SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of October 26, 2007, among Fushi International, Inc., a Nevada
      corporation (the “Company”),
      and
      the investors listed on the Schedule of Buyers attached hereto as Annex
      A
      and
      identified on the signature pages hereto (each, an “Investor”
      and
      collectively, the “Investors”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act (as defined below) and Regulation D
      promulgated thereunder, the Company desires to issue and sell to each Investor,
      and each Investor, severally and not jointly, desires to purchase from the
      Company certain securities of the Company, as more fully described in this
      Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and the Investors agree as
      follows:

     

    ARTICLE
      1.

    DEFINITIONS

     

    1.1. Definitions.
      In addition to the terms defined elsewhere in this Agreement, for all purposes
      of this Agreement, the following terms shall have the meanings indicated in
      this
      Section 1.1:

     

    “Action”
      means
      any action, suit, inquiry, notice of violation, proceeding (including any
      partial proceeding such as a deposition) or investigation pending or threatened
      in writing against or affecting the Company, any Subsidiary or any of their
      respective properties before or by any court, arbitrator, governmental or
      administrative agency, regulatory authority (federal, state, county, local
      or
      foreign), stock market, stock exchange or trading facility.

     

    “Affiliate”
      means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144.

     

    “Applicable
      Law”
      has the
      meaning set forth in Section 3.1(h).

     

    “Business
      Day”
      means
      any day except Saturday, Sunday and any day which is a federal legal holiday
      or
      a day on which banking institutions in the State of New York are authorized
      or
      required by law or other governmental action to close.

     

    “Buy-In”
has
      the
      meaning set forth in Section 4.1(c).

     

    “Charter
      Documents”
      has the
      meaning set forth in Section 3.1(h).

     

    “Closing”
      means
      the closing of the purchase and sale of the Shares pursuant to Article
      II.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    “Closing
      Date”
      means
      the Business Day on which all of the conditions set forth in Sections 5.1 and
      5.2 hereof are satisfied, or such other date as the parties may
      agree.

     

    "Closing
      Escrow Agreement"
      means
      the Closing Escrow Agreement, dated as of the date hereof, between the Company,
      Roth Capital Partners, LLC and the escrow agent (the “Escrow
      Agent”)
      identified therein, in the form of Exhibit
      B
      hereto.

     

    “Commission”
      means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
      means
      the common stock of the Company, par value $0.006 per share, and any securities
      into which such common stock may hereafter be reclassified.

     

    “Common
      Stock Equivalents”
      means
      any securities of the Company or any Subsidiary which entitle the holder thereof
      to acquire Common Stock at any time, including without limitation, any debt,
      preferred stock, rights, options, warrants or other instrument that is at any
      time convertible into or exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock or other securities that entitle the holder
      to
      receive, directly or indirectly, Common Stock.

     

    “Company
      Deliverables”
      has the
      meaning set forth in Section 2.2(a).

     

    “Dalian
      Fushi”
      means
      Dalian Fushi Bimetallic Manufacturing Co., Ltd., a limited liability company
      organized under the laws of the PRC.

     

    “Disclosure
      Materials”
      means
      the SEC
      Reports, together with the Disclosure Schedules attached as Exhibit
      C
      to this
      Agreement.

     

    “Disclosure
      Schedules”
      means
      the disclosure schedules attached hereto as Exhibit
      C.
      

     

    “Effective
      Date”
      means
      the date that the initial Registration Statement required by Section 2(a) of
      the
      Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Environmental
      Laws”
      has the
      meaning set forth in Section 3.1(x).

     

    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended.

     

    “FHI”
      means
      Fushi Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of
      the
      Company.

     

    “Financial
      Statements”
      has the
      meaning set forth in Section 3.1(r)(i).

     

    “FCPA”
      has the
      meaning set forth in Section 3.1(z).

     

    “GAAP”
      means
      U.S. generally accepted accounting principles.

     

    “Governmental
      Authority”
      has the
      meaning set forth in Section 3.1(h).

     

    
      
        
        

      

      
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    “Group
      Companies”
      means,
      collectively, the Company and its Subsidiaries (including FHI, the WFOE and
      Dalian Fushi).

     

    “Intellectual
      Property”
      has the
      meaning set forth in Section 3.1(p).

     

    “Investment
      Amount”
      means,
      with respect to each Investor, the Investment Amount indicated on such
      Investor’s signature page to this Agreement.

     

    “Investor
      Deliverables”
      has the
      meaning set forth in Section 2.2(b).

     

    “Investor
      Party”
      has the
      meaning set forth in Section 4.7.

     

    “Lien”
      means
      any lien, charge, encumbrance, security interest, right of first refusal or
      other restrictions of any kind.

     

    “Material
      Adverse Change”
      has the
      meaning set forth in Section 3.1(r)(ii).

     

    “Material
      Adverse Effect” has
      the
      meaning set forth in Section 3.1(c).

     

    “Money
      Laundering Laws”
      has the
      meaning set forth in Section 3.1(ee).

     

    “New
      York Courts”
      means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    “OFAC”
      has the
      meaning set forth in Section 3.1(dd).

     

    “Outside
      Date”
      means
      the thirtieth calendar day following the date of this Agreement.

     

    “PFIC”
      has the
      meaning set forth in Section 3.1(cc).

     

    “Permits”
      has the
      meaning set forth in Section 3.1(l).

     

    “Per
      Share Purchase Price”
      equals
      $14.

     

    “Person”
      means an
      individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “PRC”
means
      the People’s Republic of China, not including Taiwan, Hong Kong and
      Macau.

     

    “Proceeding”
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

     

    “Registration
      Rights Agreement”
      means
      the Registration Rights Agreement, dated as of the date of this Agreement,
      among
      the Company and the Investors, in the form of Exhibit
      A
      hereto.

     


    
      
        
        

      

      
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    “Registration
      Statement”
      means a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Investors of the
      Shares.

     

    “Rule
      144”
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “SEC
      Reports”
      has the
      meaning set forth in Section 3.1(a).

     

    “Securities
      Act”
      means
      the Securities Act of 1933, as amended.

     

    “Share
      Delivery Date”
has
      the
      meaning set forth in Section 4.1(c).

     

    “Shares”
      means
      the shares of Common Stock issued or issuable to the Investors pursuant to
      this
      Agreement.

     

    “Short
      Sales”
      include,
      without limitation, all “short sales” as defined in Rule 200 promulgated under
      Regulation SHO under the Exchange Act and all types of direct and indirect
      stock
      pledges, forward sale contracts, options, puts, calls, swaps and similar
      arrangements (including on a total return basis), and sales and other
      transactions through non-US broker dealers or foreign regulated
      brokers.

     

    “Subsidiary”
      means
      any “significant subsidiary” as defined in Rule 1.02 of Regulation S-X
      promulgated by the Commission under the Exchange Act. 

     

    “Tax”
      has the
      meaning set forth in Section 3.1(o).

     

    “Trading
      Day”
      means
      (i) a day on which the Common Stock is traded on a Trading Market (other than
      the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
      Market (other than the OTC Bulletin Board), a day on which the Common Stock
      is
      traded in the over-the-counter market, as reported by the OTC Bulletin Board,
      or
      (iii) if the Common Stock is not quoted on any Trading Market, a day on which
      the Common Stock is quoted in the over-the-counter market as reported by the
      Pink Sheets LLC (or any similar organization or agency succeeding to its
      functions of reporting prices); provided, that in the event that the Common
      Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
      Trading Day shall mean a Business Day.

     

    “Trading
      Market”
      means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
      or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
      on the date in question.

     

    “Transaction
      Documents”
      means
      this Agreement, the Registration Rights Agreement, the Closing Escrow Agreement
      and any other documents or agreements executed in connection with the
      transactions contemplated hereunder.

     


    
      
        
        

      

      
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    “WFOE” means
      Fushi International (Dalian) Bimetallic Cable Co., Ltd., a wholly-owned
      subsidiary of FHI, incorporated under the laws of the PRC.

     

    ARTICLE
      2.

    PURCHASE
      AND SALE

     

    2.1. Closing.
      Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, the Shares representing
      such Investor’s Investment Amount. The Closing shall take place at the offices
      of Bryan Cave LLP, 1290 Avenue of the Americas, New York, NY 10104 on the
      Closing Date or at such other location or time as the parties may
      agree.

     

    2.2.
      Closing
      Deliveries.
      (a) At
      the Closing, the Company shall deliver or cause to be delivered to each Investor
      the following (the “Company
      Deliverables”):

     

    (i) a
      certificate evidencing a number of Shares equal to such Investor’s Investment
      Amount divided by the Per Share Purchase Price, registered in the name of such
      Investor;

     

    (ii) the
      legal
      opinion of Guzov Ofsink, LLC, Company counsel, in agreed form, addressed to
      the
      Investors; 

     

    (iii) the
      Registration Rights Agreement, duly executed by the Company; and

     

    (iv) the
      Closing Escrow Agreement, and each other Transaction Document to be executed
      prior to Closing, duly executed by all parties thereto.

     

    (b) At
      the
      Closing, each Investor shall deliver or cause to be delivered the following
      (the
“Investor
      Deliverables”):

     

    (i) Unless
      otherwise agreed to by the Company and Roth Capital Partners, LLC, to the Escrow
      Agent, for deposit and disbursement in accordance with the Closing Escrow
      Agreement, its Investment Amount, in immediately available funds, by wire
      transfer to an account designated in writing by the Escrow Agent for such
      purpose; and

     

    (ii) to
      the
      Company, the Registration Rights Agreement and
      each
      other Transaction Document to be executed by such Investor at or prior to
      Closing,
      duly
      executed by such Investor.

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1. Representations
      and Warranties of the Company. The Company represents and warrants to the
      Investors that, except as set forth in the Disclosure Schedules attached hereto
      as Exhibit C which exceptions shall be deemed to part of the
      representations and warranties made hereunder, the following representations
      and
      warranties are true and correct as of the date hereof. 

     


    
      
        
        

      

      
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    (a) SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it under the Securities Act and the Exchange Act,
      including pursuant to Section 13(a), 13(c) or 15(d) thereof (the foregoing
      materials, including the exhibits thereto and documents incorporated by
      reference therein, being collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      the date of filing, in the case of SEC Reports filed pursuant to the Exchange
      Act (and to the extent such SEC Report was amended, then as of the date of
      filing of such amendment), and as of the date of effectiveness in the case
      of
      SEC Reports filed pursuant to the Securities Act (and to the extent such SEC
      Report was amended, then as of the date of effectiveness of such amendment),
      the
      SEC Reports complied in all material respects with the applicable requirements
      of the Securities Act and the Exchange Act and the rules and regulations of
      the
      Commission promulgated thereunder, as applicable, and none of the SEC Reports,
      as of the date of filing, in the case of SEC Reports filed pursuant to the
      Exchange Act (and to the extent such SEC Report was amended, then as to the
      date
      of filing of such amendment), and as of the date of effectiveness in the case
      of
      SEC Reports filed pursuant to the Securities Act (and to the extent such SEC
      Report was amended, then as of the date of effectiveness of such amendment),
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading. Except as disclosed in Schedule
      3.1(a)
      of the
      Disclosure Schedule, the financial statements of the Company included in the
      SEC
      Reports have been prepared in accordance with the applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing. Such financial statements have
      been
      prepared in accordance with GAAP, except as may be otherwise specified in such
      financial statements, the notes thereto or in Schedule
      3.1(a)
      of the
      Disclosure Schedule, and except that unaudited financial statements may not
      contain all footnotes required by GAAP, and fairly present in all material
      respects the financial condition, results of operations and cash flows of the
      Company and its consolidated subsidiaries as of and for the dates thereof and
      the results of operations and cash flows for the periods then ended, subject,
      in
      the case of unaudited statements, to normal, immaterial, year-end audit
      adjustments. 

     

    (b) Ownership
      of Shares of Subsidiaries; Affiliates.
      Except
      as set forth in Schedule
      3.1(b),
      the Company has no direct or indirect Subsidiaries other than as specified
      in
      the SEC Reports. Except as disclosed in the SEC Reports or in Schedule
      3.1 (b),
      the Company owns,
      directly or indirectly, all
      of the capital
      stock
      of each Subsidiary free and clear of any and all Liens, and all the issued
      and
      outstanding shares of capital stock of each Subsidiary are validly issued and
      are fully paid, non-assessable and free of preemptive and similar
      rights.

     


    
      
        
        

      

      
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    (c) Organization.
      Each of
      the Group Companies (i) has been duly organized, is validly existing and is
      in
      good standing under the laws of its jurisdiction of organization, (ii) has
      all
      requisite power and authority to carry on its business and to own, lease and
      operate its properties and assets, and (iii) is duly qualified or licensed
      to do
      business and is in good standing as a foreign corporation or limited liability
      company, as the case may be, authorized to do business in each jurisdiction
      in
      which the nature of such business or the ownership or leasing of such properties
      requires such qualification, except where the failure to be so qualified would
      not, individually or in the aggregate, have a material adverse effect on (A)
      the
      properties, business, prospects, operations, earnings, assets, liabilities
      or
      condition (financial or otherwise) of the Group Companies, taken as a whole,
      (B)
      the ability of the Group Companies to perform their respective obligations
      under
      any Transaction Document or (C) the validity of any of the Transaction Documents
      or the consummation of any of the transactions contemplated therein (each,
      a
“Material
      Adverse Effect”).
      

     

    (d) Capitalization
      and Voting Rights.
      

     

    (i) Capital
      Stock.
      The
      authorized capital of the Company consists, immediately prior to the Closing,
      of
      (i) One Hundred Million (100,000,000) shares of Common Stock, of which
22,382,225
      shares
      are issued and outstanding immediately prior to the Closing, and (ii) Five
      Million (5,000,000) shares of preferred stock with no shares of preferred stock
      outstanding. 

     

    (ii) Issued
      Shares.
      As at
      the date hereof and immediately prior to the Closing, the aggregate number
      of
      shares of Common Stock issued and which are issuable pursuant to any exercise,
      conversion, exchange, subscription or otherwise in connection with any warrants,
      options (including pursuant to the Company’s stock option plan), convertible
      securities or any agreement to sell or issue Common Stock or securities which
      may be exercised, converted or exchanged for Common Stock (collectively,
“Fully-Diluted”)
      is set
      forth on Schedule
      3.1(d)(ii).
      All of
      the issued and outstanding shares of each of the Group Company’s shares as of
      the Closing are duly authorized, validly issued, fully paid and non-assessable,
      were issued in accordance with the registration or qualification provisions
      of
      the Securities Act and any relevant blue sky laws of the United States of
      America or pursuant to valid exemptions therefrom and were issued in compliance
      with other applicable laws (including, without limitation, applicable PRC laws,
      rules and regulations) and are not subject to any rescission right or put right
      on the part of the holder thereof nor does any holder thereof have the right
      to
      require the Company to repurchase such share capital.

     

    (iii) Voting
      and other Agreements.
      Except
      as set forth in the SEC Reports or on Schedule
      3.1(d)(iii)
      of the
      Disclosure Schedule, there are no outstanding (A) options, warrants or other
      rights to purchase from any Group Company, (B) agreements, contracts,
      arrangements or other obligations of any Group Company to issue, or (C) other
      rights to convert any obligation into or exchange any securities for, in the
      case of each of clauses (A) through (C), shares of capital stock of, or other
      ownership or equity interests in, any Group Company. The Company is not a party
      or subject to any agreement or understanding, and, to the Company’s knowledge
      after due inquiry, there is no agreement or understanding with any Person that
      affects or relates to (i) the voting or giving of written consents with respect
      to any security of the Company (including, without limitation, any voting
      agreements, voting trust agreements, shareholder agreements or similar
      agreements) or the voting by a director of the Company or (ii) the sale,
      transfer or other disposition with respect to any security of the
      Company.

     


    
      
        
        

      

      
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    (iv) The
      Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and
      the Company has taken no action designed to, or which to its knowledge is likely
      to have the effect of, terminating the registration of the Common Stock under
      the Exchange Act, nor has the Company received any notification that the
      Commission is contemplating terminating such registration. The Company has
      not,
      in the 12 months preceding the date hereof, received notice from the Trading
      Market to the effect that the Company is not in compliance with the requirements
      of the Trading Market. The Company is, and expects to be, in compliance with
      all
      of the listing requirements of the Trading Market in the foreseeable
      future.

     

    (e) No
      Registration Rights.
      Except
      as set forth on Schedule
      3.1(e),
      no
      holder of securities of any of the Group Companies is or will be entitled to
      have any registration rights with respect to such securities. 

     

    (f) Authorization.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations thereunder. The execution and
      delivery of each of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of the Company and no further
      action is required by the Company, its Board or Directors or its stockholders
      in
      connection therewith. Each Transaction Document has been (or upon delivery
      will
      have been) duly executed by the Company and, when delivered in accordance with
      the terms hereof, will constitute the valid and binding obligation of the
      Company enforceable against the Company in accordance with its terms, except
      as
      such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application. 

     

    (g) Valid
      Issuance of Shares.
      The
      Shares have been duly and validly authorized for issuance by the Company, and
      when issued pursuant to the terms of this Agreement, will be validly issued,
      fully paid and non-assessable, not subject to any preemptive or similar rights,
      free from all taxes, Liens, charges and security interests with respect to
      the
      issuance thereof and free of restrictions on transfer other than as expressly
      contemplated by the Transaction Documents. The Company’s stockholders have no
      preemptive rights with respect to the Shares and except as set forth on
Schedule
      3.1(g)
      the
      issuance of the Shares is not subject to any rights of first refusal.


     

    (h) Compliance
      with Instruments.
      None of
      the Group Companies is in violation of its respective certificate of
      incorporation, by-laws or other organizational documents (the “Charter
      Documents”).
      None
      of the Group Companies is, nor does any condition exist (with the passage of
      time or otherwise) that could reasonably be expected to cause any of the Group
      Companies to be, (i) in violation of any statute, rule, regulation, law or
      ordinance, or any judgment, decree or order applicable to any of the Group
      Companies or any of their properties (collectively, “Applicable
      Law”)
      of any
      United States federal, state, PRC national, provincial, local or other
      governmental authority, governmental or regulatory agency or body, court,
      arbitrator or self-regulatory organization of applicable jurisdictions, domestic
      or foreign (each, a “Governmental
      Authority”),
      or
      (ii) in breach of or in default under any bond, debenture, note or other
      evidence of indebtedness, indenture, mortgage, deed of trust, lease or any
      other
      agreement or instrument to which any of them is a party or by which any of
      them
      or their respective property is bound (collectively, “Applicable
      Agreements”),
      other
      than in each of clause (i) and (ii) such violations, breaches or defaults that
      (a) are disclosed in the SEC Reports or in Schedule
      3.1(h)
      of the
      Disclosure Schedule or (b) could not, individually or in the aggregate, result
      in a Material Adverse Effect. 

     


    
      
        
        

      

      
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    (i) No
      Conflicts.
      Neither
      the execution, delivery or performance of any of the Transaction Documents
      nor
      the consummation of any of the transactions contemplated therein will conflict
      with, violate, constitute a breach of or a default (with the passage of time
      or
      otherwise) under, require the consent of any person or a Governmental Authority
      (other than consents already obtained) or result in the imposition of a Lien
      (other than a Lien arising under the transactions contemplated by this
      Agreement) on any assets of any of the Group Companies under or pursuant to
      (i)
      the Charter Documents, (ii) any Applicable Agreement, or (iii) any Applicable
      Law, other than in each of clause (ii) and (iii) such violations, breaches
      or
      defaults that would not, individually or in aggregate, have a Material Adverse
      Effect. 

     

    (j) Governmental
      Consents.
      No
      filing with, consent, approval, authorization or order of, any Governmental
      Authority is required for the consummation of the transactions contemplated
      by
      the Transaction Documents, except (i) as have been obtained or will have been
      obtained on or before the Closing Date and (ii) as may be required under the
      Securities Act or state securities laws or “Blue Sky” laws. 

     

    (k) Proceedings.
      Except
      as set forth in Schedule
      3.1(k),
      there
      is no Proceeding or other action, investigation or inquiry, whether formal
      or
      informal by or before any regulatory or self-regulatory authority pending or,
      to
      the knowledge of the Company, threatened, that seeks to restrain, enjoin,
      prevent the consummation of, or otherwise challenges any of the Transaction
      Documents or could result in a Material Adverse Effect. Except as disclosed
      in
      the SEC Reports, none of the Group Companies is subject to any judgment, order
      or decree of which the Company has knowledge and which could, individually
      or in
      the aggregate, result in a Material Adverse Effect. There has not been, and
      to
      the knowledge of the Company, there is not pending or contemplated, any
      investigation by the SEC involving any of the Group Companies. 

     

    (l) Permits.
      Each of
      the Group Companies possesses all licenses, permits, certificates, consents,
      orders, approvals and other authorizations from, and has made all declarations
      and filings with, all Governmental Authorities, presently required or necessary
      to own or lease, as the case may be, and to operate their respective properties
      and to carry on their respective businesses as now conducted (“Permits”),
      except where the failure to possess such Permits could not, individually or
      in
      the aggregate, have or reasonably be expected to result in, a Material Adverse
      Effect. Each of the Group Companies has fulfilled and performed all of its
      respective obligations with respect to such Permits and no event has occurred
      which allows, or after notice or lapse of time could allow, revocation or
      termination thereof or result in any other material impairment of the rights
      of
      the holder of any such Permit. None of the Group Companies has received actual
      notice of any Proceeding relating to revocation or modification of any such
      Permit. 

     

    (m) Title
      to Property.
      Each of
      the Group Companies has good and marketable title to all real property and
      personal property owned by it, in each case free and clear of any Liens as
      of
      the Closing Date, except as disclosed in the SEC Reports or in Schedule
      3.1(m),
      or
      except for such Liens as do not materially interfere with the use made and
      proposed to be made of such property. For the real property not owned by any
      of
      the Group Companies and currently used or planned to be used for the business
      operations of the Group Companies, each of such Group Companies has good and
      marketable title to all leasehold estates in real and personal property being
      leased by it and, in each case free and clear of all Liens as of the Closing
      Date except as disclosed in the SEC Reports or in Schedule
      3.1(m),
      or
      except for such Liens as do not materially interfere with the use made and
      proposed to be made of such property. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (n) Insurance.
      Except
      as disclosed in Schedule
      3.1(n),
      each of
      the Group Companies maintains reasonable adequate insurance covering its
      material properties, operations, personnel and business, and is insured by
      insurers of recognized financial responsibility against such losses and risks
      and in such amounts as are prudent and customary in the businesses in which
      it
      is engaged. All policies of insurance insuring the Group Companies and their
      respective businesses, assets, employees, officers and directors are in full
      force and effect. Each of the Group Companies is in compliance with the terms
      of
      such policies and instruments in all material respects, and there are no claims
      by any of the Group Companies under any such policy or instrument as to which
      any insurance company is denying liability or defending under a reservation
      of
      rights clause. None of the Group Companies has been refused any insurance
      coverage sought or applied for, and none of the Group Companies has any reason
      to believe that it will not be able to renew its existing insurance coverage
      as
      and when such coverage expires or to obtain similar coverage from similar
      insurers as may be necessary to continue its business at a cost that could
      not,
      individually or in the aggregate, have a Material Adverse Effect. 

     

    (o) Taxes.
      All Tax
      returns required to be filed by each of the Group Companies have been filed,
      and
      all such returns are true, complete and correct in all material respects. All
      material Taxes that are due from each of the Group Companies have been paid
      other than those (i) currently payable without penalty or interest or (ii)
      being
      diligently contested in good faith and by appropriate proceedings and for which
      adequate reserves have been established in accordance with GAAP. To the
      knowledge of the Company after due inquiry, there are no proposed Tax
      assessments against any of the Group Companies. The accruals and reserves on
      the
      books and records of each of the Group Companies in respect of any Tax liability
      for any Taxable period not finally determined are adequate to meet any
      assessments of Tax for any such period. For purposes of this Agreement, the
      term
“Tax”
and
      “Taxes”
shall
      mean all Federal, state, PRC national, provincial, local and foreign taxes,
      and
      other assessments of a similar nature (whether imposed directly or through
      withholding), including any interest, additions to tax, or penalties applicable
      thereto. 

     

    (p) Intellectual
      Property.
      

     

    (i)
      The
      Company or its Subsidiaries own or have valid rights to use all patent,
      copyright, trade secret, trademark or other proprietary rights that are used
      in
      the business of the Company and are material to the Company and its Subsidiaries
      taken as a whole (collectively, “Intellectual
      Property”).
      Schedule
      3.1 (p)
      sets
      forth a list of all of the Intellectual Property used by the Company and its
      Subsidiaries. 

     

    (ii)
      All
      material licenses or other material agreements under which (i) the Company
      or any Subsidiary is granted rights in Intellectual Property and (ii) the
      Company or any Subsidiary has granted rights to others in Intellectual Property
      owned or licensed by the Company or any Subsidiary, are in full force and effect
      and there is no material default by the Company or any Subsidiary
      thereto.

     


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    (iii)
      No
      proceedings have been instituted or are pending which challenge in a material
      manner the rights of the Company or any Subsidiary in respect to the Company
      or
      any Subsidiary’s right to the use of the Intellectual Property. The Company and
      each Subsidiary has the right to use, free and clear of material claims or
      rights of other persons, all of its customer lists, designs, computer software,
      systems, data compilations, and other information that are required for its
      products or its business as presently conducted. 

     

    (iv)
      The
      Company believes it and each Subsidiary has taken such reasonable steps as
      are
      required in accordance with sound business practice and business judgment to
      establish and preserve its ownership of all material copyright, trade secret
      and
      other proprietary rights with respect to its products and
      technology.

     

    (v)
      To
      the knowledge of the Company, the present business, activities and products
      of
      the Company and each Subsidiary do not infringe any intellectual property of
      any
      other person, except where such infringement would not have a Material Adverse
      Effect. No material proceeding charging the Company or any Subsidiary with
      infringement of any adversely held Intellectual Property has been filed. The
      Company has not received notice of or is not otherwise aware of any infringement
      of or conflict with asserted rights of others with respect to any Intellectual
      Property or of any facts or circumstances which would render any Intellectual
      Property invalid or inadequate to protect the interests of the Company or any
      Subsidiary, and which infringement or conflict (if the subject of any
      unfavorable decision, ruling or finding) or invalidity or inadequacy, singly
      or
      in the aggregate, would result in a Material Adverse Effect. To the Company’s
      knowledge, there exists no third party unexpired patent or patent application
      which includes claims that would be infringed by, or otherwise have a Material
      Adverse Effect on the Company. To the knowledge of the Company, the Company
      is
      not making unauthorized use of any material confidential information or trade
      secrets of any third party. To the Company’s knowledge, the activities of the
      Company or any Subsidiary or any employee on behalf of the Company or any
      Subsidiary do not violate any material agreements or arrangements known to
      the
      Company which any such employees have with other persons, if any.

     

    (q) Internal
      Controls.
      Except
      as set forth on Schedule
      3.1(q)
      each of
      the Group Companies maintains a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorization, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any material differences. Each of the Group Companies
      is in material compliance with the provisions of the Sarbanes-Oxley Act of
      2002
      which are applicable to it. During the past 12 months prior to the date hereof
      none of the Group Companies has received any notice of correspondence from
      any
      accountant relating to any potential material weakness in any part of the system
      of internal accounting controls of any Group Company. 

     

    
      
        
        

      

      
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    (r) Financial
      Statements.
      


    (i) The
      Company maintains disclosure controls and procedures (as such term is defined
      in
      Rule 13a-15(e) under the Exchange Act) that are effective in ensuring that
      information required to be disclosed by the Company in the reports that it
      files
      or submits under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the rules and forms of the
      Commission, including, without limitation, controls and procedures designed
      in
      to ensure that information required to be disclosed by the Company in the
      reports that it files or submits under the Exchange Act is accumulated and
      communicated to the Company's management, including its principal executive
      officer or officers and its principal financial officer or officers, as
      appropriate, to allow timely decisions regarding required disclosure. Except
      as
      disclosed in Schedule
      3.1(r)(i)
      of the
      Disclosure Schedule, the audited consolidated financial statements and related
      notes of the Company contained in the Form 10-KSB for the three years ended
      December 31, 2006 and the unaudited consolidated financial statements and
      related notes in the Form 10-QSB for the six months ended June 30, 2007
      (collectively, the “Financial
      Statements”)
      present fairly in all material respects the financial position, results of
      operations and cash flows of the Company and its consolidated Subsidiaries,
      as
      of the respective dates and for the respective periods to which they apply
      and
      have been prepared in accordance with GAAP and comply as to form with the
      applicable requirements of Regulation S-X of the Securities Act. All other
      financial, statistical, and market and industry-related data included in the
      SEC
      Reports are based on or derived from sources that the Company reasonably
      believes to be reliable and accurate. 

     

    (ii) 
      Subsequent to the date of the Company’s audited financial statements filed for
      the year ended December 31, 2006, except as disclosed therein or in any
      subsequent SEC Report, (i) there has not been any material decrease in the
      capital stock or any material increase in long-term indebtedness or any material
      increase in short-term indebtedness of the Group Companies, or any payment
      of or
      declaration to pay any dividends or any other distribution with respect to
      the
      Group Companies, and (ii) there has not been any material adverse change in
      the
      properties, business, prospects, operations, earnings, assets, liabilities
      or
      condition (financial or otherwise) of the Group Companies taken as a whole;
      excluding any changes caused by (x) the condition of the industry of the Company
      that do not disproportionately affect the Company, (y) the failure of the
      Company to meet its financial projections or (z) the execution and delivery
      of
      this Agreement and consummation of the transactions contemplated hereby (each
      of
      clauses (i), (ii) and (iii), a “Material
      Adverse Change”).
      To
      the knowledge of the Company, there is no event that is reasonably likely to
      occur in the foreseeable future, which if it were to occur, could, individually
      or in the aggregate, have a Material Adverse Change. Since the date of the
      latest audited financial statements included within the SEC Reports, except
      as
      specifically disclosed in a subsequent SEC Report, (i) there has been no event,
      occurrence or development that has had or that could reasonably be expected
      by
      the Company to result in a Material Adverse Effect, (ii) the Company has not
      incurred any liabilities (contingent or otherwise) other than (A) trade payables
      and accrued expenses incurred in the ordinary course of business consistent
      with
      past practice and (B) liabilities not required to be reflected in the Company's
      financial statements pursuant to GAAP or disclosed in filings made with the
      Commission, (iii) the Company has not altered its method of accounting, (iv)
      the
      Company has not declared or made any dividend or distribution of cash or other
      property to its stockholders or purchased, redeemed or made any agreements
      to
      purchase or redeem any shares of its capital stock and (v) the Company has
      not
      issued any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission any request for confidential treatment of
      information. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (s) Solvency.
      Based
      on the financial condition of the Company as of the Closing Date (and assuming
      that the Closing shall have occurred), (i) the Company’s fair saleable value of
      its assets exceeds the amount that will be required to be paid on or in respect
      of the Company’s existing debts and other liabilities (including known
      contingent liabilities) as they mature, (ii) the Company’s assets do not
      constitute unreasonably small capital to carry on its business for the current
      fiscal year as now conducted and as proposed to be conducted including its
      capital needs taking into account the particular capital requirements of the
      business conducted by the Company, and projected capital requirements and
      capital availability thereof, and (iii) the current cash flow of the Company,
      together with the proceeds the Company would receive, were it to liquidate
      all
      of its assets, after taking into account all anticipated uses of the cash,
      would
      be sufficient to pay all amounts on or in respect of its debt when such amounts
      are required to be paid. The Company does not intend to incur debts beyond
      its
      ability to pay such debts as they mature (taking into account the timing and
      amounts of cash to be payable on or in respect of its debt). 

     

    (t) No
      Stabilization.
      None of
      the Group Companies has and, to each of its knowledge after due inquiry, no
      one
      acting on their behalf has, (i) taken, directly or indirectly, any action
      designed to cause or to result in, or that has constituted or which might
      reasonably be expected to constitute, the stabilization or manipulation of
      the
      price of any security of any of the Group Companies to facilitate the sale
      or
      resale of any of the Shares, (ii) sold, bid for, purchased, or paid anyone
      any
      compensation for soliciting purchases of, the Shares, or (iii) paid or agreed
      to
      pay to any person any compensation for soliciting another to purchase any other
      securities of the Company or its Subsidiaries. 

     

    (u) No
      Registration.
      Assuming the accuracy of the Investors’ representations and warranties set forth
      in Section 3.2, no registration under the Securities Act of the Shares is
      required for the offer, sale and delivery of the Shares in the manner
      contemplated herein. 

     

    (v) Labor
      Matters.
      None of
      the Group Companies is bound by or subject to (and none of its assets or
      properties is bound by or subject to) any written or oral, express or implied,
      contract, commitment or arrangement with any labor union, and no labor union
      has
      requested or, to the knowledge of the Company, has sought to represent any
      of
      the employees, representatives or agents of the Group Companies. There is no
      strike or other labor dispute involving any of the Group Companies pending
      or
      threatened, which could have a Material Adverse Effect. There is no employment
      related charge, complaint, grievance, investigation, unfair labor practice
      claim
      or inquiry of any kind, pending against any of the Group Companies that could,
      individually or in the aggregate, have a Material Adverse Effect. 

    
 

    
      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

    

     

    (w) Brokers
      and Finders.
      The
      Company has not engaged any broker, finder, commission agent or other similar
      person (other than Roth Capital Partners, LLC) in connection with the
      transactions contemplated under the Transaction Documents, and the Company
      is
      not under any obligation to pay any broker’s fee or commission in connection
      with such transactions (other than commissions or fees to Roth Capital Partners,
      LLC). No Holder shall have any obligation with respect to any fees or with
      respect to any claims made by or on behalf of other Persons for fees of a type
      contemplated in this Section that may be due in connection with the transactions
      contemplated by this Agreement or any agreement relating thereto as a result
      of
      any action taken by any Group Company.

     

    (x) Environmental
      Matters.
      Each of
      the Group Companies (i) is in compliance with any and all applicable foreign,
      federal, state, PRC national, provincial, and local laws and regulations
      relating to the protection of the environment or hazardous or toxic substances
      or wastes, pollutants or contaminants (“Environmental
      Laws”),
      (ii)
      has received and is in compliance with all permits, licenses or other approvals
      required of it under applicable Environmental Laws to conduct its business,
      (iii) has not received actual notice of any actual or potential liability for
      the investigation or remediation of any disposal or release of hazardous or
      toxic substances or wastes, pollutants or contaminants, (iv) has no knowledge
      of
      any facts which would give rise to any claim, public or private, of violation
      of
      Environmental Laws emanating from, occurring on or in any way related to real
      properties now or formerly owned, leased or operated by any of them or to other
      assets or their use, except, in each case, such as would not reasonably be
      expected to result in a Material Adverse Effect; and (v) has stored no hazardous
      materials on real properties now or formerly owned, leased or operated by any
      of
      them and has not disposed of any hazardous materials in a manner contrary to
      any
      Environmental Laws; except where such non-compliance with Environmental Laws,
      failure to receive required permits, licenses or other approvals, or liability
      would not, individually or in the aggregate, have a Material Adverse Effect.
      

     

    (y) Certificate.
      Each
      certificate signed by any officer of any of the Group Companies and delivered
      to
      the Investors shall be deemed a representation and warranty by such company
      (and
      not individually by such officer) to the Investors with respect to the matters
      covered thereby. 

     

    (z) Foreign
      Corrupt Practices Act.
      None of
      the Group Companies, nor to the knowledge of the Company, any person authorized
      to act on behalf of any of the Group Companies, directly or indirectly, (i)
      has
      used any funds or will use such funds or any proceeds from the sale of the
      Shares for unlawful contributions, gifts, entertainment or other unlawful
      expenses related to foreign or domestic political activity, (ii) made any
      unlawful payment to foreign or domestic government officials or employees or
      to
      any foreign or domestic political parties or campaigns from corporate funds,
      (iii) failed to disclose fully any contribution made by the Group Companies
      (or
      made by any person acting on its behalf of which the Company is aware) which
      is
      in violation of law, or (iv) violated in any material respect any provision
      of
      the Foreign Corrupt Practices Act of 1977, as amended and the rules and
      regulations thereunder (the “FCPA”).
      

     

    (aa) Related
      Party Transactions.
      Except
      as set forth in the SEC Reports or otherwise disclosed in Schedule
      3.1(aa)
      of the
      Disclosure Schedule, no material relationship, direct or indirect, exists
      between or among any of the Group Company or its Subsidiaries or any Affiliate
      of the Group Companies or its subsidiaries, on the one hand, and any former
      or
      current director, officer, stockholder, customer or supplier of any of them
      (including his or her spouse, child, sibling, any company or undertaking in
      which he or she holds any equity interest, or any person related by marriage
      or
      consanguinity), on the other hand. 

     


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    (bb) Investment
      Company.
      None of
      the Group Companies is, and as a result of the offer and sale of the Shares
      contemplated herein will not be, required to register as an “investment company”
under, and as such term is defined in, the U.S. Investment Company Act of 1940,
      as amended, in connection with or as a result of the offer and sale of the
      Shares. 

     

    (cc) PFIC.
      None of
      the Group Companies is or intends to become a “passive foreign investment
      company” (a “PFIC”)
      within
      the meaning of Section 1297 of the U.S. Internal Revenue Code. 

     

    (dd) OFAC.
      None of
      the Group Companies, to the knowledge of the Company, any director, officer,
      agent, employee, Affiliate or Person acting on behalf of the Company is
      currently subject to any U.S. sanctions administered by the Office of Foreign
      Assets Control of the U.S. Treasury Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the offering,
      or
      lend, contribute or otherwise make available such proceeds to any Subsidiary,
      joint venture partner or other Person or entity, for the purpose of financing
      the activities of any person currently subject to any U.S. sanctions
      administered by OFAC. 

     

    (ee) Money
      Laundering Laws.
      The
      operations of each of the Group Companies are and have been conducted at all
      times in compliance with the money laundering statutes of applicable
      jurisdictions, the rules and regulations thereunder and any related or similar
      rules, regulations or guidelines, issued, administered or enforced by any
      applicable governmental agency (collectively, the “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving any of the Group Companies with
      respect to the Money Laundering Laws is pending or, to the best knowledge of
      the
      Company, threatened. 

     

    (ff) No
      Integrated Offering.
      Assuming
      the accuracy of the Investors' representations and warranties set forth in
      Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
      acting on its or their behalf has, directly or indirectly, made any offers
      or
      sales of any security or solicited any offers to buy any security, under
      circumstances that would cause this offering of the Shares to be integrated
      with
      prior offerings by the Company for purposes of the Securities Act or any
      applicable shareholder approval provisions of any Trading Market on which any
      of
      the securities of the Company are listed or designated.

     

    (gg) 
      No
      General Solicitation.
      Neither
      the Company nor any person acting on behalf of the Company has offered or sold
      any of the Shares by any form of general solicitation or general advertising.
      The Company has offered the Shares for sale only to the Investors and certain
      other "accredited investors" within the meaning of Rule 501 under the Securities
      Act.

     

    (hh) Off
      Balance Sheet Arrangements.
      There
      is no transaction, arrangement, or other relationship between the Company and
      an
      unconsolidated or other off balance sheet entity that is required to be
      disclosed by the Company in its Exchange Act filings and is not so disclosed
      or
      that otherwise would be reasonably likely to have a Material Adverse
      Effect.

     


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


     

    (ii) No
      Undisclosed Events, Liabilities, Developments or Circumstances.
      Except
      for the transactions contemplated by this Agreement and the pending acquisition,
      no event, liability, development or circumstance has occurred or exists with
      respect to the Company or its business, properties, prospects, operations or
      financial condition, that is required to be, and has not been, disclosed, by
      the
      Company under applicable securities laws on a Current Report on Form 8-K filed
      with the Commission. 

     

    (jj) Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has taken,
      directly or indirectly, any action designed to cause or to result in the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Shares.

     

    (kk) Material,
      Non-Public Information.
      The
      Company confirms that neither it nor, to its knowledge, any of its officers
      or
      directors nor any other Person acting on its or their behalf has provided,
      and
      it has not authorized any placement agent to provide, any Investor or its
      respective agents or counsel with any information that it believes constitutes
      or could reasonably be expected to constitute material, non-public information
      except insofar as the existence, provisions and terms of the Transaction
      Documents and the proposed transactions hereunder may constitute such
      information, all of which will be disclosed by the Company in the press release
      and Current Report on Form 8-K as contemplated by Section 4.4 hereof. The
      Company understands and confirms that the Investors will rely on the foregoing
      representations in effecting transactions in securities of the Company. No
      event
      or circumstance has occurred or information exists with respect to the Company
      or any of its Subsidiaries or its or their business, properties, operations
      or
      financial conditions, which, under applicable law, rule or regulation, requires
      public disclosure or announcement by the Company but which has not been so
      publicly announced or disclosed (assuming for this purpose that the Company’s
      reports filed under the Exchange Act are being incorporated into an effective
      registration statement filed by the Company under the Securities Act), except
      for the announcement of this Agreement and related transactions.

     

    (ll) Acknowledgment
      Regarding Investors’ Purchase of Securities.
      The
      Company acknowledges and agrees that each of the Investors is acting solely
      in
      the capacity of an arm’s length purchaser with respect to the Transaction
      Documents and the transactions contemplated hereby and thereby. The Company
      further acknowledges that no Investor is acting as a financial advisor or
      fiduciary of the Company (or in any similar capacity) with respect to the
      Transaction Documents and the transactions contemplated thereby and any advice
      given by any Investor or any of their respective representatives or agents
      in
      connection with the Transaction Documents and the transactions contemplated
      thereby is merely incidental to the Investors’ purchase of the
      Shares.

     

    (mm) Other
      Representations and Warranties Relating to Dalian Fushi and the
      WFOE.
      

     

    (i) The
      constitutional documents and certificates and related material contracts of
      each
      of Dalian Fushi and the WFOE are valid and have been duly approved or registered
      (as applicable) by competent PRC Governmental Authorities. 

     


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    


     

    (ii) All
      material consents, approvals, authorizations or licenses requisite under PRC
      law
      for the due and proper establishment and operation of each of Dalian Fushi
      and
      the WFOE have been duly obtained from the relevant PRC Governmental Authorities
      and are in full force and effect. 

     

    (iii) All
      filings and registrations with the PRC Governmental Authorities required in
      respect of each of Dalian Fushi and the WFOE and its operations including,
      without limitation, the registrations with the Ministry of Commerce, the State
      Administration of Industry and Commerce, the State Administration for Foreign
      Exchange, tax bureau and customs authorities have been duly completed in
      accordance with the relevant PRC rules and regulations, except
      where the failure to complete such filings and registrations does not, and
      could
      not, individually or in the aggregate, have or result in a Material Adverse
      Effect.
      

     

    (iv) 
      Each of
      Dalian Fushi and the WFOE has complied with all relevant PRC laws and
      regulations regarding the contribution and payment of its registered share
      capital, the payment schedule of which has been approved by the relevant PRC
      Government Authorities. There are no outstanding rights of, or commitments
      made
      by the Company or any Subsidiary to sell any equity interest in the WFOE, or
      by
      Dalian Fushi’s shareholders to sell any equity interest in Dalian Fushi.


     

    (v) 
      Neither
      Dalian Fushi nor the WFOE is in receipt of any letter or notice from any
      relevant PRC Governmental Authority notifying it of revocation of any licenses
      or qualifications issued to it or any subsidy granted to it by any PRC
      Governmental Authority for non-compliance with the terms thereof or with
      applicable PRC laws, or the need for compliance or remedial actions in respect
      of the activities carried out by Dalian Fushi or the WFOE, except such
      revocation as does not, and could
      not, individually or in the aggregate, have or result in a Material Adverse
      Effect.
      

     

    (vi) 
      Each of
      Dalian Fushi and the WFOE has conducted its business activities within the
      permitted scope of business or has otherwise operated its business in compliance
      with all relevant legal requirements and with all requisite licenses and
      approvals granted by competent PRC Governmental Authorities. 

     

    (vii) 
      As to
      licenses, approvals and government grants and concessions requisite or useful
      for the conduct of any part of either Dalian Fushi’s or the WFOE’s business
      which are subject to periodic renewal, the Company has no knowledge of any
      grounds on which such requisite renewals will not be granted by the relevant
      PRC
      Governmental Authorities. 

     

    (viii) 
      With
      regard to employment and staff or labor, each of Dalian Fushi or the WFOE has
      complied with all applicable PRC laws and regulations in all material respects,
      including without limitation, laws and regulations pertaining to welfare funds,
      social benefits, medical benefits, insurance, retirement benefits, pensions
      or
      the like. 

     


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    


     

    (nn) Full
      Disclosure.
      All
      disclosure furnished by or on behalf of the Company to the Investors regarding
      any of the Group Companies, their respective businesses and the transactions
      contemplated under the Transaction Documents, including the Disclosure Schedules
      to this Agreement, with respect to the representations and warranties made
      herein are true and correct with respect to such representations and warranties
      and do not contain any untrue statement of a material fact or omit to state
      any
      material fact necessary in order to make the statements made therein, in light
      of the circumstances under which they were made, not misleading. The Company
      acknowledges and agrees that the Investors do not make any representations
      or
      warranties with respect to the transactions contemplated hereby other than
      those
      specifically set forth in Section 3.2 hereof.

     

    3.2. Representations
      and Warranties of the Investors.
      Each
      Investor hereby, for itself and for no other Investor, represents and warrants
      to the Company as follows:

     

    (a) Organization;
      Authority.
      Such
      Investor is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite
      corporate, partnership, or other power and authority to enter into and to
      consummate the transactions contemplated by the applicable Transaction Documents
      and otherwise to carry out its obligations thereunder. The execution, delivery
      and performance by such Investor of the transactions contemplated by this
      Agreement has been duly authorized by all necessary corporate or, if such
      Investor is not a corporation, such partnership, limited liability company
      or
      other applicable like action, on the part of such Investor. Each of this
      Agreement and the Registration Rights Agreement has been duly executed by such
      Investor, and when delivered by such Investor in accordance with the terms
      hereof, will constitute the valid and legally binding obligation of such
      Investor, enforceable against it in accordance with its terms, except as such
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application.

     

    (b) Investment
      Intent.
      Such
      Investor is acquiring the Shares as principal for its own account for investment
      purposes only and not with a view to or for distributing or reselling such
      Shares or any part thereof, without prejudice, however, to such Investor’s right
      at all times to sell or otherwise dispose of all or any part of such Shares
      in
      compliance with applicable federal and state securities laws. Subject to the
      immediately preceding sentence, nothing contained herein shall be deemed a
      representation or warranty by such Investor to hold the Shares for any period
      of
      time. Such Investor is acquiring the Shares hereunder in the ordinary course
      of
      its business. Such Investor does not have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the
      Shares.

     

    (c) Investor
      Status.
      At the
      time such Investor was offered the Shares, it was, and as of the date hereof
      it
      is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
      Such Investor also has such sophistication, knowledge and skill as to be able
      to
      fully evaluate the risks of investing in the Company.

     

    (d) General
      Solicitation.
      Such
      Investor is not purchasing the Shares as a result of any advertisement, article,
      notice or other communication regarding the Shares published in any newspaper,
      magazine or similar media or broadcast over television or radio or presented
      at
      any seminar or any other general solicitation or general
      advertisement.

     


    
      
        
        

      

      
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    (e) Access
      to Information.
      Such
      Investor acknowledges that it has reviewed the Disclosure Materials and has
      been
      afforded (i) the opportunity to ask such questions as it has deemed necessary
      of, and to receive answers from, representatives of the Company concerning
      the
      terms and conditions of the offering of the Shares and the merits and risks
      of
      investing in the Shares; (ii) access to information about the Company and the
      Subsidiaries and their respective financial condition, results of operations,
      business, properties, management and prospects sufficient to enable it to
      evaluate its investment; and (iii) the opportunity to obtain such additional
      information that the Company possesses or can acquire without unreasonable
      effort or expense that is necessary to make an informed investment decision
      with
      respect to the investment. Neither such inquiries nor any other investigation
      conducted by or on behalf of such Investor or its representatives or counsel
      shall modify, amend or affect such Investor’s right to rely on the truth,
      accuracy and completeness of the Disclosure Materials and the Company’s
      representations and warranties contained in the Transaction
      Documents.

     

    (f) Certain
      Trading Activities.
      Such
      Investor has not directly or indirectly, nor has any Person acting on behalf
      of
      or pursuant to any understanding with such Investor, engaged in any transactions
      in the securities of the Company (including, without limitations, any Short
      Sales involving the Company’s securities) since the time that such Investor was
      first contacted by the Company or Roth Capital Partners, LLC regarding the
      investment in the Company contemplated by this Agreement. Such Investor
      covenants that neither it nor any Person acting on its behalf or pursuant to
      any
      understanding with it will engage in any transactions in the securities of
      the
      Company (including Short Sales) prior to the time that the transactions
      contemplated by this Agreement are publicly disclosed. Notwithstanding the
      foregoing, in the case of Morgan Stanley & Co. Incorporated, this section
      3.2(f) shall apply only with respect to activity by the Principal Strategies
      Group that made the investment decision to purchase the Shares. Employees of
      Morgan Stanley & Co. Incorporated who manage other activities will have no
      direct knowledge of the investment decision by the Principal Strategies Group
      to
      purchase the Shares and may continue ordinary trading activities in the ordinary
      course of business. 

     

    (g) Limited
      Ownership. 
      The
      purchase by such Investor of the Shares issuable to it at the Closing will
      not
      result in such Investor (individually or together with other Person with whom
      such Investor has identified, or will have identified, itself as part of a
      “group” in a public filing made with the Commission involving the Company’s
      securities) acquiring, or obtaining the right to acquire, in excess of 19.999%
      of the outstanding shares of Common Stock or the voting power of the Company
      on
      a post transaction basis that assumes that the Closing shall have occurred.
      Such
      Investor does not presently intend to, alone or together with others, make
      a
      public filing with the Commission to disclose that it has (or that it together
      with such other Persons have) acquired, or obtained the right to acquire, as
      a
      result of the Closing (when added to any other securities of the Company that
      it
      or they then own or have the right to acquire), in excess of 19.999% of the
      outstanding shares of Common Stock or the voting power of the Company on a
      post
      transaction basis that assumes that the Closing shall have
      occurred.

     

    (h) Independent
      Investment Decision.
      Such
      Investor has independently evaluated the merits of its decision to purchase
      Shares pursuant to the Transaction Documents, and such Investor confirms that
      it
      has not relied on the advice of any other Investor’s business and/or legal
      counsel in making such decision. Such Investor has not relied on the business
      or
      legal advice of Roth Capital Partners, LLC or any of its agents, counsel or
      Affiliates in making its investment decision hereunder, and confirms that none
      of such Persons has made any representations or warranties to such Investor
      in
      connection with the transactions contemplated by the Transaction
      Documents.

     


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    


    The
      Company acknowledges and agrees that no Investor has made or makes any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.2.

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1.         
      (a) Shares
      may only be disposed of by the Investors in compliance with state and federal
      securities laws. In connection with any transfer of the Shares other than
      pursuant to an effective registration statement, to the Company, to an Affiliate
      of an Investor or in connection with a pledge as contemplated in Section 4.1(b),
      the Company may require the transferor thereof to provide to the Company an
      opinion of counsel selected by the transferor, the form and substance of which
      opinion shall be reasonably satisfactory to the Company, to the effect that
      such
      transfer does not require registration of such transferred Shares under the
      Securities Act.

     

    (b) Certificates
      evidencing the Shares will contain the following legend, until such time as
      they
      are not required under Section 4.1(c):

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT SECURED BY SUCH SECURITIES.

     


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    


     

    The
      Company acknowledges and agrees that an Investor may from time to time pledge,
      and/or grant a security interest in some or all of the Shares pursuant to a
      bona
      fide margin agreement in connection with a bona fide margin account and, if
      required under the terms of such agreement or account, such Investor may
      transfer pledged or secured Shares to the pledgees or secured parties. Such
      a
      pledge or transfer would not be subject to approval or consent of the Company
      and no legal opinion of legal counsel to the pledgee, secured party or pledgor
      shall be required in connection with the pledge, but such legal opinion may
      be
      required in connection with a subsequent transfer following default by the
      Investor transferee of the pledge. No notice shall be required of such pledge.
      At the appropriate Investor’s expense, the Company will execute and deliver such
      reasonable documentation as a pledgee or secured party of Shares may reasonably
      request in connection with a pledge or transfer of the Shares including the
      preparation and filing of any required prospectus supplement under Rule
      424(b)(3) of the Securities Act or other applicable provision of the Securities
      Act to appropriately amend the list of Selling Stockholders thereunder. Except
      as otherwise provided in Section 4.1(c), any Shares subject to a pledge or
      security interest as contemplated by this Section 4.1(b) shall continue to
      bear
      the legend set forth in this Section 4.1(b) and be subject to the restrictions
      on transfer set forth in Section 4.1(a).

     

    (c) Certificates
      evidencing Shares shall not contain any legend (including the legend set forth
      in Section 4.1(b)): (i) following a sale or transfer of such Shares pursuant
      to
      an effective registration statement (including a Registration Statement), or
      (ii) following a sale or transfer of such Shares pursuant to Rule 144 (assuming
      the transferee is not an Affiliate of the Company), or (iii) while such Shares
      are eligible for sale under Rule 144(k). If an Investor shall make a sale or
      transfer of Shares either (x) pursuant to Rule 144 or (y) pursuant to a
      registration statement and in each case shall have delivered to the Company
      or
      the Company’s transfer agent the certificate representing Shares containing a
      restrictive legend which are the subject of such sale or transfer
      and a representation letter in customary form (the
      date of such sale or transfer and Share delivery being the “Share
      Delivery Date”)
      and (1) the Company shall fail to deliver or cause to be delivered to such
      Investor a certificate representing such Shares that is free from all
      restrictive or other legends by the third Trading Day following the Share
      Delivery Date and (2) following such third Trading Day after the Share Delivery
      Date and prior to the time such Shares are received free from restrictive
      legends, the Investor, or any third party on behalf of such Investor, purchases
      (in an open market transaction or otherwise) shares of Common Stock to deliver
      in satisfaction of a sale by the Investor of such Shares (a "Buy-In"),
      then the Company shall pay in cash to the Investor (for costs incurred either
      directly by such Investor or on behalf of a third party) the amount by which
      the
      total purchase price paid for Common Stock as a result of the Buy-In (including
      brokerage commissions, if any) exceed the proceeds received by such Investor
      as
      a result of the sale to which such Buy-In relates. The Investor shall provide
      the Company written notice indicating the amounts payable to the Investor in
      respect of the Buy-In.

     

    (d) Notwithstanding
      the foregoing, while a registration statement (including a Registration
      Statement) covering such Shares is then effective, an Investor who holds any
      such Shares may request the removal of the legend set forth in Section 4.1(b)
      from the stock certificate representing such Shares by delivering to the Company
      a written request for the removal of such legend, together with (i) a
      certification to the Company that such Investor will only sell or otherwise
      dispose of such Shares pursuant to a Registration Statement or Rule 144 in
      accordance with applicable law and (ii) an agreement of such Investor, in a
      form
      reasonably satisfactory to the Company, to indemnify the Company for any losses
      or expenses the Company may reasonably incur as a result of any breach by such
      Investor of the certification referred to in this Section 4.1(d)(i). Upon
      receipt of any such written request from an Investor, the Company shall promptly
      authorize and direct the transfer agent of the Company to promptly reissue
      to
      such Investor upon receipt from such Investor of a certificate or certificates
      representing such Shares containing a restrictive legend which are the subject
      of such written request, a new stock certificate for the same number of such
      Shares which does not contain any restrictive legend.

     


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    


    4.2. Furnishing
      of Information.
      As long
      as any Investor owns the Shares, the Company covenants to timely file (or obtain
      extensions in respect thereof and file within the applicable grace period)
      all
      reports required to be filed by the Company after the date hereof pursuant
      to
      the Exchange Act. As long as any Investor owns Shares, if the Company is not
      required to file reports pursuant to such laws, it will prepare and furnish
      to
      the Investors and make publicly available in accordance with Rule 144(c) such
      information as is required for the Investors to sell the Shares under Rule
      144.
      The Company further covenants that it will take such further action as any
      holder of Shares may reasonably request, all to the extent required from time to
      time to enable such Person to sell the Shares without registration under the
      Securities Act within the limitation of the exemptions provided by Rule
      144.

     

    4.3. Integration.
      The
      Company shall not, and shall use its best efforts to ensure that no Affiliate
      of
      the Company shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Shares in a manner
      that would require the registration under the Securities Act of the sale of
      the
      Shares to the Investors, or that would be integrated with the offer or sale
      of
      the Shares for purposes of the rules and regulations of any Trading Market
      in a
      manner that would require stockholder approval of the sale of the securities
      to
      the Investors.

     

    4.4. Subsequent
      Registrations. Other than pursuant to Schedule 4.4, the Company may
      not file any registration statement (other than on Form S-8) with the Commission
      with respect to any securities of the Company prior to the time that all Shares
      are registered pursuant to one or more effective Registration Statement(s),
      and
      the prospectuses forming a portion of such Registration Statement(s) is
      available for the resale of all Shares.

     

    4.5. Securities
      Laws Disclosure; Publicity.
      By 9:00
      a.m. (New York time) on the Trading Day following the execution of this
      Agreement, and by 9:00 a.m. (New York time) on the Trading Day following the
      Closing Date, the Company shall issue press releases disclosing the transactions
      contemplated hereby and the Closing. On the Trading Day following the execution
      of this Agreement the Company will file a Current Report on Form 8-K disclosing
      the material terms of the Transaction Documents (and attach as exhibits thereto
      the Transaction Documents or the agreed forms thereof if such Transaction
      Document is an exhibit to this Agreement), and on the Trading Day following
      the
      Closing Date the Company will file an additional Current Report on Form 8-K
      to
      disclose the Closing. In addition, the Company will make such other filings
      and
      notices in the manner and time required by the Commission and the Trading Market
      on which the Common Stock is listed. Notwithstanding the foregoing, the Company
      shall not publicly disclose the name of any Investor, or include the name of
      any
      Investor in any filing with the Commission (other than the Registration
      Statement and any exhibits to filings made in respect of this transaction in
      accordance with periodic filing requirements under the Exchange Act) or any
      regulatory agency or Trading Market, without the prior written consent of such
      Investor, except to the extent such disclosure is required by law or Trading
      Market regulations.

     

    4.6. Limitation
      on Issuance of Future Priced Securities.
      During
      the six months following the Closing Date, the Company shall not issue any
      “Future Priced Securities” as such term is described by NASD
      IM-4350-1.

     


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    


    4.7. Indemnification
      of Investors.
      In
      addition to the indemnity provided in the Registration Rights Agreement, the
      Company will indemnify and hold the Investors and their directors, officers,
      shareholders, partners, employees and agents (each, an “Investor
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation (collectively, “Losses”)
      that
      any such Investor Party may suffer or incur as a result of or relating to any
      misrepresentation, breach or inaccuracy of any representation, warranty,
      covenant or agreement made by the Company in any Transaction Document. In
      addition to the indemnity contained herein, the Company will reimburse each
      Investor Party for its reasonable legal and other expenses (including the cost
      of any investigation, preparation and travel in connection therewith) incurred
      in connection therewith, as such expenses are incurred. Except as otherwise
      set
      forth herein, the mechanics and procedures with respect to the rights and
      obligations under this Section 4.7 shall be the same as those set forth in
      Section 5 of the Registration Rights Agreement.

     

    4.8. Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other Person acting on
      its
      behalf will provide any Investor or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Investor shall have executed a written agreement regarding
      the confidentiality and use of such information. The Company understands and
      confirms that each Investor shall be relying on the foregoing representations
      in
      effecting transactions in securities of the Company.

     

    4.9. Listing
      of Shares.
      The
      Company agrees, (i) to have the Shares listed on the current Trading Market
      as
      promptly as possible, (ii) if the Company applies to have the Common Stock
      listed on another Trading Market, it will include in such application the
      Shares, and will take such other action as is necessary or desirable to cause
      the Shares to be listed on such other Trading Market as promptly as possible,
      and (iii) it will take all action reasonably necessary to continue the listing
      and trading of its Common Stock on a Trading Market and will comply in all
      material respects with the Company’s reporting, filing and other obligations
      under the bylaws or rules of the Trading Market.

     

    4.10. Use
      of
      Proceeds.
      The
      Company will use the net proceeds from the sale of the Shares hereunder for
      working capital purposes and not for the satisfaction of any portion of the
      Company’s debt (other than payment of trade payables and accrued expenses in the
      ordinary course of the Company’s business and consistent with prior practices),
      or to redeem any Common Stock or Common Stock Equivalents.

     

    ARTICLE
      5.

    CONDITIONS
      PRECEDENT TO CLOSING

     

    5.1. Conditions
      Precedent to the Obligations of the Investors to Purchase Shares.
      The
      obligation of each Investor to acquire Shares at the Closing is subject to
      the
      satisfaction or waiver by such Investor, at or before the Closing, of each
      of
      the following conditions:

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of the Company contained herein shall be true
      and
      correct in all material respects as of the date when made and as of the Closing
      as though made on and as of such date;

     


    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    


    (b) Performance.
      The
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by it at or prior to
      the
      Closing;

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents;

     

    (d) Adverse
      Changes.
      Since
      the date of execution of this Agreement, no event or series of events shall
      have
      occurred that reasonably could have or result in a Material Adverse
      Effect;

     

    (e) No
      Suspensions of Trading in Common Stock; Listing.
      Trading
      in the Common Stock shall not have been suspended by the Commission or any
      Trading Market (except for any suspensions of trading of not more than one
      Trading Day solely to permit dissemination of material information regarding
      the
      Company) at any time since the date of execution of this Agreement, and the
      Common Stock shall have been at all times since such date listed for trading
      on
      a Trading Market; 

     

    (f) Nasdaq
      Listing.
      If
      applicable, the
      Nasdaq Stock Market shall have waived application of the 15 day prior notice
      contained in NASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have
      expired without objection;

     

    (g) Company
      Deliverables.
      The
      Company shall have delivered the Company Deliverables in accordance with Section
      2.2(a); and

     

    (h) Termination.
      This
      Agreement shall not have been terminated as to such Investor in accordance
      with
      Section 6.5.

     

    5.2. Conditions
      Precedent to the Obligations of the Company to sell Shares.
      The
      obligation of the Company to sell Shares at the Closing is subject to the
      satisfaction or waiver by the Company, at or before the Closing, of each of
      the
      following conditions:

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of each Investor contained herein shall be true
      and correct in all material respects as of the date when made and as of the
      Closing Date as though made on and as of such date;

     

    (b) Performance.
      Each
      Investor shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by such Investor at or
      prior to the Closing;

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents; 

     


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


    (d) Nasdaq
      Listing.
      If
      applicable, the
      Nasdaq Stock Market shall have waived application of the 15 day prior notice
      contained in NASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have
      expired without objection;

     

    (e) Investors
      Deliverables.
      Each
      Investor shall have delivered its Investors Deliverables in accordance with
      Section 2.2(b); and

     

    (f) Termination.
      This
      Agreement shall not have been terminated as to such Investor in accordance
      with
      Section 6.5.

     

    ARTICLE
      6.

    MISCELLANEOUS

     

    6.1. Fees
      and Expenses.
      Each
      party shall pay the fees and expenses of its advisers, counsel, accountants
      and
      other experts, if any, and all other expenses incurred by such party incident
      to
      the negotiation, preparation, execution, delivery and performance of the
      Transaction Documents. The Company shall pay all stamp and other taxes and
      duties levied in connection with the issuance of the Shares.

     

    6.2. Entire
      Agreement.
      The
      Transaction Documents, together with the Exhibits and Schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements, understandings, discussions and
      representations, oral or written, with respect to such matters, which the
      parties acknowledge have been merged into such documents, exhibits and
      schedules.

     

    6.3. Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
      the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 5:30 p.m. (New York City time)
      on
      any Trading Day, (c) the Trading Day following the date of mailing, if sent
      by
      U.S. nationally recognized overnight courier service, or (d) upon actual receipt
      by the party to whom such notice is required to be given. The address for such
      notices and communications shall be as follows:

     

    
      
        	
                If
                  to the Company:

              	 	
                Fushi
                  International, Inc.

              
	 	 	
                1
                  Shuang Qiang Road 

              
	 	 	
                Jinzhou,
                  Dalian 116100

              
	
                 

              	 	
                People's
                  Republic of China

              
	 	 	
                Facsimile: 
                  [   ]

              
	 	 	
                Attention:
                  President

              


      

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      
        	
                With
                  a copy to:

              	 	
                Weil,
                  Gotshal & Manges LLP

              
	 	 	
                Plaza
                  66, Tower 2, 38th Floor

              
	 	 	
                1366
                  Nanjing Road West

              
	 	 	
                Shanghai
                  200040

              
	 	 	
                People's
                  Republic of China

              
	 	 	
                Facsimile:
                    +86 6288 3866

              
	 	 	
                Attn.:
                    David Meredith, Esq. 

              


      

       

      
        	                                           
                	If
                to
                an
                Investor:                          	
                To
                  the address set forth under such Investor’s name on the signature pages
                  hereof;

              


      

       

    

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

     

    6.4. Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the Company and the Investors holding a majority of the
      Shares. No waiver of any default with respect to any provision, condition or
      requirement of this Agreement shall be deemed to be a continuing waiver in
      the
      future or a waiver of any subsequent default or a waiver of any other provision,
      condition or requirement hereof, nor shall any delay or omission of either
      party
      to exercise any right hereunder in any manner impair the exercise of any such
      right. No consideration shall be offered or paid to any Investor to amend or
      consent to a waiver or modification of any provision of any Transaction Document
      unless the same consideration is also offered to all Investors who then hold
      Shares.

     

    6.5. Termination.
      This
      Agreement may be terminated prior to Closing:

     

    (a) by
      written agreement of the Investors and the Company; and

     

    (b) by
      the
      Company or an Investor (as to itself but no other Investor) upon written notice
      to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern
      time on the Outside Date; provided,
      that
      the right to terminate this Agreement under this Section 6.5(b) shall not
      be available to any Person whose failure to comply with its obligations under
      this Agreement has been the cause of or resulted in the failure of the Closing
      to occur on or before such time.

     

    In
      the
      event of a termination pursuant to this Section, the Company shall promptly
      notify all non-terminating Investors. Upon a termination in accordance with
      this
      Section 6.5, the Company and the terminating Investor(s) shall not have any
      further obligation or liability (including as arising from such termination)
      to
      the other and no Investor will have any liability to any other Investor under
      the Transaction Documents as a result therefrom.

     


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


     

    6.6. Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party. This Agreement shall be
      construed as if drafted jointly by the parties, and no presumption or burden
      of
      proof shall arise favoring or disfavoring any party by virtue of the authorship
      of any provisions of this Agreement or any of the Transaction
      Documents.

     

    6.7. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the Investors. Any Investor may assign any or all of its rights
      under
      this Agreement to any Person to whom such Investor assigns or transfers any
      Shares, provided such transferee agrees in writing to be bound, with respect
      to
      the transferred Shares, by the provisions hereof that apply to the
“Investors.”

     

    6.8. No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.7 (as to each Investor Party).

     

    6.9. Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and any other Transaction Documents (whether
      brought against a party hereto or its respective Affiliates, employees or
      agents) shall be commenced exclusively in the New York Courts. Each party hereto
      hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein (including with respect
      to the enforcement of the any of the Transaction Documents), and hereby
      irrevocably waives, and agrees not to assert in any Proceeding, any claim that
      it is not personally subject to the jurisdiction of any such New York Court,
      or
      that such Proceeding has been commenced in an improper or inconvenient forum.
      Each party hereto hereby irrevocably waives personal service of process and
      consents to process being served in any such Proceeding by mailing a copy
      thereof via registered or certified mail or overnight delivery (with evidence
      of
      delivery) to such party at the address in effect for notices to it under this
      Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      Each party hereto hereby irrevocably waives, to the fullest extent permitted
      by
      applicable law, any and all right to trial by jury in any legal proceeding
      arising out of or relating to this Agreement or the transactions contemplated
      hereby. If either party shall commence a Proceeding to enforce any provisions
      of
      a Transaction Document, then the prevailing party in such Proceeding shall
      be
      reimbursed by the other party for its reasonable attorneys’ fees and other costs
      and expenses incurred with the investigation, preparation and prosecution of
      such Proceeding.

     

    6.10. Survival.
      The
      representations, warranties, agreements and covenants contained herein shall
      survive the Closing and the delivery of the Shares.

     


    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    


    


     

    6.11. Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    6.12. Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    6.13. Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Investor
      exercises a right, election, demand or option under a Transaction Document
      and
      the Company does not timely perform its related obligations within the periods
      therein provided, then such Investor may rescind or withdraw, in its sole
      discretion from time to time upon written notice to the Company, any relevant
      notice, demand or election in whole or in part without prejudice to its future
      actions and rights.

     

    6.14. Replacement
      of Shares.
      If any
      certificate or instrument evidencing any Shares is mutilated, lost, stolen
      or
      destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement Shares.
      If a
      replacement certificate or instrument evidencing any Shares is requested due
      to
      a mutilation thereof, the Company may require delivery of such mutilated
      certificate or instrument as a condition precedent to any issuance of a
      replacement.

     

    6.15. Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Investors and the Company will
      be entitled to specific performance under the Transaction Documents. The parties
      agree that monetary damages may not be adequate compensation for any loss
      incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

    6.16. Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to any Investor pursuant
      to
      any Transaction Document or an Investor enforces or exercises its rights
      thereunder, and such payment or payments or the proceeds of such enforcement
      or
      exercise or any part thereof are subsequently invalidated, declared to be
      fraudulent or preferential, set aside, recovered from, disgorged by or are
      required to be refunded, repaid or otherwise restored to the Company, a trustee,
      receiver or any other person under any law (including, without limitation,
      any
      bankruptcy law, state or federal law, common law or equitable cause of action),
      then to the extent of any such restoration the obligation or part thereof
      originally intended to be satisfied shall be revived and continued in full
      force
      and effect as if such payment had not been made or such enforcement or setoff
      had not occurred.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    6.17. Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Shares pursuant to the Transaction Documents has been made by such
      Investor independently of any other Investor. Nothing contained herein or in
      any
      Transaction Document, and no action taken by any Investor pursuant thereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated by the Transaction Documents.
      Each
      Investor acknowledges that no other Investor has acted as agent for such
      Investor in connection with making its investment hereunder and that no Investor
      will be acting as agent of such Investor in connection with monitoring its
      investment in the Shares or enforcing its rights under the Transaction
      Documents. Each Investor shall be entitled to independently protect and enforce
      its rights, including without limitation the rights arising out of this
      Agreement or out of the other Transaction Documents, and it shall not be
      necessary for any other Investor to be joined as an additional party in any
      proceeding for such purpose. The Company acknowledges that each of the Investors
      has been provided with the same Transaction Documents for the purpose of closing
      a transaction with multiple Investors and not because it was required or
      requested to do so by any Investor.

     

    6.18. Limitation
      of Liability.
      Notwithstanding anything herein to the contrary, the Company acknowledges and
      agrees that the liability of an Investor arising directly or indirectly, under
      any Transaction Document of any and every nature whatsoever shall be satisfied
      solely out of the assets of such Investor, and that no trustee, officer, other
      investment vehicle or any other Affiliate of such Investor or any investor,
      shareholder or holder of shares of beneficial interest of such a Investor shall
      be personally liable for any liabilities of such Investor.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOLLOW]

     


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    
      	 	 	 
	 	FUSHI INTERNATIONAL,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name: 
	 	Title:


    

     

    
      
        	 	 	 
	 	FUSHI HOLDINGS,
                INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name: 
	 	Title:


      

       

      
        
          	 	 	 
	 	
                  FUSHI INTERNATIONAL (DALIAN)
                    

                  BIMETALLIC CABLE CO.,
                    LTD.

                
	 
 	 
 	 
 
	 	By:  	 
	 	
                  
Name: 
	 	Title:


        

         

        
          
            	 	 	 
	 	
                    DALIAN FUSHI BIMETALLIC 

                    MANUFACTURING CO.,
                      LTD.

                  
	 
 	 
 	 
 
	 	By:  	 
	 	
                    
Name: 
	 	Title:


          

        

      

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOR INVESTORS FOLLOW]

     


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    NAME
      OF INVESTOR

     

    _________________________________________

     

    By: 
      ______________________________________

    Name:
      

    Title: 

     

    Investment
      Amount: $________________________

     

    Tax
      ID
      No.:_________________________________

     

    ADDRESS
      FOR NOTICE

     

    c/o:_______________________________________

     

    Street:_____________________________________

     

    City/State/Zip:_______________________________

     

    Attention:__________________________________

     

    Tel:_______________________________________

     

    Fax:_______________________________________

     

    DELIVERY
      INSTRUCTIONS

     

    (if
      different from above)

     

    c/o:_______________________________________

     

    Street:_____________________________________

     

    City/State/Zip:_______________________________

     

    Attention:__________________________________

     

    Tel:_______________________________________

     


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    Annex
      A

     

    SCHEDULE
      OF BUYERS

     

    
      	
              (1)

            	 	
              (2)

            
	
              Buyer

            	 	
               

               

               

               

              Address
                and

              Facsimile
                Number

            
	 	 	 
	 	 	
               

               

            
	 	 	 
	 	 	 
	 	 	 


    

     


    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    
       

      Disclosure
        Schedules to the Securities Purchase Agreement, dated as of October 26,
        2007 (the “Agreement”), by and between Fushi International, Inc., a Nevada
        corporation (the “Company”), and the investors listed on the Schedule of Buyers
        attached hereto as Annex
        A
        and identified on the signature pages hereto (each, an “Investor” and
        collectively, the “Investors”).

       

      All
        capitalized terms used but not defined herein shall have the meanings as
        defined
        in the Agreement, unless otherwise provided herein.

       

      This
        Disclosure Schedule shall be construed with and be deemed as an integral
        part of
        the Agreement to the same extent as if the same had been set forth in their
        entirety therein. This Disclosure Schedule is intended only to qualify and
        limit
        the representations and warranties of the Company in the Agreement and shall
        not
        be deemed to expand in any way the scope or effect of any such representations
        and warranties.

       

      The
        Disclosure Schedule indicates the section and, if applicable, the subsection
        of
        the Agreement to which it relates, but shall also qualify such other sections
        or
        subsections in the Agreement provided the disclosure is in sufficient detail
        to
        enable a reasonable person to identify such other section or subsection to
        which
        such information is responsive.

       

      Headings
        have been inserted in the sections of this Disclosure Schedule for convenience
        of reference only and shall to no extent have the effect of amending or changing
        the express language of the corresponding sections in the
        Agreement.

       

      Where
        the
        terms of a contract, lease, or agreement have been summarized or described
        in
        this Disclosure Schedule, such summary or description does not purport to
        be a
        complete statement of the material terms of such contract, lease, agreement
        or
        other disclosure item but is a sufficient statement of the matters required
        to
        be disclosed in such description.

       

      SCHEDULE
        3.1(a)

       

      1. As
        disclosed in the Company’s quarterly report on Form 10-QSB for the quarter ended
        September 30, 2006, the Company’s consolidated statement of income and other
        comprehensive income for the three and nine months ending September 30, 2005
        were restated due to an error with respect to the foreign exchange rate used
        in
        the calculation of foreign exchange translation gain (loss) as part of other
        comprehensive income (loss). The Company is also in the process of reviewing
        the
        calculation of foreign exchange translation gain (loss) for the year ended
        December 31, 2005. Once it has completed the review process, it may
        need to restate the financial statements to the extent that it is necessary
        and
        material.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      


      2. In
        the
        Company’s annual report on Form 10-KSB for the period ended December 12, 2005
        and its Registration Statement on Form SB-2, which was declared effective
        August
        2, 2006, it disclosed that according to its internal market surveys based
        on
        information provided by its customers and information collected from its
        competitors, it believed the estimated consumption of CCA in the U.S. has
        averaged approximately 30,000 tons per year in recent years. This and certain
        other market information may have been over-estimated and therefore,
        inaccurate.

       

      SCHEDULE
        3.1 (b)

      


      Ownership
        of Shares of Subsidiaries; Affiliates

      


      Set
        forth
        below is a complete and correct list of each Subsidiary: 

       

        



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


       

      On
        January 24, 2007, Fushi International, Inc. (the "Company"), Fushi Holdings,
        Inc., a wholly-owned subsidiary of the Company (“FHI”), Fushi International
        (Dalian) Bimetallic Cable Co., Ltd., a wholly-owned subsidiary of FHI (“FID”),
        Dalian Fushi Bimetallic Manufacturing Co., Ltd. (“DF”) and Citadel Equity Fund
        Ltd. ("Citadel") entered into a Notes Purchase Agreement (the “Notes Purchase
        Agreement”). Pursuant to the terms of the Notes Purchase Agreement, the Company
        offered and sold and Citadel purchased (a) $40,000,000 of the Company’s
        Guaranteed Senior Secured Floating Rate Notes due 2012 (the “HY Notes”) and (b)
        $20,000,000 of the Company’s 3.0% Senior Secured Convertible Notes due 2012 (the
“Convertible Notes” and collectively with the HY Notes, the "Notes").


      


      The
        HY
        Notes and the Convertible Notes were issued pursuant to indentures, each
        dated
        January 25, 2007 (the “HY Indenture” and “CB Indenture”, respectively, and
        together, the "Indentures") among the Company, the FHI, as guarantor, and
        The
        Bank of New York, as trustee for the Notes. Pursuant to the Indentures, FHI
        has
        agreed, and all of the Company’s other existing and future domestic subsidiaries
        are obligated, to guarantee, on a senior secured basis, to the holders of
        the
        Notes and the trustee the payment and performance of the Company’s obligations
        thereunder.

      


      As
        security for the Notes, the Company and The Bank of New York, as collateral
        agent, entered into a share pledge agreement, dated January 25, 2007 (the
        "Share
        Pledge Agreement"), to guarantee the Notes with all of the shares of common
        stock of FHI held by the Company as collateral.

      


      SCHEDULE
        3.1(d)(ii) 

      


      25,895,452
        

      


      SCHEDULE
        3(d)(iii)

      


      Voting
        and Other Agreements

       

      As
        of September 30, 2007, the Company has 

      
        	·  	
                outstanding
                  warrants to purchase 421,190 shares of the Company’s common stock with an
                  exercise price of $3.11 per share (which expire December
                  2011),

              


        	·  	
                vested
                  options granted to senior management to purchase 183,335 shares
                  of the
                  Company’s stock with a strike price of $12.3


              


        	·  	
                vested
                  options granted to independent directors to purchase 51,561 shares
                  of the
                  Company’s stock with a strike price of $11.75,
                  and

              


        	·  	
                $20
                  million principal amount 3% senior secured convertible notes outstanding,
                  which are convertible into 2,857,143 shares of the Company's common
                  stock
                  at an initial conversion price of $7.00 per share. 
                  

              




      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      For
        information relating to certain voting arrangements reference is made to
        the
        Investor Rights Agreements (the “Investor
        Rights Agreement”)
        dated
        as of January 25,
         2007
        by and among (i) the Company, Fushi Holdings, Inc., a Delaware corporation
        (“FHI”),
        Dalian Fushi Bimetallic Manufacturing Company Limited, a limited liability
        company organized and existing under the laws of the PRC (“Dalian
        Fushi”),
        Fushi International (Dalian) Bimetallic Cable Co., Ltd.(the “WFOE”,
        and, together with the Company, FHI and Dalian Fushi, the “Group
        Companies”),
        Mr. Fu Li (the “Controlling
        Shareholder”),
        and Mr. Fu Li, Mr. Mathus Yang Yue, and Mr. Chris Wang Wenbing (together
        with
        Mr. Fu Li and Mr. Mathus Yang Yue, the “Senior
        Management”)
        and (ii) Citadel Equity Fund Ltd.
        (“Citadel”).
        

       

      SCHEDULE
        3.1(e)

      


      Registration
        Rights

       

      On
        September 11, 2006, Mr. Yang Yue, a Director and President of the Company
        entered into a stock purchase agreement to sell a total of 200,000 shares
        of
        Company common stock to Coronado Capital Partners, LP and SEI Private Trust
        Co.
        FAO the JM Smucker Co. Master Trust to sell a total of 200,000 shares of
        Company
        common stock. The transaction closed on September 15, 2006. The shares were
        sold
        in a private sale and with a restrictive legend. Each purchaser was assigned
        Mr.
        Yang’s piggyback registration rights.

      


      On
        September 13, 2006, Mr. Fu Li, a Director, Chairman and CEO of the Company,
        entered into two stock purchase agreements to sell a total of 800,000 shares
        of
        common stock of Fushi International, Inc. to Pope Investments LLC and Halter
        Pope USX China Fund. The transaction closed on September 19, 2006. The shares
        were sold in a private sale transaction and with a restrictive legend. Each
        purchaser was assigned Mr. Fu’s piggyback registration rights.

      


      Citadel
        will be a party to the Registration Rights Agreement to be entered into by
        the
        Investors. 

      


      SCHEDULE
        3.1(g)

      


      Reference
        is made to the Investor Rights Agreement for a description of rights of first
        refusal and tag along rights granted to Citadel. Citadel is waving its rights
        of
        first refusal with respect to this financing.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      SCHEDULE
        3.1(h)

      


      Compliance
        with Instruments

       

      According
        to the Notice On Relevant Issues Concerning Foreign Exchange Administration
        For
        Domestic Residents To Engage In Financing And In Return Investment Via Overseas
        Special-purpose Vehicles (the “SAFE Notice No.75”), which was promulgated by the
        State Administration of Foreign Exchange (the “SAFE”) on October 21, 2005,
        domestic residents who have set up or control overseas special purpose vehicles
        and have completed the returning investment before the Notice was effective,
        and
        did not register for overseas investment according to the Notice, shall
        post-register such investment with the local foreign exchange bureau before
        March 31, 2006. 

      


      Fushi
        International (Dalian) Bimetallic Cable Co., Ltd. and its former shareholders
        who are PRC residents did not complete the
        registration formalities at Dalian Jinzhou Provincial Exchange Bureau pursuant
        to SAFE Notice No.75 by the deadline of March 31, 2006. Despite this, PRC
        counsel has advised that Fushi
        International (Dalian) Bimetallic Cable Co., Ltd. will
        not be restricted from paying dividends out of profits or making other similar
        distributions of profits to the Company or any of its Subsidiaries that own
        outstanding shares of capital stock or similar equity interests of Fushi
        International (Dalian) Bimetallic Cable Co., Ltd.

       

      According
        to the Company's PRC counsel, the Dalian Administrative Bureau of Foreign
        Exchange (the "Bureau") has received the application documents for the
        registration of SAFE Notice No. 75 and, based on oral communication from
        the
        Bureau, prior to the registration of SAFE Notice No. 75, Fushi
        International (Dalian) Bimetallic Cable Co., Ltd. will
        not
        be subjected to any administrative punishment of any nature by the Bureau
        on the
        grounds of Fushi
        International (Dalian) Bimetallic Cable Co., Ltd.’s and its former shareholders’
failure
        to register with the Bureau by March 31, 2006 pursuant to SAFE Notice No.
        75.

       

      Dalian
        Fushi Company Group Co., Ltd, a former shareholder of Dalian Fushi Bimetallic
        Manufacturing Co., Ltd transferred all its shares and rights in Dalian Fushi
        to
        Li Fu pursuant to a Resolution of Shareholders dated December, 12, 2005,
        which,
        according to PRC counsel, is valid, binding and enforceable under the laws
        of
        the PRC. 

      


      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      SCHEDULE
        3.1(k) 

       

      Legal
        Proceedings

      


      On
        December 11, 2006 the Company received service of an action filed by Kuhns
        Brothers, Inc., Kuhns Brothers Securities Corp., and Kuhns Brothers & Co.,
        Inc. against the Company in the United States District Court, District of
        Connecticut filed on November 27, 2006 (the “Action”).  The Action seeks
        declaratory judgment concerning the interpretation and enforceability of
        specific terms of the engagement letter agreement, dated May 27, 2005, by
        and
        between Kuhns Brothers, Inc. and the Company, which the Company terminated
        in
        September 2006.  The Action further asserts that the Company breached the
        terms of the Agreement. The Company believes that the plaintiffs’ claims are
        without merit and intends to vigorously defend the Action.

      


      On
        August
        1, 2006, Dalian Fushi filed an action in Suzhou Intermediate People’s Court
        against Suzhou Xinda Bimetallic Material Co. Ltd with respect to Dalian Fushi’s
        patent Jointing Device Producing Copper Clad Aluminum Lead.

       

      On
        August
        1, 2006, Dalian Fushi filed an action in Suzhou Intermediate People’s Court
        against Wujiang Zhongxin Technologies Co. Ltd with respect to Dalian Fushi’s
        patent Jointing Device Producing Copper Clad Aluminum Lead.

       

      On
        August
        1, 2006, Dalian Fushi filed an action in Nanjin Intermediate People’s Court
        against Changzhou Yingte Compound Metal Processing Co. Ltd with respect to
        Dalian Fushi’s patent Jointing Device Producing Copper Clad Aluminum
        Lead.

       

      On
        August
        1, 2006, Dalian Fushi filed an action in Nanjin Intermediate People’s Court
        against Changzhou Wujinhengtong Co. Ltd with respect to Dalian Fushi’s patent
        Jointing Device Producing Copper Clad Aluminum Lead.

       

      On
        August
        1, 2006, Dalian Fushi filed an action in Nanjin Intermediate People’s Court
        against Changzhou Mingtong Co. Ltd with respect to Dalian Fushi’s patent
        Jointing Device Producing Copper Clad Aluminum Lead.

       

      On
        August
        1, 2006, Dalian Fushi filed an action in Nanjin Intermediate People’s Court
        against Jiangsu Sanmu Group with respect to Dalian Fushi’s patent Jointing
        Device Producing Copper Clad Aluminum Lead.

       

      On
        August
        1, 2006, Dalian Fushi filed an action in Nanjin Intermediate People’s Court
        against Wuxi Ruicheng Co. Ltd with respect to Dalian Fushi’s patent Jointing
        Device Producing Copper Clad Aluminum Lead.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


       

      On
        August
        1, 2006, Dalian Fushi filed an action in Dalian Intermediate People’s Court
        against Mr. Shaoyi Liu with respect to Dalian Fushi’s patent Jointing Device
        Producing Copper Clad Aluminum Lead. 

      


      SCHEDULE
        3.1(m) 

       

      Title
        To Property 

      


      1.
        On May
        6, 2003, Dalian Fushi entered into a 60-month loan agreement (“ICBC Loan
        Agreement”) with the Industrial and Commercial Bank of China Dalian branch
        (“ICBC”) for the loan of RMB80 million from ICBC to Dalian Fushi. The security
        provided by Dalian Fushi in consideration for the said loan includes land
        use
        rights, workshops and production lines. 

      


      The
        following assets are collateral for the loan agreement between Dalian Fushi
        and
        ICBC in 2003.

       

      List
        of Collateral Assets

       

      
        	
                Assets

              	
                Space

                (Square
                  metres)

              	
                Book
                  value(RMB)

              	
                Market
                  value(RMB)

              	
                Location

              	
                Owned
                  by

              
	
                Land
                  Use Rights 

              	
                60,000

              	
                23,199,000

              	
                429,00,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Workshop

              	
                4,000

              	
                5,169,750

              	
                12,400,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Workshop

              	
                4,800

              	
                6,203,700

              	
                14,880,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Workshop

              	
                4,800

              	
                6,203,700

              	
                14,880,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                5
                  Production lines

              	
                -

              	
                11,600,000

              	
                6,883,250

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Book
        Value: the amount Dalian Fushi paid for the purchase of the assets.

      Market
        Value: current market value of the assets.

       

      2.
        On
        August 24, 2006, Dalian Fushi entered into a Comprehensive Credit Extension
        Agreement with the Bank of China Dalian Branch (“Bank of China”). Bank of China
        agreed to grant Dalian Fushi a maximum credit line of RMB 89.80 million.
        The
        security provided in consideration of the credit line includes, without
        limitation, Dalian Fushi’s land use rights, administration building, workshops
        and accommodation buildings. 

      


      The
        following assets are collateral for the credit extension agreement between
        Dalian Fushi and Bank of China in 2006.

       

      List
        of Collateral Assets

       

      
        	
                Assets

              	
                Space

                (Square
                  metres)

              	
                Book
                  value(RMB)

              	
                Market
                  value(RMB)

              	
                Location

              	
                Owned
                  by

              
	
                Land
                  Use Rights

              	
                43,605

              	
                16,860,000

              	
                31,177,580

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Administration
                  building

              	
                26,584

              	
                126,365,920

              	
                151,528,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Workshop

              	
                8,720

              	
                35,652,700

              	
                41,854,510

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Workshop

              	
                4,800

              	
                6,203,700

              	
                14,880,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Workshop

              	
                4,000

              	
                5,169,750

              	
                12,400,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Accommodation
                  building

              	
                3,834

              	
                16,150,880

              	
                17,253,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              
	
                Accommodation
                  building

              	
                3,834

              	
                16,150,880

              	
                17,253,000

              	
                1
                  Shuang Qiang Road, Jinzhou, Dalian, China 116100

              	
                Dalian
                  Fushi

              


      

       

      Book
        Value: the amount Dalian Fushi paid for the purchase of the assets.

      Market
        Value: current market value of the assets.

       

      SCHEDULE
        3.1 (n) 

      


      Insurance

      


      The
        Company does not presently maintain product liability insurance, and its
        property and equipment insurance does not cover the full value of its property
        and equipment, which
        leaves the Company with exposure in the event of loss or damage to its
        properties or
        claims
        filed against it.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      It
        currently does not carry any product liability or other similar insurance.
        The
        Company has purchased automobile insurance with third party liability coverage
        for its vehicles. In addition, it has purchased property insurance from China
        United Property Insurance Company to cover real property and plant of up
        to
        RMB43,350,000 (approximately US$5,344,652), and manufacturing machine and
        equipment of up to RMB36,750,000 (approximately US$4,541,410). The total
        coverage of its property and equipment is approximately US$9,886,062.


      


      Except
        for property and automobile insurance, the Company does not have other insurance
        such as business liability or disruption insurance coverage for its operations
        in
        the
        PRC.

      


      Set
        forth
        below is a list of the Company’s insurance policies: 

      


      


      
        	
                Insurance
                  Policy Number

              	 	
                Type
                  of Insurance 

              	 	
                Property

              	
                Coverage
                  Period

              	 	
                Insurance
                  Coverage RMB

              	
                Name
                  of Insurance Company

              	
                Secured
                  Lender

              
	 	 	
                Property

                Insurance

              	 	
                Buildings
                  

              	 	 	
                20,000,000

              	
                China
                  Pacific Property Insurance Co., Ltd.

              	
                Industrial
                  and Commercial Bank of China

              
	
                AP00AB01HQ

                D2006B000012

              	 	
                Property
                  

                Insurance

              	 	
                Buildings
                  

              	
                07/24/2007
                  to 07/23/2008

              	 	
                89,000,000

              	
                Yongan
                  Property Insurance Co., Ltd. Dalian Branch

              	
                Bank
                  of China

              
	 	 	
                Property
                  

                Insurance

              	 	
                Fixed
                  Assets

              	
                07/08/2007
                  to 07/07/2008

              	 	
                80,000,000

              	
                China
                  United Property Insurance Company

              	
                Industrial
                  and Commercial Bank of China

              
	 	 	
                Property
                  

                Insurance

              	 	
                Fixed
                  Assets

              	
                07/03/2007
                  to 07/02/2008

              	 	
                60,000,000

              	
                China
                  United Property Insurance Company

              	
                Bank
                  of China

              
	
                020684010805

                0818000153

              	 	
                Property
                  Insurance/Third Party Liability Insurance

              	 	
                Auto

              	
                03/24/2007
                  to 03/23/2008

              	 	
                100,000

              	
                China
                  United Property Insurance Company

              	
                None

              
	 	 	
                Property
                  Insurance/Third Party Liability Insurance

              	 	
                Auto

              	
                03/24/2007
                  to 03/23/2008

              	 	
                100,000

              	
                China
                  United Property Insurance Company

              	
                None

              
	
                AP00AB01DMC2006B000207

              	 	
                Third
                  Party Liability Insurance

              	 	
                Auto

              	 	 	 	
                Yongan
                  Property Insurance Company Limited

              	
                None

              


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

        

          
            	
                    AP00AB01DMC2006B000208

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000209

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000210

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000211

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000212

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000213

                  	
                    Third
                      Party Liability Insurance Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000214

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB01DMC2006B000215

                  	
                    Third
                      Party Liability Insurance

                  	
                    Auto

                  	
                     

                  	
                     

                  	
                    Yongan
                      Property Insurance Company Limited

                  	
                    None

                  
	
                    AP00AB010FA2006B000025

                  	
                    Third
                      Party 

                  	
                    Auto

                  	
                     

                  	
                    Loss
                      of Life or Limb

                  	
                    50,000

                  	
                    Yongan
                      Insurance Co., Ltd.

                  	
                    None

                  
	
                    Hospitalization

                  	
                    8,000

                  
	
                    Damage
                      of Property

                  	
                    2,000

                  
	
                    Loss
                      of Life or Limb (No Fault)

                  	
                    10,000

                  
	
                    Hospitalization

                    (No
                      Fault)

                  	
                    1,600

                  
	
                    Damage
                      of Property

                    (No
                      Fault)

                  	
                    400

                  


          

        

         

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      

        
          	
                  AP00AB010FA2006B000026

                	
                  Third
                    Party Liability Insurance

                	
                  Auto

                	
                   

                	
                  Loss
                    of Life or Limb

                   

                  Hospitalization

                   

                  Damage
                    of Property

                   

                  Loss
                    of Life or Limb (No Fault)

                   

                  Hospitalization
                    (No Fault)

                   

                  Damage
                    of 

                  Property
                    (No Fault)

                	
                  50,000

                   

                  8,000

                   

                  2,000

                   

                  10,000

                   

                  1,600

                   

                  400

                	
                  Yongan
                    Insurance Co., Ltd.

                	
                  None

                
	
                  AP00AB010FA2006B000028

                	
                  Third
                    Party Liability Insurance

                	
                  Auto

                	
                   

                	
                  Loss
                    of Life or Limb

                	
                  50,000

                	
                  Yongan
                    Insurance Co., Ltd.

                	
                  None

                
	
                  Hospitalization

                	
                  8,000

                
	
                  Damage
                    of Property

                	
                  2,000

                
	
                  Loss
                    of Life or Limb (No Fault)

                	
                  10,000

                
	
                  Hospitalization
                    (No Fault)

                	
                  1,600

                
	
                  Damage
                    of Property

                  (No
                    Fault)

                	
                  400

                
	
                  20590221020007011086

                	
                  Third
                    Party Liability Insurance

                	
                  Auto

                	
                  06/21/2007
                    to 06/20/2008

                	
                  100,000

                	
                  Dubang
                    Insurance Co., Ltd.

                	
                  None

                
	
                  20590221020007011093

                	
                  Third
                    Party Liability Insurance

                	
                  Auto

                	
                   

                	
                   

                	
                  Dubang
                    Insurance Co., Ltd.

                	
                  None

                


        

      

      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Schedule
        3.1(p)

       

      Intellectual
        Property 

       

      
        	
                Name
                  of IP

              	
                Type
                  of IP

              	
                ID
                  No.

              	
                Owned
                  by

              	
                Country
                  of Registration

              
	
                Jointing
                  Device Producing Copper Clad Aluminum Lead

              	
                Patent

                (expired)

              	
                ZL96238273.6

              	
                Fushi
                  International (Dalian) Bimetallic Cable Co., Ltd.

              	
                PRC

              
	
                Aluminum
                  Bar Brushing Machine

              	
                Patent

              	
                ZL200320105379.X

              	
                Dalian
                  Fushi Bimetallic Manufacturing Co., Ltd.

              	
                PRC

              
	
                Metallurgical
                  Rolling and Welding Device for CCA and CCS

              	
                Patent

              	
                ZL200420031104.0

              	
                Dalian
                  Fushi Bimetallic Manufacturing Co., Ltd.

              	
                PRC

              
	
                Polyurethane(PU)
                  Roller

              	
                Patent

              	
                ZL200320105378.5

              	
                Dalian
                  Fushi Bimetallic Manufacturing Co., Ltd.

              	
                PRC

              
	
                Press
                  Cladding Device for CCA

              	
                Patent

              	
                ZL200320105377.0

              	
                Dalian
                  Fushi Bimetallic Manufacturing Co., Ltd.

              	
                PRC

              
	
                Jointing
                  Device For Copper Clad Steel Bimetallic Composite Lead

              	
                Patent

              	
                ZL992234549

              	
                Fushi
                  International (Dalian) Bimetallic Cable Co., Ltd.

              	
                PRC

              
	
                Vertical
                  Integrated Drawing Machine for CCA

              	
                Patent

              	
                ZL200320105380.2

              	
                Dalian
                  Fushi Bimetallic Manufacturing Co., Ltd.

              	
                PRC

              
	
                Facture For Producing
                  Regular Wire of Copper Clad Aluminium

              	
                Patent

              	
                Application
                  Pending

              	
                Dalian
                  Fushi Bimetallic Manufacturing Co., Ltd.

              	
                PRC

              
	
                Fushi

                 

              	
                Trademark

              	 	
                Li
                  Fu ;Trademark Authorization to Dalian Fushi Bimetallic Manufacturing
                  Co.,
                  Ltd.

              	
                PRC

              


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        3.1(q)

      


      Internal
        controls 

      


      The
        Company has completed the re-engineering of the internal control system and
        is
        currently test-running the system. The Company has not yet evaluated its
        internal controls over financial reporting in order to allow management to
        report on, and the independent auditors to attest to, its internal controls
        over
        financial reporting, as will be required by Section 404 of the Sarbanes-Oxley
        Act of 2002 and the rules and regulations of the SEC. The Company plans to
        perform the testing of the operating effectiveness of controls before December
        31, 2007 in an effort to comply with the management assessment certification
        requirements of Section 404, which will initially apply to us as of December
        31,
        2007. 

       

      SCHEDULE
        3.1(r)(1)

      


      Financial
        Statements

      


      1. As
        disclosed in the Company’s quarterly report on Form 10-QSB for the quarter ended
        September 30, 2006, the Company’s consolidated statement of income and other
        comprehensive income for the three and nine months ending September 30, 2005
        was
        restated due to an error with respect to the foreign exchange rate used in
        the
        calculation of foreign exchange translation gain (loss) as part of other
        comprehensive income (loss). The Company is also in the process of reviewing
        the
        calculation of foreign exchange translation gain (loss) for the year ended
        December 31, 2005. Once it has completed the review process,  it may
        need to restate the financial statements to the extent that it is necessary
        and
        material.

      


      2. In
        the
        Company’s annual report on Form 10-KSB for the period ended December 12, 2005
        and its Registration Statement on Form SB-2, which was declared effective
        August
        2, 2006, it disclosed that according to its internal market surveys based
        on
        information provided by its customers and information collected from its
        competitors, it believed the estimated consumption of CCA in the U.S. has
        averaged approximately 30,000 tons per year in recent years. This and certain
        other market information may have been over-estimated and therefore,
        inaccurate.

      


      SCHEDULE
        3.1(r)(ii)

      


      Please
        refer to the Company’s Form 8-K filed with the SEC on January 26,
        2007.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      SCHEDULE
        3.1 (aa)

      


      Related
        Party Transactions 

      


      John
        Kuhns is formerly a director of both the Company and FHI and is also a
        shareholder, director and chairman of Kuhns Brothers, Inc.

      


      On
        December 13, 2005, the Company entered into and consummated a share exchange
        agreement with the 14 holders of all of the outstanding capital stock of
        Fushi
        Holdings, Inc. (“FHI”)
        (formerly known as Diversified Products, Inc.). The stockholders of FHI were
        Dalian Fushi Enterprise Group Co. Ltd., Yue Mathus Yang, Xishan Yang, Chunyan
        Xu, Kuhns Brothers, John Kuhns, Mary Fellows, John Starr, Jay Gutterman,
        Kelly
        Chow, Redwood Capital, Inc., Chris Bickel, Sam Shoen and Paul Kuhns.


      


      Kuhns
        Brothers, Inc. received its shares of FHI common stock for services rendered
        in
        connection with the reorganization of Dalian Fushi's business.

      


      Under
        the
        share exchange agreement, the Company issued an aggregate of 784,575.16 shares
        of the Company’s Series A convertible preferred stock in exchange for the 15,560
        shares of common stock of FHI held by the FHI Stockholders, representing
        all of
        the outstanding capital stock of FHI. As a result of the reverse stock-split,
        which was effectuated on January 30, 2006, the series A convertible preferred
        stock converted into an aggregate of 15,475,595 shares of common stock of
        the
        Company, representing approximately 77.85% of its total outstanding common
        stock.

      


      On
        December 28, 2005, the Company completed a private placement offering of
        215,424.84 shares of its series B convertible preferred stock, together with
        warrants, for $12,000,000 under certain stock purchase agreements. The series
        B
        convertible preferred stock converted automatically into approximately 4,250,000
        shares of the Company’s common stock upon the occurrence of the reverse
        stock-split on January 30, 2006. In addition to the series B convertible
        preferred stock, each investor received one warrant for every two shares
        of the
        Company’s common stock that it acquired upon the automatic conversion of the
        series B convertible preferred stock.

      


      The
        Company sold the series B convertible preferred stock, together with the
        warrants, in a private placement through Kuhns Brothers Securities Corporation
        (“Kuhns Brothers Securities"), an NASD and SEC registered broker-dealer. Kuhns
        Brothers Securities is a subsidiary of Kuhns Brothers, Inc. 

        


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      In
        connection with the placement of the Company’s series B convertible preferred
        stock and warrants, Kuhns Brothers Securities, as placement agent, received
        the
        following compensation: (i) $200,000 cash as signing fee, documentation fee
        and
        purchase fee, (ii) 10% of the total cash paid for the series B convertible
        preferred stock and warrants, (iii) 38,321.15 shares of series A convertible
        preferred stock, which converted automatically into approximately 756,017
        shares
        of the Company’s common stock on January 30, 2006, and (iv) a warrant to
        purchase 424,929 shares of common stock at the exercise price of $3.1064
        per
        share, exercisable within 5 years of the date of issue. In addition, Kuhns
        Brothers Securities is to receive 10% of the proceeds from the exercise of
        the
        warrants issued to the investors.

      


      SCHEDULE
        3.1(mm)

      


      Prefer
        refer to Schedule 3.1(h).