Exhibit 10.3
 
SECURITIES PURCHASE AGREEMENT

BETWEEN

MALEX, INC.

AND

BARRON PARTNERS LP

AND

THE OTHER INVESTORS NAMED HEREIN

DATED

November 13, 2007

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SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made and entered into as
of the 13th day of November, 2007 between Malex, Inc., a Delaware corporation
(the “Company”), and Barron Partners LP, a Delaware limited partnership
(“Barron”), and any other investors named on the signature page of this
Agreement (together with Barron, the “Investors” and each an “Investor”).
 
RECITALS:
 
WHEREAS, the Investors wish to purchase from the Company, upon the terms and
subject to the conditions of this Agreement, for the Purchase Price, as
hereinafter defined, one or more convertible notes (the “Notes”) in the
aggregate principal amount of $5,525,000, which Notes are convertible into
either
 
(a) an aggregate of (i) 14,787,135 shares of the Company’s Series A Convertible
Preferred Stock, par value $.001 per share (“Series A Preferred Stock”), with
each share of Series A Preferred Stock being initially convertible into one (1)
share of the Company’s common stock, par value $.001 per share (“Common Stock”),
subject to adjustment, and (ii) common stock purchase warrants (the “Warrants”)
to purchase 11,176,504 shares of Common Stock at $0.58 per share, 5,588,252
shares of Common Stock at $0.83 per share, and 2,065,000 shares at $0.92 per
share; or
 
(b) an aggregate of (i) 14,787,135 shares of the Common Stock, subject to
adjustment, and (ii) Warrants to purchase 11,176,504 shares of Common Stock at
$0.58 per share, 5,588,252 shares of Common Stock at $0.83 per share, and
2,065,000 shares at $0.92 per share; or
 
(c) if the Restated Certificate and the Certificate of Designation, as
hereinafter defined, shall not have been filed as required by this Agreement and
the Note, 33,616,891shares of Common Stock; and
 
WHEREAS, each Investor is purchasing Notes in the principal amount set forth in
Schedule A of this Agreement;
 
WHEREAS, contemporaneously with the Closing, the Company is acquiring all of the
issued and outstanding capital stock of Fulland Limited, a Cayman Islands
corporation (“Fulland”), which is the sole stockholder of Greenpower
Environmental Technologies Co., Ltd., a corporation organized under the laws of
the Peoples’ Republic of China as a wholly foreign owned enterprise
(“Greenpower”); and
 
WHEREAS, Greenpower is a party to agreements with Huayang Dye Machine Co., Ltd.
(“Dye Co.”) and Huayang Electricity Power Equipment Co., Ltd. (“Power Co.”) and,
together with Dye Co., collectively, the “PRC Companies”), pursuant to which
Greenpower has the right to advise, consult, manage and operate the PRC
Companies and collect and own all of their net profits, and, pursuant to a proxy
and voting agreement and a voting trust and escrow agreement, the stockholders
of the PRC Companies have vested their voting control over the PRC Companies to
Greenpower; and
 
WHEREAS, the parties intend to memorialize the terms on which the Company will
sell to the Investors and the Investors will purchase the Securities;
 
SECURITIES PURCHASE AGREEMENT BETWEEN
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NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby conclusively acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
 
Article 1
 
INCORPORATION BY REFERENCE AND DEFINITIONS
 
1.1 Incorporation by Reference. The foregoing recitals and the Exhibits and
Schedules attached hereto and referred to herein, are hereby acknowledged to be
true and accurate, and are incorporated herein by this reference.
 
1.2 Supersedes Other Agreements. This Agreement, to the extent that it is
inconsistent with any other instrument or understanding among the parties, shall
supersede such instrument or understanding to the fullest extent permitted by
law. A copy of this Agreement shall be filed at the Company’s principal office.
 
1.3 Certain Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings (all capitalized terms used
in this Agreement that are not defined in this Article 1 shall have the meanings
set forth elsewhere in this Agreement):
 
1.3.1 “4.9% Limitation” has the meaning set forth in Section 2.1.3 of this
Agreement.
 
1.3.2 “1933 Act” means the Securities Act of 1933, as amended.
 
1.3.3 “1934 Act” means the Securities Exchange Act of 1934, as amended.
 
1.3.4 “Affiliate” means a Person or Persons directly or indirectly, through one
or more intermediaries, controlling, controlled by or under common control with
the Person(s) in question. The term “control,” as used in the immediately
preceding sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50% of the voting
rights attributable to the shares of such controlled corporation and, with
respect to a Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such controlled Person.
 
1.3.5 “Articles” means the certificate of incorporation of the Company, as the
same may be amended from time to time. 
 
1.3.6 “Authorized Stock Proviso” has the meaning set forth in Section 4.4.3 of
this Agreement.
 
1.3.7 “Bylaws” means the bylaws of the Company, as the same may be amended from
time to time.
 
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1.3.8 “Certificate of Designation” means the certificate of the rights,
preferences and privileges, subject to the limitations, with respect to the
Series A Preferred Stock. The Certificate of Designation shall be in
substantially the form of Exhibit A to this Agreement.
 
1.3.9 “Closing” means the consummation of the transactions contemplated by this
Agreement, all of which transactions shall be consummated contemporaneously with
the Closing.
 
1.3.10 “Closing Date” means the date on which the Closing occurs.
 
1.3.11 “Closing Escrow Agreement” shall mean the agreement between the Company,
the Investors and the Escrow Agent pursuant to which securities are deposited
into escrow to be held as provided in Section 6 of this Agreement. The Closing
Escrow Agreement shall be in substantially the form of Exhibit B to this
Agreement.
 
1.3.12 “Common Stock” means the Company’s common stock, which is presently
designated as the common stock, par value $.00002 per share. Pursuant to the
Restated Certificate, the par value will be changed to $.001 per share.
 
1.3.13 “Company’s Governing Documents” means the Articles and Bylaws.
 
1.3.14 “Delaware Law” shall mean the Delaware General Corporation Law.
 
1.3.15 “EBITDA” means consolidated earnings before interest, taxes, depreciation
and amortization, determined in accordance with GAAP.
 
1.3.16 “Escrow Agreement” means the Escrow Agreement dated November 6, 2007,
among the Company, Barron Partners and Sichenzia Ross Friedman Ference LLP, as
Escrow Agent.
 
1.3.17 “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers, directors of and consultants (other than
consultants whose services relate to the raising of funds) of the Company
pursuant to any stock or option plan that was or may be adopted by a majority of
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose, (b) securities upon the exercise of or conversion of any securities
issued hereunder and pursuant to the Registration Rights Agreement, the Notes,
the Warrants and the Certificate of Designation and any other options, warrants
or convertible securities which are outstanding on after completion of the
Closing, and (c) securities issued pursuant to acquisitions, licensing
agreements, or other strategic transactions, provided any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating
company in a business which the Company’s board of directors believes is
beneficial to the Company and in which the Company receives benefits in addition
to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities.
 
1.3.18 “GAAP” means United States generally accepted accounting principles
consistently applied.
 
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1.3.19 “Make-Good Note” shall mean the note issued pursuant to Section 6.15.9 of
this Agreement, and shall be in substantially the form of Exhibit C to this
Agreement.
 
1.3.20 “Material Adverse Effect” means any adverse effect on the business,
operations, properties or financial condition of the Company or any of its
Subsidiaries that is material and adverse to the Company and its Subsidiaries
taken as a whole and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company or
any Subsidiary to perform any of its material obligations under this Agreement,
the Registration Rights Agreement or the Warrants or to perform its obligations
under any other material agreement.
 
1.3.21 “Note(s)” shall have the meaning set forth in the introductory paragraph
of this Agreement and shall be in substantially the form of Exhibit D to this
Agreement.
 
1.3.22 “Person” means an individual, partnership, firm, limited liability
company, trust, joint venture, association, corporation, or any other legal
entity.
 
1.3.23 “PRC Agreements” shall mean the agreements between Greenpower and the PRC
Companies.
 
1.3.24 “PRC Company Stockholders” shall mean the stockholders of the PRC
Companies, which, as of the date of this Agreement, are WU Jianhua and TANG
Lihua, as to Dye Co. and TANG Lihua, WU Haoyang (WU Jianhua’s son) and Dye Co.,
as to Power Co.
 
1.3.25 “Preferred Stock” means the preferred stock, par value $.001 per share,
as created by the Restated Certificate.
 
1.3.26 “Pre-Tax Income” means income before income taxes determined in
accordance with GAAP plus (a) any charges relating to the transaction
contemplated by this Agreement and the Registration Rights Agreement and the
other Transaction Documents, including the issuance of the Note and any other
securities issuable pursuant to this Agreement, the Note and the Registration
Rights Agreement, minus (b) the amount, if any, by which all non-recurring
losses or expenses exceed all non-recurring items or income or gain. Pre-Tax
Income shall not be adjusted if all non-recurring items of income or gain exceed
all non-recurring losses or expenses. Items shall be deemed to be non-recurring
only if they qualify as non-recurring pursuant to GAAP.
 
1.3.27 “Proxy Statement” means a proxy statement filed with the SEC pursuant to
Section 14(a) of the 1934 Act which seeks stockholder approval of the Restated
Certificate or an information statement pursuant to Section 14(c) of the 1934
Act advising stockholders that the holders of a majority of the shares of Common
Stock have approved the Restated Certificate, whichever shall be appropriate.
 
1.3.28 “Purchase Price” means the $5,525,000 to be paid by the Investors to the
Company for the Securities.
 
1.3.29 “Registration Rights Agreement” means the registration rights agreement
between the Investor and the Company in substantially the form of Exhibit E to
this Agreement.
 
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1.3.30 “Registration Statement” means the registration statement under the 1933
Act to be filed with the SEC for the registration of the Shares pursuant to the
Registration Rights Agreement.
 
1.3.31 “Related Companies” shall mean Fulland, Greenpower and the PRC Companies,
each of which is a “Related Company.”
 
1.3.32 “Restated Certificate” means the restated certificate of incorporation
which is in substantially the form of Exhibit F to this Agreement.
 
1.3.33 “Restricted Stockholders” shall have the meaning set forth in Section
6.16 of this Agreement.
 
1.3.34 “Restriction Termination Date” shall mean the date on which the Investors
shall have (a) converted all Notes and shares of Series A Preferred Stock and
exercised all Warrants (other than Warrants that shall have expired unexercised)
and (b) sold the underlying Shares in the public market.
 
1.3.35 “Restriction Termination Date at 90%” shall mean the date on which the
Investors shall have (a) converted Notes and shares of Series A Preferred Stock
and exercised Warrants (other than Warrants that shall have expired unexercised)
and (b) sold 90% of the Total Shares.
 
1.3.36 “Securities” means the Note, the shares of Series A Preferred Stock, the
Warrants and the Shares.
 
1.3.37 “SEC” means the Securities and Exchange Commission.
 
1.3.38 “SEC Documents” means, at any given time, the Company’s latest Form 10-K
or Form 10-KSB and all Forms 10-Q or 10-QSB and 8-K and all proxy statements or
information statements filed between the date the most recent Form 10-K or Form
10-KSB was filed and the date as to which a determination is being made.
 
1.3.39 “Series A Preferred Stock” means the shares of Series A Preferred Stock
having the rights, preferences and privileges and subject to the limitations set
forth in the Certificate of Designation.
 
1.3.40 “Shares” means, collectively, the shares of Common Stock issued or
issuable (i) upon conversion of the Notes or Series A Preferred Stock and (ii)
upon exercise of the Warrants.
 
1.3.41 “Subsidiary” means an entity in which the Company and/or one or more
other Subsidiaries directly or indirectly own either 50% of the voting rights or
50% of the equity interests.
 
1.3.42 “Subsequent Financing” means any offer and sale of shares of Preferred
Stock or debt that is initially convertible into shares of Common Stock or
otherwise senior or superior to the Series A Preferred Stock.
 
1.3.43 “Target Number” has the meaning set forth in Section 6.15.2 of this
Agreement.
 
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1.3.44 “Total Shares” means the number of shares of Common Stock as have been or
would be issued upon conversion of the Notes and the Series A Preferred Stock
and Warrants issuable upon conversion of the Notes. The number of Total Shares
shall be adjusted to reflect any change in the conversion price of the Notes or
Series A Preferred Stock and the expiration of any Warrants.
 
1.3.45 “Transaction Documents” means this Agreement, all Schedules and Exhibits
attached hereto, the Notes, the Certificate of Designation, the Warrants, the
Registration Rights Agreement, the Closing Escrow Agreement and all other
documents and instruments to be executed and delivered by the parties in order
to consummate the transactions contemplated hereby.
 
1.3.46 “Unsold Shares” means the difference between (a) the number of shares of
Series A Preferred Stock which were initially issued upon conversion of the
Notes and (b) the number of shares of Series A Preferred Stock, regardless of
when such shares were issued, which have been converted into Common Stock with
the Common Stock having been sold.
 
1.3.47 “Warrants” means the common stock purchase warrants in substantially the
forms of Exhibits G-1, G-2 and G-3 to this Agreement.
 
1.4 References. All references in this Agreement to “herein” or words of like
effect, when referring to preamble, recitals, article and section numbers,
schedules and exhibits shall refer to this Agreement unless otherwise stated.
 
1.5 Value of Series A Preferred Stock. Whereever this Agreement provides for the
delivery of shares of Series A Preferred Stock in satisfaction of an obligation
under this Agreement, a share of Series A Preferred Stock shall have a value
equal to its liquidation preference as set forth in the Certificate of
Designation.
 
Article 2

SALE AND PURCHASE OF NOTES; PURCHASE PRICE
 
2.1 Sale of Notes. 
 
2.1.1 Upon the terms and subject to the conditions set forth herein, and in
accordance with applicable law, the Company agrees to sell to the Investors, and
each Investor severally agrees to purchase from the Company, on the Closing
Date, Notes for portion of the Purchase Price set forth after the Investor’s
name on Schedule A to this Agreement in the principal amount set forth in said
Schedule A. At or prior to the Closing each Investor shall wire the Investor’s
portion of the Purchase Price to the Escrow Agent, who shall release the
Purchase Price to the Company upon receipt of instructions from the Investor and
the Company as provided in the Escrow Agreement. The Company shall cause the
Notes to be issued to the Investors upon the release of the Purchase Price to
the Company by the Escrow Agent pursuant to the terms of the Escrow Agreement.
 
2.1.2 The Notes shall be convertible into Preferred Stock and Warrants, or
Common Stock and Warrants or Common Stock in the manner set forth in the first
introductory paragraph of this Agreement, all as set forth in the Notes. As
provided in the Notes, upon filing of the Restated Certificate and the
Certificate of Designation, the Notes shall be automatically converted, without
any action on the part of the holder thereof, into an aggregate of 14,787,135
shares of Series A Preferred Stock and Warrants to purchase an aggregate of
11,176,504 shares of Common Stock at $0.58 per share, 5,588,252 shares of Common
Stock at $0.83 per share, and 2,065,000 shares at $0.92 per share, less any
securities issued as a result of a conversion prior to such automatic
conversion. The Warrants are subject to redemption by the Company as provided in
those Warrants.
 
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2.1.3 Except as expressly provided in the Certificate of Designation and the
Warrants, an Investor shall not be entitled to convert the Notes or Series A
Preferred Stock into shares of Common Stock or to exercise the Warrants to the
extent that such conversion or exercise would result in beneficial ownership by
the Investor and its Affiliates of more than 4.9% of the then outstanding number
of shares of Common Stock on such date after giving effect to such conversion or
exercise. For the purposes of this Agreement beneficial ownership shall be
determined in accordance with Section 13(d) of the 1934 Act, and Regulation
13d-3 thereunder. The limitation set forth in this Section 2.1.3 is referred to
as the “4.9% Limitation.” As a result of the 4.9% Limitation, no Investor will
have 5% of the voting power of the Company; provided, however, that this
sentence shall not affect any of an Investor’s rights under the Certificate of
Designation.
 
Article 3
 
CLOSING DATE AND DELIVERIES AT CLOSING
 
3.1 Closing Date. The Closing of the transactions contemplated by this
Agreement, unless expressly determined herein, shall be held at the offices of
the Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York, New York 10006,
at 2:00 P.M. local time, on the Closing Date or on such other date and at such
other place as may be mutually agreed by the parties, including closing by
facsimile with originals to follow.
 
3.2 Deliveries by the Company. In addition to and without limiting any other
provision of this Agreement, the Company agrees to deliver, or cause to be
delivered, to the escrow agent under the Escrow Agreement, the following:
 
(a) At or prior to Closing, an executed Agreement with all exhibits and
schedules attached hereto;
 
(b) At the Closing, Notes in the names of the Investors in the amounts set forth
in Schedule A to this Agreement;
 
(c) The executed Registration Rights Agreement;
 
(d) The executed Closing Escrow Agreement;
 
(e) Evidence that the Company has acquired all of the outstanding shares of
Fulland.
 
(f) Copies of all SEC correspondence since last Form 10-KSB and any
correspondence which was issued prior to the last Form 10-KSB which has not been
resolved to the satisfaction of the SEC.
 
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(g) Schedule of all amounts owed (cash and stock) to officers, consultants and
key employees (salary, bonuses, etc.).
 
(h) Certifications in form and substance acceptable to the Company and the
Investors from any and all brokers or agents involved in the transactions
contemplated hereby as to the amount of commission or compensation payable to
such broker or agent as a result of the consummation of the transactions
contemplated hereby and from the Company or Investor, as appropriate, to the
effect that reasonable reserves for any other commissions or compensation that
may be claimed by any broker or agent have been set aside;
 
(i) Management letter from the Company’s registered independent accounting firm
or confirmation from such firm that no such letter were issued in connection
with the Company’s most recent audit;
 
(j) Evidence of approval of the Board of Directors of the Company of the
Transaction Documents and the transactions contemplated hereby and thereby;
 
(k) Agreements from the Restricted Stockholders pursuant to Section 6.16 of this
Agreement.
 
(l) Evidence that the Restated Certificate has been approved by the directors,
and that the board of directors has authorized the filing of the Proxy Statement
with the SEC.
 
(m) Good standing certificate from the Secretary of State of the State of
Delaware;
 
(n) Copy of the Company’s Articles, as currently in effect, certified by the
Secretary of State of the State of Delaware;
 
(o) An opinion from the Company’s counsel concerning the Transaction Documents
and the transactions contemplated hereby in form and substance reasonably
acceptable to Investors;
 
(p) An opinion from the Company’s PRC counsel that (i) each of the Related
Companies is legally established and validly existing as an independent legal
entity; (ii) each of the Related Companies is an independent legal person and
none of them is exposed to liabilities incurred by the other party; (iii) the
PRC Agreements constitute valid and binding obligations of the parties to such
agreements, and (iv) each of the PRC Agreements and the rights and obligations
of the parties thereto are enforceable and valid in accordance with the laws of
the PRC;
 
(q) An agreement between Greenpower and the PRC Companies pursuant to which the
PRC Companies transfer to Greenpower all of the patent, trademark and other
intellectual property rights and other intangible assets;
 
(r) Evidence that all agreement between Greenpower and the PRC Companies are
executed and are satisfactory in all material respects to the Investors;  
 
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(s) The executed disbursement instructions pursuant to the Escrow Agreement,
which shall provide that the Escrow Agent continue to hold $100,000 to pay the
Company’s anticipated obligations to its investor relations company;
 
(t) Evidence satisfactory to the Investors that (i) the PRC Companies have, in
the aggregate, not less than RMB¥3,500,000 in cash on the Closing Date; (ii) the
combined debt of the PRC Companies and Greenpower shall not exceed RMB¥5,000,000
on the Closing Date; and (iii) all accrued and unpaid taxes as of the Closing
Date shall have been forgiven.
 
(u) Copies of all executive employment agreements, all past and present
financing documentation or other documentation where stock could potentially be
issued or issued as payment, all past and present litigation documents;
 
(v) Copies of the non-competition agreements provided in Section 4.17 of this
Agreement;
 
(w) Such other documents or certificates as shall be reasonably requested by
Investors or their counsel; and
 
(x) The Company must be current in its filings with the SEC, and the Company’s
Common Stock must be trading on the OTC Bulletin Board.
 
3.3 Deliveries by Investors. In addition to and without limiting any other
provision of this Agreement, the Investors agree to deliver, or cause to be
delivered, to the Escrow Agent under the Escrow Agreement, the following:
 
(a) A deposit from each Investor as to the Investor’s portion of the Purchase
Price;
 
(b) The executed Agreement with all Exhibits and Schedules attached hereto;
 
(c) The executed Registration Rights Agreement;
 
(d) The executed Closing Escrow Agreement;
 
(e) The executed disbursement instructions pursuant to the Escrow Agreement; and
 
(f) Such other documents or certificates as shall be reasonably requested by the
Company or its counsel.
 
3.4 Delivery of Original Documents. In the event any document provided to the
other party in Paragraphs 3.2 and 3.3 herein are provided by facsimile, the
party shall forward an original document to the other party within seven (7)
business days.
 
3.5 Further Assurances. The Company and each Investor shall, upon request, on or
after the Closing Date, cooperate with each other (specifically, the Company
shall cooperate with the Investors, and each Investor shall cooperate with the
Company) by furnishing any additional information, executing and delivering any
additional documents and/or other instruments and doing any and all such things
as may be reasonably required by the parties or their counsel to consummate or
otherwise implement the transactions contemplated by this Agreement.
 
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3.6 Waiver. An Investor may waive any of the requirements of Section 3.2 of this
Agreement, and the Company may waive any of the provisions of Section 3.3 of
this Agreement. The Investors may also waive any of the requirements of the
Company under the Escrow Agreement.
 
Article 4
 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company represents and warrants to the Investors as of the date hereof and
as of Closing Date (which warranties and representations shall survive the
Closing regardless of any examinations, inspections, audits and other
investigations the Investors have heretofore made or may hereinafter make with
respect to such warranties and representations) as follows:
 
4.1 Organization and Qualification. Each of the Company, each Subsidiary and
each of the Related Companies is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is duly
qualified to do business in any other jurisdiction by virtue of the nature of
the businesses conducted by it or the ownership or leasing of its properties,
except where the failure to be so qualified will not, when taken together with
all other such failures, have a Material Adverse Effect on the business,
operations, properties, assets, financial condition or results of operation of
the Company, its Subsidiaries and the Related Companies taken as a whole.
 
4.2 Company’s Governing Documents. The complete and correct copies of the
Company’s Governing Documents (a) have been provided to the Investor and (b)
have been filed with the SEC in accordance with the regulations of the SEC and
(c) will be in full force and effect on the Closing Date.
 
4.3 Capitalization.
 
4.3.1 The authorized and outstanding capital stock of the Company as of the date
of this Agreement and as adjusted to reflect the issuance and sale of the
Securities pursuant to this Agreement is set forth in Schedule 4.3.l to this
Agreement. Schedule 4.3.1 lists all shares and potentially dilutive events,
including shares issuable pursuant to employment, consulting and other services
agreements, acquisition agreements, options and equity-based incentive plans,
debt securities, convertible securities, financing or business relationships as
well as each agreement, plan, arrangement or understanding pursuant to which any
shares of any class of capital stock may be issued, a copy of each of which has
been provided to the Investors.
 
4.3.2 All shares of capital stock described above to be issued have been duly
authorized and when issued, will be validly issued, fully paid and
non-assessable and free of preemptive rights.
 
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4.3.3 Except pursuant to this Agreement and as set forth in Schedule 4.3.1,
there are no outstanding options, warrants, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any class of capital stock of
the Company, or agreements, understandings or arrangements to which the Company
is a party, or by which the Company is or may be bound, to issue additional
shares of its capital stock or options, warrants, scrip or rights to subscribe
for, calls or commitment of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, any shares of any class of its
capital stock. The Company agrees to inform the Investors in writing of any
additional warrants granted prior to the Closing Date.
 
4.3.4 Neither of the PRC Companies, nor Greenpower nor Fulland has any agreement
or understanding, whether formal or informal, which could result in the issuance
of any equity securities or right to purchase or otherwise acquire equity
securities of such corporation.
 
4.4 Authority.
 
4.4.1 The Company has all requisite corporate power and authority to execute and
deliver this Agreement, Notes and the Securities issuable upon conversion of the
Notes, the Registration Rights Agreement, the Closing Escrow Agreement and any
other Transaction Documents to which the Company is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement,
the Notes and the Securities issuable upon conversion of the Notes, the
Registration Rights Agreement, the Closing Escrow Agreement and any other
Transaction Documents to which the Company is a party have been duly authorized
by all necessary corporate action and no other corporate proceedings on the part
of the Company is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby and thereby except as disclosed in this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditors’ rights and except
that any the granting of equitable relief is in the discretion of the court.
 
4.4.2 The Note, when issued pursuant to this Agreement, constitutes the valid,
binding and obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency and other laws
of general application affecting the enforcement of creditors’ rights and except
that any the granting of equitable relief is in the discretion of the court. The
Restated Certificate has been approved by the board of directors. Upon the
filing of the Restated Certificate and the Certificate of Designation, the
equity Securities issuable upon conversion of the Note, when so issued, will be
duly and validly authorized and issued, fully paid and non-assessable and the
Warrants will be the valid and binding obligations of the Company, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency and other laws of general application affecting the
enforcement of creditors’ rights and except that any the granting of equitable
relief is in the discretion of the court. All such Securities, when so issued,
will be free and clear of all liens, charges, claims, options, pledges,
restrictions, preemptive rights, rights of first refusal and encumbrances
whatsoever (other than those incurred by the Investor).
 
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4.4.3 Notwithstanding any contrary representations and warranties, no
representation is made with respect to the ability of any Investor to convert
the Note or, following the filing of the Restated Certificate and the
Certificate of Designation, the Series A Preferred Stock or exercise any Warrant
if and to the extent that the conversion price of the Note or the Series A
Preferred Stock, as defined in the Note or the Certificate of Designation, or
the number of Shares issuable upon exercise of the Warrants would result in the
issuance of a number of shares of Common Stock which is greater than the amount
by which the authorized Common Stock exceeds the sum of the outstanding Common
Stock and the shares of Common Stock reserved for issuance pursuant to
outstanding agreements and outstanding options, warrants, rights, convertible
securities and other securities upon the exercise or conversion of which or
pursuant to the terms of which additional shares of Common Stock may be issuable
(the foregoing proviso being referred to as the “Authorized Stock Proviso”).
 
4.4.4 Each Related Company is legally established, and validly existing as an
independent legal entities; (ii) each Related Company is an independent legal
person and none of them is exposed to liabilities incurred by the other party;
(iii) the PRC Agreements constitute valid and binding obligations of the parties
to such agreements, and (iv) each of the PRC Agreements and the rights and
obligations of the parties thereto are enforceable and valid in accordance with
the laws of the PRC.
 
4.5 No Conflict; Required Filings and Consents. Neither the execution and
delivery of this Agreement by the Company nor the issuance of the Notes and
other Transaction Documents, and the performance by the Company of its
obligations hereunder and thereunder will: (i) conflict with or violate the
Company’s or any Subsidiary’s Governing Instruments; (ii) conflict with, breach
or violate any federal, state, foreign or local law, statute, ordinance, rule,
regulation, order, judgment or decree (collectively, “Laws”) in effect as of the
date of this Agreement and applicable to the Company or any Subsidiary; or (iii)
result in any breach of, constitute a default (or an event that with notice or
lapse of time or both would become a default) under, give to any other entity
any right of termination, amendment, acceleration or cancellation of, require
payment under, or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company or any Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties or assets is bound, other than such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens that would
not, in the aggregate, have a Material Adverse Effect except to the extent that
stockholder approval may be required as a result of the Authorized Stock
Proviso, in which event, the Company will seek stockholder approval to an
increase in the authorized Common Stock sufficient to enable the Company to be
in compliance with this Section 4.5. Neither the execution of this Agreement nor
the consummation of the terms contemplated by this Agreement will impair
Greenpower’s rights under the PRC Agreements.
 
4.6 Reports and Financial Statements.
 
4.6.1 The consolidated financial statements of the Related Companies for the
years ended December 31, 2006 and 2005, including consolidated balance sheets,
statements of operations, stockholders’ equity and cash flows, together with the
notes thereon, certified by Sherb & Co., LLP (“Sherb”), the Company’s
independent registered accounting firm, together with the unaudited consolidated
financial statements for the six months ended June 30, 2007 and 2007, consisting
of a balance sheet at June 30, 2007, statement of stockholders’ equity for the
six months ended June 30, 2007, and statements of operations and cash flows for
the six months ended June 30, 2007 and 2006, which have been reviewed by Sherb
have been delivered to the Investors. Each of the consolidated balance sheets
fairly presents the financial position of the Related Companies, as of its date,
and each of the consolidated statements of income, stockholders’ equity and cash
flows (including any related notes and schedules thereto) fairly presents the
results of operations, cash flows and changes in stockholders’ equity, as the
case may be, of the Related Companies for the periods to which they relate, in
each case in accordance with GAAP consistently applied during the periods
involved. Sherb is independent as to the Company and each of the Related
Companies in accordance with the rules and regulations of the SEC. The books and
records of the Related Companies have been, and are being, maintained in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transaction. Neither the Company
nor any of the Related Companies has received any advice from Sherb to the
effect that there is any significant deficiency or material weakness in the
Company’s or any Related Party’s controls or recommending any corrective action
on the part of the Company or any Related Party. Neither the Company nor any
Related Party has any contingent liability which is not reflected in the
financial statements. To the extent that the consolidated financial statements
of Fulland do not include the financial condition or results of operations of
the PRC Companies, separate statements for the PRC Companies, conforming to the
delivery requirements of this Section 4.6.1, shall have been delivered.
 
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4.6.2 The Company’s Form 10-KSB for the year ended April 30, 2007, contains the
audited financial statements of the Company, certified by Comiskey and Company,
(“Comiskey”), the Company’s independent registered accounting firm, for the
years ended April 30, 2007 and 2006, and the Company’s Form 10-QSB for the
quarter ended April 30, 2007 contains the unaudited financial statements of the
Company which have been reviewed by Comiskey. The balance sheets fairly present
the financial position of the Company, as of their respective dates, and each of
the consolidated statements of income, stockholders’ equity and cash flows
(including any related notes and schedules thereto) fairly presents the results
of operations, cash flows and changes in stockholders’ equity, as the case may
be, of the Company for the periods to which they relate, in each case in
accordance with GAAP consistently applied during the periods involved. Comiskey
is independent as to the Company in accordance with the rules and regulations of
the SEC. The books and records of the Company have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transaction. The Company has not received any letters of comments from the SEC
relating to any filing made by the Company with the SEC which has not been
addressed by an amended filing, and each amended filing fully responds to the
questions raised by the staff of the SEC. The Company maintains disclosure
controls and procedures that are effective to ensure that information required
to be disclosed by the Company in its annual and quarterly reports filed with
the SEC is accumulated and communicated to the Company’s management, including
its principal executive and financial officers as appropriate, to allow timely
decisions regarding required disclosure. There were no significant changes in
the Company’s internal controls or other factors that could significantly affect
such controls subsequent to December 31, 2006. The Company has not received any
advice from Comiskey to the effect that there is any significant deficiency or
material weakness in the Company’s controls or recommending any corrective
action on the part of the Company or any Subsidiary. The Company does not have
any contingent liabilities.
 
4.7 Compliance with Applicable Laws. Neither the Company nor any Subsidiary nor
any Related Party is in violation of, or, to the knowledge of the Company is
under investigation with respect to or has been given notice or has been charged
with the violation of, any Law of a governmental agency, except for violations
which individually or in the aggregate do not have a Material Adverse Effect.
 
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4.8 Brokers. Except as set forth on Schedule 4.8, no broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
 
4.9 SEC Documents. The Investors acknowledge that the Company is a publicly held
company and has made available to the Investors upon request true and complete
copies of any requested SEC Documents. The Company has registered its Common
Stock pursuant to Section 12(d) of the 1934 Act, and the Common Stock is quoted
and traded on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. The Company has received no notice, either oral or written, with
respect to the continued quotation or trading of the Common Stock on the OTC
Bulletin Board. The Company has not provided to the Investor any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act, and rules and
regulations of the SEC promulgated thereunder and the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
 
4.10 Litigation. To the knowledge of the Company, no litigation, claim, or other
proceeding before any court or governmental agency is pending or to the
knowledge of the Company, threatened against the Company, the prosecution or
outcome of which may have a Material Adverse Effect.
 
4.11 Employment Agreements. Except as disclosed in the Company’s Form 10-KSB for
the year ended December 31, 2006 or as otherwise disclosed pursuant to this
Agreement, the Company does not have any agreement or understanding with any
officer or director, and there has been no material change in the compensation
of any officer and director from that shown in said Form 10-KSB.
 
4.12 Exemption from Registration. Subject to the accuracy of the Investors’
representations in Article V of this Agreement, except as required pursuant to
the Registration Rights Agreement, the sale of the Note by the Company to the
Investor or the issuance of Series A Preferred Stock or Common Stock and
Warrants will not require registration under the 1933 Act. When issued upon
conversion of the Notes or the Series A Preferred Stock, as the case may be, or
upon exercise of the Warrants in accordance with their terms, the Shares
underlying the Preferred Stock and the Warrants will be duly and validly
authorized and issued, fully paid, and non-assessable. The Company is issuing
Notes, and upon conversion of the Notes, the Preferred Stock and the Warrants in
accordance with and in reliance upon the exemption from securities registration
afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC
under the 1933 Act, and/or Section 4(2) of the 1933 Act.
 
4.13 No General Solicitation or Advertising in Regard to this Transaction.
Neither the Company nor any of its Affiliates nor, to the knowledge of the
Company, any Person acting on its or their behalf (i) has conducted or will
conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D as promulgated by the SEC under the 1933 Act) or general
advertising with respect to the sale of the Preferred Stock or Warrants, or (ii)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the Notes,
Series A Preferred Stock, Common Stock or Warrants, under the 1933 Act, except
as required herein.
 
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4.14 No Material Adverse Effect. Since December 31, 2006, no event or
circumstance resulting in a Material Adverse Effect has occurred or exists with
respect to the Company, any Subsidiary or any Related Party. No material
supplier or customer has given notice, oral or written, that it intends to cease
or reduce the volume of its business with the Company, any Subsidiary or any
Related Party from historical levels. Since December 31, 2006, no event or
circumstance has occurred or exists with respect to the Company, any Subsidiary
or any Related Party, that, under any applicable law, rule or regulation,
requires or would require, public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed
in writing to the Investor.
 
4.15 Material Non-Public Information. The Company has not disclosed to the
Investors any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
 
4.16 Internal Controls And Procedures. The Company and its Subsidiaries and each
of the Related Parties maintain books and records and internal accounting
controls which provide reasonable assurance that (i) all transactions to which
the Company or any Subsidiary or any Related Party is a party or by which their
respective properties are bound are executed with management’s authorization;
(ii) the recorded accounting of the Company’s, any Subsidiary’s or any Related
Party’s consolidated assets is compared with existing assets at regular
intervals; (iii) access to the Company’s, any Subsidiary’s or any Related
Party’s consolidated assets is permitted only in accordance with management’s
authorization; and (iv) all transactions to which the Company or any Subsidiary
or any Related Party is a party or by which any of their respective properties
are bound are recorded as necessary to permit preparation of the financial
statements of the Company and the Related Companies individually (unless the
financial condition and results of operations and cash flows are consolidated
with those of the Company under GAAP) in accordance with GAAP.
 
4.17 Non-Competition Agreement. Each of the Company’s executive officers shall
have entered into an agreement with the Company pursuant to which they agree
that, to the maximum extent permitted by law, the Company’s executive officers
shall not be involved in any business venture, whether as an officer, director,
partner, manager, lender, guarantor, consultant or any other capacity in any
business which competes with or is similar in nature to the Company in China. To
the extent that the provisions of this Section 4.17 are not enforceable under
applicable law, the non-competition agreement shall provide that it shall be
deemed to restrict the executive officers only to the maximum extent permitted
by law. A copy of a true and correct English translation of each of these
agreements has been provided to the Investors.
 
4.18 Full Disclosure. No representation or warranty made by the Company in this
Agreement and no certificate or document furnished or to be furnished to the
Investor pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
 
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Article 5
 
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
 
Each Investor severally and not jointly represents and warrants to the Company
that:
 
5.1 Concerning the Investors. The state in which any offer to purchase shares
hereunder was made or accepted by such Investor is the state shown as such
Investor’s address. The Investor was not formed for the purpose of investing
solely in the Securities.
 
5.2 Authorization and Power. The Investor has the requisite power and authority
to enter into and perform this Agreement and to purchase the securities being
sold to it hereunder. The execution, delivery and performance of this Agreement
by the Investor and the consummation by the Investor of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action where appropriate. This Agreement, the Registration Rights Agreement and
the Closing Escrow Agreement have been duly executed and delivered by such
Investor and at the Closing shall constitute valid and binding obligations of
such Investor enforceable against the Investor in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.
 
5.3 No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by such Investor of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such Investor’s
charter documents or bylaws where appropriate or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument to which such Investor is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Investor or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on such Investor). The Investor is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of such Investor’s obligations under this Agreement or to
purchase the securities from the Company in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, the
Investor is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
 
5.4 Financial Risks. Such Investor acknowledges that such Investor is able to
bear the financial risks associated with an investment in the securities being
purchased by such Investor from the Company and that it has been given full
access to such records of the Company and its Subsidiaries and to the officers
of the Company and its Subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation. Such Investor is capable of evaluating
the risks and merits of an investment in the securities being purchased by the
Investor from the Company by virtue of its experience as an investor and its
knowledge, experience, and sophistication in financial and business matters and
the Investor is capable of bearing the entire loss of its investment in the
securities being purchased by the Investor from the Company.
 
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5.5 Accredited Investor. The Investor is (i) an “accredited investor” as that
term is defined in Rule 501 of Regulation D promulgated under the 1933 Act by
reason of Rule 501(a)(3) and (6), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any way
by the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the securities being purchased by the Investor from the Company.
 
5.6 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or Commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of such Investor. Such Investor understands that any obligations under
agreements or arrangements with brokers disclosed in Schedule 4.8 are
obligations of the Company.
 
5.7 Knowledge of Company. Such Investor and such Investor’s advisors, if any,
have been, upon request, furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the securities being purchased by such Investor from the Company. Such
Investor and such Investor’s advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries.
 
5.8 Risk Factors. Each Investor understands that such Investor’s investment in
the securities being purchased by such Investor from the Company involves a high
degree of risk. Such Investor understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the securities being purchased by the Investor
from the Company. Such Investor warrants that such Investor is able to bear the
complete loss of such Investor’s investment in the securities being purchased by
the Investor from the Company.
 
5.9 Full Disclosure. No representation or warranty made by such Investor in this
Agreement and no certificate or document furnished or to be furnished to the
Company pursuant to this Agreement contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading. Except as set
forth or referred to in this Agreement, Investor does not have any agreement or
understanding with any person relating to acquiring, holding, voting or
disposing of any equity securities of the Company.
 
Article 6
 
COVENANTS OF THE COMPANY
 
6.1 Registration Rights. The Company shall cause the Registration Rights
Agreement to remain in full force and effect according to the provisions of the
Registration Rights Agreement and the Company shall comply in all material
respects with the terms thereof. The Company does not have any agreement or
obligation which would enable any Person to include securities in any
registration statement required to be filed on behalf of the Investors pursuant
to the Registration Rights Agreement and will not take any action which will
give any Person any right to include securities in any such registration
statement. Except as contemplated by the Registration Rights Agreement, no
Person has any demand or piggyback registration right with respect to any
securities of the Company. The Company will not file any registration statement
covering any shares of Common Stock issuable to any officers, directors,
Affiliates of or consultants to the Company until the earlier of (a) thirty (30)
months from the Closing Date or (b) the Restriction Termination Date at 90%;
provided, however, that the Company may file a registration statement on Form
S-8 for shares issued or issuable pursuant to employee stock option plans for
employees who are not officers, directors or Affiliates of the Company.
 
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6.2 Reservation of Common Stock. As of the date hereof, the Company has reserved
and the Company shall continue to reserve and keep available at all times, free
of preemptive rights, the maximum number of shares of Common Stock for the
purpose of enabling the Company to issue the shares of Common Stock underlying
the Notes, Series A Preferred Stock and Warrants.
 
6.3 Compliance with Laws. The Company hereby agrees to comply and to cause each
Subsidiary and each Related Party to comply in all respects with the Company’s
reporting, filing and other obligations under the Laws.
 
6.4 Exchange Act Registration. The Company will continue its obligation to
report to the SEC under Section 12 of the 1934 Act and will use its best efforts
to comply in all respects with its reporting and filing obligations under the
1934 Act, and will not take any action or file any document (whether or not
permitted by the 1934 Act or the rules thereunder) to terminate or suspend any
such registration or to terminate or suspend its reporting and filing
obligations under the 1934 until the Investors have disposed of all of their
Shares.
 
6.5 Corporate Existence; No Conflicting Agreements. The Company will take all
steps necessary to preserve and continue the corporate existence of the Company.
The Company shall not enter into any agreement, the terms of which agreement
would restrict or impair the right or ability of the Company to perform any of
its obligations under this Agreement or any of the other agreements attached as
exhibits hereto.
 
6.6 Listing, Securities Exchange Act of 1934 and Rule 144 Requirements.
 
6.6.1 The Company shall not take any action which would cause its Common Stock
not to be traded on the OTC Bulletin Board, except that the Company may list the
Common Stock on the Nasdaq Stock Market or the American or New York Stock
Exchange if it meets the applicable listing requirements. If, for any time after
the Closing, the Company is no longer in compliance with this Section 6.6.1,
then the Company shall pay to the Investors as liquidated damages and not as a
penalty, an amount equal to twelve percent (12%) per annum, based on the lesser
of (a) the Purchase Price or (b) that percentage of the Purchase Price which the
Unsold Shares bears to the number of shares of Common Stock initially issuable
upon conversion of the Series A Preferred Stock sold pursuant to this Agreement.
The Unsold Shares shall mean shares of Series A Preferred Stock with respect to
which both (i) the Series A Preferred Stock has not been converted and (ii) the
underlying shares of Common Stock have not been sold or otherwise transferred
pursuant to a registration statement or Rule 144. The liquidated damages shall
be payable in cash or in shares of Series A Preferred Stock, as the Company
shall determine. If, pursuant to this Agreement, share of Series A Preferred
Stock are to be delivered, each share of Series A Preferred Stock shall be
valued at an amount equal to the conversion ratio, as set forth in the
Certificate of Designation, which initially shall be one (1), multiplied by the
average closing price of the Common Stock for the five (5) trading days
preceding the date on which the computation is required to be made. Such damages
shall be payable quarterly on the tenth (10th) day of the following calendar
quarter, and shall cease at the time the Company begins complying with the
provisions of this Section 6.6.1.
 
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6.6.2 Commencing not later than two years from the Closing Date, the Company
shall have caused its Common Stock to be listed on the Nasdaq Global Market or
Nasdaq Capital Market or the New York or American Stock Exchange, and, from and
after the date of such listing, the Common stock shall continue to be listed on
one of such markets or exchanges until the Restriction Termination Date at 90%.
If, for any time after the Closing and prior to the Restriction Termination Date
at 90%, the Company is not in compliance with this Section 6.6.2, then the
Company shall pay to the Investors as liquidated damages and not as a penalty,
an amount equal to six percent (6%) per annum, based on the lesser of (a) the
Purchase Price or (b) that percentage of the Purchase Price which the Unsold
Shares bears to the number of shares of Common Stock initially issuable upon
conversion of the Series A Preferred Stock issued upon conversion of the Note.
Notwithstanding the foregoing, no liquidated damages shall be payable pursuant
to this Section 6.6.2 during any period for which liquidated damages are payable
pursuant to Section 6.6.1.
 
6.6.3 Liquidated damages payable pursuant to Sections 6.6.1 and 6.6.2 shall be
payable in shares of Series A Preferred Stock or cash, as the Investors may
request. In no event shall the total liquidated damages payable pursuant to
Sections 6.6.1 and 6.6.2, whether in cash or Series A Preferred Stock, exceed in
the aggregate twelve percent (12%) of the Purchase Price of the Unsold Shares
that are outstanding as of the date on which a computation is being made.
 
6.7 No Convertible Debt or Preferred Stock. On or prior to the Closing Date, the
Company will cause to be cancelled or paid all convertible debt in the Company.
Until the earlier of (a) four years from the Closing Date or (b) the Restriction
Termination Date, the Company will not issue any convertible debt or any shares
of any class or series of Preferred Stock.
 
6.8 Debt Limitation. The Company agrees until the earlier of (a) three years
after Closing Date or (b) the Restriction Termination Date at 90%, it will not
have outstanding any debt in an amount greater than twice the sum of the EBITDA
from continuing operations for the past four quarters. Nothing in this Section
6.8 shall be construed to prohibit the Company from borrowing from the Chinese
government or from Chinese banks as long as such loans do not result in the
Company being in default of any of its covenants set forth in this Article 6.
 
6.9 Reset Equity Deals. On or prior to the Closing Date, the Company will cause
to be cancelled any and all reset features related to any shares outstanding
that could result in additional shares being issued. Until the earlier of (a)
five years from the Closing Date or (b) the Restriction Termination Date, the
Company will not enter into any transactions that have any reset features that
could result in additional shares being issued.
 
6.10 Independent Directors.
 
6.10.1 The Company shall have caused the appointment of the majority of the
board of directors, which shall not consist of more than nine members, to be
independent directors, as defined by the rules of the Nasdaq Stock Market, not
later than the ninety (90) days after the Closing Date.
 
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6.10.2 If, at any time subsequent to ninety (90) days after the Closing Date
until the earlier of (a) three years from the Closing or (b) the Restriction
Termination Date at 90%, the board of directors shall not be composed of a
majority of independent directors:
 
6.10.2.1 for a reason other than for an Excused Reason, the Company shall have
60 days to take such steps as are necessary so that a majority of the Company’s
directors are independent directors, and
 
6.10.2.2 for an Excused Reason, the Company shall have 75 days from the date
that the Company becomes aware of the event (or the last event if there are more
than one such event) giving rise to the Excused Reason, to take such steps as
are necessary so that a majority of the Company’s directors are independent
directors.
 
6.10.3 The term “Excused Reason” shall mean the death or resignation of an
independent director or the occurrence of an event whereby an independent
director ceases to be independent.
 
6.10.4 From and after the Closing Date, the Company shall have a chief financial
officer who speaks and understands both English and Chinese and is familiar with
GAAP (a “qualified CFO”), who may serve on a part time basis until three months
after the Closing Date, by which time the Company shall have a full-time
qualified CFO. In the event that at any time subsequent to the Closing Date the
Company fails to have a qualified CFO, the Company shall, within 60 days from
the date that the Company ceases to have a qualified CFO, hire a qualified CFO.
If the Company shall not be able to hire a qualified CFO promptly upon the
resignation or termination of employment of the former chief financial officer,
the Company may engage an accountant or accounting firm to perform the duties of
the chief financial officer until a qualified CFO can be hired. In no event
shall the Company either (i) fail to file an annual, quarter or other report in
a timely manner because of the absence of a qualified CFO, or (ii) not have a
person who can make the statements and sign the certifications required to be
filed in an annual or quarterly report under the 1933 Act.
 
6.10.5 If, at the time set forth in Section 6.10.1, or during the period
referred to in Section 6.10.2 of this Agreement, the Company shall have failed
to have a board of directors composed of a majority of independent directors
after the date by which such situation was to have been cured pursuant to
Section 6.10.2.1 or Section 6.10.2.2 of this Agreement, whichever shall apply,
or if the Company shall have failed to file an annual or quarterly report in a
timely manner because of the absence or lack of a qualified CFO, the Company
shall pay to the Investors, as liquidated damages and not as a penalty, an
amount equal to twelve percent (12%) per annum of the Purchase Price of the then
outstanding shares of Series A Preferred Stock, payable monthly on the tenth
(10th) day of the following month, in cash or in Series A Preferred Stock at the
option of the Investors, based on the number of days that such condition exists
beyond the applicable grace period. The parties agree that the only damages
payable for a violation of such provisions shall be such liquidated damages. The
parties hereto agree that the liquidated damages provided for in this Section
6.10.5 constitute a reasonable estimate of the damages that may be incurred by
the Investors by reason of the failure of the Company to have a majority of
directors as independent directors. If the Company fails to comply with Section
6.10.1, the period for measuring liquidated damages pursuant to this Section
6.10.5 shall commence at the end of the 90 day period referred to therein and
continue until the Company shall have a majority of independent directors, and
the grace periods allowed by Section 6.10.2 shall not apply.
 
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6.10.6 In no event shall the total payments made pursuant to this Section 6.10
and Section 6.11, whether in cash or Series A Preferred Stock exceed in the
aggregate twelve percent (12%) of the Purchase Price of the shares of Series A
Preferred Stock that are outstanding as of the date on which a computation is
being made.
 
6.10.7 Within three months from the Closing Date, the Company shall hire a
bilingual (English and Chinese) technical sales person at the level which is not
less than that of a vice president.
 
6.11 Independent Directors; Committees.  No later than ninety (90) days after
the Closing Date, the Company will have an audit committee comprised solely of
not less than three independent directors and a compensation committee comprised
of not less than three directors, a majority of whom are independent directors.
Further, if the Company shall form an executive or nominating committee or any
other committee, a majority of the members of such committee shall be
independent directors. If at any time subsequent to the Closing Date during the
period when the Company is required to have a majority of independent directors
pursuant to Section 6.10 of this Agreement, independent directors do not
comprise all of the members of the audit committee and a majority of the members
of the compensation committee or any other committee within the grace periods
provided in Section 6.10, the Company shall pay to the Investors, as liquidated
damages and not as a penalty, an amount equal to twelve percent (12%) per annum
of the Purchase Price of the then outstanding Series A Preferred Stock payable
in the manner and at the time provided in Section 6.10, such payment shall be
based on the number of days that such condition exists. The parties agree that
the only damages payable for a violation of the terms of this Agreement with
respect to which liquidated damages are expressly provided shall be such
liquidated damages. Notwithstanding the foregoing, no liquidated damages shall
be payable pursuant to this Section 6.11 during any period for which liquidated
damages are payable pursuant to Section 6.10.
 
6.12 Use of Proceeds. The Company will use the net proceeds from the sale of the
Securities, after payment of legal fees and other closing costs, including a
payment of not more than $625,000 in connection with the reverse acquisition,
$400,000 to a stockholder as previously approved by the Investors, and to
provided funds for Greenpower to purchase and own new equipment in accordance
with a schedule previously provided to the Investors, with Greenpower having the
right to permit the PRC Companies to use the equipment in connection with
Greenpower’s business. The Company shall also allocate $200,000 which will be
retained in escrow, of which $100,000 shall be allocated to pay the Company’s
anticipated obligations to its investor relations firm and $100,000 shall be
retained for the payment of professional fees payable subsequent to the Closing.
In addition, not less than 75% of the proceeds from the exercise of warrants
shall be used by Greenpower to purchase scheduled assets and equipment for use
in its business. Neither the Company nor any Subsidiary shall use any portion of
the proceeds from the sale of the Notes or the exercise of the Warrants to make
any payment to either of the PRC Companies except as for the purchase of capital
in a transaction in which all of the proceeds of such purchase are used by the
PRC Companies for the manufacture of products to be sold by Greenpower.
 
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6.13 Right of First Refusal.
 
6.13.1 Until the earlier of (i) three years from the date of this Agreement or
(ii) such time as the Investors, as a group, cease to own at least five percent
(5%) of the total number of shares of Common Stock that were issued or are
issuable upon conversion of Series A Preferred Stock that were initially issued
to the Investors, in the event that the Company seeks to raise additional funds
through a private placement of its securities (a “Proposed Financing”), other
than Exempt Issuances, each Investor shall have the right to participate in any
subsequent funding by the Company of the offering price on a pro rata basis,
based on the percentage that (a) the number of such Investor’s Percentage
Shares, without regard to the 4.9% Limitation but excluding shares of Common
Stock issuable upon exercise of Warrants, bears to (b) the total number of
shares of Common Stock outstanding plus the number of Shares issuable upon
conversion of the Series A Preferred Stock and any other series of convertible
preferred stock or debt securities, without regard to the 4.9% Limitations any
other limitations on exercise such other convertible preferred stock or debt
securities. This Section 6.13 shall apply to each such offering based on the
total purchase price of the securities being offered by the Company. This right
is personal to the Investors and is not transferable, whether in connection with
the sale of stock or otherwise.
 
6.13.2 The terms on which the Investors shall purchase securities pursuant to
Proposed Financing shall be the same as such securities are purchased by other
investors. The Company shall give the Investors the opportunity to participate
in the offering by giving the Investors not less than ten (10) days notice
setting forth the terms of the Proposed Financing. In the event that the terms
of the Proposed Financing are changed in a manner which is more favorable to the
potential investor, the Company shall provide the Investors, at the same time as
the notice is provided to the other potential investors, with a new ten (10) day
notice setting forth the revised terms that are provided to the other potential
investors.
 
6.13.3 In the event that the Investors does not exercise its right to
participate in the Proposed Financing within the time limits set forth in
Section 6.13.2 of this Agreement, the Company may sell the securities in the
Proposed Financing at a price and on terms which are no more favorable to the
investors than the terms provided to the Investors. If the Company subsequently
changes the price or terms so that the price is more favorable to the investors
or so the terms are more favorable to the investors, the Company shall provide
the Investors with the opportunity to purchase the securities on the revised
terms in the manner set forth in Section 6.13.2 of this Agreement.
 
6.14 Price Adjustment. From the Closing Date until such time as the Restriction
Termination Date, except for Exempt Issuances, as to which this Section 6.14
does not apply, if the Company closes on the sale or issuance of Common Stock at
a price, or warrants, options, convertible debt or equity securities with a
exercise price per share or exercise price per share which is less than the
Conversion Price, as defined in the Note and the Certificate of Designation,
then in effect (such lower sales price, conversion or exercise price, as the
case may be, being referred to as the “Lower Price”), the Conversion Price in
effect from and after the date of such transaction shall be reduced to the Lower
Price. For purpose of determining the exercise price of warrants issued by the
Company, the price, if any, paid per share for the warrants shall be added to
the exercise price of the warrants. A similar provision shall be included in the
Warrants.
 
6.15 Deliveries from Escrow Based on Pre-Tax Earnings Per Share.
 
6.15.1 At the Closing, pursuant to the Closing Escrow Agreement, the Company
shall deliver to the Escrow Agent 14,787,135 shares of Series A Preferred Stock.
 
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6.15.2 In the event the Company’s consolidated Pre-Tax Earning per share, on a
fully-diluted basis, for the year ended December 31, 2007 or 2008 is less than
the amount per share hereinafter provided (the “Target Number”), the percentage
shortfall shall be determined by dividing the amount of the shortfall by the
applicable Target Number. The Target Number for 2007 shall be $0.08316 per
share, and the Target Number for 2008 shall be $0.13131 per share.
 
6.15.3 If the percentage shortfall for 2007 is equal to or greater than fifty
percent (50%), then the Escrow Agent shall deliver the 14,787,135 shares of
Series A Preferred Stock to the Investors in the ratio of their initial purchase
of Securities.
 
6.15.4 If the percentage shortfall for 2007 is less than fifty percent (50%),
then the adjustment percentage shall be determined. The adjustment percentage
shall mean the percentage that the percentage shortfall bears to fifty percent
(50%). The Escrow Agent shall deliver to the Investors in the ratio of their
initial purchase of Securities such number of shares of Series A Preferred Stock
as is determined by multiplying the adjustment percentage by 14,787,135 shares
and retain the balance. For example, if the percentage shortfall is 20%, the
adjustment percentage would be 40%, and 40% of the 14,787,135 shares of Series A
Preferred Stock, or 5,914,854 shares, would be delivered to the Investors, with
the balance being retain by the Escrow Agent.
 
6.15.5 If the percentage shortfall for 2008 is equal to or greater than fifty
percent (50%), then the Escrow Agent shall deliver all of the shares of Series A
Preferred Stock then held by the Escrow Agent to the Investors in the ratio of
their initial purchase of Securities.
 
6.15.6 If the percentage shortfall for 2008 is less than fifty percent (50%),
then the adjustment percentage for 2008 shall be determined. The adjustment
percentage shall mean the percentage that the percentage shortfall bears to
fifty percent (50%). The maximum number of shares to be delivered shall be
determined by multiplying the adjustment percentage by 14,787,135 shares. The
number of shares to be delivered to the Investors shall be the lesser of the
number of shares of Series A Preferred Stock then held by the Escrow Agent or
the number of shares determined by the preceding sentence. The Escrow Agent
shall deliver to the Investors the number of shares of Series A Preferred Stock
as is determined pursuant to this Section 6.15.6 in the ratio of their initial
purchase of Securities.
 
6.15.7 For purpose of determining Pre Tax Earning Per Share on a fully-diluted
basis, all shares of Common Stock issuable upon conversion of convertible
securities and upon exercise of warrants and options (whether or not vested)
shall be deemed to be outstanding, regardless of whether (i) such shares are
treated as outstanding for determining diluted earnings per share under GAAP,
(ii) such securities are “in the money,” or (iii) such shares may be issued as a
result of the 4.9% Limitation; provided, however, that none of the shares of
Series A Preferred Stock held in escrow pursuant to this Section 6.15 nor the
shares of Common Stock issuable upon conversion of such Series A Preferred Stock
shall be deemed outstanding for purpose of this Section 6.15.
 
6.15.8 The distribution of shares of Series A Preferred Stock pursuant to this
Section 6.15 shall be made within five (5) business days after the Company files
its Form 10-KSB with the SEC for the applicable year. In the event that the
Company does not file its Form 10-KSB for the year ended December 31, 2007 or
2008 with the SEC within thirty (30) days after the date that filing was
required, after giving effect to any extension pursuant to Rule 12b-25 of the
Exchange Act, all of the 3,700,000 shares of Series A Preferred Stock shall be
delivered to the Investors.
 
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6.15.9 Notwithstanding the forgoing provisions, since the Company does not
presently have authorized Preferred Stock, at the Closing, in lieu of the
14,787,135 shares of Series A Preferred Stock to be delivered pursuant to
Section 6.15.9 and the 10,000,000 shares of Series A Preferred Stock to be
delivered pursuant to Section 6.25, the Company shall deliver to the Escrow
Agent the Company’s 6% convertible promissory note due March 31, 2008, in the
principal amount of $3,000,000 (the “Make-Good Note”), which shall automatically
convert into 24,787,135 shares of Series A Preferred Stock upon the filing of
the Restated Articles and the Certificate of Designation; provided, that if the
Restated Articles and the Certificate of Designation shall not have been filed
by the maturity date, the Make-Good Note shall automatically convert into
24,787,135 shares of Common Stock.
 
6.15.10 The parties understand that, pursuant to the Closing Escrow Agreement,
the Escrow Agent will not make any deliveries of shares without the signed
written instructions from the Company and the Investors.
 
6.16 Insider Selling. No Restricted Stockholders may sell any shares of Common
Stock in the public market prior to the earlier of 27 months from the Closing
Date or the Restriction Termination Date; provided, however, that if any
Restricted Stockholder who is director and not an executive officer of the
Company shall cease to be a director, such Person may sell not more than a total
of 50,000 shares of Common Stock in the public market during the period set
forth in this sentence. Restricted Stockholders shall mean any Person who is an
officer, director or Affiliate of the Company or who becomes an officer or
director of the Company subsequent to the Closing Date. Without limiting the
generality of the foregoing, the Restricted Stockholders shall not to directly
or indirectly offer to sell, grant an option for the purchase or sale of,
transfer, pledge assign, hypothecate, distribute or otherwise encumber or
dispose of any securities in the Company in a transaction which is not in the
public market unless the transferee agrees to be bound by the provisions of this
Section 6.16. The Company shall require any newly elected officer or director to
agree to the restriction set forth in this Section 6.16. Andrew Barron Worden
and the Investors shall not be considered Restricted Stockholders. The
restrictions in this Section 6.16 shall not apply to shares issued pursuant to a
stock option or long-term incentive plans which may be approved by the
Compensation Committee provided that such committee is comprised of a majority
of independent directors.
 
6.17 Employment and Consulting Contracts. For three years after the Closing, the
Company shall have a unanimous approval from the Compensation Committee that any
awards other than salary are usual, appropriate and reasonable for any officer,
director or consultants whose compensation is more than $100,000 per annum. This
Section 6.17 does not apply to attorneys, accountants and other persons who
provide professional services to the Company.
 
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6.18 Subsequent Equity Sales. From the date hereof until the Restriction
Termination Date, the Company shall be not effect or enter into an agreement to
effect any Subsequent Financing involving a “Variable Rate Transaction” or an
“MFN Transaction” (each as defined below). The term “Variable Rate Transaction”
shall mean a transaction in which the Company issues or sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock. The
term “MFN Transaction” shall mean a transaction in which the Company issues or
sells any securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms more favorable than those
granted to such investor in such offering. Any Investor shall be entitled to
obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
Notwithstanding the foregoing, this Section 6.18 shall not apply in respect of
an Exempt Issuance, except that no Variable Rate Transaction or MFN Transaction
shall be an Exempt Issuance.
 
6.19 Restated Certificate. The Company’s board of directors has approved the
Restated Certificate. The Company shall promptly, but not later than thirty (30)
days after the Closing Date, file the Proxy Statement with the SEC, and shall
mail the Proxy Statement to stockholders within five (5) business days after the
SEC has completed its review of the Proxy Statement, of, if the SEC does not
review the Proxy Statement, within fifteen (15) business days after the Proxy
Statement is filed with the SEC. The Company shall schedule an annual or special
meeting of stockholders as soon as possible, but not later than twenty five (25)
days after the Proxy Statement is mailed to stockholders. The Company shall file
the Restated Certificate with the Secretary of State of the State of Delaware
promptly, but not later than three (3) business days after the meeting of
stockholders at which the Restated Certificate is approved. Wu Jianhua, Tang
Lihua and Ren Yunxia each agree to vote in favor of the Restated Certificate.
 
6.20 Stock Splits. All forward and reverse stock splits shall effect all equity
and derivative holders proportionately.
 
6.21 Retention of Investor Relations Firm. The Company shall instruct the Escrow
Agent to retain $100,000 of the proceeds of the sale of the Securities to be
utilized for payment to investor relations firms. The Company shall retain an
investor relations firm within 30 days after the Closing Date.
 
6.22 Payment of Due Diligence Expenses. At Closing the Escrow Agent shall
disperse to Barron the sum of $30,000.00 for its due diligence expenses.
 
6.23 No Outside Interests. Until the Restriction Termination Date, the Company’s
chairman and chief executive officer will devote their full time and attention
to the business of the Company and shall not have any business interests or
activities other than as chairman or chief executive officer, as the case may
be, except that he or she may devote time, which shall not be material and which
shall not interfere with his or her duties as the Company’s chairman or chief
executive officer, as the case may be, to personal passive investments and
charitable and community activities. Furthermore, none of the PRC Company
Stockholders shall have any interests or engage in any business which is
directly or indirectly competitive with that of the Company or any Related
Party.
 
6.24 No Waiver of Non-Competition Obligations. Until the Restriction Termination
Date, the Company shall not waive the obligations of its executive officers
pursuant to the non-competition agreements described in Section 4.17 of this
Agreement.
 
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6.25 Issuance of Additional Shares based on Tax Obligations. The Company has
represented to the Investors that neither the Company nor any Subsidiary nor any
Related Party has any tax liabilities or obligations to the government of the
PRC or any PRC governmental authority or taxing agency, and that all previously
accrued taxes have been forgiven in accordance with the laws of the PRC. In the
event that, based on the Company’s audited financial statements for the year
ended December 31, 2007 or 2008, the Company or any of its Subsidiaries or any
Related Company owes taxes to any such government or government agency for any
period ended on or prior to September 30, 2007 (the “Covered Period”), the
Company shall issue to the Investors, in proportion to their investment, four
shares of Series A Preferred Stock for each US$1.00 of tax liability shown on
the balance sheet or owed or paid by any of the Company, any Subsidiary or any
Related Company to any such government or government agency relating to the
Covered Period; provided, however, that in no event shall the number of shares
of Series A Preferred Stock issuable pursuant to this Section 6.25 exceed
10,000,000 shares. Such shares shall be delivered not later than five days after
the Company’s Form 10-KSB for the each of the years ended December 31, 2007 and
2008 with respect to any tax payment or accruals covered by this Section 6.25
for such year; provided, however, that if the Company shall not have filed its
Form 10-KSB for 2008 within 45 days after such form is required to be filed, the
Company shall issue to the Investors, 10,000,000 shares of Series A Preferred
Stock. In the event that more than 10,000,000 shares are due, the excess shall
be taken from the 14,787,135 shares of series A preferred stock held in escrow
pursuant to the Section 6.15 of this Agreement. Notwithstanding the foregoing,
if, at any time prior to the completion of the audit for 2007 or 2008 it shall
be determined that the Company, any Subsidiaries or any Related Party has any
tax obligation or pays or accrued any taxes relating to the Covered Period, the
payment pursuant to this Section 6.25 shall be made at that time. If a final
settlement shall have been made, after making delivery of shares to the
Investors pursuant to this Section 6.25, the Company’s obligations under this
Section 6.25 shall terminate, otherwise, the Company’s obligations set forth in
this Section 6.25 shall continue as herein provided. The Company shall, at the
Closing, deliver a certificate for 10,000,000 shares of Series A Preferred
Stock, which shall be issued in the name of the Escrow Agent, pursuant to the
Closing Escrow Agreement. Any shares not delivered to the Investors pursuant to
this Section 6.25 shall be returned to the Company and cancelled at such time as
the Company’s obligations under this Agreement terminate.
 
6.26 No Loans or Advances. Until the first to occur of three years from the
Closing Date or the Restriction Termination Date at 90%, the Company and its
Subsidiaries will not make, and will use their commercially reasonable best
efforts to ensure that no PRC Company shall make, any loans, advances or other
extensions of credit to the executive officers or directors of the Company, any
Subsidiary or any Related Company or any family member or Affiliate of any of
such executive officers or directors.
 
Article 7
 
COVENANTS OF THE INVESTOR
 
Each Investor, severally and not jointly, covenants and agrees with the Company
as follows:
 
7.1 Compliance with Law. Each Investor’s trading activities with respect to
shares of the Company’s Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and rules and
regulations of any public market on which the Company’s Common Stock is listed.
 
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7.2 Transfer Restrictions. The Investor’s acknowledge that (a) the Preferred
Stock, Warrants and Shares underlying the Preferred Stock and Warrants have not
been registered under the provisions of the 1933 Act, and may not be transferred
unless (i) subsequently registered thereunder or (ii) the Investor shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Preferred Stock,
Warrants and Shares underlying the Notes and Warrants to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration; and
(b) any sale of the Shares underlying the Preferred Stock and Warrants made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder. Each Investor agrees that until the Restriction Termination Date it
will not sell the Common Stock short or effect any sales based upon market-based
metrics.
 
7.3 Restrictive Legend. Each Investor acknowledges and agrees that the
Securities and the Shares shall bear a restrictive legend and a stop-transfer
order may be placed against transfer of any such Securities except that the
requirement for a restrictive legend shall not apply to Shares sold pursuant to
a current and effective registration statement or a sale pursuant Rule 144 or
any successor rule.
 
Article 8
 
CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS
 
The obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
 
8.1 No Termination. This Agreement shall not have been terminated pursuant to
Article 10 hereof.
 
8.2 Representations True and Correct. The representations and warranties of the
Investors contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.
 
8.3 Compliance with Covenants. The Investors shall have performed and complied
in all material respects with all covenants, agreements, and conditions required
by this Agreement to be performed or complied by it prior to or at the Closing
Date.
 
8.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall
be pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.
 
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Article 9
 
CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS
 
The obligation of the Investors to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
 
9.1 No Termination. This Agreement shall not have been terminated pursuant to
Article 10 hereof.
 
9.2 Representations True and Correct. The representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.
 
9.3 Compliance with Covenants . The Company shall have performed and complied in
all material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied by it prior to or at the Closing
Date.
 
9.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall
be pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.
 
Article 10
 
TERMINATION, AMENDMENT AND WAIVER
 
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date
 
10.1.1 by mutual written consent of the Investor and the Company;
 
10.1.2 by the Company upon a material breach of any representation, warranty,
covenant or agreement on the part of any Investor set forth in this Agreement,
or any Investor upon a material breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively, shall
have become untrue, in either case such that any of the conditions set forth in
Article 8 or Article 9 hereof would not be satisfied (a “Terminating Breach”),
and such breach shall, if capable of cure, not have been cured within five (5)
business days after receipt by the party in breach of a notice from the
non-breaching party setting forth in detail the nature of such breach.
 
10.2 Effect of Termination. Except as otherwise provided herein, in the event of
the termination of this Agreement pursuant to Section 10.1 hereof, there shall
be no liability on the part of the Company or any Investor or any of their
respective officers, directors, agents or other representatives and all rights
and obligations of any party hereto shall cease.
 
10.3 Amendment and Waiver.
 
10.3.1 This Agreement may be amended by the parties hereto any time prior to the
Closing Date by an instrument in writing signed by the parties hereto, subject
to the provisions of Section 10.3.3; provided, however that the 4.9% Limitation
may not be amended or waived.
 
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10.3.2 At any time prior to the Closing Date, the Company or the Investors, as
appropriate, may: (a) extend the time for the performance of any of the
obligations or other acts of other party or; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto which have been made to it or them; or (c) waive compliance with
any of the agreements or conditions contained herein for its or their benefit
other than the 4.9% Limitation which may not be waived. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby, subject to Section 10.3.3 of this
Agreement.
 
10.3.3 Any amendment or waiver signed by the holders of 75% of the principal
amount of the Note or, after the issuance of the Series A Preferred Stock, 75%
of the holders of the then outstanding shares of Series A Preferred Stock, or,
after the conversion of all shares of Series A Preferred Stock, the holders of
Warrant to purchase a majority of the shares of Common Stock then issuable upon
exercise of the Warrants, shall be deemed to be approval of the Investors;
provided, that any amendment or waiver which changes the conversion rate or
conversion price of the Notes or Series A Preferred Stock or the exercise price
of the Warrants shall require the approval of all of the holders of the
Warrants.
 
Article 11
 
GENERAL PROVISIONS
 
11.1 Transaction Costs Except as otherwise provided herein, each of the parties
shall pay all of his or its costs and expenses (including attorney fees and
other legal costs and expenses and accountants’ fees and other accounting costs
and expenses) incurred by that party in connection with this Agreement;
provided, the Company shall pay Investor such due diligence expenses as
described in Section 6.22.
 
11.2 Indemnification. The Investor agrees to indemnify, defend and hold the
Company (following the Closing Date) and its officers and directors harmless
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities or damages, including interest, penalties and
reasonable attorney’s fees, that it shall incur or suffer, which arise out of or
result from any breach of this Agreement by the Investors or failure by the
Investors to perform with respect to the representations, warranties or
covenants contained in this Agreement or in any exhibit or other instrument
furnished or to be furnished under this Agreement. The Company agrees to
indemnify, defend and hold the Investors (following the Closing Date) harmless
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities or damages, including interest, penalties and
reasonable attorney’s fees, that it shall incur or suffer, which arise out of,
result from or relate to any breach of this Agreement or failure by the Company
to perform with respect to the representations, warranties or covenants
contained in this Agreement or in any exhibit or other instrument furnished or
to be furnished under this Agreement. In no event shall the Company or the
Investors be entitled to recover consequential or punitive damages resulting
from a breach or violation of this Agreement nor shall any party have any
liability hereunder in the event of gross negligence or willful misconduct of
the indemnified party. In the event of the failure of the Company to issue the
Series A Preferred Stock and Warrants in violation of the provisions of this
Agreement, the Investors, as their sole remedy, shall be entitled to pursue a
remedy of specific performance upon tender into the Court an amount equal to the
Purchase Price hereunder. The indemnification by the Investors shall be limited
to $50,000.00. This Section 11.2 shall not relate to indemnification under the
Registration Rights Agreement.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
MALEX, INC. AND BARRON PARTNERS LP
PAGE 29

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11.3 Headings. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
 
11.4 Entire Agreement. This Agreement (together with the Schedule, Exhibits,
Warrants and documents referred to herein) constitute the entire agreement of
the parties and supersede all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof.
 
11.5 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given (i) on the date they are delivered if
delivered in person; (ii) on the date initially received if delivered by
facsimile transmission followed by registered or certified mail confirmation;
(iii) on the date delivered by an overnight courier service; or (iv) on the
third business day after it is mailed by registered or certified mail, return
receipt requested with postage and other fees prepaid as follows:
 
If to the Company:
 
Malex, Inc.
c/o Greenpower Environmental Technologies, Inc.
Qianzhou Town, Wuxi City
Jiangsu, PRC 214181
Attention: Wu Jianhua
E-mail: 13861880987@e172.com
Fax: 86 510 3380099

With a copy to:

Richardson & Patel LLP
10900 Wilshire Boulevard, Suite 500
Los Angeles, CA 90024
Attention: Kevin L. Leung
E-mail: kleung@richardsonpatel.com
Fax: (310) 208-1154

Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006
Attention: Asher S. Levitsky PC
E-mail: alevitsky@srff.com
Fax: (212) 930-9725
 
If to Barron:
 
Barron Partners L.P.
c/o Barron Capital Advisors, LLC
730 Fifth Avenue, 25th Floor
New York, New York 10019
Attn: Andrew Barron Worden
E-mail: abw@barronpartners.com and onf@barronpartners.com
Fax: (212) 359-0222
 
If to the other Investors, at their addresses set forth on Appendix A.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
MALEX, INC. AND BARRON PARTNERS LP
PAGE 30

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11.6 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
 
11.7 Binding Effect. All the terms and provisions of this Agreement whether so
expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
 
11.8 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its preparation.
The parties acknowledge each contributed and is equally responsible for its
preparation. In resolving any dispute regarding, or construing any provision in,
this Agreement, there shall be no presumption made or inference drawn because of
the drafting history of the Agreement, or because of the inclusion of a
provision not contained in a prior draft or the deletion or modification of a
provision contained in a prior draft.
 
11.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
applicable principles of conflicts of law.
 
11.10 Jurisdiction; Waiver of Jury Trial. If any action is brought among the
parties with respect to this Agreement or otherwise, by way of a claim or
counterclaim, the parties agree that in any such action, and on all issues, the
parties irrevocably waive their right to a trial by jury. Exclusive jurisdiction
and venue for any such action shall be the federal and state courts situated in
the City, County and State of New York. In the event suit or action is brought
by any party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court if such party prevails on substantially all issues in dispute.
 
11.11 Preparation and Filing of Securities and Exchange Commission filings. The
Investors shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after the
Closing Date.
 
11.12 Further Assurances, Cooperation. Each party shall, upon reasonable request
by the other party, execute and deliver any additional documents necessary or
desirable to complete the transactions herein pursuant to and in the manner
contemplated by this Agreement. The parties hereto agree to cooperate and use
their respective best efforts to consummate the transactions contemplated by
this Agreement.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
MALEX, INC. AND BARRON PARTNERS LP
PAGE 31

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11.13 Survival. The representations, warranties, covenants and agreements made
herein shall survive the Closing of the transaction contemplated hereby.
 
11.14 Third Parties. Except as disclosed in this Agreement, nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties hereto and their respective administrators, executors, legal
representatives, heirs, successors and assignees. Nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
 
11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty, covenant or agreement herein, nor shall
nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
 
11.16 Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto. 
 
[SIGNATURES ON FOLLOWING PAGE]
 
SECURITIES PURCHASE AGREEMENT BETWEEN
MALEX, INC. AND BARRON PARTNERS LP

PAGE 32

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IN WITNESS WHEREOF, the Investors and the Company have as of the date first
written above executed this Agreement.
 
THE COMPANY:

MALEX, INC.

By:
/s/ Wu Jianhua
 
Wu Jianhua, CEO

 
INVESTORS:

BARRON PARTNERS LP
By:  Barron Capital Advisors, LLC, its General Partner
 
/s/ Andrew Barron
Andrew Barron Worden, President

 
EOS HOLDINGS

By:
/s/ John R. Carnes
 
Jon R.Carnes, President

 
/s/ Steve Mazur
Steve Mazur

 
Huayang Dye Machine Co., Ltd. and Huayang Electricity Power Equipment Co., Ltd.
hereby agree to the provisions of Section 6.26 of this Agreement.
 
Huayang Dye Machine Co., Ltd.
Huayang Electricity Power Equipment Co., Ltd.
   
By:
/s/ Wu Jianhua
 
By:
Tang Lihua
 
Name: Wu Jianhua
Name: Tang Lihua
Title:
Title:

The undersigned hereby agrees to be bound by the provisions of Sections 6.16,
6.19 and 6.23 of this Agreement.
 
/s/ Wu Jianhua
 
/s/ Tang Lihua
 
/s/ Ren Yunxia
Wu Jianhua
 
Tang Lihua
 
Ren Yunxia

 
SECURITIES PURCHASE AGREEMENT BETWEEN
MALEX, INC. AND BARRON PARTNERS LP
SIGNATURE PAGE

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Schedule A
 
Name and
Address
 
Amount of
Investment
 
Principal
Amount
of Note
 
Number of Shares
of Preferred Stock 
into Which Note 
is Convertible
 
Number of
Shares
Underlying
$0.58 Warrants/
$0.83 Warrants
 
Number of
Shares
Underlying
$0.85 Warrants/
$1.00 Warrants
 
Barron Partners LP
730 Fifth Avenue, 25th Floor
New York, New York 10019
Attn: Andrew Barron Worden
 
$
5,275,000
 
$
5,275,000
   
14,118,034
   
10,670,780/
5,335,390
   
2,836,734/
2,386,878
                                   
Eos Holdings
2560 Highvale Dr.
Las Vegas, NV 89134
Attn: Jon R. Carnes, President
 
$
150,000
 
$
150,000
   
401,461
   
303,434/
151,717
   
80,665/
67,873
                                   
Steve Mazur
200 Broad Street
Apt 2321
Stamford CT  06901
 
$
100,000
 
$
100,000
   
267,640
   
202,290/
101,145
   
53,777/
45,249
     
$
5,525,000
 
$
5,525,000
   
14,787,135
   
11,176,504/
5,588,252
   
2,971,176/
2,500,000
 

 

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

 
Schedule 4.3.1
 
[Note to Vintage: Insert Excell spreadsheet here]

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

Schedule 4.8

Schedule of Brokers
 

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

Exhibit A
 
CHINA WIND SYSTEMS, INC.
Statement of Designations
 
Section 1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement (as defined below) shall have the
meanings given such terms in the Purchase Agreement. For the purposes hereof,
the following terms shall have the following meanings:
 
“4.9% Limitation” shall have the meaning set forth in the Purchase Agreement.
 
“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1.02(s) of Regulation
S-X) thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof; (b) there is commenced against
the Company or any Significant Subsidiary thereof any such case or proceeding
that is not stayed or dismissed within 90 days after commencement; (c) the
Company or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Significant Subsidiary thereof
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 90 days; (e) the
Company or any Significant Subsidiary thereof makes a general assignment for the
benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.
 
“Closing Date” means the Closing Date, as defined in the Purchase Agreement.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the Company’s common stock, which is presently designated
as the common stock, par value $.00002 per share.  Pursuant to the Restated
Certificate, the par value will be changed to $.001 per share.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
 
“Conversion Date” shall have the meaning set forth in Section 6(a).
 
“Conversion Ratio” shall mean the number of shares of Common Stock issuable upon
conversion of one share of Series A Preferred Stock. Each share of Series A
Preferred Stock shall be convertible into one (1.0) share of Common Stock (the
“Conversion Ratio”), subject to adjustment as provided in this Statement of
Designations.
 
“Conversion Price” shall mean $0.374, subject to adjustment as provided in this
Statement of Designations.
 
“Conversion Shares” means, collectively, the shares of Common Stock into which
the shares of Series A Preferred Stock are convertible in accordance with the
terms hereof.
 
“Conversion Shares Registration Statement” means a registration statement that
meets the requirements of the Registration Rights Agreement and registers the
resale of the Conversion Shares by the Holder, who shall be named as a “selling
stockholder” thereunder, all as provided in the Registration Rights Agreement.
 
“Conversion Value” means an amount determined by multiplying the number of
Conversion Shares as to which a value is to be determined by the average of the
closing prices of the Common Stock on the principal market or exchange on which
the Common Stock is traded for the five days prior to the date as of which a
Conversion Value is being determined.
 

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

 
“Dilutive Issuance” shall have the meaning set forth in Section 7(b) hereof.
 
“Effective Date” means the date that the Conversion Shares Registration
Statement is declared effective by the Commission.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Exempt Issuance” shall have the meaning set forth in the Purchase Agreement.
 
“Fundamental Transaction” shall have the meaning set forth in Section 7(f)(iv)
hereof.
 
“Holder” shall have the meaning given such term in Section 2 hereof.
 
“Investors” shall mean the persons named in Schedule A to the Purchase
Agreement.
 
“Original Issue Date” shall mean the date of the first issuance of any shares of
the Series A Preferred Stock regardless of the number of transfers of any
particular shares of Series A Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Series A Preferred Stock.
 
“Person” means a corporation, an association, a partnership, a limited liability
company, a business association, an individual, a trust, a government or
political subdivision thereof or a governmental agency.
 
“Purchase Agreement” means the Securities Purchase Agreement dated as of
November 13, 2007, relating to the sale of (a) 14,787,135 shares of the
Company’s Series A Preferred Stock, (b) warrants to purchase (i) 11,176,504
shares of Common Stock at $0.58 per share, and (ii) 5,588,252 shares of Common
Stock at $0.83 per share, and (iii) 2,065,000 shares of Common Stock at $0.92
per share, as such agreement may be amended, modified or supplemented from time
to time, a copy of which is on file at the principal offices of the Company.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the Closing Date, to which the Company and the original Holder are
parties, as amended, modified or supplemented from time to time.
 
“Securities” shall have the meaning set forth in Section 1.3.33 of the Purchase
Agreement.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 

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

“Series A Preferred Stock” shall have the meaning set forth in Section 2.
 
“Subsidiary” shall mean a corporation, limited liability company, partnership,
joint venture or other business entity of which the Company owns beneficially or
of record more than a majority of the equity interest.
 
“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.
 
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq
SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.
 
“Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.
 
“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the primary Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg Financial
L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
the VAP function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the “Pink
Sheets” published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (c) in all
other cases, the fair market value of a share of Common Stock as determined by a
nationally recognized-independent appraiser selected in good faith by Purchasers
holding a majority of the principal amount of Series A Preferred Stock then
outstanding.
 
Rank of Series. For purposes of this Statement of Designations, any stock of any
series or class of the Corporation shall be deemed to rank:
 
(a) senior to the shares of Series A Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if the holders of
such class or classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series A Preferred Stock;
 

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

(b) on a parity with shares of Series A Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, whether or not the
dividend rates, dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those of Series A
Preferred Stock, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or priority,
one over the other, as between the holders of such stock and the holders of
shares of Series A Preferred Stock;
 
(c) junior to shares of Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if such class shall
be Common Stock or if the holders of shares of Series A Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in preference
or priority to the holders of shares of such class or classes.
 
Section 2. Designation and Amount. The series of preferred stock, par value
$.001 per share (“Preferred Stock”) consisting of sixty million (60,000,000)
shares shall be designated as the Company’s Series A Convertible Preferred Stock
(the “Series A Preferred Stock”) and the number of shares so designated shall be
(which shall not be subject to increase without the consent of all of the
holders of 75% of the then outstanding shares of Series A Preferred Stock (each
a “Holder” and collectively, the “Holders”). In the event that the Company shall
change the par value of the Preferred Stock, the par value of the Series A
Preferred Stock shall be likewise changed. In the event of the conversion of
shares of Series A Preferred Stock into this Company’s Common Stock, pursuant to
Section 6 hereof, or in the event that the Company shall otherwise acquire and
cancel any shares of Series A Preferred Stock, the shares of Series A Preferred
Stock so converted or otherwise acquired and canceled shall have the status of
authorized but unissued shares of preferred stock, without designation as to
series until such stock is once more designated as part of a particular Series
by the Company’s Board of Directors. In addition, if the Company shall not issue
the maximum number of shares of Series A Preferred Stock, the Company may, from
time to time, by resolution of the Board of Directors and the approval of the
holders of a majority of the outstanding shares of Series A Preferred Stock,
reduce the number of shares of Series A Preferred Stock authorized, provided,
that no such reduction shall reduce the number of authorized shares to a number
which is less than the number of shares of Series A Preferred Stock then issued
or reserved for issuance. The number of shares by which the Series A Preferred
Stock is reduced shall have the status of authorized but unissued shares of
Preferred Stock, without designation as to series, until such stock is once more
designated as part of a particular Series by the Company’s Board of Directors.
The Board of Directors shall cause to be filed with the Secretary of State of
the State of Nevada such certificate as shall be necessary to reflect any
reduction in the number of shares constituting the Series A Preferred Stock.
 
Section 3. Dividends and Other Distributions. No dividends shall be payable with
respect to the Series A Preferred Stock. No dividends shall be declared or
payable with respect to the Common Stock or the Series B Preferred Stock while
the Series A Preferred Stock is outstanding. The Company shall not redeem or
purchase any shares of Common Stock or any other class or series of capital
stock which is junior to or on a parity with the Series A Preferred Stock while
the Series A Preferred Stock is outstanding.

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

Section 4. Voting Rights. The Series A Preferred Stock shall have no voting
rights except as required by law. However, so long as any shares of Series A
Preferred Stock are outstanding, the Company shall not, without the affirmative
approval of the Holders of 75% of the shares of the Series A Preferred Stock
then outstanding, (a) alter or change adversely the powers, preferences or
rights given to the Series A Preferred Stock or alter or amend this Statement of
Designations, (b) authorize or create any class of stock ranking as to dividends
or distribution of assets upon a Liquidation (as defined in Section 5) senior to
or otherwise pari passu with the Series A Preferred Stock, or any of preferred
stock possessing greater voting rights or the right to convert at a more
favorable price than the Series A Preferred Stock, (c) amend its certificate of
incorporation or other charter documents in breach of any of the provisions
hereof, (d) increase the authorized number of shares of Series A Preferred Stock
or the number of authorized shares of Preferred Stock, or (e) enter into any
agreement with respect to the foregoing. Notwithstanding any other provision of
the Statement of Designations; the provisions of Section 6(c) of this Statement
of Designations may not be amended or waived.
 
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a “Liquidation”), the Holders shall
be entitled to receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Series A Preferred Stock an amount equal
to thirty eight and 4/10 cents ($0.384) per share of Series A Preferred Stock,
which amount is referred to as the “Liquidation Preference,” before any
distribution or payment shall be made to the holders of any securities which are
junior to the Series A Preferred Stock upon voluntary or involuntary
liquidation, dissolution or winding up and after any distributions or payments
made to holders of any class or series of securities which are senior to the
Series A Preferred Stock upon voluntary or involuntary liquidation, dissolution
or winding up, and if the assets of the Company shall be insufficient to pay in
full such amounts, then the entire assets to be distributed to the Holders shall
be distributed among the Holders ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. In the event the assets of the Company available for distribution
to the holders of shares of Series A Preferred Stock upon dissolution,
liquidation or winding up of the Company, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to Section 5, no such distribution shall be made on account of
any shares of any other class or series of capital stock of the Company ranking
on a parity with the shares of Series A Preferred Stock upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of Series A Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation or
winding up. At the election of a Holder made by written notice delivered to the
Company at least two (2) business days prior to the effective date of the
subject transaction, as to the shares of Series A Preferred Stock held by such
Holder, a Fundamental Transaction (excluding for purposes of this Section 5 any
Fundamental Transaction described in Section 7(f)(iv)(A) or 7(f)(iv)(B)) or
Change of Control shall be treated as a Liquidation as to such Holder.
 

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

Section 6. Conversion.
 
(a) Conversions at Option of Holder. Each share of Series A Preferred Stock
shall be initially convertible (subject to the limitations set forth in Section
6(c)), into such number of shares of Common Stock based on the Conversion Ratio
at the option of the Holders, at any time and from time to time from and after
the Original Issue Date; provided, however, that until the Restated Certificate,
as defined in the Purchase Agreement, is filed with the Secretary of State of
the State of Delaware, the Series A Preferred Stock shall not be convertible
into Common Stock to the extent that such conversion would result in the
issuance of more than the number of authorized shares of Common Stock. Holders
shall effect conversions by providing the Company with the form of conversion
notice attached hereto as Annex A (a “Notice of Conversion”) as fully and
originally executed by the Holder, together with the delivery by the Holder to
the Company of the stock certificate(s) representing the number of shares of
Series A Preferred Stock so converted, with such stock certificates being duly
endorsed in full for transfer to the Company or with an applicable stock power
duly executed by the Holder in the manner and form as deemed reasonable by the
transfer agent of the Common Stock. Each Notice of Conversion shall specify the
number of shares of Series A Preferred Stock to be converted, the number of
shares of Series A Preferred Stock owned prior to the conversion at issue, the
number of shares of Series A Preferred Stock owned subsequent to the conversion
at issue, the stock certificate number and the shares of Series A Preferred
Stock represented thereby which are accompanying the Notice of Conversion, and
the date on which such conversion is to be effected, which date may not be prior
to the date the Holder delivers such Notice of Conversion and the applicable
stock certificates to the Company by overnight delivery service (the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the Trading Day immediately following the date that
such Notice of Conversion and applicable stock certificates are received by the
Company. The calculations and entries set forth in the Notice of Conversion
shall control in the absence of manifest or mathematical error. Shares of Series
A Preferred Stock converted into Common Stock in accordance with the terms
hereof shall be canceled and may not be reissued. If the Conversion Price is
adjusted pursuant to Section 7 or as otherwise provided in this Statement of
Designations, the Conversion Ratio shall likewise be adjusted and the new
Conversion Ratio shall determined by multiplying the Conversion Ratio in effect
by a fraction, the numerator of which is the Conversion Price in effect before
the adjustment and the denominator of which is the new Conversion Price.
Thereafter, subject to any further adjustments in the Conversion Price, each
share of Series A Preferred Stock shall be initially convertible into Common
Stock based on the new Conversion Ratio.
 
(b) Automatic Conversion Upon Change of Control. Subject to Section 5, all of
the outstanding shares of Series A Preferred Stock shall be automatically
converted into the Conversion Shares upon the close of business on the business
day immediately preceding the date fixed for consummation of any transaction
resulting in a Change of Control of the Company (an “Automatic Conversion
Event”). A “Change in Control” means a consolidation or merger of the Company
with or into another company or entity in which the Company is not the surviving
entity or the sale of all or substantially all of the assets of the Company to
another company or entity not controlled by the then existing stockholders of
the Company in a transaction or series of transactions. The Company shall not be
obligated to issue certificates evidencing the Conversion Shares unless
certificates evidencing the shares of Series A Preferred Stock so converted are
either delivered to the Company or its transfer agent or the holder notifies the
Company or its transfer agent in writing that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection therewith. Upon
the conversion of the Series A Preferred Stock pursuant to this Section 6(b),
the Company shall promptly send written notice thereof, by hand delivery or by
overnight delivery, to the holders of record of all of the Series A Preferred
Stock at their addresses then shown on the records of the Company, which notice
shall state that certificates evidencing shares of Series A Preferred Stock must
be surrendered at the office of the Company (or of its transfer agent for the
Common Stock, if applicable).
 

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(c) Beneficial Ownership Limitation. Except as provided in Section 6(b) of this
Statement of Designations, which shall apply as stated therein if an Automatic
Conversion Event shall occur, the right of the Holder to convert the Series A
Preferred Stock shall be subject to the 4.9% Limitation, with the result that
Company shall not effect any conversion of the Series A Preferred Stock, and the
Holder shall not have the right to convert any portion of the Series A Preferred
Stock, to the extent that after giving effect to such conversion, the Holder
(together with the Holder’s affiliates), as set forth on the applicable Notice
of Conversion, would beneficially own in excess of 4.9% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
conversion.  For the purposes of this Agreement beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act, and Regulation
13d-3 thereunder. For purposes of this Section 6(c), in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in the most recent of the
following: (A) the Company’s most recent quarterly reports (Form 10-Q or Form
10-QSB), Annual Reports (Form 10-K or Form 10-KSB), or definitive proxy
statement or information statement as filed with the Commission under the
Exchange Act, (B) a more recent public announcement by the Company, or (C) any
other written notice by the Company or the Company’s transfer agent setting
forth the number of shares of Common Stock outstanding.  Upon the written or
oral request of the Holder, the Company shall within two (2) Trading Days
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding.  In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the Series A Preferred Stock, by the Holder
or its affiliates since the date as of which such number of outstanding shares
of Common Stock was publicly reported by the Company. The 4.9% Limitation may be
not be waived or amended.
 
(d) Mechanics of Conversion
 
(i) Delivery of Certificate Upon Conversion. Except as otherwise set forth
herein, not later than three Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver to the Holder (A) a certificate or
certificates which, after the Effective Date, shall be free of restrictive
legends and trading restrictions (other than those required by the Purchase
Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of shares of Series A Preferred Stock, and (B) a bank check in
the amount of accrued and unpaid dividends (if the Company has elected or is
required to pay accrued dividends in cash). After the Effective Date, the
Company shall, upon request of the Holder, deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Company or another established
clearing Company performing similar functions if the Company’s transfer agent
has the ability to deliver shares of Common Stock in such manner. If in the case
of any Notice of Conversion such certificate or certificates are not delivered
to or as directed by the applicable Holder by the third Trading Day after the
Conversion Date, the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Series A
Preferred Stock tendered for conversion.
 

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(ii) Obligation Absolute; Partial Liquidated Damages. The Company’s obligations
to issue and deliver the Conversion Shares upon conversion of Series A Preferred
Stock in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Conversion Shares. In the event a Holder shall elect to convert any or all of
its Series A Preferred Stock, the Company may not refuse conversion based on any
claim that such Holder or any one associated or affiliated with the Holder of
has been engaged in any violation of law, agreement or for any other reason
(other than the inability of the Company to issue shares of Common Stock as a
result of the limitation set forth in Section 6(c) hereof) unless an injunction
from a court, on notice, restraining and or enjoining conversion of all or part
of this Series A Preferred Stock shall have been sought and obtained and the
Company posts a surety bond for the benefit of the Holder in the amount of 150%
of the Conversion Value of Series A Preferred Stock which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent it obtains judgment. In the absence of an
injunction precluding the same, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. If the Company fails to
deliver to the Holder such certificate or certificates pursuant to Section
6(d)(i) within two Trading Days of the Share Delivery Date applicable to such
conversion, the Company shall pay to such Holder, in cash, as liquidated damages
and not as a penalty, for each $5,000 of Conversion Value of Series A Preferred
Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day
after three (3) Trading Days and increasing to $200 per Trading Day six (6)
Trading Days after such damages begin to accrue) for each Trading Day after the
Share Delivery Date until such certificates are delivered. Nothing herein shall
limit a Holder’s right to pursue actual damages for the Company’s failure to
deliver certificates representing shares of Common Stock upon conversion within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
 
(iii) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. If the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 6(d)(i) by a Share Delivery Date, and if after
such Share Delivery Date the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of
the Conversion Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a “Buy-In”), then the Company
shall pay in cash to the Holder the amount by which (x) the Holder’s total
purchase price (including brokerage commissions, if any) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that such Holder was entitled to receive from the conversion at
issue multiplied by (2) the price at which the sell order giving rise to such
purchase obligation was executed. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Series A Preferred Stock with respect to
which the aggregate sale price giving rise to such purchase obligation is
$10,000, under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence reasonably
requested by the Company. Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock upon conversion of the shares of Series A
Preferred Stock as required pursuant to the terms hereof.
 

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(iv) Reservation of Shares Issuable Upon Conversion. The Company covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock solely for the purpose of issuance upon
conversion of the Series A Preferred Stock, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common Stock
as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 7) upon the
conversion of all outstanding shares of Series A Preferred Stock. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid, nonassessable and,
if the Conversion Shares Registration Statement is then effective under the
Securities Act, registered for public sale in accordance with such Conversion
Shares Registration Statement provided that the holder or its broker delivers
confirmation to the Company or its transfer agent to the effect that the
Conversion Shares have been sold pursuant to such registration statement.
 
(v) Fractional Shares. Upon a conversion of the Series A Preferred Stock, the
Company shall not be required to issue stock certificates representing
fractional shares of Common Stock. All fractional shares shall be carried
forward and any fractional shares which remain after a Holder converts all of
his or her Series A Preferred Stock shall be dropped and eliminated.
 
(vi) Transfer Taxes. The issuance of certificates for shares of the Common Stock
on conversion of the Series A Preferred Stock shall be made without charge to
the Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate, provided that
the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such shares of Series
A Preferred Stock so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
 
(vii) Absolute Obligation. Except as expressly provided herein, no provision of
this Statement of Designations shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the liquidated damages (if
any) on, the shares of Series A Preferred Stock at the time, place, and rate,
and in the coin or currency, herein prescribed.
 
Section 7.  Certain Adjustments.
 
(a) Stock Dividends and Stock Splits. If the Company, at any time subsequent to
the Closing Date as long as the Series A Preferred Stock is outstanding: (i)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this Series
A Preferred Stock), (ii) subdivide outstanding shares of Common Stock into a
larger number of shares, (iii) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
 

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(b) Price Adjustment. From and after the Closing Date and until such time as the
Investors hold no Securities, except for (i) Exempt Issuances, (ii) issuances
covered by Sections 7(a) and 7(c) hereof or (iii) an issuance of Common Stock
upon exercise or upon conversion of warrants, options or other convertible
securities for which an adjustment has already been made pursuant to this
Section 7, as to all of which this Section 7(b) does not apply, if the Company
closes on the sale or issuance of Common Stock at a price, or issues warrants,
options, convertible debt or equity securities with a exercise price per share
or conversion price which is less than the Conversion Price then in effect (such
lower sales price, conversion or exercise price, as the case may be, being
referred to as the “Lower Price”), the Conversion Price in effect from and after
the date of such transaction shall be reduced to the Lower Price. For purpose of
determining the exercise price of warrants issued by the Company, the price, if
any, paid per share for the warrants shall be added to the exercise price of the
warrants.
 
(c) Pro Rata Distributions. If the Company, at any time from and after the
Closing Date and as long as the Series A Preferred Stock is outstanding, shall
distribute to all holders of Common Stock (and not to Holders) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Conversion Price shall be determined by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
 

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(d) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company or any of its subsidiaries.
For purposes of this Section 7, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares and shares owned by
subsidiaries, if any) actually issued and outstanding.
 
(e) Notice to Holders.
 
(i) Adjustment to Conversion Price. Whenever the Conversion Price is adjusted
pursuant to any of this Section 7, the Company shall promptly mail to each
Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. If the
Company issues a variable rate security, despite the prohibition thereon in the
Purchase Agreement, the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion or exercise price at
which such securities may be converted or exercised in the case of a Variable
Rate Transaction (as defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as defined in the Purchase
Agreement).
 
(ii) Notices of Other Events. If (A) the Company shall declare a dividend (or
any other distribution) on the Common Stock; (B) the Company shall declare a
redemption of the Common Stock; (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock or any Fundamental Transaction, (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of the Series A Preferred Stock, and shall cause to be mailed to the
Holders at their last addresses as they shall appear upon the stock books of the
Company, at least 30 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification is expected to become effective or close, and the date as
of which it is expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification or Fundamental
Transaction; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.
 
(f) Exempt Issuance. Notwithstanding the foregoing, no adjustment in the
Conversion Price will be made in respect of an Exempt Issuance.
 

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(g) Fundamental Transaction. If, at any time while this Series A Preferred Stock
is outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
“Fundamental Transaction”), then upon any subsequent conversion of this Series A
Preferred Stock, the Holder shall have the right to receive, for each Conversion
Share that would have been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock (the “Alternate Consideration”). For
purposes of any such conversion, the determination of the Conversion Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Series A Preferred Stock following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall file a new Statement of Designations with the same terms and
conditions and issue to the Holder new preferred stock consistent with the
foregoing provisions and evidencing the Holder’s right to convert such preferred
stock into Alternate Consideration. The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(f)(iv) and insuring that this Series A Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. Notwithstanding the foregoing or any other
provisions of this Statement of Designations, in the event that the agreement
relating to a Fundamental Transaction provides for the conversion or exchange of
the Series A Preferred Stock into equity or debt securities, cash or other
consideration and the agreement is approved by the holders of a majority of the
then-outstanding shares of Series A Preferred Stock, then the holders of the
Series A Preferred Stock shall have only the rights set forth in such agreement.
 

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Section 8.  Miscellaneous.
 
(a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, sent by
a nationally recognized overnight courier service, addressed to the Company, at
its principal address as reflected in its most recent filing with the
Commission. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile telephone number or address of such
Holder appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries hereunder shall be deemed given when
received, and any notice by telecopier shall be effective if confirmation of
receipt is given by the party to whom the notice is transmitted. 
 
(b) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Series A
Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the shares of
Series A Preferred Stock so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such certificate, and
of the ownership thereof, and indemnity, if requested, all reasonably
satisfactory to the Company.
 
(c) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
 
(d) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Statement of Designations and shall not be deemed to
limit or affect any of the provisions hereof.
 
(e) Amendment. This Statement of Designations may be amended with the approval
of the Company’s board of directors and the consent of the holders of
seventy-five percent (75%) of the outstanding shares of Series A Preferred
Stock, except that the 4.9% Limitation may not be waived.
 

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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES A
PREFERRED STOCK)
 
The undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the “Common Stock”), of China Wind Systems, Inc., a
Delaware corporation (the “Company”), according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
 
Date to Effect Conversion: ________________________________________
 
Number of shares of Common Stock owned prior to Conversion: _______________
 
Number of shares of Series A Preferred Stock to be Converted: ________________
 
Value of shares of Series A Preferred Stock to be Converted:
____________________
 
Number of shares of Common Stock to be Issued: ___________________________
 
Certificate Number of Series A Preferred Stock attached hereto:_________________
 
Number of Shares of Series A Preferred Stock represented by attached
certificate:_________
 
Number of shares of Series A Preferred Stock subsequent to Conversion:
________________

 
[HOLDER]
 
By:
     
Name:
    
Title:
 

 

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