FORM
      OF PLACEMENT AGENCY AGREEMENT

     

    October
      31, 2007

     

    Roth
      Capital Partners, LLC

    24
      Corporate Plaza

    Newport
      Beach, CA 92660

     

    Ladies
      and Gentlemen:

     

    Introductory.
      Subject
      to the terms and conditions herein, China Precision Steel, Inc., a Colorado
      corporation (the “Company”),
      hereby agrees to sell an aggregate of up to 7,100,000 shares (the “Shares”)
      of
      common stock, US$0.001 par value per share (the "Common
      Stock”),
      and
      an aggregate of up to 1,420,000 warrants (the “Warrants”
and,
      together with the Shares, the “Securities”)
      to
      purchase shares of Common Stock, of the Company, directly to various investors
      (each an “Investor”
and,
      collectively, the “Investors”)
      through Roth Capital Partners, LLC, as placement agent (the “Placement
      Agent”.)

     

    The
      Company hereby confirms its agreement with the Placement Agent as follows:
      

     

    Section
      1. Agreement
      to Act as Placement Agent.
      

     

    (a) On
      the
      basis of the representations, warranties and agreements of the Company herein
      contained, and subject to all the terms and conditions of this Agreement, the
      Placement Agent shall be the exclusive Placement Agent in connection with the
      offering and sale by the Company of the Securities from the Company's shelf
      registration statement on Form S-3 (File No. 333-143454), with the terms of
      such
      offering (the “Offering”)
      to be
      subject to market conditions and negotiations between the Company, the Placement
      Agent and the prospective Investors. The Placement Agent shall act on a best
      efforts basis and does not guarantee that it will be able to sell the Securities
      in the prospective Offering. As compensation for services rendered, on the
      Closing Date (as defined below), the Company shall pay to the Placement Agent
      an
      aggregate amount equal to 7.0% of the gross proceeds received by the Company
      from the sale of such Securities. The purchase price to the Investors for each
      Share is US$6.75 and the exercise price to the Investors of each share of common
      stock issuable upon exercise of the Warrants is US$8.45. The Placement Agent
      may
      retain other brokers or dealers to act as sub-agents on its behalf in connection
      with the Offering. 

     

    (b)
      Concurrently
      with the Closing (as defined below) for the Offering, the Company will issue
      to
      the Placement Agent warrants to purchase Common Stock in an amount and with
      such
      terms as set forth in Schedule
      I
      hereto.

     

    (c) The
      term
      of the Placement Agent's exclusive engagement will be the earlier of (i) the
      Closing Date and (ii) six (6) months from the date hereof (the “Exclusive
      Term”);
      however, a party hereto may terminate the engagement with respect to itself
      at
      any time upon 10 days written notice to the other parties. Upon termination
      or
      expiration of this Agreement, the Placement Agent will be entitled to collect
      all fees earned, and to be reimbursed for all reimbursable expenses (as set
      forth in Section 6 below) incurred, through the date of termination or
      expiration, as applicable. Notwithstanding the foregoing, if during the 180
      day
      period beginning on the date this Agreement is terminated or otherwise expires,
      the Company issues and sells any securities of the Company, the Company agrees
      to pay to the Placement Agent upon the closing of such transaction or
      transactions a cash fee equal to the amount that would otherwise have been
      payable to the Placement Agent had such transaction or transactions occurred
      during the Exclusive Term. Nothing in this Agreement shall be construed to
      limit
      the ability of the Placement Agent or its affiliates to pursue, investigate,
      analyze, invest in, or engage in investment banking, financial advisory or
      any
      other business relationship with entities or persons other than the
      Company.


    
      
        
        

      

      
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    Section
      2. Representations,
      Warranties and Covenants

     

    A.
       Representations,
      Warranties and Covenants of the Company.
      The
      Company hereby represents, warrants and covenants to the Placement Agent as
      of
      the date hereof, and as of each Closing Date, as follows: 

     

    (a) Securities
      Law Filings.
      The
      Company meets the requirements for use of Form S-3 under the Securities Act
      of
      1933, as amended (the “Act”),
      and
      has prepared and filed with the Securities and Exchange Commission (the
“Commission”)
      a
      registration statement on such Form S-3 (File No. 333-143454), which became
      effective on July 16, 2007 at 5:00 P.M., for the registration under the Act
      of
      the Securities. Such registration statement meets the requirements set forth
      in
      Rule 415(a)(1)(x) under the Act and complies in all other material respects
      with
      said Rule and the Act. The Company will file with the Commission pursuant to
      Rule 424(b) under the Act a supplement to the form of prospectus included in
      such registration statement relating to the offering of the Securities and
      the
      plan of distribution thereof and the Company has advised the Placement Agent
      of
      all further information (financial and other) with respect to the Company to
      be
      set forth therein. Such registration statement, including the exhibits thereto,
      as amended at the date of this Agreement, is hereinafter called the
“Registration
      Statement”;
      the
      prospectus, in the form in which it appears in the Registration Statement,
      is
      hereinafter called the “Base
      Prospectus”;
      and
      each supplemented form of prospectus, in the form in which it will be filed
      with
      the Commission pursuant to Rule 424(b), is hereinafter called a “Prospectus
      Supplement.”
Any
      reference herein to the Registration Statement, the Base Prospectus or a
      Prospectus Supplement shall be deemed to refer to and include the documents,
      if
      any, which may be incorporated by reference in the Registration Statement,
      the
      Base Prospectus and any Prospectus Supplement (the “Incorporated
      Documents”)
      pursuant to Form S-3 and which were filed under the Securities Exchange Act
      of 1934, as amended (the “Exchange
      Act”),
      on or
      before the date of this Agreement, or the issue date of the Base Prospectus
      or
      any Prospectus Supplement, as the case may be; and any reference herein to
      the
      terms “amend,”
      “amendment”
or
      “supplement”
with
      respect to the Registration Statement, the Base Prospectus or a Prospectus
      Supplement shall be deemed to refer to and include the filing of any document
      under the Exchange Act after the date of this Agreement, or the issue date
      of
      the Base Prospectus or any Prospectus Supplement, as the case may be, deemed
      to
      be incorporated therein by reference. All references in this Agreement to
      financial statements and schedules and other information which is “contained,”
      “included”
or
      “stated”
in
      the
      Registration Statement or any Prospectus Supplement (and all other references
      of
      like import) shall be deemed to mean and include all such financial statements
      and schedules and other information which is or is deemed to be incorporated
      by
      reference in the Registration Statement or such Prospectus Supplement, as the
      case may be. 

     

    (b) Effectiveness;
      No Stop Order.
      The
      Registration Statement has been declared effective by the Commission under
      the
      Act and the Company has complied to the Commission’s satisfaction with all
      requests of the Commission for additional or supplemental information. No stop
      order suspending the effectiveness of the Registration Statement or the use
      of
      the Base Prospectus or any Prospectus Supplement has been issued, and no
      proceeding for any such purpose is pending or has been initiated or, to the
      Company’s knowledge, is threatened by the Commission. 

     

    
      
        
        

      

      
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    (c) Compliance
      with Applicable Regulations.
      The
      Registration Statement (and any further documents to be filed with the
      Commission) contains all exhibits and schedules as required by the Act. Each
      of
      the Registration Statement and any post-effective amendment thereto, at the
      time
      it became effective and at all subsequent times, complied and will comply in
      all
      material respects with the Act and the applicable rules and regulations of
      the
      Commission thereunder and did not and, as amended or supplemented, if
      applicable, will not, contain any untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading. Each of the Base Prospectus and any
      Prospectus Supplement, as of its respective date and at all subsequent times,
      complied and will comply in all material respects with the Act and the
      applicable rules and regulations of the Commission thereunder. Each of the
      Base
      Prospectus and any Prospectus Supplement, as amended or supplemented, as of
      its
      date and at all subsequent times, did not and will not contain any untrue
      statement of a material fact or omit to state a material fact necessary in
      order
      to make the statements therein, in light of the circumstances under which they
      were made, not misleading. The Incorporated Documents, if any, when they became
      effective or were filed with the Commission, as the case may be, conformed
      in
      all material respects to the requirements of the Act and the Exchange Act,
      as
      applicable, and the applicable rules and regulations of the Commission
      thereunder, and none of such documents contained any untrue statement of a
      material fact or omitted to state a material fact necessary to make the
      statements therein not misleading; and any further documents so filed and
      incorporated by reference in the Base Prospectus or any Prospectus Supplement,
      if any, when such documents become effective or are filed with the Commission,
      as the case may be, will conform in all material respects to the requirements
      of
      the Act and the Exchange Act, as applicable, and the applicable rules and
      regulations of the Commission thereunder, and will not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make
      the statements therein not misleading. No post-effective amendment to the
      Registration Statement reflecting any facts or events arising after the
      effective date thereof which represent, individually or in the aggregate, a
      fundamental change in the information set forth therein is required to be filed
      with the Commission. This representation by the Company shall not apply to
      statements in or omissions from the Registration Statement based upon and in
      conformity with written information furnished to the Company by the Placement
      Agent specifically for use therein, it being understood and agreed that the
      only
      such information furnished by the Placement Agent consists of the information
      described as such in Section 7(c) hereof. 

     

    (d) Disclosure
      Package.
      The
      term “Disclosure
      Package”
shall
      mean (i) the Base Prospectus, (ii) any preliminary Prospectus Supplement
      relating to the Offering that is filed with the Commission and delivered to
      investors prior to the Sale Time (as defined below), and (iii) any issuer free
      writing prospectus as defined in Rule 433 of the Act (each, an “Issuer
      Free Writing Prospectus”),
      if
      any, that the parties hereto shall hereafter expressly agree in writing to
      treat
      as part of the Disclosure Package. As of 4:00 p.m. (Eastern Time) on the date
      of
      this Agreement with respect to the Offering hereunder (the “Sale
      Time”)
      the
      Disclosure Package did not contain any untrue statement of material fact or
      omit
      to state any material fact necessary in order to make the statements therein,
      in
      light of the circumstances under which they were made, not misleading. The
      preceding sentence does not apply to statements in or omissions from the
      Disclosure Package based upon and in conformity with written information
      furnished to the Company by the Placement Agent specifically for use therein,
      it
      being understood and agreed that the only such information furnished by or
      on
      behalf of the Placement Agent consists of the information described as such
      in
      Section 7(c) hereof. 

     

    (e) Reports
      and Documents, etc.
      There
      are no documents required to be filed with the Commission in connection with
      the
      transactions contemplated hereby that (i) have not been filed as required
      pursuant to the Act or (ii) will not be filed within the requisite time
      period. There are no contracts or other documents required to be described
      in
      the Base Prospectus or any Prospectus Supplement, or to be filed as exhibits
      or
      schedules to the Registration Statement, which have not been or will not be
      described or filed as required. 

     

    (f) Offering
      Materials Furnished to the Placement Agent.
      The
      Company has delivered, or will as promptly as practicable deliver, to the
      Placement Agent complete conformed copies of the Registration Statement and
      of
      each consent and certificate of experts filed as a part thereof, and conformed
      copies of the Registration Statement (without exhibits) and the Base Prospectus
      and each Prospectus Supplement, as amended or supplemented, in such quantities
      and at such places as the Placement Agent reasonably requests. 

     

    
      
        
        

      

      
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    (g) Distribution
      of Offering Materials.
      The
      Company is not an “Ineligible
      Issuer,”
as
      defined in Rule 405 of the Act. Subject to Section 4A(e) below, the Company
      represents and warrants that it has not prepared or had prepared on its behalf
      or used or referred to any Issuer Free Writing Prospectus in connection with
      the
      Offering. Subject to Section 4A(e) below, the Company has not distributed and
      the Company will not distribute, prior to the completion of the distribution
      of
      the Securities, any offering material in connection with the Offering other
      than
      the Base Prospectus, a Prospectus Supplement or the Registration Statement
      and
      copies of the documents, if any, incorporated by reference therein.


     

    (h) The
      Placement Agency Agreement.
      This
      Agreement has been duly authorized, executed and delivered by, and is a valid
      and binding agreement of, the Company enforceable against the Company in
      accordance with its terms, except
      as
      rights to indemnification and contribution hereunder may be limited by
      applicable law and except as the enforcement hereof may be limited by
      bankruptcy, insolvency, reorganization, moratorium or other similar laws
      relating to or affecting the rights and remedies of creditors or by general
      equitable principles. 

     

    (i) No
      Applicable Registration or Other Similar Rights.
      There
      are no persons with registration, preemptive or other similar rights to have
      any
      securities (whether equity, debt or any combination thereof) registered or
      qualified for sale under the Registration Statement or a Prospectus Supplement
      or included in the Offering contemplated by this Agreement, except for such
      rights as have been duly waived or satisfied. 

     

    (j) No
      Material Adverse Change.
      Subsequent to the respective dates as of which information is given in the
      Base
      Prospectus and in any Prospectus Supplement: (i) there has been no material
      adverse change or effect, or any development that could reasonably be expected
      to result in a material adverse change or effect, in the condition, financial
      or
      other, or in the earnings, business, operations or prospects, whether or not
      arising from transactions in the ordinary course of business, of the Company
      and
      the Subsidiaries (as defined herein) taken as a whole (any such change or
      effect, where the context so requires, is called a “Material
      Adverse Change”
or
      a
“Material
      Adverse Effect”);
      (ii)
      the Company and the Subsidiaries have not incurred any material liability or
      obligation, indirect, direct or contingent, not in the ordinary course of
      business nor entered into any material transaction or agreement not in the
      ordinary course of business; and (iii) there has been no dividend or
      distribution of any kind declared, paid or made by the Company on any class
      of
      capital stock or repurchase or redemption by the Company of any class of capital
      stock. 

     

    (k) Independent
      Accountants.
      To the
      best of the Company’s knowledge, Murrell, Hall, McIntosh & Co., PLLP, who
      have expressed their opinion with respect to the financial statements (which
      term as used in this Agreement includes the related notes and schedules thereto)
      and supporting schedules filed with the Commission as a part of the Registration
      Statement and included in or incorporated by reference in the Disclosure Package
      or any Prospectus Supplement, is an independent registered public accounting
      firm as required by the Act and the Exchange Act. 

     

    (l) Preparation
      of the Financial Statements.
      The
      financial statements and selected financial data filed with the Commission
      as a
      part of the Registration Statement or included or incorporated by reference
      in
      the Disclosure Package or any Prospectus Supplement present fairly the financial
      position of the Company and its consolidated subsidiaries as of and at the
      dates
      indicated and the results of its operations and cash flows for the periods
      specified therein. The supporting exhibits and schedules included in the
      Registration Statement, if any, present fairly the information required to
      be
      stated therein subject to the normal year-end adjustments which are not expected
      to be material in amount. Such financial statements and supporting schedules,
      if
      any, have been prepared in conformity with generally accepted accounting
      principles as applied in the United States (“U.S.
      GAAP”),
      as
      applicable, applied on a consistent basis throughout the periods involved,
      except as may be expressly stated in the related notes thereto, and comply
      in
      all material respects with the accounting requirements of the Act, the Exchange
      Act and the applicable rules and regulations of the Commission thereunder.
      No
      other financial statements or supporting schedules or exhibits are required
      by
      the Act or the rules and regulations of the Commission thereunder to be included
      in the Registration Statement, the Base Prospectus or any Prospectus Supplement.
      

     

    
      
        
        

      

      
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    (m) Critical
      Accounting Policies; Material Trends and Off Balance Sheet
      Transactions.
      The
      section entitled “Management’s Discussion and Analysis of Financial Condition
      and Results of Operation—Critical Accounting Policies” in the Registration
      Statement or included or incorporated by reference in the Disclosure Package
      or
      any Prospectus Supplement accurately and fully describes (A) accounting policies
      which the Company believes are the most important in the portrayal of the
      financial condition and results of operations of the Company and its
      consolidated subsidiaries and which require management’s most difficult,
      subjective or complex judgments (“critical accounting policies”); (B) judgments
      and uncertainties affecting the application of critical accounting policies;
      and
      (C) explanation of the likelihood that materially different amounts would be
      reported under different conditions or using different assumptions. The
      Company’s board of directors, senior management and audit committee have
      reviewed and agreed with the selection, application and disclosure of critical
      accounting policies. The section entitled “Management’s Discussion and Analysis
      of Financial Condition and Results of Operations” in the Registration Statement
      or included or incorporated by reference in the Disclosure Package or any
      Prospectus Supplement accurately and fully describes (X) all material trends,
      demands, commitments, events, uncertainties and risks that the Company believes
      would materially affect liquidity and are reasonably likely to occur; and (Y)
      all off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on the financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources of the Company and its Subsidiaries taken
      as a
      whole. Except as otherwise disclosed in the Registration Statement, Disclosure
      Package or any Prospectus Supplement, there are no outstanding guarantees or
      other contingent obligations of the Company or any subsidiary that could
      reasonably be expected to have a Material Adverse Effect.

     

    (n) Incorporation
      and Good Standing.
      Each of
      the Company and its subsidiaries set forth in Exhibit
      A
      attached hereto (the “Subsidiaries”)
      has
      been duly organized and is validly existing and, as applicable, is a corporation
      in good standing under the laws of its jurisdiction of incorporation with full
      corporate power and authority to own its properties and other assets and conduct
      its business as described in the Disclosure Package and any Prospectus
      Supplement, and is duly qualified or licensed to do business as a foreign
      corporation and, as applicable, is in good standing under the laws of each
      jurisdiction which requires such qualification or license, except where the
      failure to be so qualified or in good standing would not have a Material Adverse
      Effect. 

     

    (o) Capitalization
      and Other Capital Stock Matters.
      The
      authorized, issued and outstanding capital stock of the Company, and the
      outstanding options and warrants, are as described in the Disclosure Package
      and
      any Prospectus Supplement (other than for issuances after the dates thereof,
      if
      any, pursuant to employee benefit plans, or upon exercise of outstanding options
      or warrants, described in the Disclosure Package and any Prospectus Supplement),
      as the case may be. The Common Stock and warrants, including the Securities,
      conforms in all material respects to the description thereof contained in the
      Disclosure Package and any Prospectus Supplement. As of the effective date
      of
      the Registration Statement, there were 38,796,288 shares of Common Stock
      outstanding. Since the effective date of the Registration Statement, the Company
      has not issued any securities other than Common Stock of the Company pursuant
      to
      (i) Section 5(a) of the Stock Purchase Agreement, dated as of February 16,
      2007
      (the "Make Good Shares"), and (ii) the exercise of previously outstanding
      options and warrants, in each case as disclosed in the Disclosure Package and
      any Prospectus Supplement. All the issued and outstanding shares of the capital
      stock of the Company and the Subsidiaries have been duly authorized and validly
      issued, are fully paid and nonassessable and have been issued in compliance,
      in
      all material respects, with all applicable laws. Except as set forth in the
      Disclosure Package and any Prospectus Supplement, all of the outstanding shares
      of capital stock of the Subsidiaries are owned, directly or indirectly, by
      the
      Company, and such shares are held free and clear of any security on interest
      mortgage, pledge, lien, encumbrance or claim. None of the outstanding shares
      of
      capital stock of the Company or any Subsidiary were issued in violation of
      any
      preemptive rights, rights of first refusal or other similar rights to subscribe
      for or purchase securities. There are no authorized or outstanding options,
      warrants, preemptive rights, rights of first refusal or other rights to
      purchase, or equity or debt securities convertible into or exchangeable or
      exercisable for, any capital stock of the Company or any Subsidiary other than
      those described in the Disclosure Package and any Prospectus Supplement. The
      description of the Company’s stock option, stock bonus and other stock plans or
      arrangements, and the options, warrants or other rights granted thereunder,
      set
      forth in the Disclosure Package and any Prospectus Supplement accurately and
      fairly presents the information required by the Act to be shown with respect
      to
      such plans, arrangements, options and rights. Except as set forth in the
      Disclosure Package or in any Prospectus Supplement, the Company does not have
      any subsidiaries or own directly or indirectly any of the capital stock or
      other
      equity or long-term debt securities or have any equity interest in any other
      person.

     

    
      
        
        

      

      
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    (p) Stock
      Exchange Listing.
      The
      Common Stock (including the Shares and the shares of common stock issuable
      upon
      exercise of the Warrants) is registered under the Exchange Act and is listed
      on
      the NASDAQ Capital Market (“NASDAQ”).
      The
      Company has taken no action designed to, or likely to have the effect of,
      terminating the registration of the Common Stock under the Exchange Act or
      delisting or suspending from trading the Common Stock on NASDAQ, nor has the
      Company received any information suggesting that the Commission or NASDAQ is
      contemplating terminating or suspending such registration or listing.


     

    (q) No
      Consents, Approvals or Authorizations Required.
      No
      consent, approval, authorization, filing with or order of any court or
      governmental agency or regulatory body or vote of the Company’s stockholders is
      required in connection with the performance by the Company of its obligations
      under this Agreement or the Offering contemplated hereby and by the Disclosure
      Package and any Prospectus Supplement, except such as have been obtained or
      made
      by the Company under the Act or the rules and regulations promulgated thereunder
      and are in full force and effect, and such as may be required under applicable
      state securities or blue sky laws.

     

    (r) Non-Contravention
      of Existing Instruments and Agreements.
      Neither
      the issue and sale of the Securities nor the performance by the Company of
      its
      obligations under this Agreement nor the fulfillment of the terms hereof will
      conflict with, result in a breach or violation of, or the loss of any benefit
      under, or give rise to a right of acceleration or any other right, or the
      imposition of any lien, charge or encumbrance upon any property or assets of
      the
      Company or any Subsidiary pursuant to: (i) the charter or by-laws of the Company
      or any Subsidiary; (ii) the terms of any indenture, contract, lease, mortgage,
      deed of trust, note agreement, loan agreement or other agreement, obligation,
      condition, covenant or instrument to which the Company or any Subsidiary is
      a
      party or is bound or to which any of its property is subject and which conflict,
      breach, violation, loss of benefit, acceleration, imposition of lien, charge
      or
      encumbrance is reasonably likely to have a Material Adverse Effect; or (iii)
      any
      statute, law, rule, regulation, judgment, order or decree applicable to the
      Company or any Subsidiary, as the case may be, of any court, regulatory body,
      administrative agency, governmental body, arbitrator or other authority having
      jurisdiction over the Company or such Subsidiary, as the case may be, or any
      of
      its property. 

    
 

    
      
        
          
          

        

        
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    (s) No
      Defaults or Violations.
      None of
      the Company or any Subsidiary is in violation or default of: (i) any provision
      of its charter or by-laws; (ii) the terms of any indenture, contract, lease,
      mortgage, deed of trust, note agreement, loan agreement or other agreement,
      obligation, condition, covenant or instrument to which it is a party or by
      which
      it is bound or to which any of its property is subject; or (iii) any foreign,
      federal, state or local statute, law or rule applicable to the Company or any
      Subsidiary, as the case may be, or any regulation, judgment, order or decree
      of
      any court, governmental body, or agency having jurisdiction over the Company
      or
      such Subsidiary, as the case may be, or any of its property, as applicable,
      except in case of clause (ii) any such violation or default which would not,
      singly or in the aggregate, reasonably be expected to result in a Material
      Adverse Change not specifically disclosed in the Disclosure Package or any
      Prospectus Supplement. 

     

    (t) No
      Actions, Suits or Proceedings.
      No
      action, suit or proceeding by or before any foreign, federal, state or local
      court or governmental agency, authority or body or any arbitrator involving
      the
      Company or any Subsidiary, as the case may be, or any of its property is pending
      or, to the best knowledge of the Company, threatened that if adversely
      determined: (i) could reasonably be expected to have a Material Adverse Effect
      on the performance of this Agreement or the consummation of any of the
      transactions contemplated hereby; or (ii) could reasonably be expected to result
      in a Material Adverse Change. 

     

    (u) All
      Necessary Permits, Etc.
      Each of
      the Company and its Subsidiaries possesses such valid and current certificates,
      authorizations and permits issued by the appropriate foreign, federal, state
      or
      local regulatory agencies or bodies necessary to conduct its business as
      currently conducted, except to the extent that the failure to obtain such
      certificates, authorizations or permits would not have a Material Adverse
      Effect, and neither the Company nor any Subsidiary has received any notice
      of
      proceedings relating to the revocation or modification of, or non-compliance
      with, any such certificate, authorization or permit which, singly or in the
      aggregate, if the subject of an unfavorable decision, ruling or finding, could
      reasonably be expected to result in a Material Adverse Change. 

     

    (v) Title
      to Properties.
      Each of
      the Company and its Subsidiaries has good and marketable title to all real
      and
      personal property and assets reflected as owned by it in the financial
      statements referred to in Section 2(l) above (or elsewhere in the Disclosure
      Package and any Prospectus Supplement) and which are material to the business
      of
      the Company or such Subsidiary, in each case free and clear of any security
      interests, mortgages, liens, encumbrances, claims and other defects, except
      such
      as do not materially and adversely affect the value of such property and do
      not
      materially interfere with the use made or proposed to be made of such property
      and except as otherwise described in the Registration Statement and the
      Disclosure Package. The real property, improvements, equipment and personal
      property held under lease by each of the Company and its Subsidiaries are held
      under valid and enforceable leases, with such exceptions as are not material,
      and do not materially interfere with the use made or proposed to be made of
      such
      real property, improvements, equipment or personal property. The Company and
      its
      Subsidiaries own or have valid rights to use the intellectual property assets
      necessary to conduct the business described in the Disclosure Package and any
      Prospectus Supplement, and no material right is expected to expire, terminate
      or
      be disposed of in the foreseeable future, except as disclosed therein. Neither
      the Company nor any Subsidiary has received any notice of, and neither the
      Company nor any Subsidiary has knowledge of, any infringement of or conflict
      with the asserted intellectual property rights of others, except where the
      loss
      of any such right would not be reasonably likely to have a Material Adverse
      Effect. The Company is not a party to or bound by any options, licenses or
      agreements with respect to the intellectual property rights of any other person
      or entity that are required to be described in the Disclosure Package and any
      Prospectus Supplement and are not described in all material respects.  None
      of the technology employed by the Company has been obtained or is being used
      by
      the Company in violation of any contractual obligation binding on the Company
      or, to the Company’s knowledge, any of its officers, directors or employees or
      otherwise in violation of the rights of any persons

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (w) Tax
      Law Compliance.
      Each of
      the Company its Subsidiaries has filed all necessary foreign, federal, state
      and
      local income and franchise Tax returns, except to the extent that the failure
      to
      file such Tax returns would not have a Material Adverse Effect, and have paid
      all Taxes required to be paid by any of them and, if due and payable, any
      related or similar assessment, fine or penalty levied against any of them.
      The
      Company has made adequate charges, accruals and reserves in the applicable
      financial statements referred to in Section 2(l) above in respect of all
      federal, state and foreign income and franchise taxes for all periods as to
      which the Tax liability of the Company or any Subsidiary has not been finally
      determined. Neither the Company nor any Subsidiary is aware of any Tax
      deficiency that has been or might reasonably be asserted or threatened against
      it that could reasonably be expected to result in a Material Adverse Change.
      For
      purposes of this Agreement, the terms “Tax”
and
      “Taxes”
mean
      all federal, state, local and foreign taxes, and any other assessments of a
      similar nature (whether imposed directly or through withholding), including,
      without limitation, any interest, additions to tax, or penalties applicable
      thereto. All such Tax returns are true, complete and correct in all material
      respects. 

     

    (x) No
      Transfer Taxes or Other Fees Payable.
      There
      are no transfer Taxes or other similar fees or charges under United States
      law
      or the laws of any state or any political subdivision thereof, required to
      be
      paid by the Company in connection with the execution and delivery of this
      Agreement or the sale by the Company of the Securities. No stamp or other
      issuance or transfer Taxes or duties and no capital gains, income, withholding
      or other Taxes are payable by or on behalf of the Placement Agent to the United
      States or the Peoples Republic of China (the "PRC") or any political subdivision
      or taxing authority thereof or therein in connection with (A) the issuance
      of
      the Securities by the Company, and (B) the consummation by the Company of any
      other transaction contemplated in this Agreement or the performance by the
      Company of its obligations under this Agreement.

     

    (y) Disclosure
      Controls and Procedures. 
      The Company has established and maintains disclosure controls and procedures
      (as
      such term is defined in Rule 13a-15(e) under the Exchange Act), which (i) are
      designed to ensure that material information relating to the Company, including
      its consolidated subsidiaries, is made known to the Company’s principal
      executive officer and its principal financial officer by others within those
      entities, particularly during the periods in which the periodic reports required
      under the Exchange Act are being prepared, (ii) will be evaluated for
      effectiveness as of the end of each fiscal quarter and fiscal year of the
      Company and (iii) are effective in all material respects to perform the
      functions for which they were established. The Company is not aware of (A)
      any
      significant deficiency in the design or operation of internal controls which
      could adversely affect the Company’s ability to record, process, summarize and
      report financial data or any material weaknesses in internal controls, or (B)
      any fraud, whether or not material, that involves management or other employees
      who have a significant role in the Company’s internal controls.

     

    (z) Accounting
      Controls.
      Each of
      the Company and its Subsidiaries (i) makes and keeps accurate books and records,
      and (ii) maintains a system of accounting controls sufficient to provide
      reasonable assurances that: (A) transactions are executed in accordance with
      management’s general or specific authorization; (B) transactions are recorded as
      necessary to permit preparation of financial statements in conformity with
      U.S.
      GAAP, the Act and the Exchange Act and the rules and regulations of the
      Commission thereunder, and to maintain accountability for assets; (C) access
      to
      assets is permitted only in accordance with management’s general or specific
      authorization; and (D) recorded assets are compared with existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (aa) Conflicts
      of Interest.
      Except
      as disclosed in the Registration Statement and the Disclosure Package, none
      of
      the directors or officers of the Company is a shareholder, officer or director
      in any business similar to or in competition with the business of the Company,
      nor are any of the directors or their respective associates interested, directly
      or indirectly, in any assets which have since the date two years immediately
      preceding the date of the Registration Statement been acquired or disposed
      of by
      or leased to the Company.

     

    (bb) Company
      not an “Investment Company.”
      The
      Company is not, and after giving effect to the offer and sale of the Securities
      and the application of the proceeds thereof as described in the Disclosure
      Package or any Prospectus Supplement, will not be, required to register as
      an
“investment
      company”
or
      an
      entity “controlled”
by
      an
“investment
      company”
within
      the meaning of the Investment Company Act of 1940, as amended. 

     

    (cc) Insurance.
      Each of
      the Company and its Subsidiaries is insured by recognized, financially sound
      and
      reputable institutions with policies in such amounts and with such deductibles
      and covering such risks as are prudent and customary in the business in which
      it
      is engaged, including directors and officers liability. Neither the Company
      nor
      any Subsidiary has any reason to believe that it will not be able: (i) to renew
      its existing insurance coverage as and when such policies expire; or (ii) to
      obtain comparable coverage from similar institutions as may be necessary or
      appropriate to conduct its business as now conducted. Neither the Company nor
      any Subsidiary has been denied any insurance coverage which it has sought or
      for
      which it has applied, such as would have a Material Adverse Effect.

     

    (dd) Labor
      Matters.
      No
      material labor disturbance by the employees of the Company or any Subsidiary
      exists or, to the knowledge of the Company or any Subsidiary, is threatened
      or
      imminent, and neither the Company nor any Subsidiary is aware of any existing,
      threatened or imminent labor disturbance by the employees of any of its
      principal suppliers, manufacturers, contractors or customers that could
      reasonably be expected to result in a Material Adverse Effect. 

     

    (ee) No
      Price Stabilization or Manipulation.
      The
      Company has not taken and will not take, directly or indirectly, any action
      designed to or that could reasonably be expected to cause or result in
      stabilization or manipulation of the price of the Common Stock to facilitate
      the
      sale or resale of the Securities. 

     

    (ff) Prior
      Stock Issuances.
      All
      offers and sales of capital stock of the Company prior to the date hereof were
      at all relevant times duly registered or exempt from the registration
      requirements of the Act and were duly registered or subject to an available
      exemption from the registration requirements of the applicable state securities
      or blue sky laws. 

     

    (gg) Related
      Party Transactions.
      There
      are no business relationships or related-party transactions involving the
      Company or any Subsidiary or any other person required by the Act to be
      described in the Base Prospectus or any Prospectus Supplement, which have not
      been described, or incorporated by reference, therein as required. 

     

    (hh)
       Inter-company
      Indebtedness.
      Except
      as otherwise disclosed in the Registration Statement and the Disclosure Package,
      (A) no indebtedness (actual or contingent) and no contract or arrangement is
      outstanding between the Company and any of its subsidiaries and (B) no
      indebtedness (actual or contingent) and no material contract or arrangement
      is
      outstanding between (i) the Company or any of its subsidiaries (on the one
      hand), and (ii) any significant shareholder of the Company, any director or
      officer of the Company or related party of the Company or any of their
      associates (on the other hand).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (ii) Exchange
      Act Reports Filed.
      The
      Company has timely filed all reports required of it to be filed pursuant to
      the
      Act and the Exchange Act and has filed all such reports in the manner prescribed
      thereby. 

     

    (jj) Exhibits.
      Each
      agreement filed as an exhibit to the Registration Statement or described in
      the
      Disclosure Package and any Prospectus Supplement, including all documents,
      if
      any, incorporated by reference therein, is in full force and effect and is
      valid, binding and enforceable by the Company or a Subsidiary, as the case
      may
      be, in accordance with its terms, except as the enforceability thereof may
      be
      limited by applicable bankruptcy, insolvency or similar laws affecting
      creditors’ rights generally. Neither the Company nor any Subsidiary, as the case
      may be, nor, to the knowledge of the Company or any such Subsidiary, any other
      party, is in default in the observance or performance of any term or obligation
      to be performed by it under any such agreement, and no event has occurred that
      with notice or lapse of time or both would constitute such a default, in any
      such case where such default or event would have a Material Adverse Effect.
      

     

    (kk) Blue
      Sky.
      The
      Securities have been or will be qualified for sale under the securities laws
      of
      such jurisdictions (United States and foreign) as the Placement Agent
      determines, or are or will be exempt from the qualification and broker-dealer
      requirements of such jurisdictions. 

     

    (ll) No
      Unlawful Contributions or Other Payments. 
      Neither the Company nor any of its Subsidiaries nor any employee or agent of
      the
      Company or any Subsidiary, has made any contribution or other payment to any
      official of, or candidate for, any federal, state or foreign office in violation
      of any law or of a character required to be disclosed in the Disclosure Package
      or any Prospectus Supplement.

     

    (mm)
      Compliance
      with OFAC.
      None of
      the Company or any of its Subsidiaries does any business with governments,
      entities or persons subject to sanctions administered by the Office of Foreign
      Assets Control of the U.S. Department of the Treasury or any enabling
      legislation or executive order relating thereto (the “U.S.
      Sanctions Laws”),
      or
      any person or entity in those countries or with those persons, or performs
      contracts in support of projects in or for the benefit of those countries or
      those persons; neither the entry into this Agreement nor the performance of
      any
      transactions contemplated herein would cause the Company or any of its
      Subsidiaries, the Placement Agent or any of its affiliates (as defined in Rule
      501(b) of Regulation D under the U.S. Securities Act, an “Affiliate”), or any of
      the Company’s or the Placement Agent's advisors to violate any U.S. Sanctions
      Laws applicable to such person; the Company and each of its Subsidiaries will
      not use the proceeds of the offering of the Securities, or lend, contribute
      or
      otherwise make available such proceeds to any subsidiary, joint venture partner
      or other person or entity, for the purpose of financing an activity that would
      cause the Company or any of its Subsidiaries, the Placement Agent or any of
      their Affiliates, or any of the Company’s or the Placement Agent's advisors to
      violate any U.S. Sanctions Laws applicable to such person. 

     

    (nn) Compliance
      with Money Laundering Rules.
      The
      business and operations of the Company and each of its Subsidiaries are being,
      and have been since December 28, 2006, conducted in compliance in all material
      respects with, and are not in default in any material respect under any
      applicable statutes, laws, rules, regulations, judgments, orders or decrees
      of
      and commitments to any United States, PRC or other foreign governmental
      authority relating to money laundering, bank secrecy, anti-bribery and other
      corrupt practices. There is no pending or threatened charge by any United
      States, PRC or other foreign governmental authority that the Company or any
      of
      its Subsidiaries has materially violated any such law, rule, regulation,
      judgment, order, decree or commitment, nor is there any pending or threatened
      investigation by any Governmental Authority with respect to possible material
      violations of any such law, rule, regulation, judgment, order, decree or
      commitment, except for such violations which would not, individually or in
      the
      aggregate, have a Material Adverse Effect.


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


    (oo) Compliance
      with Environmental Laws.  Except
      as
      would not, individually or in the aggregate, result in a Material Adverse Change
      (i) neither the Company nor any of its Subsidiaries is in violation of
      any federal, state, local or foreign law or regulation relating to pollution
      or
      protection of human health or the environment (including, without limitation,
      ambient air, surface water, groundwater, land surface or subsurface strata)
      or
      wildlife, including without limitation, laws and regulations relating to
      emissions, discharges, releases or threatened releases of chemicals, pollutants,
      contaminants, wastes, toxic substances, hazardous substances, petroleum and
      petroleum products (collectively, “Materials
      of Environmental Concern”),
      or
      otherwise relating to the manufacture, processing, distribution, use, treatment,
      storage, disposal, transport or handling of Materials of Environment Concern
      (collectively, “Environmental
      Laws”),
      which
      violation includes, but is not limited to, noncompliance with any permits or
      other governmental authorizations required for the operation of the business
      of
      the Company or its Subsidiaries under applicable Environmental Laws, or
      noncompliance with the terms and conditions thereof, nor has the Company or
      any
      of its Subsidiaries received any written communication, whether from a
      governmental authority, citizens group, employee or otherwise, that alleges
      that
      the Company or any of its Subsidiaries is in violation of any Environmental
      Law; (ii) there is no claim, action or cause of action filed with a court
      or governmental authority, no investigation with respect to which the Company
      has received written notice, and no written notice by any person or entity
      alleging potential liability for investigatory costs, cleanup costs,
      governmental responses costs, natural resources damages, property damages,
      personal injuries, attorneys’ fees or penalties arising out of, based on or
      resulting from the presence, or release into the environment, of any Material
      of
      Environmental Concern at any location owned, leased or operated by the Company
      or any of its Subsidiaries, now or in the past (collectively, “Environmental
      Claims”),
      pending or, to the best of the Company’s knowledge, threatened against the
      Company or any of its Subsidiaries or any person or entity whose liability
      for any Environmental Claim the Company or any of its Subsidiaries has
      retained or assumed either contractually or by operation of law; and
      (iii) to the best of the Company’s knowledge, there are no past or present
      actions, activities, circumstances, conditions, events or incidents, including,
      without limitation, the release, emission, discharge, presence or disposal
      of
      any Material of Environmental Concern, that reasonably could result in a
      violation of any Environmental Law or form the basis of a potential
      Environmental Claim against the Company or any of its Subsidiaries or
      against any person or entity whose liability for any Environmental Claim the
      Company or any of its Subsidiaries has retained or assumed either
      contractually or by operation of law.

     

    (pp) ERISA
      Compliance.  The
      Company and its Subsidiaries and any “employee
      benefit plan”
(as
      defined under the Employee Retirement Income Security Act of 1974, as amended,
      and the regulations and published interpretations thereunder (collectively,
      “ERISA”))
      established or maintained by the Company, its Subsidiaries or their
“ERISA
      Affiliates”
(as
      defined below) are in compliance in all material respects with ERISA. 
“ERISA
      Affiliate”
means,
      with respect to the Company or a Subsidiary, any member of any group of
      organizations described in Sections 414(b), (c), (m) or (o) of the Internal
      Revenue Code of 1986, as amended, and the regulations and published
      interpretations thereunder (the “Code”)
      of
      which the Company or such Subsidiary is a member.  No “reportable
      event”
(as
      defined under ERISA) has occurred or is reasonably expected to occur with
      respect to any “employee
      benefit plan”
      established or maintained by the Company, its Subsidiaries or any of their
      ERISA Affiliates.  No “employee
      benefit plan”
      established or maintained by the Company, its Subsidiaries or any of their
      ERISA Affiliates, if such “employee
      benefit plan”
were
      terminated, would have any “amount
      of unfunded benefit liabilities”
(as
      defined under ERISA).  Neither the Company, its Subsidiaries nor any
      of their ERISA Affiliates has incurred or reasonably expects to incur any
      liability under (i) Title IV of ERISA with respect to termination of, or
      withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971,
      4975 or 4980B of the Code.  Each “employee benefit plan” established or
      maintained by the Company, its Subsidiaries or any of their ERISA
      Affiliates that is intended to be qualified under Section 401(a) of
      the Code is so qualified and nothing has occurred, whether by action or failure
      to act, which would cause the loss of such qualification.

     


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (qq) Compliance
      with Sarbanes-Oxley Act of 2002. 
      The Company and, to the best of its knowledge, its officers and directors are
      in
      compliance with all applicable provisions of the Sarbanes-Oxley Act of 2002
      and
      the rules and regulations promulgated in connection therewith (the
“Sarbanes-Oxley
      Act”)
      that
      are effective and are actively taking steps to ensure that they will be in
      compliance with other applicable provisions of the Sarbanes-Oxley Act upon
      the
      effectiveness of such provisions.

     

    (rr)
      No
      Contracts Relating to the Sale of Securities.
      Except
      as disclosed in the Registration Statement and the Disclosure Package, there
      are
      no contracts, agreements or understandings between the Company and any person
      that would give rise to a valid claim against the Company or any Placement
      Agent
      for a brokerage commission, finder’s fee or other like payment in connection
      with the sale of the Securities. 

     

    Any
      certificate signed by an officer of the Company and delivered to
      the Placement Agent or to counsel for the Placement Agent shall be
      deemed to be a representation and warranty by the Company to the Placement
      Agent as to the matters set forth therein.

     

    The
      Company acknowledges that the Placement Agent will rely upon the accuracy
      and truthfulness of the foregoing representations and warranties and hereby
      consents to such reliance. 

     

    Section
      3. Delivery
      and Payment.

     

    Subject
      to the terms and conditions hereof, payment of the purchase price for, and
      delivery of, the Securities shall be made at one or more closings (each a
“Closing”
and
      the
      date on which each Closing occurs, a “Closing
      Date”)
      at the
      offices of Roth Capital Partners, LLC, 24 Corporate Plaza, Newport Beach, CA
      92660 (or at such other place as shall be agreed upon by the Placement Agent
      and
      the Company), the first such Closing to take place at 10:00 A.M., New York
      City
      time, on November 6, 2007 (unless another time shall be agreed to by the
      Placement Agent and the Company). Subject to the terms and conditions hereof,
      at
      each Closing payment of the purchase price for the Shares sold on such Closing
      Date shall be made by Federal Funds wire transfer, against delivery of such
      Securities (through the facilities of The Depository Trust Company), and such
      Securities shall be registered in such name or names and shall be in such
      denominations, as the Placement Agent may request at least one business day
      before the time of purchase (as defined below). For the avoidance of doubt,
      each
      of the Company and the Placement Agent agree for the benefit of the Investors
      that no instructions shall be provided to the Escrow Agent, as defined in the
      Escrow Agreement, dated October 29, 2007 (the “Escrow
      Agreement”),
      for
      the release of funds from the Escrow Account (as defined in the Escrow
      Agreement) until confirmation has been received from the Company’s registrar and
      transfer agent that the Securities have been delivered in accordance with the
      Placement Agent’s instructions. Payment of the purchase price for the Shares
      shall be made at the time of purchase by the Investors to the Escrow Account
      set
      forth in the subscription agreement executed by each Investor (the “Subscription
      Agreement”),
      in
      the form attached hereto as Exhibit
      B.
      The
      time at which such payment and delivery are to be made is hereinafter sometimes
      called “the time of purchase.” Physical delivery of the Securities shall be made
      at the time of purchase in such names and in such denominations as is set forth
      in the applicable Subscription Agreement.

     

    Deliveries
      of the documents described in Section 4 hereof with respect to the purchase
      of
      the Securities shall be made at the offices of DLA Piper US LLP, 2415 East
      Camelback Road, Suite 700, Phoenix, Arizona 85016-4245 on each Closing Date.
      All
      actions taken at a Closing shall be deemed to have occurred
      simultaneously.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
      4. Covenants
      and Agreements of the Company.
      

     

    A.
       Covenants
      and Agreements of the Company.
      The
      Company further covenants and agrees with the Placement Agent as follows:


     

    (a) Registration
      Statement Matters.
      The
      Company will advise the Placement Agent promptly after it receives notice
      thereof of the time when any amendment to the Registration Statement has been
      filed or becomes effective or any supplement to any Prospectus Supplement or
      any
      amended Prospectus Supplement has been filed and will furnish the Placement
      Agent with copies thereof. The Company will file promptly all reports and any
      definitive proxy or information statements required to be filed by the Company
      with the Commission pursuant to Section 13(a), 14 or 15(d) of the Exchange
      Act
      subsequent to the date of any Prospectus Supplement and for so long as the
      delivery of a prospectus is required in connection with the Offering. The
      Company will advise the Placement Agent, promptly after it receives notice
      thereof (i) of any request by the Commission to amend the Registration Statement
      or to amend or supplement any Prospectus Supplement or for additional
      information, and (ii) of the issuance by the Commission of any stop order
      suspending the effectiveness of the Registration Statement or any post-effective
      amendment thereto or any order directed at any Incorporated Document, if any,
      or
      any amendment or supplement thereto or any order preventing or suspending the
      use of the Base Prospectus or any Prospectus Supplement or any amendment or
      supplement thereto or any post-effective amendment to the Registration
      Statement, of the suspension of the qualification of the Securities for offering
      or sale in any jurisdiction, of the institution or threatened institution of
      any
      proceeding for any such purpose, or of any request by the Commission for the
      amending or supplementing of the Registration Statement or a Prospectus
      Supplement or for additional information. The Company shall use its best efforts
      to prevent the issuance of any such stop order or prevention or suspension
      of
      such use.  If the Commission shall enter any such stop order or order or
      notice of prevention or suspension at any time, the Company will use its best
      efforts to obtain the lifting of such order at the earliest possible moment,
      or
      will file a new registration statement and use its best efforts to have such
      new
      registration statement declared effective as soon as practicable. 
Additionally, the Company agrees that it shall comply with the provisions of
      Rules 424(b), 430A, 430B and 430C, as applicable, under the Act, including
      with respect to the timely filing of documents thereunder, and will use its
      reasonable efforts to confirm that any filings made by the Company under such
      Rule 424(b) are received in a timely manner by the
      Commission.

     

    (b) Blue
      Sky Compliance.
      The
      Company will cooperate with the Placement Agent and the Investors in endeavoring
      to qualify the Securities for sale under the securities laws of such
      jurisdictions (United States and foreign) as the Placement Agent and the
      Investors may reasonably request and will make such applications, file such
      documents, and furnish such information as may be reasonably required for that
      purpose, provided the Company shall not be required to qualify as a foreign
      corporation or to file a general consent to service of process in any
      jurisdiction where it is not now so qualified or required to file such a
      consent, and provided further that the Company shall not be required to produce
      any new disclosure document other than a Prospectus Supplement. The Company
      will, from time to time, prepare and file such statements, reports and other
      documents as are or may be required to continue such qualifications in effect
      for so long a period as the Placement Agent may reasonably request for
      distribution of the Securities. The Company will advise the Placement Agent
      promptly of the suspension of the qualification or registration of (or any
      such
      exemption relating to) the Securities for offering, sale or trading in any
      jurisdiction or any initiation or threat of any proceeding for any such purpose,
      and in the event of the issuance of any order suspending such qualification,
      registration or exemption, the Company shall use its best efforts to obtain
      the
      withdrawal thereof at the earliest possible moment.

     


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (c) Amendments
      and Supplements to a Prospectus Supplement and Other Matters.
      The
      Company will comply with the Act and the Exchange Act, and the rules and
      regulations of the Commission thereunder, so as to permit the completion of
      the
      distribution of the Securities as contemplated in this Agreement, the Disclosure
      Package and any Prospectus Supplement. If during the period in which a
      prospectus is required by law to be delivered in connection with the
      distribution of Securities contemplated by the Disclosure Package or any
      Prospectus Supplement (the “Prospectus
      Delivery Period”),
      any
      event shall occur as a result of which, in the judgment of the Company or in
      the
      opinion of the Placement Agent or counsel for the Placement Agent, it becomes
      necessary to amend or supplement the Disclosure Package or any Prospectus
      Supplement in order to make the statements therein, in the light of the
      circumstances under which they were made, as the case may be, not misleading,
      or
      if it is necessary at any time to amend or supplement the Disclosure Package
      or
      any Prospectus Supplement or to file under the Exchange Act any Incorporated
      Document to comply with any law, the Company will promptly prepare and file
      with
      the Commission, and furnish at its own expense to the Placement Agent and to
      dealers, an appropriate amendment to the Registration Statement or supplement
      to
      the Registration Statement, the Disclosure Package or any Prospectus Supplement
      that is necessary in order to make the statements in the Disclosure Package
      and
      any Prospectus Supplement as so amended or supplemented, in the light of the
      circumstances under which they were made, as the case may be, not misleading,
      or
      so that the Registration Statement, the Disclosure Package or any Prospectus
      Supplement, as so amended or supplemented, will comply with law. Before amending
      the Registration Statement or supplementing the Disclosure Package or any
      Prospectus Supplement in connection with the Offering, the Company will furnish
      the Placement Agent with a copy of such proposed amendment or supplement and
      will not file any such amendment or supplement to which the Placement Agent
      reasonably objects. 

     

    (d) Copies
      of any Amendments and Supplements to a Prospectus Supplement.
      The
      Company will furnish the Placement Agent, without charge, during the period
      beginning on the date hereof and ending on the later of the last Closing Date
      of
      the Offering or the last date of the Prospectus Delivery Period, as many copies
      of the Disclosure Package and any Prospectus Supplement and any amendments
      and
      supplements thereto (including any Incorporated Documents, if any) as the
      Placement Agent may reasonably request. 

     

    (e) Free
      Writing Prospectus.
      The
      Company covenants that it will not, unless it obtains the prior written consent
      of the Placement Agent, make any offer relating to the Securities that would
      constitute an Issuer Free Writing Prospectus or that would otherwise constitute
      a “free
      writing prospectus”
(as
      defined in Rule 405 of the Act) required to be filed by the Company with the
      Commission or retained by the Company under Rule 433 of the Act. In the event
      that the Placement Agent expressly consents in writing to any such free writing
      prospectus (a “Permitted
      Free Writing Prospectus”),
      the
      Company covenants that it shall (i) treat each Permitted Free Writing Prospectus
      as an Issuer Free Writing Prospectus, and (ii) comply with the requirements
      of
      Rule 164 and 433 of the Act applicable to such Permitted Free Writing
      Prospectus, including in respect of timely filing with the Commission, legending
      and record keeping.

     

    (f) Transfer
      Agent.
      The
      Company will maintain, at its expense, a registrar and transfer agent for the
      Common Stock. 

     

    (g) Earnings
      Statement.
      As soon
      as practicable and in accordance with applicable requirements under the Act,
      but
      in any event not later than 18 months after the last Closing Date, the Company
      will make generally available to its security holders and to the Placement
      Agent
      an earnings statement, covering a period of at least 12 consecutive months
      beginning after the last Closing Date, that satisfies the provisions of Section
      11(a) and Rule 158 under the Act. 

     

    (h) Periodic
      Reporting Obligations.
      During
      the Prospectus Delivery Period, the Company will duly file, on a timely basis,
      with the Commission and NASDAQ all reports and documents required to be filed
      under the Exchange Act within the time periods and in the manner required by
      the
      Exchange Act. 

     

    (i) Additional
      Documents.
      The
      Company will enter into any subscription, purchase or other customary agreements
      as the Placement Agent or the Investors deem necessary or appropriate to
      consummate the Offering, all of which will be in form and substance reasonably
      acceptable to the Placement Agent and the Investors. The Company agrees that
      the
      Placement Agent may rely upon, and each is a third party beneficiary of, the
      representations and warranties, and applicable covenants, set forth in any
      such
      purchase, subscription or other agreement with Investors in the
      Offering.

     

    
      
        
        

      

      
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    (j) No
      Manipulation of Price.  The
      Company will not take, directly or indirectly, any action designed to cause
      or
      result in, or that has constituted or might reasonably be expected to
      constitute, the stabilization or manipulation of the price of any securities
      of
      the Company.

     

    (k) Acknowledgment.
      The
      Company acknowledges that any advice given by the Placement Agent to the Company
      is solely for the benefit and use of the Board of Directors of the Company
      and
      may not be used, reproduced, disseminated, quoted or referred to, without the
      Placement Agent's prior written consent.

     

    Section
      5. Conditions
      of the Obligations of the Placement Agent.
      

     

    The
      obligations of the Placement Agent hereunder shall be subject to the accuracy
      of
      the representations and warranties on the part of the Company set forth in
      Section 2 hereof, in each case as of the date hereof and as of each Closing
      Date
      as though then made, to the timely performance by each of the Company of its
      covenants and other obligations hereunder on and as of such dates, and to each
      of the following additional conditions: 

     

    (a) Accountants’
      Comfort Letter.
      On the
      date hereof, the Placement Agent shall have received, and the Company shall
      have
      caused to be delivered to the Placement Agent, a letter from Murrell, Hall,
      McIntosh & Co., PLLP (the independent registered public accounting firm of
      the Company), addressed to the Placement Agent, dated as of the date hereof,
      in
      form and substance satisfactory to the Placement Agent. The letter shall not
      disclose any change in the condition (financial or other), earnings, operations,
      business or prospects of the Company from that set forth in the Disclosure
      Package or the applicable Prospectus Supplement, which, in the Placement Agent's
      sole judgment, is material and adverse and that makes it, in the Placement
      Agent's sole judgment, impracticable or inadvisable to proceed with the Offering
      of the Securities as contemplated by such Prospectus Supplement. 

     

    (b) Compliance
      with Registration Requirements; No Stop Order; No Objection from the
      NASD.
      Each
      Prospectus Supplement (in accordance with Rule 424(b)) and “free
      writing prospectus”
(as
      defined in Rule 405 of the Act), if any, shall have been duly filed with the
      Commission, as appropriate; no stop order suspending the effectiveness of the
      Registration Statement or any part thereof shall have been issued and no
      proceeding for that purpose shall have been initiated or threatened by the
      Commission; no order preventing or suspending the use of any Prospectus
      Supplement shall have been issued and no proceeding for that purpose shall
      have
      been initiated or threatened by the Commission; no order having the effect
      of
      ceasing or suspending the distribution of the Securities or any other securities
      of the Company shall have been issued by any securities commission, securities
      regulatory authority or stock exchange and no proceedings for that purpose
      shall
      have been instituted or shall be pending or, to the knowledge of the Company,
      contemplated by any securities commission, securities regulatory authority
      or
      stock exchange; all requests for additional information on the part of the
      Commission shall have been complied with; and the NASD shall have raised no
      objection to the fairness and reasonableness of the placement terms and
      arrangements. 

     

    (c) Corporate
      Proceedings.
      All
      corporate proceedings and other legal matters in connection with this Agreement,
      the Registration Statement and each Prospectus Supplement, and the registration,
      sale and delivery of the Securities, shall have been completed or resolved
      in a
      manner reasonably satisfactory to the Placement Agent's counsel, and such
      counsel shall have been furnished with such papers and information as it may
      reasonably have requested to enable such counsel to pass upon the matters
      referred to in this Section 5. 

     

    
      
        
        

      

      
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    (d) No
      Material Adverse Change.
      Subsequent to the execution and delivery of this Agreement and prior to each
      Closing Date, in the Placement Agent's sole judgment after consultation with
      the
      Company, there shall not have occurred any Material Adverse Change or Material
      Adverse Effect. 

     

    (e) Opinion
      of Counsel for the Company.
      The
      Placement Agent shall have received on each Closing Date the favorable opinion
      of legal counsel to the Company, dated as of such Closing Date, addressed to
      the
      Placement Agent in form and substance satisfactory to the Placement Agent.
      

     

    (f) Officers’
      Certificate.
      The
      Placement Agent shall have received on each Closing Date a certificate of the
      Company, dated as of such Closing Date, signed by the Chief Executive Officer
      and Chief Financial Officer of the Company, to the effect that, and the
      Placement Agent shall be satisfied that, the signers of such certificate have
      reviewed the Registration Statement, the Disclosure Package, any Prospectus
      Supplement, and this Agreement and to the further effect that: 

     

    (i) The
      representations and warranties of the Company in this Agreement are true and
      correct, as if made on and as of such Closing Date, and the Company has complied
      with all the agreements and satisfied all the conditions on its part to be
      performed or satisfied at or prior to such Closing Date; 

     

    (ii) No
      stop
      order suspending the effectiveness of the Registration Statement or the use
      of
      the Base Prospectus or any Prospectus Supplement has been issued and no
      proceedings for that purpose have been instituted or are pending or, to the
      Company’s knowledge, threatened under the Act; no order having the effect of
      ceasing or suspending the distribution of the Securities or any other securities
      of the Company has been issued by any securities commission, securities
      regulatory authority or stock exchange in the United States and no proceedings
      for that purpose have been instituted or are pending or, to the knowledge of
      the
      Company, contemplated by any securities commission, securities regulatory
      authority or stock exchange in the United States; 

     

    (iii) When
      the
      Registration Statement became effective, at the Sale Time, and at all times
      subsequent thereto up to the delivery of such certificate, the Registration
      Statement, the Disclosure Package and the Incorporated Documents, if any, when
      such documents became effective or were filed with the Commission, contained
      all
      material information required to be included therein by the Act and the Exchange
      Act and the applicable rules and regulations of the Commission thereunder,
      as
      the case may be, and in all material respects conformed to the requirements
      of
      the Act and the Exchange Act and the applicable rules and regulations of the
      Commission thereunder, as the case may be, and the Registration Statement,
      the
      Disclosure Package and the Incorporated Documents, if any, did not and do not
      include any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein,
      in
      the light of the circumstances under which they were made, not misleading
      (provided, however, that the preceding representations and warranties contained
      in this paragraph (iii) shall not apply to any statements or omissions made
      in
      reliance upon and in conformity with information furnished in writing to the
      Company by the Placement Agent expressly for use therein) and, since the
      effective date of the Registration Statement, there has occurred no event
      required by the Act and the rules and regulations of the Commission thereunder
      to be set forth in the Disclosure Package which has not been so set forth;
      and

     

    
      
        
        

      

      
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    (iv) Subsequent
      to the respective dates as of which information is given in the Registration
      Statement, the Disclosure Package and any Prospectus Supplement, there has
      not
      been: (a) any Material Adverse Change; (b) any transaction that is material
      to
      the Company and the Subsidiaries taken as a whole, except transactions entered
      into in the ordinary course of business; (c) any obligation, direct or
      contingent, that is material to the Company and the Subsidiaries taken as a
      whole, incurred by the Company or any Subsidiary, except obligations incurred
      in
      the ordinary course of business; (d) any material change in the capital stock
      (except changes thereto resulting from the exercise of outstanding stock options
      or warrants) or outstanding indebtedness of the Company or any Subsidiary;
      (e)
      any dividend or distribution of any kind declared, paid or made on the capital
      stock of the Company; or (f) any loss or damage (whether or not insured) to
      the
      property of the Company or any Subsidiary which has been sustained or will
      have
      been sustained which has a Material Adverse Effect.

     

    (g) Bring-down
      Comfort Letter.  On
      each
      Closing Date, the Placement Agent shall have received from Murrell, Hall,
      McIntosh & Co., PLLP, or such other independent registered public
      accounting firm of the Company, a letter dated as of such Closing Date, in
      form
      and substance satisfactory to the Placement Agent, to the effect that they
      reaffirm the statements made in the letter furnished pursuant to
      subsection (a) of this Section 5, except that the specified date
      referred to therein for the carrying out of procedures shall be no more than
      three business days prior to such Closing Date.

     

    (h) Stock
      Exchange Listing.
      The
      Common Stock shall be registered under the Exchange Act and shall be listed
      on
      NASDAQ, and the Company shall not have taken any action designed to terminate,
      or likely to have the effect of terminating, the registration of the Common
      Stock under the Exchange Act or delisting or suspending from trading the Common
      Stock from NASDAQ, nor shall the Company have received any information
      suggesting that the Commission or the NASD is contemplating terminating such
      registration or listing. 

     

    (i) Compliance
      with Prospectus Delivery Requirements.
      The
      Company shall have complied with the provisions of Section 4A(c) and Section
      4A(d) with respect to the furnishing of the documents referred to therein.
      

     

    (j) Additional
      Documents.
      On or
      before each Closing Date, the Placement Agent and counsel for the Placement
      Agent shall have received such information and documents as they may reasonably
      require for the purposes of enabling them to pass upon the issuance and sale
      of
      the Securities as contemplated herein, or in order to evidence the accuracy
      of
      any of the representations and warranties, or the satisfaction of any of the
      conditions or agreements, herein contained. 

     

    If
      any
      condition specified in this Section 5 is not satisfied when and as required
      to
      be satisfied, this Agreement may be terminated by the Placement Agent by notice
      to the Company at any time on or prior to a Closing Date, which termination
      shall be without liability on the part of any party to any other party, except
      that Section 6 (Payment of Expenses), Section 7 (Indemnification and
      Contribution) and Section 8 (Representations and Indemnities to Survive
      Delivery) shall at all times be effective and shall survive such termination.
      

     

    
      
        
        

      

      
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    Section
      6. Payment
      of Expenses.
      

     

    The
      Company agrees to pay all costs, fees and expenses incurred by the Company
      in
      connection with the performance of its obligations hereunder and in connection
      with the transactions contemplated hereby, including, without limitation: (i)
      all expenses incident to the issuance, delivery and qualification of the
      Securities (including all printing and engraving costs); (ii) all fees and
      expenses of the registrar and transfer agent of the Common Stock; (iii) all
      necessary issue, transfer and other stamp taxes in connection with the issuance
      and sale of the Securities; (iv) all fees and expenses of the Company’s
      counsel, independent public or certified public accountants and other advisors;
      (v) all costs and expenses incurred in connection with the preparation,
      printing, filing, shipping and distribution of the Registration Statement
      (including financial statements, exhibits, schedules, consents and certificates
      of experts), the Base Prospectus and each Prospectus Supplement, and all
      amendments and supplements thereto, and this Agreement; (vi) all filing fees,
      reasonable attorneys’ fees and expenses incurred by the Company or the Placement
      Agent in connection with qualifying or registering (or obtaining exemptions
      from
      the qualification or registration of) all or any part of the Securities for
      offer and sale under the state securities or blue sky laws or the securities
      laws of any other country, and, if requested by the Placement Agent, preparing
      and printing a “Blue
      Sky Survey,”
an
      “International
      Blue Sky Survey”
or
      other memorandum, and any supplements thereto, advising the Placement Agent
      of
      such qualifications, registrations and exemptions; (vii) if applicable, the
      filing fees incident to, and the reasonable fees and expenses of counsel for
      the
      Placement Agent in connection with, the review and approval by the NASD of
      the
      Placement Agent's participation in the offering and distribution of the
      Securities; provided, however, that the Company shall not be responsible for
      reimbursement of any such fees and expenses set forth in clauses (vi) and (vii)
      in excess of $25,000; (viii) the fees and expenses associated with including
      the
      Securities on NASDAQ; (ix) all costs and expenses incident to the travel and
      accommodation of the Company’s and the Placement Agent's employees on the
“roadshow,”
if
      any; and (x) all other fees, costs and expenses referred to in Part II of the
      Registration Statement. 

     

    Section
      7. Indemnification
      and Contribution.
      

     

    (a) Indemnification
      of the Placement Agent.
      The
      Company agrees to indemnify and hold harmless the Placement Agent, its officers
      and employees, and each person, if any, who controls the Placement Agent within
      the meaning of the Act and the Exchange Act against any loss, claim, damage,
      liability or expense, as incurred, to which the Placement Agent or such
      controlling person may become subject, under the Act, the Exchange Act, or
      other
      federal or state statutory law or regulation, or at common law or otherwise
      (including in settlement of any litigation, if such settlement is effected
      with
      the written consent of the Company, which consent shall not be unreasonably
      withheld), insofar as such loss, claim, damage, liability or expense (or actions
      in respect thereof as contemplated below) arises out of or is based: (A) upon
      any untrue statement or alleged untrue statement of a material fact contained
      in
      the Registration Statement, or any amendment thereto, including any information
      deemed to be a part thereof pursuant to Rule 430A, Rule 430B and Rule 430C
      under
      the Act, or the omission or alleged omission therefrom of a material fact
      required to be stated therein or necessary to make the statements therein not
      misleading; (B) upon any untrue statement or alleged untrue statement of a
      material fact contained in the Base Prospectus, any Issuer Free Writing
      Prospectus, any Prospectus Supplement or any Incorporated Document (or any
      amendment or supplement thereto), or the omission or alleged omission therefrom
      of a material fact necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not misleading; (C)
      in
      whole or in part upon any inaccuracy in the representations and warranties
      of
      the Company contained herein; (D) in whole or in part upon any failure of the
      Company to perform its obligations hereunder or under law; or (E) upon any
      act
      or failure to act or any alleged act or failure to act by the Placement Agent
      in
      connection with, or relating in any manner to, the Securities or the Offering
      contemplated hereby, and which is included as part of or referred to in any
      loss, claim, damage, liability or action arising out of or based upon any matter
      covered by clause (A), (B), (C) or (D) above, provided that the Company shall
      not be liable under this clause (E) to the extent that a court of competent
      jurisdiction shall have determined by a final judgment that such loss, claim,
      damage, liability or action resulted directly from any such acts or failures
      to
      act undertaken or omitted to be taken by the Placement Agent through its gross
      negligence, bad faith or willful misconduct; and to reimburse the Placement
      Agent and each such controlling person for any and all expenses (including
      the
      reasonable fees and disbursements of counsel chosen by the Placement Agent)
      as
      such expenses are incurred by the Placement Agent or such controlling person
      in
      connection with investigating, defending, settling, compromising or paying
      any
      such loss, claim, damage, liability, expense or action; provided,
      however,
      that
      the foregoing indemnity agreement shall not apply to any loss, claim, damage,
      liability or expense to the extent, but only to the extent, arising out of
      or
      based upon any untrue statement or alleged untrue statement or omission or
      alleged omission made in reliance upon and in conformity with written
      information furnished to the Company by the Placement Agent expressly for use
      in
      the Registration Statement, the Base Prospectus, any Issuer Free Writing
      Prospectus or any Prospectus Supplement (or any amendment or supplement
      thereto). 

     

    
      
        
        

      

      
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    (b) Indemnification
      of the Company, its Directors and Officers.
      The
      Placement Agent agrees to indemnify and hold harmless the Company, each of
      its
      directors, each of its officers who signed the Registration Statement, and
      each
      person, if any, who controls the Company within the meaning of the Act or the
      Exchange Act, against any loss, claim, damage, liability or expense, as
      incurred, to which the Company, or any such director, officer, or controlling
      person may become subject, under the Act, the Exchange Act, or other federal,
      state statutory law or regulation, or at common law or otherwise (including
      in
      settlement of any litigation, if such settlement is effected with the written
      consent of the Placement Agent), insofar as such loss, claim, damage, liability
      or expense (or actions in respect thereof as contemplated below) arises out
      of
      or is based upon any untrue or alleged untrue statement of a material fact
      contained in any Prospectus Supplement (or any amendment or supplement thereto),
      or arises out of or is based upon the omission or alleged omission to state
      therein a material fact required to be stated therein or necessary to make
      the
      statements therein, in light of the circumstances under which they were made,
      not misleading, in each case to the extent, but only to the extent, that such
      untrue statement or alleged untrue statement or omission or alleged omission
      was
      made in such Prospectus Supplement (or any amendment or supplement thereto),
      in
      reliance upon and in conformity with written information furnished to the
      Company by the Placement Agent expressly for use therein; and to reimburse
      the
      Company, or any such director, officer, or controlling person for any legal
      and
      other expense reasonably incurred by the Company, or any such director, officer
      or controlling person, in connection with investigating, defending, settling,
      compromising or paying any such loss, claim, damage, liability, expense or
      action. The indemnity agreement set forth in this Section 7(b) shall be in
      addition to any liabilities that the Placement Agent may otherwise have.


     

    (c) Information
      Provided by the Placement Agent.
      The
      Company and each person, if any, who controls the Company within the meaning
      of
      the Act or the Exchange Act, hereby acknowledges that the only information
      that
      the Placement Agent has furnished to the Company expressly for use in any
      Prospectus Supplement (or any amendment or supplement thereto) are the
      statements regarding the Placement Agent set forth under the caption
“Plan
      of Distribution”
in
      such
      Prospectus Supplement. 

     

    (d) Notifications
      and Other Indemnification Procedures.
      Promptly after receipt by an indemnified party under this Section 7 of notice
      of
      the commencement of any action, such indemnified party will, if a claim in
      respect thereof is to be made against an indemnifying party under this Section
      7, notify the indemnifying party in writing of the commencement thereof, but
      the
      omission so to notify the indemnifying party will not relieve it from any
      liability, which it may have to any indemnified party for contribution to the
      extent it is not prejudiced as a proximate result of such failure. In case
      any
      such action is brought against any indemnified party and such indemnified party
      seeks or intends to seek indemnity from an indemnifying party, the indemnifying
      party will be entitled to participate in, and, to the extent that it shall
      elect, jointly with all other indemnifying parties similarly notified, by
      written notice delivered to the indemnified party promptly after receiving
      the
      aforesaid notice from such indemnified party, to assume the defense thereof
      with
      counsel reasonably satisfactory to such indemnified party; provided, however,
      if
      the defendants in any such action include both the indemnified party and the
      indemnifying party and the indemnified party shall have reasonably concluded
      that a conflict may arise between the positions of the indemnifying party and
      the indemnified party in conducting the defense of any such action or that
      there
      may be legal defenses available to it and/or other indemnified parties which
      are
      different from or additional to those available to the indemnifying party,
      the
      indemnified party or parties shall have the right to select separate counsel
      to
      assume such legal defenses and to otherwise participate in the defense of such
      action on behalf of such indemnified party or parties. Upon receipt of notice
      from the indemnifying party to such indemnified party of such indemnifying
      party’s election so to assume the defense of such action and approval by the
      indemnified party of counsel, the indemnifying party will not be liable to
      such
      indemnified party under this Section 7 for any legal or other expenses
      subsequently incurred by such indemnified party in connection with the defense
      thereof unless: (i) the indemnified party shall have employed separate counsel
      in accordance with the proviso to the next preceding sentence (it being
      understood, however, that the indemnifying party shall not be liable for the
      expenses of more than one separate counsel (together with local counsel),
      approved by the indemnifying party), representing the indemnified parties who
      are parties to such action); (ii) the indemnifying party shall not have employed
      counsel satisfactory to the indemnified party to represent the indemnified
      party
      within a reasonable time after notice of commencement of the action; or (iii)
      the indemnifying party has authorized the employment of counsel for the
      indemnified party at the expense of the indemnifying party, in each of which
      cases the fees and expenses of counsel shall be at the expense of the
      indemnifying party. 

     

    
      
        
        

      

      
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    (e) Settlements.
      The
      indemnifying party under this Section 7 shall not be liable for any settlement
      of any proceeding effected without its written consent, which consent shall
      not
      be unreasonably withheld, but if settled with such consent or if there be a
      final judgment for the plaintiff, the indemnifying party agrees to indemnify
      the
      indemnified party against any loss, claim, damage, liability or expense by
      reason of such settlement or judgment. Notwithstanding the foregoing sentence,
      if at any time an indemnified party shall have requested an indemnifying party
      to reimburse the indemnified party for fees and expenses of counsel as
      contemplated by Section 7(d) hereof, the indemnifying party agrees that it
      shall
      be liable for any settlement of any proceeding effected without its written
      consent if (i) such settlement is entered into more than 45 days after the
      receipt by such indemnifying party of the aforesaid request, and (ii) such
      indemnifying party shall have not reimbursed such indemnified party in
      accordance with such request prior to the date of such settlement. No
      indemnifying party shall, without the prior written consent of the indemnified
      party, effect any settlement, compromise or consent to the entry of judgment
      in
      any pending or threatened action, suit or proceeding in respect of which any
      indemnified party is or could have been a party and indemnity was or could
      have
      been sought hereunder by such indemnified party, unless such settlement,
      compromise or consent includes: (A) an unconditional release of such indemnified
      party from all liability on claims that are the subject matter of such action,
      suit or proceeding; and (B) does not include a statement as to or an admission
      of fault, culpability or a failure to act by or on behalf of any indemnified
      party. 

     

    (f) Contribution.
      If the
      indemnification provided for in this Section 7 is for any reason held to be
      unavailable to or otherwise insufficient to hold harmless an indemnified party
      in respect of any losses, claims, damages, liabilities or expenses (or actions
      or proceedings in respect thereof) referred to therein, then each indemnifying
      party shall contribute to the aggregate amount paid or payable by such
      indemnified party, as incurred, as a result of any losses, claims, damages,
      liabilities or expenses (or actions or proceedings in respect thereof) referred
      to therein (i) in such proportion as is appropriate to reflect the relative
      benefits received by the indemnifying parties, on the one hand, and the
      indemnified parties, on the other hand, from the Offering of the Securities
      pursuant to this Agreement, or (ii) if the allocation provided by clause (i)
      above is not permitted by applicable law, in such proportion as is appropriate
      to reflect not only such relative benefits but also the relative fault of the
      indemnifying parties, on the one hand, and the indemnified parties, on the
      other
      hand, in connection with the statements or omissions or the inaccuracies in
      the
      representations and warranties herein that resulted in such losses, claims,
      damages, liabilities or expenses (or actions or proceedings in respect thereof),
      as well as any other relevant equitable considerations. The relative benefits
      received by the indemnifying parties, on the one hand, and the indemnified
      parties, on the other hand, in connection with the Offering of Securities
      pursuant to this Agreement shall be deemed to be in the same respective
      proportions as the total net proceeds from such Offering of Securities pursuant
      to this Agreement (before deducting expenses) received by the indemnifying
      parties, and the total Placement Agent fees received by the indemnified parties,
      in each case as set forth on the cover page of the applicable Prospectus
      Supplement bear to the aggregate offering price of the Securities set forth
      on
      such cover. The relative fault of the indemnifying parties, on the one hand,
      and
      the indemnified parties, on the other hand, shall be determined by reference
      to,
      among other things, whether the untrue or alleged untrue statement of a material
      fact or the omission or alleged omission to state a material fact or any such
      inaccurate or alleged inaccurate representation or warranty relates to
      information supplied by the indemnifying parties, on the one hand, or the
      indemnified parties, on the other hand, and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      statement or omission. 

     

    
      
        
        

      

      
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    The
      amount paid or payable by a party as a result of the losses, claims, damages,
      liabilities and expenses referred to above shall be deemed to include, subject
      to the limitations set forth in Section 7(d) above, any legal or other fees
      or
      expenses reasonably incurred by such party in connection with investigating
      or
      defending any action or claim.  The provisions set forth in Section 7(d)
      with respect to notice of commencement of any action shall apply if a claim
      for
      contribution is to be made under this Section 7(f); provided,
      however,
      that no
      additional notice shall be required with respect to any action for which notice
      has been given under Section 7(d) for purposes of indemnification.

     

    The
      Company and the Placement Agent agree that it would not be just and equitable
      if
      contributions pursuant to this Section 7(f) were determined by pro rata
      allocation or by any other method of allocation which does not take account
      of
      the equitable considerations referred to above in this Section 7(f).
      Notwithstanding the provisions of this Section 7(f): (i) the Placement Agent
      shall not be required to contribute any amount in excess of the amount of the
      Placement Agent fees actually received by the Placement Agent pursuant to this
      Agreement; and (ii) no person guilty of fraudulent misrepresentation (within
      the
      meaning of Section 11(f) of the Act) shall be entitled to contribution from
      any
      person who was not guilty of such fraudulent misrepresentation. 

     

    (g) Timing
      of Any Payments of Indemnification.
      Any
      losses, claims, damages, liabilities or expenses for which an indemnified party
      is entitled to indemnification or contribution under this Section 7 shall be
      paid by the indemnifying party to the indemnified party as such losses, claims,
      damages, liabilities or expenses are incurred, but in all cases, within
      forty-five (45) days of invoice to the indemnifying party. 

     

    (h) Acknowledgements
      of Parties.
      The
      parties to this Agreement hereby acknowledge that they are sophisticated
      business persons who were represented by counsel during the negotiations
      regarding the provisions hereof including, without limitation, the provisions
      of
      this Section 7, and are fully informed regarding said provisions. They further
      acknowledge that the provisions of this Section 7 fairly allocate the risks
      in
      light of the ability of the parties to investigate the Company and its business
      in order to assure that adequate disclosure is made in the Registration
      Statement, the Disclosure Package and each Prospectus Supplement as required
      by
      the Act and the Exchange Act. 

     

    Section
      8. Representations
      and Indemnities to Survive Delivery.
      

     

    The
      respective indemnities, agreements, representations, warranties and other
      statements of the Company or any person controlling the Company, of its
      officers, and of the Placement Agent set forth in or made pursuant to this
      Agreement will remain in full force and effect, regardless of any investigation
      made by or on behalf of the Placement Agent, the Company, or any of its or
      their
      partners, officers or directors or any controlling person, as the case may
      be,
      and will survive delivery of and payment for the Securities sold hereunder
      and
      any termination of this Agreement. A successor to a Placement Agent, or to
      the
      Company, its directors or officers or any person controlling the Company, shall
      be entitled to the benefits of the indemnity, contribution and reimbursement
      agreements contained in this Agreement. 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    Section
      9. Notices.
      

     

    All
      communications hereunder shall be in writing and shall be mailed, hand delivered
      or telecopied and confirmed to the parties hereto as follows: 

     

    If
      to the
      Placement Agent: 

    


    Roth
      Capital Partners, LLC

    24
      Corporate Plaza

    Newport
      Beach, California 92660 

    Facsimile:
      (949) 720-7223

    Attention:
      Managing Director 

    


    With
      a copy to: 

    


    DLA
      Piper
      US LLP

    2415
      East
      Camelback Road

    Suite
      700

    Phoenix,
      Arizona 85016-4245

    Facsimile:
      1 (816) 480 606-5101

    Attention:
      David P. Lewis, Esq.

     

    If
      to the
      Company: 

    


    China
      Precision Steel, Inc.

    8th Floor,
      Teda Building

    87
      Wing
      Lok Street

    Sheung
      Wan, Hong Kong

    People’s
      Republic of China

    Facsimile:
      (852) 2543-8223

    Attention:
      Company Secretary

    


    With
      a copy to: 

    


    Kirkpatrick
      & Lockhart Preston Gates Ellis LLP

    One
      Lincoln Street

    Boston,
      MA 02111

    Facsimile:
      (617) 951-9096

    Attention:
      Barbara A. Jones, Esq.

    


    Any
      party
      hereto may change the address for receipt of communications by giving written
      notice to the others. 

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Section
      10. Successors.
      

     

    This
      Agreement will inure to the benefit of and be binding upon the parties hereto,
      and to the benefit of the employees, officers and directors and controlling
      persons referred to in Section 7 hereof, and to their respective successors,
      and
      personal representative, and no other person will have any right or obligation
      hereunder. 

     

    Section
      11. Partial
      Unenforceability.
      

     

    The
      invalidity or unenforceability of any section, paragraph or provision of this
      Agreement shall not affect the validity or enforceability of any other section,
      paragraph or provision hereof. If any Section, paragraph or provision of this
      Agreement is for any reason determined to be invalid or unenforceable, there
      shall be deemed to be made such minor changes (and only such minor changes)
      as
      are necessary to make it valid and enforceable. 

     

    Section
      12. Governing
      Law Provisions.
      

     

    (a) Governing
      Law.
      This
      agreement shall be governed by and construed in accordance with the internal
      laws of the state of California applicable to agreements made and to be
      performed in such state. 

     

    (b) Consent
      to Jurisdiction.
      Any
      legal suit, action or proceeding arising out of or based upon this Agreement
      or
      the transactions contemplated hereby (“Related
      Proceedings”)
      may be
      instituted in the federal courts of the United States of America located in
      the
      Borough of Manhattan, New York, New York, or the courts of the State of New
      York
      in each case located in the Borough of Manhattan, New York, New York
      (collectively, the “Specified
      Courts”),
      and
      each party irrevocably submits to the exclusive jurisdiction (except for
      proceedings instituted in regard to the enforcement of a judgment of any such
      court (a “Related
      Judgment”),
      as to
      which such jurisdiction is non-exclusive) of such courts in any such suit,
      action or proceeding. Service of any process, summons, notice or document by
      mail to such party’s address set forth above shall be effective service of
      process for any suit, action or other proceeding brought in any such court.
      The
      parties irrevocably and unconditionally waive any objection to the laying of
      venue of any suit, action or other proceeding in the Specified Courts and
      irrevocably and unconditionally waive and agree not to plead or claim in any
      such court that any such suit, action or other proceeding brought in any such
      court has been brought in an inconvenient forum. 

     

    Section
      13. General
      Provisions.
      

     

    (a) This
      Agreement constitutes the entire agreement of the parties to this Agreement
      and
      supersedes all prior written or oral and all contemporaneous oral agreements,
      understandings and negotiations with respect to the subject matter hereof.
      This
      Agreement may be executed in two or more counterparts, each one of which shall
      be an original, with the same effect as if the signatures thereto and hereto
      were upon the same instrument. This Agreement may not be amended or modified
      unless in writing by all of the parties hereto, and no condition herein (express
      or implied) may be waived unless waived in writing by each party whom the
      condition is meant to benefit. Section headings herein are for the convenience
      of the parties only and shall not affect the construction or interpretation
      of
      this Agreement. 

     

    (b) The
      Company acknowledges that in connection with the offering of the Securities:
      (i)
      the Placement Agent has acted at arms length, are not agents of, and owe no
      fiduciary duties to the Company or any other person, (ii) Placement Agent owes
      the Company only those duties and obligations set forth in this Agreement and
      (iii) the Placement Agent may have interests that differ from those of the
      Company. The Company waives to the full extent permitted by applicable law
      any
      claims it may have against the Placement Agent arising from an alleged breach
      of
      fiduciary duty in connection with the offering of the Securities

     

    [The
      remainder of this page has been intentionally left blank.]


    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    


    If
      the
      foregoing is in accordance with your understanding of our agreement, please
      sign
      below whereupon this instrument, along with all counterparts hereof, shall
      become a binding agreement in accordance with its terms. 

    
      	 	 	 
	 	Very truly yours, 
	 	 
	 	
              CHINA
                PRECISION STEEL, INC., 

              a
                Colorado corporation

            
	 
 	 
 	 
 
	 	By:  	                            
	 	Name:
	 	Title 


    

     

     

    The
      foregoing Placement Agency Agreement is hereby confirmed and accepted as of
      the
      date first above written. 

     

     

     

    ROTH
      CAPITAL PARTNERS LLC

    


    


    By:                          

    Name:

    Title:

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


    Schedule
      I

     

    Warrants
      to be granted to the Placement Agent at each Closing

    


    Concurrently
      with each Closing, the Company will issue to the Placement Agent warrants to
      purchase a number of shares of Common Stock equal to 3.0% of the number of
      Shares issued in connection with such Closing (the "Warrants"). The Warrants
      will be exercisable into the same class of Common Stock as issued as part of
      the
      Offering, have a strike price equal to 120% of the closing price of the
      Company's Common Stock on the Closing Date and have a term of three years.
      The
      Warrants are not exercisable prior to the date that is six months from the
      Closing Date. The Warrants will provide for cashless or "net" exercise at all
      times. In the event Investors are issued warrants as part of the Offering,
      the
      terms and conditions of the Warrants shall be the same as such Investors'
      warrants, except to the extent that the aforementioned term and form of payment
      provisions of the Investors' warrants and the Warrants differ, in which case
      this Agreement shall control as to those terms of the Warrants.



    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


    Exhibit
      A

    


    List
      of Company Subsidiaries

     

     

    Shanghai
      Chengtong Precision Strip Co., Ltd. (China)

    


     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


    Exhibit
      B

    


    Form
      of Subscription Agreement

    


    


    



    
      
        
        

      

      
        27