to the terms of, any indenture, mortgage, deed of trust, note or other
agreement or instrument of which we are aware and to which the Company is a
party or by which it or any of its assets or properties or businesses is bound,
or any franchise, license, permit, judgment, decree, order, statute, rule or
regulation, domestic or foreign, of which we are aware.
 
(vi)        No consent, approval, authorization, license, registration,
qualification or order of any court, governmental agency or regulatory body of
the State of Nevada is required for the due authorization, execution, delivery
or performance of the Transaction Documents by the Company or the consummation
of the transactions contemplated thereby.
 
(vii)       To the best of our knowledge, there is no action, suit, proceeding
or other investigation, before any court or before or by any public body or
board of the State of Nevada pending or threatened against, or involving the
assets, properties or businesses of the Company.
 
(viii)      The statements in the Offering Memorandum under the captions
“Description of Notes” and “Description of Capital Stock” are accurate in all
material respects and accurately present the information contained therein with
respect to the Notes and the Company's capital stock.
 
 
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Exhibit C-3
 
Form of Opinion of Company British Virgin Islands Counsel
 
Terms not otherwise defined shall have the respective meanings given thereto in
the actual opinion of such counsel.
 
(i)           The Company is a company limited by shares registered under the
BVI Business Companies Act, 2004, as amended (the “Act”), in good standing at
the Registry of Corporate Affairs and validly existing under the laws of the
British Virgin Islands, with full corporate power and authority to carry on its
business in accordance with its memorandum and articles of association, and
possesses the capacity to sue and be sued in its own name.
 
(ii)          Based solely on our inspection of the High Court Registry from the
date of incorporation of the Company there were no actions or petitions pending
against the Company in the High Court of the British Virgin Islands as at the
time of our searches on ____________ 2010.
 
(iii)         On the basis of our searches conducted at the Registry of
Corporate Affairs and at the High Court Registry, no currently valid order or
resolution for the winding-up of the Company and no current notice of
appointment of a receiver over the Company, or any of its assets, appears on the
records maintained in respect of the Company.  It is a requirement that notice
of appointment of a receiver made under section 118 of the Insolvency Act 2003
be registered with the Registry of Corporate Affairs under section 118 of the
Insolvency Act 2003.  However, it should be noted that there is no mechanism to
file with the Registry of Corporate Affairs notice of an appointment of a
receiver made under foreign legislation.  In addition we refer you to the
Registered Agent's Certificate that states that the registered agent is not
aware that any liquidation, dissolution or insolvency proceedings have been
commenced against the Company or that a receiver has been appointed over the
Company or any of its assets.
 
(iv)         On the basis of our search conducted at the Registry of Corporate
Affairs, no register of mortgages, charges and other encumbrances was filed by
the Company pursuant to section 111A of the International Business Companies
Act, 1984 (the "IBC Act") prior to its re-registration under the
Act.  Furthermore, no charge created by the Company has been registered pursuant
to section 163 of the Act.  We also refer you to the Registered Agent's
Certificate that states that the Company did not and does not maintain a
register of mortgages, charges and other encumbrances pursuant to section 70A(2)
of the IBC Act and that no entries have been made on the Company's register of
charges maintained pursuant to section 162 of the Act.
 
(v)          The Company is authorised to issue a maximum of 20,000,000 shares
with a par value of US$0.01 each.
 
(vi)         Based solely on our review of the Register of Members and the
Registered Agent's Certificate, the Company has _______ shares in issue and the
registered holder of such shares is ShengdaTech, Inc.
 
 
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(vii)        Subject to the Company’s memorandum and articles of association,
all dividends and other distributions in respect of the issued shares in the
Company may under the current laws and regulations of the British Virgin Islands
be paid to its registered member(s), and all such dividends and other
distributions will not be subject to withholding or other taxes under the laws
and regulations of the British Virgin Islands and are otherwise free and clear
of any other tax, withholding or deduction in the British Virgin Islands, and do
not require any authorisation from any governmental authorities or agencies or
other official bodies in the British Virgin Islands.
 
(viii)       There is no exchange control legislation under the laws of the
British Virgin Islands and accordingly there are no exchange control regulations
imposed under the laws of the British Virgin Islands.  Dividends and
distributions paid in respect of the Company's shares are freely transferable
out of the British Virgin Islands.
 
 
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Exhibit C-4
 
Form of Opinion of Company PRC Counsel
 
Terms not otherwise defined shall have the respective meanings given thereto in
the actual opinion of such counsel.
 
(i)           Each of Shandong Haize Nanomaterials Co., Ltd., Shandong Bangsheng
Chemical Co., Ltd., Shaanxi Haize Nanomaterials Co., Ltd., Zibo Jiaze
Nanomaterials Co., Ltd. and Anhui Yuanzhong Nanomaterials  Co., Ltd. (each, a
“PRC Subsidiary” and together, the “PRC Subsidiaries”) has been duly organized
and is validly existing as a wholly foreign owned limited liability enterprise
with legal person status under PRC laws.
 
(ii)          Each of the PRC Subsidiaries has the full power (corporate and
other) and authority to own, lease and operate its assets and to conduct its
business in the manner presently conducted as described in the Disclosure
Package and the Offering Memorandum.
 
(iii)         All of the registered capital of each PRC Subsidiary is fully paid
and is owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities, mortgages, pledges, claims.  The liability of the
Company in respect of equity interests in each PRC Subsidiary is limited to its
investments therein.  None of the outstanding equity interest in any PRC
Subsidiary was issued in violation of any preemptive rights, resale rights,
rights of first refusal or similar rights of any of its security holder.  No
options, warrants or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligation into shares of capital stock
or ownership interests in any of the PRC Subsidiaries are outstanding.  Each PRC
Subsidiary has obtained all approvals, authorizations, consents and orders, and
has made all filings, which are required under PRC law and regulations for the
ownership of interest by the Company of its equity interest in the PRC
Subsidiaries.
 
(iv)         The articles of association, the business licenses and other
constitutive documents of the PRC Subsidiaries comply with the requirements of
the PRC laws and regulations and are in full force and effect.
 
(v)          Each PRC Subsidiary has all necessary licenses, consents,
approvals, orders, licenses, consents, authorizations, orders, certificates,
authorizations or permits (the “Approvals”) of and from, and has made all
filings with, all appropriate national, provincial, municipal local regulatory
agencies or bodies in the PRC (the “Governmental Authorities”) to (A) own,
lease, license and use its properties, assets and conduct its business in the
manner described in the Disclosure Package and the Offering Memorandum, (B)
conduct its business as presently conducted, and (C) use the proceeds to be
received by the Company from the Offering contemplated by the Disclosure Package
and the Offering Memorandum (including any transfer to and application of
proceeds by an PRC Subsidiary), without restriction.  Such Approvals are in full
force and effect and contain no restrictions or conditions not described in the
Disclosure Package and the Offering Memorandum.  No violation exists in respect
of any such Approvals and no such Approvals are subject to suspension,
revocation or withdrawal.  Each PRC Subsidiary is in compliance with the
provisions of all such Approvals in all material respects and there are no
circumstances existing which might lead to modification, suspension or
revocation of any such Approvals.
 
 
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(vi)         The ownership structure of the Company and the PRC Subsidiaries,
individually or in the aggregate, is in compliance with the PRC laws.
 
(vii)        No steps have been or are being taken and no order or resolution
has been made or passed to appoint a receiver, liquidator or similar officer of,
or to wind up or dissolve, any PRC Subsidiary.  No meeting has been convened and
no order, petition or resolution has been passed for the winding-up,
amalgamation, reconstruction, reorganization, administration, dissolution,
liquidation, merger or consolidation or analogous procedure of any PRC
Subsidiary, no notice of appointment in respect of any PRC Subsidiary of a
liquidator, receiver, administrator, trustee, custodian or other similar officer
has been served and no such steps are intended and no steps have been or are
going to be taken for the suspension, revocation or cancellation of any of their
respective business licenses or articles of association, as applicable as of the
date hereof in respect of or by any PRC Subsidiary.
 
(viii)       Each PRC Subsidiary has taken all necessary steps to comply with,
and to ensure compliance by all of the Company’s direct or indirect shareholders
and option holders who are PRC residents with any applicable State
Administration for Foreign Exchange (the “SAFE”) Rules and Regulations,
including without limitation, requiring each shareholder and option holder that
is, or is directly or indirectly owned or controlled by, a PRC resident to
complete any registration and other procedures required under applicable SAFE
Rules and Regulations.
 
(ix)          According to “Provisions Regarding Mergers and Acquisitions of
Domestic Enterprises by Foreign Investors”(the “New M&A Rule”), issued by  the
Ministry of Commerce, the State-owned Assets Supervision and Administration
Commission, the State Administration of Taxation, the State Administration for
Industry and Commerce, the China Securities Regulatory Commission (“CSRC”), and
SAFE on August 8, 2006, offshore special purpose vehicles, or SPVs, formed for
listing purposes through acquisitions of PRC domestic companies and controlled
by PRC individuals are required to obtain the approval of the CSRC prior to
publicly listing their securities on an overseas stock exchange.  The CSRC
approval requirement applies to SPVs that acquired equity interests in PRC
companies through share swaps and using cash.  On September 21, 2006, pursuant
to the New M&A Rule and other PRC laws and regulations, the CSRC, in its
official website, promulgated relevant guidance with respect to the issues of
listing and trading of domestic enterprises securities on overseas stock
exchanges, including a list of application materials with respect to the listing
on overseas stock exchanges by SPVs.  Based on our understanding of the current
PRC laws, rules and regulations and the New M&A Rule, the new regulation does
not require that the Company obtain prior CSRC approval for the listing and
trading of its shares of common stock on the NASDAQ Capital Select Market,
because the Company had completed its reorganization under which the equity
interests in the PRC Subsidiaries were transferred to the Company prior to
September 8, 2006,  and has received all necessary approvals from PRC regulatory
authorities for the acquisition prior to September 8, 2006, the effective date
of the New M&A Rule.
 
 
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(x)           Subject to the requirements that the Company’s shareholders or
ultimate equity investors of shareholders who are qualified PRC residents shall
comply with foreign investment registration requirements under the relevant PRC
laws and regulations, all dividends and other distributions declared and payable
upon the equity interests in the PRC Subsidiaries may under the current PRC laws
and regulations of the PRC be paid to the Company in Renminbi that may be
converted into U.S. dollars and freely transferred out of the PRC, and all such
dividends and other distributions are not and will not be subject to withholding
or other taxes under the laws and regulations of the PRC and are otherwise free
and clear of any other tax, withholding or deduction in the PRC, and may be so
paid without the necessity of obtaining any Approvals or registration, clearance
or qualification of or with any governmental authority, agency or body, any
self-regulatory organization or any court or other tribunal in the PRC.
 
(xi)          Each PRC Subsidiary has full power, authority and legal right to
enter into, execute, assume, deliver and perform its obligations under each of
the contracts disclosed in the Disclosure Package and the Offering Memorandum,
to which it is a party (collectively, the “Disclosed Contracts”) and has duly
authorized, executed and delivered each of the Disclosed Contracts, and such
obligations constitute valid, legal and binding obligations enforceable against
such PRC Subsidiary in accordance with the terms of each of the Disclosed
Contracts.  Each PRC Subsidiary has not sent or received any communication
regarding termination of, or intent not to renew, any of the Disclosed
Contracts, and no such termination or non-renewal has been threatened by any PRC
Subsidiary or any other party to any such contract or agreement.
 
(xii)         Each of the Disclosed Contracts and the transactions contemplated
thereby are legal, valid, enforceable and admissible as evidence under the PRC
laws and regulations and is binding on the persons expressed to be parties
thereto.
 
(xiii)        None of the Disclosed Contracts or the transactions contemplated
thereby, taken both individually and together as a whole, has resulted in or
results in the creation or imposition of any lien, charge, encumbrance or claim
pursuant to any instrument or agreement to which any of the relevant PRC
Subsidiaries or any of their respective properties or assets was or is bound.
 
(xiv)        The execution and delivery by each PRC Subsidiary of, and the
performance by each PRC Subsidiary of its obligations under, the Disclosed
Contracts will not contravene (A) any provision of the applicable PRC laws,
regulations or rules, or any decree, judgment or order of any court of the PRC;
(B) the articles of association  of any PRC Subsidiary; or (C) any agreement or
other instrument binding upon any PRC Subsidiary, or any judgment, order or
decree of any governmental body, agency or court in the PRC having jurisdiction
over any PRC Subsidiary, and no consent, approval, authorization or order of, or
qualification with, any PRC governmental body or agency is required for the
performance by any PRC Subsidiary of its obligations and the transactions
contemplated under the Disclosed Contracts.
 
(xv)         The choice of PRC laws as the governing law in each Disclosed
Contract is a valid choice of governing law and will be binding on the parties
to the relevant Disclosed Contract.  None of the PRC Subsidiaries is in breach
or default in the performance of any of the terms or provisions of such
Disclosed Contract, and none of the Disclosed Contract has been amended or
revoked or is liable to be set aside under any applicable PRC laws.
 
(xvi)        The indemnification and contribution provisions set forth in the
Transaction Documents do not contravene the public interest or laws of the PRC.
 
 
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(xvii)       The irrevocable submission of the Company to the jurisdiction of
any New York Court, the waiver by the Company of any objection to the venue of a
proceeding in a New York Court, the waiver and agreement not to plead an
inconvenient forum, the waiver of sovereign immunity and the agreement of the
Company that the Transaction Documents shall be construed in accordance with and
governed by the laws of the State of New York are legal, valid and binding under
the laws of the PRC and will be respected by PRC courts; service of process
effected in the manner set forth in the Transaction Documents will be effective,
insofar as PRC law is concerned, to confer valid personal jurisdiction over the
Company; and any judgment obtained in a New York Court or arbitration award
arising out of or in relation to the obligations of the Company under the
Transaction Documents will be recognized and enforceable in PRC courts.
 
(xviii)      Neither the Company, nor any of the PRC Subsidiaries is in breach
or violation of or in default, as the case may be, (A) any provision of the
applicable PRC laws, regulations or rules, or any decree, judgment or order of
any court of the PRC applicable to the Company or any PRC Subsidiary, (B) any
Approval granted by any Governmental Authorities or (C) (in the case of the PRC
Subsidiaries) its respective articles of association, business license or any
other constitutive documents.
 
(xix)         Neither the Company nor any of the PRC Subsidiaries is in default,
and no event has occurred that, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in (A) any indenture, mortgage, deed of trust,
loan agreement or other evidence of indebtedness governed by PRC laws or (B) any
license, lease, contract or other agreement or instrument governed by PRC laws
to which the Company or any PRC Subsidiary is a party or by which any of them is
bound or to which any of their respective properties or assets is subject.
 
(xx)          There are no legal, governmental, administrative or arbitrative
proceedings before any court of the PRC or before or by any Governmental
Authority of the PRC pending or threatened to which any of the Company or the
PRC Subsidiaries is a party or to which any of the properties of the Company or
the PRC Subsidiaries is subject.
 
(xxi)         Each of the PRC Subsidiaries owns or leases all such properties as
are necessary to conduct its business operations.  Each of the PRC Subsidiaries
has (A) good and marketable title, in each case free and clear of all liens,
encumbrances and defects, and has obtained proper and valid land use rights
certificates, in respect of all the land held by such PRC Subsidiary, (B) good
and marketable title, in each case free and clear of all liens, encumbrances and
defects, and have obtained proper and valid title certificates, in respect of
all the buildings owned or held by such PRC Subsidiary, and (C) valid,
subsisting and enforceable leases, in each case free of all liens, encumbrances,
third parties rights or other defects, in respect of all land and buildings held
under lease by such PRC Subsidiary.
 
(xxii)        The mining rights of each mine operated by the PRC Subsidiaries
are free from any liens, encumbrances, third parties rights or other defects;
there is no claim against the PRC Subsidiaries in respect of the mining rights
of each mine and, there is no ground for the unilateral termination by the PRC
government of the mining rights of any of such mines prior to the expiry of the
term of its mining permit; and there would be no material legal impediment to
renew the mining rights of each of such mines upon the expiry of the term of
such mining permit.
 
 
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(xxiii)       The PRC Subsidiaries own or have valid licenses in full force and
effect or otherwise have the legal right to use, or can acquire on reasonable
terms, all material copyrights, patents, patent rights, inventions, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
domain names (the “Intellectual Property”) currently employed by them in
connection with the business currently operated by them as described in the
Disclosure Package and the Offering Memorandum, and none of the PRC Subsidiaries
has received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing.
 
(xxiv)       (A) There are no third parties who have or will be able to
establish rights to any Intellectual Property except for, and to the extent of,
the ownership rights of the owners of the Intellectual Property which the
Disclosure Package and the Offering Memorandum disclose as licensed to any PRC
Subsidiary; (B) there is no infringement by third parties of any Intellectual
Property; (C) no Intellectual Property of the PRC Subsidiaries is subject to any
outstanding decree, order, injunction, judgment or ruling restricting the use of
such Intellectual Property; (D) the PRC Subsidiaries have complied with the
terms of each agreement pursuant to which Intellectual Property has been
licensed to any of them and all such agreements are in full force and effect;
and (E) no employee of the PRC Subsidiaries is in  violation of any term of any
patent disclosure agreement, invention assignment agreement, non-competition
agreement, non-solicitation agreement, non-disclosure agreement or any
restrictive covenant to or with a former employer where the basis of such
violation relates to such employee's employment with  the PRC Subsidiaries or
actions undertaken by the employee while employed with  the PRC Subsidiaries.
 
(xxv)        There are no outstanding guarantees or contingent payment
obligations of the PRC Subsidiaries in respect of indebtedness of third parties.
 
(xxvi)       (A) Each of the PRC Subsidiaries is in compliance with and is not
in breach of any applicable rules, regulations, statutes and subordinate
legislation and other national, state and local laws, insofar as they relate to
the protection of human health and safety and the environment from hazardous or
toxic substances, wastes, pollutants or contaminants (“Environmental and Safety
Laws”); (B) each of the PRC Subsidiaries has received and is in compliance with
all permits, licenses or other approvals required of them under applicable
Environmental and Safety Laws to conduct their respective businesses; (C) each
of the PRC Subsidiaries has not received notice of any actual or potential
liability (including, without limitation, administrative regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigation or proceeding against any of the PRC
Subsidiaries) under any Environmental and Safety Law; and (D) there are no
events or circumstances that might reasonably be expected to form the basis of
an order for clean-up or remedial measures, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting any of
the PRC Subsidiaries relating to hazardous material (including, without
limitation, any hazardous or toxic substances, chemicals, petroleum, petroleum
products, pollutants or contaminants).
 
(xxvii)      There is no pending or threatened PRC regulatory, administrative or
other governmental initiative that, if implemented or adopted in the manner
proposed or contemplated, would have a material adverse effect on the operations
of any PRC Subsidiary in the PRC in the manner presently conducted or as
disclosed in the Disclosure Package and the Offering Memorandum.
 
 
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(xxviii)     No labor dispute, work stoppage, slow down or other conflict with
the employees of any of the PRC Subsidiaries exists or is imminent or
threatened.
 
(xxix)        (A) The PRC tax laws and regulations applicable to the activities
of the PRC Subsidiaries in the PRC are assessed or apply to the PRC Subsidiaries
in substantially the same manner as are currently applicable to any company
incorporated under the PRC Company Law engaged in the same business as the
Company in the PRC; (B) there are no material PRC fees or taxes that are or will
become applicable to any of the PRC Subsidiaries as a consequence of the
reorganization or the Offering that have not been disclosed in the Disclosure
Package and the Offering Memorandum; and (C) all returns, reports or filings
which ought to have been made by or in respect of the PRC Subsidiaries for
taxation purposes as required by the law of the PRC have been made and all such
returns are correct and on a proper basis in all material respects and are not
the subject of any dispute with the relevant tax, revenue or other appropriate
authorities.  All taxes and other assessments of a similar nature (whether
imposed directly or through withholding) including any interest, additions to
tax or penalties applicable thereto due or claimed to be due from such
authorities have been paid in full; and the PRC Subsidiaries have not committed
any breach of the relevant PRC tax laws and regulations.  All national,
provincial and local tax waivers, tax relief, concession and preferential
treatment are valid, binding and enforceable and do not violate any provision of
PRC laws.
 
(xxx)         Each PRC Subsidiary is not prohibited, directly or indirectly,
from paying any dividends to the Company, from making any other distribution on
its capital stock, from repaying to the Company any loans or advances to it from
the Company or from transferring any of its property or assets to the Company or
any other subsidiaries of the Company.
 
(xxxi)        Neither the Company nor any of the PRC Subsidiaries has any
financial obligation to the PRC government or National Council for Social
Security Fund in connection with the Offering as contemplated by the Disclosure
Package and the Offering Memorandum.  Subject to applicable PRC statutory
requirements, the PRC Subsidiaries have no other material legal obligations to
provide housing benefits or retirement benefits, death or disability benefits
(or other actual or contingent employee benefits or perquisites) to any present
or past employee, whether permanent or temporary, of the PRC Subsidiaries.
 
(xxxii)       The application of the net proceeds to be received by the Company
from the Offering as contemplated by the Disclosure Package and the Offering
Memorandum will not contravene, breach or violate (A) any provision of
applicable PRC laws, rules or regulations, (B) any articles of association,
other constitutive documents or business licenses of any PRC Subsidiary, (C) any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which any of the PRC Subsidiaries  is a party or bound or to which their
property is subject, or (D) any judgment, order or decree of any governmental
body, agency or court in the PRC having jurisdiction over the Company or any PRC
Subsidiary, or (E) result in the imposition of any lien, charge or encumbrance
upon any property or assets of any of the PRC Subsidiaries.
 
 
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(xxxiii)      The issue and sale of the Notes by the Company, the execution and
delivery by the Company or the Trustee of, and the performance by the Company or
the Trustee of its obligations under, the Transaction Documents and the issuance
of the shares of the Common Stock upon conversion of the Notes as set forth in
the Transaction Documents will not contravene (A) any provision of applicable
law, statute, order, rule or regulation of the PRC, (B) any provision of the
articles of association, by-laws, business license or  other constituent
documents of any PRC Subsidiary, (C) any judgment, order or decree of any
governmental body, agency or court of the PRC having jurisdiction over any PRC
Subsidiary, or (D) any agreement or other instrument binding upon any PRC
Subsidiary.  No consent, approval, authorization or order of, or qualification
with, any PRC governmental body or agency is required for the issue and sale of
the Notes by the Company, the performance by the Company or the Trustee of its
obligations under the Transaction Documents and the issuance of the shares of
the Common Stock upon conversion of the Notes as set forth in the Transaction
Documents.
 
(xxxiv)      The entering into and performance or enforcement of the Transaction
Documents in accordance with their respective terms will not subject any of the
Initial Purchasers or the Trustee to any requirement to be licensed or otherwise
qualified to do business in the PRC, nor will any Initial Purchaser or the
Trustee be deemed to be resident, domiciled, carrying on business through an
establishment or place in the PRC or in breach of any laws or regulations in the
PRC by reason of the entering into, performance or enforcement of the
Transaction Documents.
 
(xxxv)       It is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of the Transaction Documents that
any such document be filed, recorded or enrolled with any governmental
department, agency or other authority in the PRC.
 
(xxxvi)      There are no reporting obligations under PRC law on non-PRC holders
of the Notes of the Company or the shares of the Common Stock upon conversion of
the Notes.
 
(xxxvii)     As a matter of PRC law, neither the Company, the Trustee nor any
holder of the Notes or the shares of the Common Stock upon conversion of the
Notes will be subject to any personal liability, or be subject to a requirement
to be licensed or otherwise qualified to do business or be deemed domiciled or
resident in the PRC, by virtue only of holding such Notes, the shares of the
Common Stock upon conversion or of the Company’s holding shares of capital stock
of, or equity interest in, the PRC Subsidiaries.  There are no limitations under
the PRC law on the rights of the Company to hold, vote or transfer its shares of
capital stock of, or equity interest in, the PRC Subsidiaries held directly or
indirectly by the Company, or on the rights of the holders of the Notes or the
shares of the Common Stock upon conversion of the Notes to hold, vote or
transfer their securities nor any statutory pre-emptive rights or transfer
restrictions applicable to the shares of the Common Stock or the Notes.
 
(xxxviii)    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 Initial Purchasers to the government of the PRC or to any political
subdivision or taxing authority thereof in connection with (A) the execution or
delivery of the Transaction Documents or the performance by any of the parties
of their respective obligations thereof, or the enforcement or admissibility in
evidence of the Transaction Documents, (B) the issuance, sale or delivery of the
Notes to the Initial Purchasers, (C) the subsequent sale and delivery of the
Notes outside of the PRC by the Initial Purchasers thereof or (D) the issuance
of the shares of the Common Stock upon conversion of the Notes.
 
 
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(xxxix)       The choice of law provisions set forth in the Transaction
Documents will be recognized by PRC courts; each of the Company and the PRC
Subsidiaries can sue and be sued in its own name under the laws of the PRC.
 
(xl)            Service of process effected in the manner set forth in the
Transaction Documents will be effective to confer jurisdiction over the PRC
Subsidiaries, assets and property of the Company in the PRC, subject to
compliance with relevant civil procedural requirements in the PRC, and any
judgment obtained in a New York Court arising out of or in relation to the
obligations of the PRC Subsidiaries under the Transaction Documents will be
recognized by PRC courts and enforceable against the Company and the PRC
Subsidiaries in PRC courts, subject to compliance with relevant civil procedural
requirements in the PRC.
 
(xli)           Neither the Company, or the PRC Subsidiaries nor any of their
respective properties, assets or revenues has any right of immunity under PRC
laws, from any legal action, suit or proceeding, from the giving of any relief
in any such legal action, suit or proceeding, from set-off or counterclaim, from
the jurisdiction of any PRC court, from service of process, attachment upon or
prior to judgment, or attachment in aid of execution of judgment, or from
execution of a judgment, or other legal process or proceeding for the giving of
any relief or for the enforcement of a judgment, in any such court, with respect
to its obligations, liabilities or any other matter under or arising out of or
in connection with the Transaction Documents.
 
(xlii)           The Transaction Documents are in proper legal form under PRC
law for the enforcement thereof under PRC law against the Company, subject to
compliance with relevant civil procedural requirements; so far as matters of PRC
law are concerned, constitutes the legal, valid and binding obligations of the
Company, enforceable in accordance with the terms therein; and to ensure the
legality, validity, enforceability or admissibility in evidence of the
Transaction Documents in the PRC, it is not necessary that such document be
filed or recorded with any court or other authority in the PRC or that any stamp
or similar tax be paid on or in respect of such document.
 
(xliii)          (A) The Disclosure Package (except for the financial statements
and financial schedules and other financial data included therein, as to which
we need not express any belief) as of the Applicable Time or as of the date
hereof did not or does not contain any untrue statement of a material fact or
did not or does not omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (B) the Offering Memorandum (except for the financial
statements and financial schedules and other financial data included therein, as
to which we need not express any belief) as of its date or as amended or
supplemented, if applicable, as of its date or the date hereof did not or does
not contain any untrue statement of a material fact or did not or does not omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
 
(xliv)          The Statements in the Disclosure Package and the Offering
Memorandum under “Risk Factors”, “Dividend Policy”, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, “Business”,
“Taxation” and “Management” insofar as they purport to describe the provisions
of PRC laws and documents referred to therein, are accurate, complete and fair
summaries thereof.  All matters of PRC law and practice relating to the Company
and the PRC Subsidiaries and their respective businesses and other statements
with respect to or involving PRC law set forth in the Disclosure Package and the
Offering Memorandum are correctly set forth therein, and nothing has been
omitted from such statements which would make the same misleading in any
material respect.
 
 
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