SECURITIES
      PURCHASE AGREEMENT

    


    THIS
      SECURITIES PURCHASE AGREEMENT
      (this
“Agreement”)
      is
      dated as of August 2, 2007, among CHINA
      NATURAL GAS, INC.,
      a
      Delaware corporation (the “Company”),
      and
      the investors 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 Rule 506 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
      I.

    DEFINITIONS

     

    Section
      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.

    


    “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 California are authorized
      or
      required by law or other governmental action to close.

    


    “Commission”
      means
      the Securities and Exchange Commission.

    


    “Common
      Stock”
      means
      the common stock of the Company, par value $0.001 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 or exercisable 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
      Counsel”
      means
      Crone Rozynko LLP.

    


    “Disclosure
      Materials”
      has the
      meaning set forth in Section 3.1(h).

    


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

    


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

    


    “First
      Closing”
      means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1(a).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


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

    


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

    


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

    


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

    


    “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 4.8.

    


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

    


    “Material
      Adverse Effect”
      means
      any of (i) a material and adverse effect on the legality, validity or
      enforceability of any Transaction Document, (ii) a material and adverse effect
      on the results of operations, assets, business, prospects or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
      or (iii) an adverse impairment to the Company’s ability to perform on a timely
      basis its obligations under any Transaction Document.

    


    “California
      Courts”
      means
      the state and federal courts sitting in the City of San Francisco, County of
      San
      Francisco, California.

    


    “Outside
      Date”
      means
      August 6, 2007.

    


    “Per
      Share Purchase Price”
      equals
      $3.25.

    


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

    


    “Proceeding”
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an 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
      B
      hereto.

    


    “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(h).

    


    “Second
      Closing”
      means
      the closing of the issuance of the Warrants set forth in Section
      2.1(b).

    


    “Second
      Closing Company Deliverables”
      has the
      meaning set forth in Section 2.2(c).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    “Securities”
      means
      the Shares, the Warrants and the Warrant Shares.

    


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

    


    “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(w) of the Regulation S-X
      promulgated by the Commission under the Exchange Act.

    


    “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
      National Quotation Bureau Incorporated (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 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 Warrants and the Registration Rights Agreement and any
      other
      documents or agreements executed in connection with the transactions
      contemplated hereunder.

    


    “Warrants”
      means
      the Common Stock purchase warrants in the form of Exhibit A, which are issuable
      to the Investors at the Second Closing.

    


    “Warrant
      Shares”
      means
      the shares of Common Stock issuable upon exercise of the Warrants.

    


    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    Section
      2.1 Closings.
      Subject
      to the terms and conditions set forth in this Agreement, each Investor agrees
      to
      purchase at the First Closing, that number of Shares and Warrants set forth
      opposite such Investor’s name on Schedule
      2.1
      hereto
      for the aggregate purchase price set forth thereon and the Company agrees to
      sell and issue to each Investor at the First Closing that number of Shares
      set
      forth opposite such Investor’s name on Schedule
      2.1
      hereto
      and to issue to each Investor at the Second Closing the Warrants to purchase
      that number of Warrant Shares as set forth opposite such Investor’s name on
Schedule
      2.1
      hereto.


    


    (a) First
      Closing.
      The
      purchase and sale of Shares and Warrants shall take place at the offices of
      Crone Rozynko LLP, 101 Montgomery Street, Suite 1950, San Francisco, California
      94104 on August 2, 2007, or at such other time and place as the Company and
      the
      Investors pursuant hereto mutually agree upon orally or in writing (which time
      and place are designated as the “First
      Closing”).

    


    (b) Second
      Closing.
      The
      issuance of the Warrants shall take place at the offices of Crone Rozynko LLP,
      101 Montgomery Street, Suite 1950, San Francisco, California 94104 within three
      business days following the Certificate of Amendment of the Company to increase
      its authorized shares of Common Stock from 30,000,000 shares to 45,000,000
      shares being filed and becoming effective with the Secretary of State of the
      State of Delaware. In the event the Second Closing does not occur 90 days
      following the First Closing, on such date and each monthly anniversary of such
      date thereafter, the Company shall pay to each Investor an amount in cash,
      as
      liquidated damages and not as a penalty, equal to 1.0% of the aggregate of
      the
      product of (x) the number of Warrant Share set forth opposite such Investor’s
      name on Schedule
      2.1
      hereto
      times (y) the per share Exercise Price as set forth in the Warrants until the
      Second Closing has occurred. In no event shall the Company be obligated to
      pay
      any penalty to any Investor pursuant to this Section 2.11(b) in an aggregate
      amount that exceeds 10% of the aggregate number of Warrant Shares times the
      per
      share Exercise Price as set forth in the Warrants.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c) Subsequent
      Closings.
      The
      Company may sell up to the balance of the authorized number of Shares and
      Warrants not sold as the Initial Closing to such purchasers as it shall select
      provided that any such sale shall be consummated not later than thirty (30)
      days
      after the Initial Closing. The subsequent purchases and sales of the Shares
      shall take place at the offices of Crone Rozynko LLP, 101 Montgomery Street,
      Suite 1950, San Francisco, California 94104, at such time or at such other
      place
      as the Company and the Investors acquiring the Shares mutually agree upon orally
      or in writing (which such time and place, together with the First and Second
      Closings, are each designated as a “Closing”)

     

    Section
      2.2 Closing
      Deliveries.
      

    


    (a)
      At
      the First Closing, the Company shall deliver or cause to be delivered to each
      Investor the following (the “First
      Closing 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) a
      certificate of the Transfer Agent with respect to the outstanding Common Stock
      number of the Company as of the most recent practicable date;

    


    (iii) an
      Officer’s Certificate and Incumbency Certificate, in agreed form, duly executed
      by such officers of the Company as of the date of the First
      Closing;

    


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

    


    (v) this
      Agreement duly executed by the Company; 

    


    (vi) a
      legal
      opinion of Company Counsel, in the form of Exhibit
      B
      attached
      hereto; and

    


    (vii) a
      copy of
      a certificate of good standing for the Company issued by the Secretary of State
      of Delaware as of the date of the First Closing.

     

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

     

    (i) its
      Investment Amount, (A) in United States dollars and in immediately available
      funds, by check or by wire transfer to the following account designated for
      such
      purpose:

    


    Account
      Name: China Natural Gas, Inc.

    Account
      Number: 

    Bank
      Name: 

    ABA
      Routing Number: 

    Bank
      Address:

    


    (ii) the
      Registration Rights Agreement, duly executed by such Investor; and

    


    	(iii)  	
            the
              Agreement duly executed by such Investor.

          


     

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i) a
      certificate of the Transfer Agent with respect to the outstanding Common Stock
      number of the Company as of the most recent practicable date;

    


    (ii) an
      Officer’s Certificate and Incumbency Certificate, in agreed form, duly executed
      by such officers of the Company as of the date of the Second
      Closing;

    


    (iii) a
      Warrant, registered in the name of such Investor, pursuant to which such
      Investor shall have the right to acquire up to the number of shares of Common
      Stock equal to 15% of the Shares to be issued to such Investor;

    


    (iv) a
      copy of
      a certificate of good standing for the Company issued by the Secretary of State
      of Delaware as of the date of the Second Closing.

    


    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    Section
      3.1 Representations
      and Warranties of the Company.
      The
      Company hereby makes the following representations and warranties to each
      Investor:

     

    (a) Subsidiaries.
      The
      Company has no direct or indirect Subsidiaries other than as specified in the
      SEC Reports. 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.
      Neither the Company nor any Subsidiary is party to any material joint venture,
      nor has any ownership interest in any entity that is material to the Company
      or
      as disclosed in the SEC Reports.

     

    (b) Organization
      and Qualification.
      The
      Company and each Subsidiary are duly incorporated or otherwise organized and
      validly existing under the laws of the jurisdiction of its incorporation or
      organization (as applicable), with the requisite power and authority to own
      and
      use its properties and assets and to carry on its business as currently
      conducted. Neither the Company nor any Subsidiary is in violation of any of
      the
      material provisions of its respective certificate or articles of incorporation,
      bylaws or other organizational or charter documents. The Company and each
      Subsidiary are duly qualified to conduct its respective businesses and are
      in
      good standing as a foreign corporation or other entity in each jurisdiction
      in
      which the nature of the business conducted or property owned by it makes such
      qualification necessary, except where the failure to be so qualified or in
      good
      standing, as the case may be, could not, individually or in the aggregate,
      have
      or reasonably be expected to result in a Material Adverse Effect, and
no
      Proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification

    


    (c) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations thereunder, including, without
      limitation, to issue the Securities in accordance with the terms thereof. The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated thereby, including,
      without limitation, the issuance of the Shares and Warrants and the reservation
      for issuance and issuance of 100% of the Warrant Shares upon exercise of the
      Warrants, have been duly authorized by all necessary action on the part of
      the
      Company and no further action is required by the Company 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.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated thereby
      do
      not and will not (i) conflict with or violate any provision of the Company’s or
      any Subsidiary’s certificate or articles of incorporation, bylaws or other
      organizational or charter documents, or (ii) conflict with, or constitute a
      default (or an event that with notice or lapse of time or both would become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or both)
      of,
      any agreement, credit facility, debt or other instrument (evidencing a Company
      or Subsidiary debt or otherwise) to which the Company or any Subsidiary is
      a
      party or by which any property or asset of the Company or any Subsidiary is
      bound, or (iii) conflict
      with or result in a violation of any law, rule, regulation, order, judgment,
      injunction, decree or other restriction of any court or governmental authority
      to which the Company or a Subsidiary is subject (including federal and state
      securities laws and regulations and regulations of each Trading Market on which
      the Common Stock of the Company is listed, quoted or traded on the date hereof),
      or by which any property or asset of the Company or a Subsidiary is bound or
      affected;
      except
      in the case of each of clauses (ii) and (iii), such as could not, individually
      or in the aggregate, have or reasonably be expected to result in a Material
      Adverse Effect.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (e) Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) the filing with the Commission of one
      or
      more Registration Statements in accordance with the requirements of the
      Registration Rights Agreement, (ii) filings required by state securities laws,
      (iii) the filing of a Notice of Sale of Securities on Form D with the Commission
      under Regulation D of the Securities Act, (iv) the filing of any requisite
      notices or applications with each applicable Trading Market and (v) those that
      have been made or obtained prior to the date of this Agreement.

    


    (f) Issuance
      of the Securities.
      The
      Securities have been duly authorized and, when issued and paid for in accordance
      with the Transaction Documents, will be duly and validly issued, fully paid
      and
      nonassessable, free and clear of all Liens. The
      Company has reserved from its duly authorized capital stock the maximum number
      of shares of Common Stock issuable pursuant to this Agreement and the
      Warrants.

    


    (g) Capitalization.
      The
      number of shares and type of all authorized, issued and outstanding capital
      stock of the Company, and all shares of Common Stock reserved for issuance
      under
      the Company’s various option and incentive plans as of March 31, 2007, is
      accurately set forth in the SEC Reports. Except as specified in the SEC Reports,
      no securities of the Company are entitled to preemptive or similar rights.
      No
      Person has any right of first refusal, preemptive right, right of participation,
      or any similar right to participate in the transactions contemplated by the
      Transaction Documents. Except as specified in the SEC Reports, Schedule
      3.1(g),
      and
      other than stock options granted pursuant to the Company’s stock option plans
      following March 31, 2007, there are no outstanding options, warrants, scrip
      rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities, rights or obligations convertible into or
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock, or contracts, commitments, understandings or
      arrangements by which the Company or any Subsidiary is or may become bound
      to
      issue additional shares of Common Stock, or securities or rights convertible
      or
      exchangeable into shares of Common Stock. The issue and sale of the Securities
      will not, immediately or with the passage of time, obligate the Company to
      issue
      shares of Common Stock or other securities to any Person (other than the
      Investors) and will not result in a right of any holder of Company securities
      to
      adjust the exercise, conversion, exchange or reset price under such
      securities.

     

    (h) SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, forms and schedules required to be filed by
      it
      under the Securities Act and the Exchange Act, including pursuant to Section
      13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
      shorter period as the Company was required by law to file such reports) (the
      foregoing materials being collectively referred to herein as the “SEC
      Reports”
      and,
      together with the Schedules to this Agreement (if any), the “Disclosure
      Materials”)
      on a
      timely basis or has timely filed a valid extension of such time of filing and
      has filed any such SEC Reports prior to the expiration of any such extension.
      As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. Each registration statement and any amendment
      thereto filed by the Company since July 1, 2005 pursuant to the Securities
      Act
      and the rules and regulations thereunder, as of the date such statement or
      amendment became effective, complied as to form in all material respects with
      the Securities Act and did not contain any untrue statement of a material fact
      or omit to state any material fact required to be stated therein or necessary
      in
      order to make the statements made therein not misleading; and each prospectus
      filed pursuant to Rule 424(b) under the Securities Act, as of its issue date
      and
      as of the closing of any sale of securities pursuant thereto did not contain
      any
      untrue statement of a material fact or omit to state any material fact required
      to be stated therein or necessary in order to make the statements made therein,
      in the light of the circumstances under which they were made, not misleading.
      The financial statements of the Company included in the SEC Reports comply
      in
      all material respects with applicable accounting requirements and the rules
      and
      regulations of the Commission with respect thereto as in effect at the time
      of
      filing. Such financial statements have been prepared in accordance with GAAP,
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      year-end audit adjustments.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (i) Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports, (i) there has
      been
      no event, occurrence or development that has had or that could reasonably be
      expected to result in a Material Adverse Effect, (ii) the Company has not
      incurred any liabilities (contingent or otherwise) other than (A) trade
      payables, accrued expenses and other liabilities 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 required to
      be disclosed in filings made with the Commission, (iii) the Company has not
      altered its method of accounting or the identity of its auditors, (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 (other than in connection
      with repurchases of unvested stock issued to employees of the Company), and
      (v)
      the Company has not issued any equity securities to any officer, director or
      Affiliate, except pursuant to existing Company stock option plans.

     

    (j) Litigation.
      There
      is no Action which (i) adversely affects or challenges the legality, validity
      or
      enforceability of any of the Transaction Documents or the Securities or (ii)
      except as specifically disclosed in the SEC Reports, could, if there were an
      unfavorable decision, individually or in the aggregate, have or reasonably
      be
      expected to result in a Material Adverse Effect. Neither the Company nor any
      Subsidiary, nor any director or officer thereof (in his or her capacity as
      such), is or has been the subject of any Action involving a claim of violation
      of or liability under federal or state securities laws or a claim of breach
      of
      fiduciary duty, except as specifically disclosed in the SEC Reports. There
      has
      not been, and to the knowledge of the Company, there is not pending any
      investigation by the Commission involving the Company or any current or former
      director or officer of the Company (in his or her capacity as such). The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

     

    (k) Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of, or in receipt of notice
      that it is in violation of, any order of any court, arbitrator or governmental
      body, or (iii) is or has been in violation of, or in receipt of notice that
      it
      is in violation of, any statute, rule or regulation of any governmental
      authority, including without limitation all foreign, federal, state and local
      laws relating to taxes, environmental protection, occupational health and
      safety, product quality and safety, employment and labor matters and, to its
      knowledge, privacy, except in each case as could not, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse
      Effect. The Company is in compliance with all effective requirements of the
      Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations
      thereunder, that are applicable to it, except where such noncompliance could
      not
      have a Material Adverse Effect.

    


    (l) Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect, and neither the Company nor any Subsidiary has received
      any notice of Proceedings relating to the revocation or modification of any
      such
      permits.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (m) Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to their respective businesses
      and
      good and marketable title in all personal property owned by them that is
      material to their respective businesses, in each case free and clear of all
      Liens, except for Liens as do not materially affect the value of such property
      and do not materially interfere with the use made and proposed to be made of
      such property by the Company and the Subsidiaries. Any real property and
      facilities held under lease by the Company and the Subsidiaries are held by
      them
      under leases valid, subsisting and enforceable against the Company and the
      Subsidiaries, and the Company and the Subsidiaries are in compliance with such
      leases, except as could not, individually or in the aggregate, have or
      reasonably be expected to result in a Material Adverse Effect.

     

    (n) Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      copyrights, licenses and other similar rights that are necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports and which the failure to so have could, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse Effect
      (collectively, the “Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a written notice that the
      Intellectual Property Rights used by the Company or any Subsidiary violates
      or
      infringes upon the rights of any Person and the Company has no knowledge of
      any
      such violation or infringement. Except as set forth in the SEC Reports, to
      the
      knowledge of the Company, all such Intellectual Property Rights are enforceable
      and,
      except as disclosed in the SEC Reports, there is no existing infringement by
      another Person of any of the Intellectual Property Rights of the Company or
      its
      Subsidiaries. The Company is unaware of any facts or circumstances which might
      give rise to a claim of infringement, and the Company and its Subsidiaries
      have
      taken reasonable measures to protect the value of their Intellectual Property
      Rights.

     

    (o) Insurance.
      Except
      as set forth in Schedule
      3.1(o),
      the
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary for enterprises of similar size and stage of development in the
      businesses in which the Company and the Subsidiaries are engaged,
      including, but not limited to, directors and officers insurance coverage of
      at
      least $10 million.
      The
      Company has no reason to believe that it will not be able to renew its and
      the
      Subsidiaries’ 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 on terms consistent with market for the Company’s and such
      Subsidiaries’ respective lines of business.

    


    (p) Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary required to be disclosed in the SEC Reports (other than for services
      as employees, officers and directors), including any contract, agreement or
      other arrangement providing for the furnishing of services to or by, providing
      for rental of real or personal property to or from, or otherwise requiring
      payments to or from any officer, director or such employee or, to the knowledge
      of the Company, any entity in which any officer, director, or any such employee
      has a substantial interest or is an officer, director, trustee or
      partner.

    


    (q) Certain
      Fees.
      Except
      as set forth in Schedule
      3.1(q),
      the
      Company has not engaged or made an agreement with any agent, broker or finder
      with respect to the transactions contemplated by this Agreement. The Investors
      shall have no obligation with respect to any fees or with respect to any claims
      (other than such fees or commissions owed by an Investor pursuant to written
      agreements executed by such Investor which fees or commissions shall be the
      sole
      responsibility of such Investor) 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.

    


    (r) Certain
      Registration Matters.
      Assuming the accuracy of the Investors’ representations and warranties set forth
      in Section 3.2(b)-(e), no registration under the Securities Act is required
      for
      the offer and sale of the Shares by the Company to the Investors under the
      Transaction Documents

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (s) Listing
      and Maintenance Requirements.
      The
      Company’s 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. Except
      as
      specified in the SEC Reports, the Company has not, in the two years preceding
      the date hereof, received notice from any Trading Market to the effect that
      the
      Company is not in compliance with the listing or maintenance requirements
      thereof. The Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with the listing and
      maintenance requirements for continued listing of the Common Stock on the
      Trading Market on which the Common Stock is currently listed or quoted. The
      issuance and sale of the Securities under the Transaction Documents does not
      contravene the rules and regulations of the Trading Market on which the Common
      Stock is currently listed or quoted, and no approval of the shareholders of
      the
      Company thereunder is required for the Company to issue and deliver to the
      Investors the Securities contemplated by Transaction Documents.

     

    (t) Investment
      Company.
      The
      Company is not, and immediately after receipt of payment for the Securities
      will
      not be, an “investment company”, an “affiliated person” of, “promoter” for or
“principal underwriter” for, or an entity “controlled” by an “investment
      company”, within the meaning of the Investment Company Act of 1940, as amended.
      The Company shall conduct its business in a manner so that it will not become
      subject to the Investment Company Act.

     

    (u) No
      Additional Agreements.
      Except
      as set forth in Schedule
      3.1(u),
      the
      Company does not have any agreement or understanding with any Investor with
      respect to the transactions contemplated by the Transaction Documents other
      than
      as specified in the Transaction Documents. 

     

    (v) Disclosure.
      The
      Company confirms that neither it nor any Person acting on its behalf has
      provided any Investor or its respective agents or counsel with any information
      that the Company believes constitutes material, non-public information except
      insofar as the existence and terms of the proposed transactions hereunder may
      constitute such information. The Company understands and confirms that the
      Investors will rely on the foregoing representations and covenants in effecting
      transactions in securities of the Company. All disclosure provided to the
      Investors regarding the Company, its business and the transactions contemplated
      hereby, furnished by or on behalf of the Company (including the Company’s
      Disclosure Materials and the representations and warranties set forth in this
      Agreement) are true and correct and do not contain any untrue statement of
      a
      material fact or omit to state any material fact necessary in order to make
      the
      statements made therein, in light of the circumstances under which they were
      made, not misleading.

    


    (w) Transfer
      Taxes.
      On the
      First Closing Date, all stock transfer or other taxes (other than income or
      similar taxes) which are required to be paid in connection with the sale and
      transfer of the Securities to be sold to each Investor hereunder will be, or
      will have been, fully paid or provided for by the Company, and all laws imposing
      such taxes will be or will have been complied with by the Company, except where
      such noncompliance would not materially adversely affect any Investor, its
      rights to the Securities or other rights or benefits under any of the
      Transaction Documents; provided that, any such material noncompliance shall
      be
      promptly cured or remedied by the Company upon obtaining knowledge of
      noncompliance.

     

    (x) Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all foreign, federal
      and state income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject, (ii) has paid all taxes and other
      governmental assessments and charges that are material in amount, shown or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and (iii) has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply, except where
      the
      failure to do so could not have or reasonably be expected to result in a
      Material Adverse Effect. There are no unpaid taxes in any material amount
      claimed to be due by the taxing authority of any jurisdiction, and the officers
      of the Company know of no basis for any such claim.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (y) Undisclosed
      Liabilities.
      No
      event, liability, development or circumstance has occurred or exists with
      respect to the Company or its respective business, properties, prospects,
      operations or financial condition, that would be required to be disclosed by
      the
      Company under the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder relating to an issuance
      and
      sale by the Company of its securities and which has not been reported in
      accordance with such rules and regulations of the Commission.

     

    (z) Employee
      Relations.
      Neither
      Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. The Company and its Subsidiaries
      believe that their relations with their employees are good. No executive officer
      of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
      Securities Act) has notified the Company or any such Subsidiary that such
      officer intends to leave the Company or any such Subsidiary or otherwise
      terminate such officer’s employment with the Company or any such Subsidiary. No
      executive officer of the Company or any of its Subsidiaries, to the knowledge
      of
      the Company or any such Subsidiary, is now, or expects to be, in violation
      of
      any material term of any employment contract, confidentiality, disclosure or
      proprietary information agreement, non-competition agreement, or any other
      contract, agreement or any restrictive covenant, and the continued employment
      of
      each such executive officer does not subject the Company or any such Subsidiary
      to any liability with respect to any of the foregoing matters. The Company
      and
      its Subsidiaries are in compliance with all federal, state and local laws and
      regulations respecting labor, employment and employment practices and benefits,
      terms and conditions of employment and wages and hours, except where failure
      to
      be in compliance would not, either individually or in the aggregate, reasonably
      be expected to result in a Material Adverse Effect. There are no complaints
      or
      charges against the Company or its Subsidiaries pending or, to the knowledge
      of
      the Company and its Subsidiaries, threatened to be filed with any Governmental
      Authority or arbitrator based on, arising out of, in connection with, or
      otherwise relating to the employment or termination of employment by the Company
      or its Subsidiaries of any individual, that would be reasonably likely to result
      in a Material Adverse Effect.

    


    (aa) Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    (bb) 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 SEC Reports and is not so disclosed or that
      otherwise would be reasonably likely to have a Material Adverse
      Effect.

    


    (cc) No
      Integrated Offering.
      Assuming
      the accuracy of the Investors’ representations and warranties set forth in this
      Agreement 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 Securities to be integrated with prior
      offerings by the Company for purposes of the Securities Act or any applicable
      shareholder approval provisions, including, without limitation, under the rules
      and regulations of any Trading Market. None of the Company, its Subsidiaries,
      their Affiliates and any Person acting on their behalf will take any action
      or
      steps referred to in the preceding sentence that would require registration
      of
      any of the Securities under the Securities Act or cause the offering of the
      Securities to be integrated with other offerings, which would impair the
      exemptions relied upon in this offering of the Securities or the Company’s
      ability to timely comply with its obligations hereunder.

    


    (dd) General
      Solicitation.
      Neither
      the Company nor any person acting on behalf of the Company has offered or sold
      any of the Securities 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.

    


    (ee) Foreign
      Corrupt Practices.
      Neither
      the Company nor any Subsidiary, nor to the knowledge of the Company, any agent
      or other person acting on behalf of the Company or any Subsidiary, has (i)
      directly or indirectly, used any corporate funds for unlawful contributions,
      gifts, entertainment or other unlawful expenses related to foreign or domestic
      political activity, (ii) made any unlawful payment to foreign or domestic
      government officials or employees or to any foreign or domestic political
      parties or campaigns from corporate funds, (iii) failed to disclose fully any
      contribution made by the Company (or made by any person acting on its behalf
      of
      which the Company is aware) which is in violation of law, or (iv) violated
      in
      any material respect any provision of the Foreign Corrupt Practices Act of
      1977,
      as amended.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (ff) Accountants.
      The
      Company’s accountants are set forth in the SEC Reports. To the Company’s
      knowledge, such accountants, are a registered public accounting firm as required
      by the Securities Act.

    


    (gg) 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 or that could
      reasonably be expected to cause or result, in the stabilization or manipulation
      of the price of any security of the Company to facilitate the sale or resale
      of
      any of the Securities.

    


    (hh) Environmental
      Laws.
      The
      Company and each of its Subsidiaries (a) are in compliance with any and all
      Environmental Laws (as hereinafter defined), (b) have received all permits,
      licenses or other approvals required of them under applicable Environmental
      Laws
      to conduct their respective businesses and (c) are in compliance with all
      terms and conditions of any such permit, license or approval where, in each
      of
      the foregoing clauses (a), (b) and (c), the failure to so comply could be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect. The term “Environmental Laws” means all applicable federal,
      state, local or foreign laws relating to pollution or protection of human health
      or the environment (including, without limitation, ambient air, surface water,
      groundwater, land surface or subsurface strata), including, without limitation,
      laws relating to emissions, discharges, releases or threatened releases of
      chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
      (collectively, “Hazardous Materials”) into the environment, or otherwise
      relating to the manufacture, processing, distribution, use, treatment, storage,
      disposal, transport or handling of Hazardous Materials, as well as all
      authorizations, codes, decrees, demands or demand letters, injunctions,
      judgments, licenses, notices or notice letters, orders, permits, plans or
      regulations issued, entered, promulgated or approved thereunder.

    


    (ii) No
      Disagreements with Accountants.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants formerly or
      presently employed by the Company which could affect the Company’s ability to
      perform any of its obligations under any of the Transaction Documents, and
      the
      Company is current with respect to any fees owed to its accountants and
      lawyers.

     

    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 or partnership 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 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 Securities as principal for its own account for
      investment purposes only and not with a view to or for distributing or reselling
      such Securities 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 Securities 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 Securities
      for
      any period of time. Such Investor is acquiring the Securities 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
      Securities.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (c) Investor
      Status.
      At the
      time such Investor was offered the Securities, it was, and at the date hereof
      it
      is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
      Such Investor is not a registered broker-dealer under Section 15 of the Exchange
      Act and has completed and executed the Accredited Investor Questionnaire
      attached hereto as Exhibit
      C.

     

    (d) General
      Solicitation.
      Such
      Investor is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities 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.

     

    (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 Securities; (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 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 by the Company. Such Investor has maintained, and covenants
      that until such time as the transactions contemplated by this Agreement are
      publicly disclosed by the Company such Investor will maintain, the
      confidentiality of any disclosures made to it in connection with this
      transaction (including the existence and terms of this transaction). Such
      Investor understands and acknowledges, that the Commission currently takes
      the
      position that coverage of Short Sales “against the box” prior to the Effective
      Date of the Registration Statement is a violation of Section 5 of the Securities
      Act, as set forth in Item 65, Section A, of the Manual of Publicly Available
      Telephone Interpretations, dated July 1997, compiled by the Office of Chief
      Counsel, Division of Corporation Finance.

    


    (g) Independent
      Investment Decision.
      Such
      Investor has independently evaluated the merits of its decision to purchase
      Securities 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 the Company 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.

    


    (h) Prohibited
      Transactions.
      During
      the last thirty (30) days prior to the date hereof, neither such Investor
      nor any Affiliate of such Investor which (a) had knowledge of the
      transactions contemplated hereby, (b) has or shares discretion relating to
      such Investor’s investments or trading or information concerning such Investor’s
      investments, including in respect
      of the
      Securities, or (c) is subject to such Investor’s review or input concerning
      such Affiliate’s investments or trading (collectively, “Trading
      Affiliates”)
      has,
      directly or indirectly, effected or agreed to effect any short sale, whether
      or
      not against the box, established any “put equivalent position” (as defined in
      Rule 16a-1(h) under the Securities Exchange Act or 1934, as amended) with
      respect to the Company’s Common Stock, granted any other right (including,
      without limitation, any put or call option) with respect to the Company’s Common
      Stock or with respect to any security that includes, relates to or derived
      any
      significant part of its value from the Company’s Common Stock or otherwise
      sought to hedge its position in the Securities (each, a “Prohibited
      Transaction”).
      Prior
      to December 31, 2007, such Investor shall not, and shall cause its Trading
      Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction.
      Such Investor acknowledges that the representations, warranties and covenants
      contained in this Section 3.2(h) are being made for the benefit of the
      Company and the Investors, and that the Company may not waive or amend any
      portion of this Section 3.2(h) without the prior written consent of all
      Investors. The Company shall use its reasonable best efforts to assert claims
      against any Investor arising out of any breach or violation of the provisions
      of
      this Section 3.2(h). 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    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
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    Section
      4.1 Additional
      Agreements.

    


    (a) Securities
      may only be disposed of in compliance with state and federal securities laws.
      In
      connection with any transfer of the Securities other than pursuant to an
      effective registration statement, Rule 144, 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 Securities under
      the
      Securities Act.

     

    (b) Certificates
      evidencing the Securities 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.

    


    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 Securities 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 Securities 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 Securities may
      reasonably request in connection with a pledge or transfer of the Securities
      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.

     

    (c) Certificates
      evidencing the Shares shall not contain any legend (including the legend set
      forth in Section 4.1(b)): (i) once
      a
      registration statement (including the Registration Statement) covering the
      resale of such security has been declared effective under the Securities
      Act,
      or (ii)
      following a sale or transfer of such Shares pursuant to Rule 144 (assuming
      the
      transferor is not an Affiliate of the Company), or (iii) while such Shares
      are
      eligible for sale under Rule 144(k), or (iv) if such legend is not required
      under applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the Staff of the Commission).
      The
      Company shall cause its counsel to issue a legal opinion to the Company’s
      transfer agent promptly after the Effective Date if required by the Company’s
      transfer agent to effect the removal of the legend hereunder. If all or any
      portion of a Warrant is exercised at a time when there is an effective
      registration statement to cover the resale of the Warrant Shares, such Warrant
      Shares shall be issued free of all legends. The Company agrees that following
      the Effective Date or at such time as such legend is no longer required under
      this Section 4.1(c), it will, no later than three Trading Days following the
      delivery by an Investor to the Company or the Company’s transfer agent of a
      certificate representing Shares or Warrant Shares, as the case may be, issued
      with a restrictive legend (such date, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Investor a certificate representing
      such Securities that is free from all restrictive and other legends. The Company
      may not make any notation on its records or give instructions to any transfer
      agent of the Company that enlarge the restrictions on transfer set forth in
      this
      Section. When
      the
      Company is required to cause unlegended certificates to replace previously
      issued legended certificates under this Section, if unlegended certificates
      are
      not delivered to an Investor within three (3) Trading Days of submission by
      that
      Investor of legended certificate(s) to the Transfer Agent as provided above
      (the
“Delivery
      Date”),
      and
      if after such Delivery Date and prior to the receipt of such unlegended
      certificates, the Investor or the Investor’s broker purchases (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Investor of the Shares which the Investor anticipated receiving
      upon
      such request (a “Buy
      In”),
      then
      the Company shall (1) pay in cash to the Investor the amount by which (x) the
      Investor’s total purchase price (including reasonable brokerage commissions, if
      any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
      by multiplying (A) the number of Shares that the Company was required to deliver
      to the Investor on the Delivery Date by (B) the closing bid price of the Common
      Stock on the Delivery Date and (2) deliver to such Investor the number of shares
      of Common Stock that would have been issued had the Company timely complied
      with
      its delivery obligations hereunder. The Investor shall provide the Company
      written notice indicating the amounts payable to the Investor in respect of
      the
      Buy In. Each
      Investor, severally and not jointly with the other Investors, agrees that the
      removal of the restrictive legend from certificates representing Securities
      as
      set forth in this Section 4.1 is predicated upon the Company’s reliance that the
      Investor will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Section
      4.2 Furnishing
      of Information.
      As long
      as any Investor owns the Securities, 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 Securities, 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 Securities 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.

    


    Section
      4.3 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 covenant and
      agreement in effecting transactions in securities of the Company.

    


    Section
      4.4 Listing
      of Securities.
      The
      Company agrees, (i) if the Company applies to have the Common Stock traded
      on
      any other Trading Market, it will include in such application the Shares and
      the
      Warrant Shares, and will take such other action as is necessary or desirable
      to
      cause the Shares and Warrant Shares to be listed on such other Trading Market
      as
      promptly as possible, and (ii) 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.

    


    Section
      4.5 Use
      of
      Proceeds.
      The
      Company will use the net proceeds from the sale of the Securities hereunder
      for
      general corporate purposes, which may include working capital and reduction
      of
      contractual obligations.

    


    Section
      4.6 Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Investors or that would be integrated with the offer
      or
      sale of the Securities for purposes of the rules and regulations of any Trading
      Market such that it would require shareholder approval prior to the closing
      of
      such other transaction unless shareholder approval is obtained before the
      closing of such subsequent transaction.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Section
      4.7  Securities
      Laws Disclosure; Publicity.
      The
      Company shall, by the fourth Trading Day following the date hereof, issue a
      Current Report on Form 8-K, reasonably acceptable to each Investor disclosing
      the material terms of the transactions contemplated hereby. The Company may
      also
      issue a press release with respect to the transactions contemplated by this
      Agreement. The Company shall not publicly disclose the name of any Investor,
      or
      include the name of the Investor in any filing with any governmental authority
      or Trading Market, without the prior written consent of the Investor, except
      (i)
      as required by federal securities law, including Current Reports on Form 8-K
      and
      any registration statements as set forth in Section 2 of the Registration Rights
      Agreement and (ii) to the extent such disclosure is required by law or
      regulations or listing agreements, in which case the Company shall provide
      such
      Investor with prior notice of such disclosure permitted under subclause (i)
      or
      (ii).

    


    Section
      4.8 Indemnification
      of Investors.
      Subject
      to the provisions of this Section 4.9, the Company will indemnify and hold
      the
      Investors and their directors, officers, shareholders, partners, employees
      and
      agents (each, a “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 that any such Investor Party may suffer or incur as a result
      of or
      relating to any breach of any of the representations, warranties, covenants
      or
      agreements made by the Company in this Agreement or in the other Transaction
      Documents up to the aggregate Investment Amount of the Investors. If any action
      shall be brought against any Investor Party in respect of which indemnity may
      be
      sought pursuant to this Agreement, such Investor Party shall promptly notify
      the
      Company in writing, and the Company shall have the right to assume the defense
      thereof with counsel of its own choosing. Any Investor Party shall have the
      right to employ separate counsel in any such action and participate in the
      defense thereof, but the fees and expenses of such counsel shall be at the
      expense of such Investor Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) in such action there is, in the reasonable opinion
      of
      such separate counsel, a material conflict on any material issue between the
      position of the Company and the position of such Investor Party. The Company
      will not be liable to any Investor Party under this Agreement for any settlement
      by an Investor Party effected without the Company’s prior written consent, which
      shall not be unreasonably withheld or delayed. 

    


    Section
      4.9 Reservation
      of Common Stock.
      As of
      the date of the Second Closing, the Company has reserved and the Company shall
      continue to reserve and keep available at all times, free of preemptive rights,
      a sufficient number of shares of Common Stock to permit the full exercise of
      the
      Warrants for Warrant Shares.

    


    Section
      4.10 Registration
      Statements.
      The
      Company shall not file any registration statements with the Commission, except
      on Forms S-8 or S-4 and post-effective amendments, until all Securities required
      to be registered pursuant to the Registration Rights Agreement have been
      registered for resale to the public and the registration statement(s)
      registering such Securities have been declared effective by the
      Commission.

    


    Section
      4.11 Participation
      in Future Financing.
      From
      the date hereof until the
      one
      year anniversary of the First Closing Date, upon any financing by the Company
      of
      Common Stock or any securities exchangeable or exercisable for, or convertible
      into, any Common Stock at a price less than the Per Share Purchase Price, other
      than issuances set forth in Section 9(d) of the Warrants (a “Subsequent
      Financing”),
      all
      the Investors shall have the right to participate in the aggregate in up to
      100%
      of the Subsequent Financing on a pro-rata basis (the
      “Participation
      Maximum”). 
      At least 5 Trading Days prior to the closing of the Subsequent Financing, the
      Company shall deliver to each Investor a written notice of its intention to
      effect a Subsequent Financing (“Pre-Notice”),
      which
      Pre-Notice shall ask such Investor if it wants to review the details of such
      financing (such additional notice, a “Subsequent
      Financing Notice”). 
      Upon the request of a Investor, and only upon a request by such Investor, for
      a
      Subsequent Financing Notice, the Company shall promptly, but no later than
      one
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Investor.  The Subsequent Financing Notice shall describe in reasonable
      detail the proposed terms of such Subsequent Financing, the amount of proceeds
      intended to be raised thereunder, the Person with whom such Subsequent Financing
      is proposed to be effected, and attached to which shall be a term sheet or
      similar document relating thereto. If by 5:30 p.m. (pacific time) on the
      5th
      Trading
      Day after all of the Investors have received the Pre-Notice, notifications
      by
      the Investors of their willingness to participate in the Subsequent Financing
      (or to cause their designees to participate) is, in the aggregate, less than
      the
      total amount of the Subsequent Financing, then the Company may effect the
      remaining portion of such Subsequent Financing on the terms and to the Persons
      set forth in the Subsequent Financing Notice.  If the Company receives no
      notice from an Investor as of such 5th
      Trading
      Day, such Investor shall be deemed to have notified the Company that it does
      not
      elect to participate.  The Company must provide the Investors with a second
      Subsequent Financing Notice, and the Investors will again have the right of
      participation set forth above in this Section 4.11, if the Subsequent Financing
      subject to the initial Subsequent Financing Notice is not consummated for any
      reason on the terms set forth in such Subsequent Financing Notice within 60
      Trading Days after the date of the initial Subsequent Financing Notice. In
      the
      event the Company receives responses to Subsequent Financing Notices from
      Investors seeking to purchase more than the aggregate amount of the Subsequent
      Financing, each such Investor shall have the right to purchase their Pro Rata
      Portion (as defined below) of the Participation Maximum.  “Pro
      Rata Portion”
is
      the
      ratio of (x) the Investment Amount of Securities purchased by a participating
      Investor and (y) the sum of the aggregate Investment Amount of all participating
      Investors.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
      V.

    CONDITIONS
      PRECEDENT TO CLOSING

    


    Section
      5.1 Conditions
      Precedent to the Obligations of the Investors to Purchase
      Securities.
      The
      obligation of each Investor to acquire Securities at the applicable Closing
      is
      subject to the satisfaction or waiver by such Investor, at or before the
      applicable 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
      applicable Closing as though made on and as of such date, except that
      representations and warranties that are qualified by materiality shall be true
      and correct as of the date when made and as of the applicable Closing as though
      made on and as of such date;

     

    (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
      applicable 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;

     

    (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 herein.

     

    Section
      5.2 Conditions
      Precedent to the Obligations of the Company to sell Securities.
      The
      obligation of the Company to sell Securities at the applicable Closing is
      subject to the satisfaction or waiver by the Company, at or before the
      applicable 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
      applicable Closing 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 applicable 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;

     

    (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 herein.

    


    ARTICLE
      VI.

    MISCELLANEOUS

     

    Section
      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 sale of the Shares.

    


    Section
      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.

     

    Section
      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 and reasonably promptly following such
      transmission sends such notice or communication via U.S. mail or overnight
      courier) at the facsimile number specified in this Section prior to 5:00 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 5:00 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: 

            	
              China
                Natural Gas 

            
	 	
              Tang
                Xing Shu Ma Building, Suite 418 

            
	 	
              Tang
                Xing Road 

            
	 	
              Xian
                High Tech Area

            
	 	
              Xian,
                Shaanxi Province, China

            
	 	
              Facsimile
                No.: 86-29-8844353

            
	 	
              Telephone
                No.: 86-29-88323325 

            	
               

            
	 	
              Attention:
                Chief Financial Officer 

            	
               

            
	 	 	 


    

    


    
      	
              With
                a copy to: 

            	
              Crone
                Rozynko LLP 

            
	
               

            	
              101
                Montgomery Street, Suite 1950 

            
	
               

            	
              San
                Francisco, CA 94104 

            
	
               

            	
              Facsimile
                No.: (415) 955-8900 

            
	
               

            	
              Attention:
                Alisande M. Rozynko, 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.

    


    Section
      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.

     

    Section
      6.5 Termination.
      This
      Agreement may be terminated prior to the First 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 First Closing shall not have taken place by 5:00 p.m.
      (New
      York City 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 First 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.

     

    Section
      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.

    


    Section
      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. Other than in connection with a merger,
      consolidation, sale of all or substantially all of the Company’s assets or other
      similar change in control transaction, 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 Securities,
      provided such transferee agrees in writing to be bound, with respect to the
      transferred Securities, by the provisions hereof that apply to the
“Investors.”

     

    Section
      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.

     

    Section
      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 California, 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 California Courts. Each party
      hereto hereby irrevocably submits to the exclusive jurisdiction of the
      California 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 California 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Section
      6.10 Survival.
      The
      agreements, covenants, representation and warranties contained herein shall
      survive the Closings and the delivery of the Securities.

     

    Section
      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.

     

    Section
      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.

     

    Section
      6.13 Replacement
      of Securities.
      If any
      certificate or instrument evidencing any Securities is mutilated, lost, stolen
      or destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, 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 Securities.
      If a replacement certificate or instrument evidencing any Securities 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.

     

    Section
      6.14 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.

     

    Section
      6.15 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Section
      6.16 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 Securities pursuant to the Transaction Documents has been made by
      such
      Investor independently of any other Investor. Each Investor’s obligations
      hereunder are expressly not conditioned on the purchase by any or all of the
      other Investors of the Shares and Warrants. 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 Securities 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. The Company’s obligations to each Investor
      under this Agreement are identical to its obligations to each other Investor
      other than such differences resulting solely from the number of Securities
      purchased by each Investor, but regardless of whether such obligations are
      memorialized herein or in another agreement between the Company and an
      Investor.

     

    Section
      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.

    


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

    


    
      	 	
              CHINA
                NATURAL GAS, INC.

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              By: 

            	
              /s/
                Qinan Ji

            	
                

            
	 	
                

            	
              Name:
                Qinan Ji 

            	
                

            
	 	
                

            	
              Title:
                Chief Executive Officer 

            	
                

            
	
                

            	
                

            	
                

            
	
                

            	
                

            	
                

            


    

     

    [Signature
      Pages for Investors Follows]



    
      
        
          


        

         

      

      
         

        
          

        

      

      
         

        
          


        

      

    


    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 

            
	
               

            	
              Alder
                Capital Partners I, L.P.

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Michael Licosati

            	
               

            
	
               

            	
              Name:
                

            	
              Michael
                Licosati

            	
               

            
	
               

            	
              Title:
                

            	
              Managing
                Partner Alder Capital, LLC.

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 161,492.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	483-82484	
               

            
	
                

            	
                

            
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Alder
                Capital, LLC.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              12750
                High Bluff Dr., Suite 120

            	
               

            
	
               

            	
                

            
	
               

            	
              City/State/Zip:
                

            	San
              Diego, CA 92130	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Michael
                Licosati

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (858)259-3900x101

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (858)259-3272

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Alder
                Offshore Partners, Ltd.

            
	
               

            	
               

            
	 	 
	 	
              By:
                

            	
              /s/
                Michael Licosati

            	
               

            
	
               

            	
              Name:
                

            	
              Michael
                Licosati

            	
               

            
	
               

            	
              Title:
                

            	
              Managing
                Partner Alder Capital, LLC.

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 63,508.25

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	483-85051-19	
               

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Alder
                Capital, LLC.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              12750
                High Bluff Dr., Suite 120

            	
               

            
	
               

            	
                

            
	
               

            	
              City/State/Zip:
                

            	San
              Diego, CA 92130	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Michael
                Licosati

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (858)259-3900x101

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (858)259-3272

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Enable
                Opportunity Partners, L.P.

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Brendan O’Neil

            	
               

            
	
               

            	
              Name:
                

            	
              Brendan
                O’Neil

            	
               

            
	
               

            	
              Title:
                

            	
              Principal
                and Portfolio Manager

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 99,999.25

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	20-1204059	
               

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Brendan
                O’Neil

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              One
                Ferry Building Suite 255

            	
               

            
	 	 
	
               

            	
              City/State/Zip:
                

            	San
              Francisco, CA 94111	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Brendan
                O’Neil

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (415)677-1578

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (415)677-1580

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Enable
                Growth Partners, L.P.

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Brendan O’Neil

            	
               

            
	
               

            	
              Name:
                

            	
              Brendan
                O’Neil

            	
               

            
	
               

            	
              Title:
                

            	
              Principal
                and Portfolio Manager

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 225,000.75

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	75-3030215	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Brendan
                O’Neil

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              One
                Ferry Building Suite 255

            	
               

            
	 	 	 	 
	
               

            	
                

            
	
               

            	
              City/State/Zip:
                

            	San
              Francisco, CA 94111	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Brendan
                O’Neil

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (415)677-1578

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (415)677-1580

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Lagunitas
                Partners, L.P.

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Jon D. Gruber

            	
               

            
	
               

            	
              Name:
                

            	
              Gruber
                + McBaine Capital Management

            	
               

            
	
               

            	
              Title:
                

            	
              General
                Partner

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 247,123.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	94-3052761	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Gruber
                + McBaine Capital Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              50
                Osgood Place - Penthouse

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	San
              Francisco, CA 94133	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Christine
                Arroyo

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (415)782-2606

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (415)981-6434

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Gruber
                + McBaine International

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Jon D. Gruber

            	
               

            
	
               

            	
              Name:
                

            	
              Gruber
                + McBaine Capital Management

            	
               

            
	
               

            	
              Title:
                

            	
              Investment
                Advisor

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 56,875.00

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	N/A
              Offshore Entity	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Gruber+McBaine
                Capital Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              50
                Osgood Place - Penthouse

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	San
              Francisco, CA 94133	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Christine
                Arroyo

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (415)782-2606

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (415)981-6434

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Jon
                D and Linda W Gruber Trust

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Jon D. Gruber

            	
               

            
	
               

            	
              Name:
                

            	
              Jon
                D. Gruber

            	
               

            
	
               

            	
              Title:
                

            	
              Trustee

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 95,998.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	###-##-####	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Gruber+McBaine
                Capital Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              50
                Osgood Place - Penthouse

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	San
              Francisco, CA 94133	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Christine
                Arroyo

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (415)782-2606

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (415)981-6434

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Excalibur
                Limited Partnership

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                William Hechter

            	
               

            
	
               

            	
              Name:
                

            	
              William
                Hechter

            	
               

            
	
               

            	
              Title:
                

            	
              President
                

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 200,001.75

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	N/A	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              33
                Prince Arthur Ave.

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Toronto
              On M5R 1B2	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              William
                Hechter

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (416)964-9077

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (416)964-8868

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              CIBC
                World Market, Inc.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              200
                King Street West, Ste 1807

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
              Toronto
                On

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Lisa
                Convad

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (416)594-8933

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Pinnacle
                China Fund, L.P.

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Barry M. Kitt

            	
               

            
	
               

            	
              Name:
                

            	
              Barry
                M. Kitt

            	
               

            
	
               

            	
              Title:
                

            	
              General
                Partner of Pinnacle China Fund, L.P.

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 1,074,999.25

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	20-3358646	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Pinnacle
                China Fund, L.P.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              4965
                Preston Park Blvd., Ste 240

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Plano,
              TX 75093	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Barry
                M. Kitt

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (972)985-2121

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (972)985-2122

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              c/o:
                

            	
              Banc
                of America Securities

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              901
                Main Street, Suite 6616

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Dallas,
              TX 75202	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Brett
                Speer

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (214)209-9973

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              The
                Pinnacle Fund, L.P.

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Barry M. Kitt

            	
               

            
	
               

            	
              Name:
                

            	
              Barry
                M. Kitt

            	
               

            
	
               

            	
              Title:
                

            	
              General
                Partner of The Pinnacle Fund, L.P.

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 1,074,999.25

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	75-2512784	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              The
                Pinnacle Fund, L.P.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              4965
                Preston Park Blvd., Ste 240

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Plano,
              TX 75093	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Barry
                M. Kitt

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (972)985-2121

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (972)985-2122

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Banc
                of America Securities

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              901
                Main Street, Suite 6616

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Dallas,
              TX 75202	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Brett
                Speer

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (214)209-9973

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Patara
                Capital, L.P.

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Berke Bakay

            	
               

            
	
               

            	
              Name:
                

            	
              Berke
                Bakay

            	
               

            
	
               

            	
              Title:
                

            	
              Principal

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 99,999.25

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	20-4364808	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Patara
                Capital, L.P.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              5050
                Quorum Drive, Ste 312

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Dallas,
              TX 75254	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Berke
                Bakay

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (214)866-0005

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (214)540-5796

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Keyrock
                Partners, L.P.

            
	
               

            	
               

            
	 	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Stephen J. Carter

            	
               

            
	
               

            	
              Name:
                

            	
              Stephen
                J. Carter

            	
               

            
	
               

            	
              Title:
                

            	
              Managing
                Member

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 124,999.88

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	
               

            	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Keyrock
                Partners, L.P.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              8201
                Preston Rd, Ste 400

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Dallas,
              TX 75225	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Stephen
                Carter

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (214)891-1601

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (214)890-8825

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Robert
                K. Moses, Jr.

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Robert K. Moses, Jr.

            	
               

            
	
               

            	
              Name:
                

            	
              Robert
                K. Moses, Jr.

            	
               

            
	
               

            	
              Title:
                

            	
              Individual
                

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 2,112,500.00

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	55462-60-2233	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Robert
                K. Moses, Jr.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              P.O.
                Box 27888

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Houston,
              TX 77227	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (713)781-6191

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (713)781-6022

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
              FedEx
                ONLY

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Robert
                K. Moses, Jr.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              1220
                Auqusta Dr, Ste 240

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Houston,
              TX 77057	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Straus
                GEPT Partners, L.P.

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Craig Connors

            	
               

            
	
               

            	
              Name:
                

            	
              Craig
                Connors

            	
               

            
	
               

            	
              Title:
                

            	
              CFO

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 192,497.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	134054804	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Straus
                Asset Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              320
                Par, Ave., 10th
                Floor

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10022	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Craig
                Connors

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (212)415-7274

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (212)415-7256

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Straus
                Asset Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              320
                Park Ave. 10th
                Floor

            	
               

            
	
               

            	
                

            
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10022	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Craig
                Connors

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (212)415-7274

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Straus
                Partners, L.P.

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Craig Connors

            	
               

            
	
               

            	
              Name:
                

            	
              Craig
                Connors

            	
               

            
	
               

            	
              Title:
                

            	
              CFO

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 157,501.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	133976076	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Straus
                Asset Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              320
                Par, Ave., 10th
                Floor

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10022	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Craig
                Connors

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (212)415-7274

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (212)415-7256

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Straus
                Asset Management

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              320
                Park Ave. 10th
                Floor

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10022	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Craig
                Connors

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (212)415-7274

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Sansar
                Capital Special Opportunity Master Fund, L.P.

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Vincent Guacci

            	
               

            
	
               

            	
              Name:
                

            	
              Vincent
                Guacci

            	
               

            
	
               

            	
              Title:
                

            	
              CFO/COO

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 2,149,998.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	20-4090101	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Sansar
                Capital Special Opportunity Master Fund

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              25
                West 53rd
                St.

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10019	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Vince
                Guacci

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (212)399-8980

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (917)849-5120

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Octagon
                Capital Partners

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Steven Hart

            	
               

            
	
               

            	
              Name:
                

            	
              Steven
                Hart

            	
               

            
	
               

            	
              Title:
                

            	
              General
                Partner

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 102,375.00

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	20-2027228	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Steven
                Hart

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              155
                West 68th
                St., #276

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10023	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (917)658-7878

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Heller
                Capital Investments

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Ronald I. Heller

            	
               

            
	
               

            	
              Name:
                

            	
              Ronald
                I. Heller

            	
               

            
	
               

            	
              Title:
                

            	
              CIO

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 347,626.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	20-2301089	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	 	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              700
                E. Palisade Ave.

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Englewood
              Cliffs, NJ 07632	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Steven
                Hart

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (201)816-4235

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (201)569-5014

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Highbridge
                International, LLC

            
	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Adam J. Chill

            	
               

            
	
               

            	
              Name:
                

            	
              Adam
                J. Chill

            	
               

            
	
               

            	
              Title:
                

            	
              Managing
                Director

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 412,503.00

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	Not
              Applicable	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Highbridge
                Capital Mangement, L.L.C.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              9
                West 57th
                St., 27th
                Floor

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10019	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Ari
                J. Storch/Adam J. Chill

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (212)287-4720

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (212)-751-0755

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Bear
                Stearns

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              1
                Metrotech Center, 20th
                Floor

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Brooklyn,
              NY 11201	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Elanna
                Bradley

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Whitebox
                Intermarket Partners, L.P.

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Jonathan Wood

            	
               

            
	
               

            	
              Name:
                

            	
              Jonathan
                Wood

            	
               

            
	
               

            	
              Title:
                

            	
              COO

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 525,001.75

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	
               

            	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Whitebox
                Advisors, LLC

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              3033
                Excelsior Blvd., Ste 300

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Minneapolis,
              MN 55416	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Ryan
                Kuehn

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (612)253-6069

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (612)253-6169

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
               

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Heartland
                Group, Inc. Solely on behalf of

            
	
               

            	
              Heartland
                Value Fund

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                David C. Fondrie

            	
               

            
	
               

            	
              Name:
                

            	
              David
                C. Fondrie

            	
               

            
	
               

            	
              Title:
                

            	
              CEO

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 4,875,000.00

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	39-1498286	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Heartland
                Advisors, Inc.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              789
                N. Water St., Ste 500

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Milwaukee,
              WI 53202	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Nicole
                J. Best

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (414)977-8748

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (414)977-8948

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
              Shares
                to be Registered to: Heartland Value Fund

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Brown
                Brothers Harriman - New York Vault

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              140
                Broadway St.

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	New
              York, NY 10005-1101	
               

            
	
               

            	
               
                Ref: A/C #6159537 / A/C Heartland Value Fund

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
               

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Nite
                Capital Master, Ltd.

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Keith A. Goodman

            	
               

            
	
               

            	
              Name:
                

            	
              Keith
                A. Goodman

            	
               

            
	
               

            	
              Title:
                

            	
              Authorized
                Signatory

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 99,999.25

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	98-0528694	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Nite
                Capital Master, Ltd.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              100
                East Cook Ave. Ste 201

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Libertyville,
              IL 60048	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Keith
                Goodman

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (847)968-2655

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (847)968-2648

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
              Nite
                Capital Master, Ltd.

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              100
                East Cook Ave. Ste 201

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Libertyville,
              IL 60048	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Keith
                Goodman

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (847)968-2655

            	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Barrington
                Partners, a California Limited Partnership

            
	
               

            	
               

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Russell Faucett

            	
               

            
	
               

            	
              Name:
                

            	
              Russell
                Faucett 

            	
               

            
	
               

            	
              Title:
                

            	
              General
                Partner

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 152,249.50

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	95-3927686	
               

            
	
                

            	
                

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Barrington
                Partners

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              2001
                Wilshire Blvd., Ste 401

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Santa
              Monica, CA 90403	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Glenn
                Rosen

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (310)264-4844x5

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (310)264-4847

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	 	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	 	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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 

            
	
               

            	
              Barrington
                Investors, L.P.

            
	 	
               

            	
               

            
	
               

            	
               

            
	 	
              By:
                

            	
              /s/
                Russell Famcett

            	
               

            
	
               

            	
              Name:
                

            	
              Russell
                Famcett 

            	
               

            
	
               

            	
              Title:
                

            	
              General
                Partner

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
              Investment
                Amount: $ 347,750.00

            	
               

            	
               

            
	 	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	 	
              Tax
                ID No.: 

            	95-4664502	
               

            
	
                

            	
                

            
	 	 
	 	
              ADDRESS
                FOR NOTICE 

            
	
                

            	
                

            
	
                

            	
                

            
	 	
              c/o:
                

            	
              Barrington
                Investors

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	
              2001
                Wilshire Blvd., Ste 401

            	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	Santa
              Monica, CA 90403	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
              Glenn
                Rosen

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	
              (310)264-4844x5

            	
               

            
	
               

            	
                

            
	
               

            	
              Fax:
                

            	
              (310)264-4847

            	
               

            
	
               

            	
               

            	
               

            
	 	 	 
	
               

            	
              DELIVERY
                INSTRUCTIONS 

            	
               

            
	
               

            	
              (if
                different from above) 

            	
               

            
	
               

            	
               

            
	 	 
	 	
              c/o:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Street:
                

            	 	
               

            
	
               

            	
                

            
	 	 
	
               

            	
              City/State/Zip:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Attention:
                

            	
               

            	
               

            
	
               

            	
                

            
	
               

            	
              Tel:
                

            	 	
               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    SCHEDULE
      2.1

     

    
      	
              Investor

            	 	
              Investment
                Amount

            	
               

            	
              No.
                of Shares

            	
               

            	
              No.
                of Warrants

            	 
	 	 	 	 	 	 	 	 
	
              Alder
                Capital Partners I, L.P.

            	 	
              $

            	
              161,492.50

            	 	 	
              49,690

            	 	 	
              7,454

            	 
	
              Alder
                Offshore Partners Ltd.

            	 	
              $

            	
              63,508.25

            	 	 	
              19,541

            	 	 	
              2,931

            	 
	
              Enable
                Opportunity Partners LP

            	 	
              $

            	
              99,999.25

            	 	 	
              30,769

            	 	 	
              4,615

            	 
	
              Enable
                Growth Partners LP

            	 	
              $

            	
              225,000.75

            	 	 	
              69,231

            	 	 	
              10,385

            	 
	
              Lagunitas
                Partners LP

            	 	
              $

            	
              247,123.50

            	 	 	
              76,038

            	 	 	
              11,406

            	 
	
              Gruber
                + McBaine International

            	 	
              $

            	
              56,875.00

            	 	 	
              17,500

            	 	 	
              2,625

            	 
	
              Jon
                D and Linda W Gruber Trust

            	 	
              $

            	
              95,998.50

            	 	 	
              29,538

            	 	 	
              4,431

            	 
	
              Excalibur
                Limited Partnership

            	 	
              $

            	
              200,001.75

            	 	 	
              61,539

            	 	 	
              9,231

            	 
	
              Pinnacle
                China Fund, L.P.

            	 	
              $

            	
              1,074,999.25

            	 	 	
              330,769

            	 	 	
              49,615

            	 
	
              The
                Pinnacle Fund, L.P.

            	 	
              $

            	
              1,074,999.25

            	 	 	
              330,769

            	 	 	
              49,615

            	 
	
              Keyrock
                Partners, L.P.

            	 	
              $

            	
              124,999.88

            	 	 	
              38,462

            	 	 	
              5,769

            	 
	
              Patara
                Capital, LP

            	 	
              $

            	
              99,999.25

            	 	 	
              30,769

            	 	 	
              4,615

            	 
	
              Robert
                K. Moses, Jr.

            	 	
              $

            	
              2,112,500.00

            	 	 	
              650,000

            	 	 	
              97,500

            	 
	
              Straus
                GEPT Partners LP

            	 	
              $

            	
              192,497.50

            	 	 	
              59,230

            	 	 	
              8,885

            	 
	
              Straus
                Partners LP

            	 	
              $

            	
              157,501.50

            	 	 	
              48,462

            	 	 	
              7,269

            	 
	
              Sansar
                Capital Special Opportunity Master Fund, LP

            	 	
              $

            	
              2,149,998.50

            	 	 	
              661,538

            	 	 	
              99,231

            	 
	
              Octagon
                Catpial Partners

            	 	
              $

            	
              102,375.00

            	 	 	
              31,500

            	 	 	
              4,725

            	 
	
              Heller
                Capital Investments

            	 	
              $

            	
              347,626.50

            	 	 	
              106,962

            	 	 	
              16,044

            	 
	
              Highbridge
                International LLC

            	 	
              $

            	
              412,503.00

            	 	 	
              126,924

            	 	 	
              19,039

            	 
	
              Whitebox
                Intermarket Partners, LP

            	 	
              $

            	
              525,001.75

            	 	 	
              161,539

            	 	 	
              24,231

            	 
	
              Heartland
                Value Fund

            	 	
              $

            	
              4,875,000.00

            	 	 	
              1,500,000

            	 	 	
              225,000

            	 
	
              Nite
                Capital Master LTD

            	 	
              $

            	
              99,999.25

            	 	 	
              30,769

            	 	 	
              4,615

            	 
	
              Barrington
                Partners, A California Limited Partnership

            	 	
              $

            	
              152,249.50

            	 	 	
              46,846

            	 	 	
              7,027

            	 
	
              Barrington
                Investors L.P.

            	 	
              $

            	
              347,750.00

            	 	 	
              107,000

            	 	 	
              16,050

            	 
	 	 	 	 	 	 	 	 	 	 	 
	
              Total

            	 	
              $

            	
              14,999,999.63

            	 	 	
              4,615,385

            	 	 	
              692,308

            	 


    

    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    CHINA
      NATUAL GAS, INC.

    


    DISCLOSURE
      SCHEDULES

    


    The
      following information is being furnished to the Investors identified on the
      signature pages of, and pursuant to, the Securities Purchase Agreement dated
      as
      of July __, 2007 (the “Purchase Agreement”), and is meant to qualify and limit
      any representations, warranties and covenants made by the Company therein.
      Any
      reference to, or disclosure of, any item or other matter in these Disclosure
      Schedule shall not be construed as an admission or indication that such item
      or
      other matter is material to the Company or that such item or other matter is
      required to be referred to, or disclosed in, these Disclosure Schedules. Any
      disclosure in these Disclosure Schedules relating to a possible breach or
      violation of any agreement, statute, rule or regulation shall not be construed
      as an admission or indication that such beach or violation exists or has
      actually occurred. The information disclosed in these Disclosure Schedules
      is
      arranged in section and subsection numbers corresponding to the section and
      subsection numbers contained in the Purchase Agreement. Capitalized terms used
      herein and not otherwise defined shall, unless the context indicates otherwise,
      have the respective meanings ascribed to them in the Purchase
      Agreement.

    


    


    Schedule
      3.1(g) Capitalization

    


    (i)
      On
      December 6, 2005, the Company entered into a share purchase agreement with
      Xian
      Xilan Natural Gas Co., Ltd., a corporation formed under the laws of the People’s
      Republic of China (“Xilan”) and each of Xilan’s shareholders. Pursuant to the
      agreement, the Company acquired all of the issued and outstanding capital stock
      of Xilan from the Xilan shareholders in exchange for 4,000,000 shares of the
      Company’s common stock (the “Exchange Transaction”). Recently, seven individuals
      presented to the Company certain Agreements of Stock Right Ownership Transfer
      and Stock Right Certificates claiming rights to 1,180,000 shares of Common
      Stock
      of Xilan (the “Xilan Shares”). Applying the exchange ratio used in the Exchange
      Transaction, such shares of Xilan would equal 68,406 shares of the Company’s
      common stock. The Xilan shares were not issued to these individuals by Xilan
      originally but purchased by these individuals from other stockholders of Xilan.
      Although it appears that the Agreements of Stock Right Ownership Transfer and
      Stock Right Certificates are stamped with the chop of Xian Xilan Natural Gas
      Stock Co., Ltd., the Company disputes the validity of such
      transfers.

    


    (ii)
      Xian
      Sunway Technology & Industry Co. Ltd. (“Sunway”) is an entity which was
      founded by Mr. Qinan Ji, the Chairman and Chief Executive Officer of the
      Company. Sunway currently owns 2,875,364 shares (approximately 11.9%) of the
      Company’s common stock and Mr. Ji holds 43% of the outstanding stock in Sunway.
      Sunway raised funds from numerous Chinese individual investors who have alleged
      that they purchased shares in Sunway based on the promise that Sunway would
      soon
      go public in the United States. However, to date Sunway has not completed a
      public offering in the United States. Sunway has expressed intent to distribute
      its current holding of the Company’s common stock on a pro rata basis to its
      shareholders to satisfy the concerns expressed by some of Sunway’s shareholders.
      Alternatively Sunway may choose to sell its shares of the Company in a private
      sale or a public offering. Sunway is subject to a lockup agreement therefore
      a
      sale or transfer of its shares of the Company would not occur prior to the
      one
      year anniversary of the effectiveness of the Registration Statement. The Company
      has no involvement with Sunway.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Schedule
      3.1(o) Insurance

    


    The
      Company does not currently maintain any directors and officers liability
      insurance policy but is in the process of obtaining such policy in the amount
      of
      $15,000,000. The Company expects to have this policy in place by December 31,
      2007.

    


    Schedule
      3.1(q) Certain
      Fees

    


    The
      Company entered into a finance representation agreement with Brean Murray,
      Carret & Co., LLC. (“BMC”) on July 31, 2007, for a period of six months.
      Pursuant to the agreement, the Company agreed to pay BMC a retainer of $10,000
      and issued a warrant to acquire 75,000 shares of the Company’s common stock. In
      addition, upon the consummation of a financing transaction, the Company shall
      pay BMC a fee equal to 7% of the gross proceeds raised in such financing
      transaction.

    


    Schedule
      3.1(u) No
      Additional Agreements

    


    In
      connection with the transactions contemplated by the Purchase Agreement and
      the
      Registration Rights Agreement, the Company has entered into a side letter
      agreement (“Side Letter”) with Heartland Group, Inc. (“Heartland”) on even date
      herewith. Pursuant to the Side Letter, the Company has agreed to notify
      Heartland and its legal counsel in the event the SEC declares any Registration
      Statement effective or issues a stop order suspending the effectiveness of
      any
      Registration Statement.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      A

    


    FORM
      OF WARRANT


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    NEITHER
      THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
      HAVE 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 AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
      BY SUCH SECURITIES.

    


    CHINA
      NATURAL GAS, INC.

    


    WARRANT

    


    Warrant
      No. [ ]       Issue
      Date: [ ], 2007

    


    China
      Natural Gas, Inc., a Delaware corporation (the "Company"), hereby certifies
      that, for value received, [ ] or its registered assigns (the "Holder"), is
      entitled to purchase from the Company up to a total of [ ](1) shares of Common
      Stock, subject to adjustment in accordance herewith (each such share, a "Warrant
      Share" and all such shares, the "Warrant Shares"), at any time and from time
      to
      time from and after the date hereof through and including [ ], 2012 (five years)
      (the "Expiration Date"), and subject to the following terms and
      conditions:

    


    1. Definitions.
      As used
      in this Warrant, the following terms shall have the respective definitions
      set
      forth in this Section 1. Capitalized terms that are used and not defined in
      this
      Warrant that are defined in the Purchase Agreement (as defined below) shall
      have
      the respective definitions set forth in the Purchase Agreement.

    


    
      
        

      

    

    (1)
      A
      number of shares as equals 15% of the Investment Amount (as defined in the
      Purchase Agreement), divided by $3.25.

    


    "Business
      Day"
      means
      any day except Saturday, Sunday and any day that is a federal legal holiday
      in
      the United States or a day on which banking institutions in the State of
      California are authorized or required by law or other government action to
      close.

    


    "Common
      Stock"
      means
      the common stock of the Company, par value $0.0001 per share, and any securities
      into which such common stock may hereafter be reclassified.

    


    "Exercise
      Price"
      means
      $7.79 per share, subject to adjustment in accordance with Section
      9.

    


    "Fundamental
      Transaction"
      means
      any of the following: (1) the Company effects any merger or consolidation of
      the
      Company with or into another Person, (2) the Company effects any sale of all
      or
      substantially all of its assets in one or a series of related transactions,
      (3)
      any tender offer or exchange offer (whether by the Company or another Person)
      is
      completed pursuant to which holders of Common Stock are permitted to tender
      or
      exchange their shares for other securities, cash or property, or (4) the Company
      effects any reclassification of the Common Stock or any compulsory share
      exchange pursuant to which the Common Stock is effectively converted into or
      exchanged for other securities, cash or property.

    


    "Original
      Issue Date"
      means
      the Original Issue Date first set forth on the first page of this
      Warrant.

    


    "California
      Courts"
      means
      the state and federal courts sitting in the City of San Francisco, County of
      San
      Francisco, California.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    "Purchase
      Agreement"
      means
      the Securities Purchase Agreement, dated August 2, 2007, to which the Company
      and the original Holder are parties.

    


    "Trading
      Day"
      means
      (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
      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).

    


    "VWAP"
      means on
      any particular Trading Day or for any particular period, the volume weighted
      average trading price per share of Common Stock on such date or for such period
      as reported by the Bloomberg L.P., or by any successor performing similar
      functions.

    


    2. Registration
      of Warrant.
      The
      Company shall register this Warrant upon records to be maintained by the Company
      for that purpose (the "Warrant Register"), in the name of the record Holder
      hereof from time to time. The Company may deem and treat the registered Holder
      of this Warrant as the absolute owner hereof for the purpose of any exercise
      hereof or any distribution to the Holder, and for all other purposes, absent
      actual notice to the contrary.

    


    3. Registration
      of Transfers.
      The
      Company shall register the transfer of any portion of this Warrant in the
      Warrant Register, upon surrender of this Warrant, with the Form of Assignment
      attached hereto duly completed and signed, to the Company at its address
      specified herein. Upon any such registration or transfer, a new Warrant to
      purchase Common Stock, in substantially the form of this Warrant (any such
      new
      Warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred
      shall be issued to the transferee and a New Warrant evidencing the remaining
      portion of this Warrant not so transferred, if any, shall be issued to the
      transferring Holder. The acceptance of the New Warrant by the transferee thereof
      shall be deemed the acceptance by such transferee of all of the rights and
      obligations of a holder of a Warrant.

    


    4. Exercise
      and Duration of Warrants.
      This
      Warrant shall be exercisable by the registered Holder at any time and from
      time
      to time on or after the date hereof through and including the Expiration Date.
      At 6:30 p.m., New York City time on the Expiration Date, the portion of this
      Warrant not exercised prior thereto shall automatically be deemed to be
      exercised in full in the manner set forth in Section 10(b), without any further
      action on behalf of the Holder immediately prior to the Expiration Date;
      provided, however, that in the event that the cashless exercise formula set
      forth in Section 10(b) yields a result that is less than or equal to zero,
      then
      the unexercised portion of this Warrant shall automatically terminate and become
      void. The Company may not call or redeem any portion of this Warrant without
      the
      prior written consent of the affected Holder.

    


    5. Delivery
      of Warrant Shares.

    


    (a) To
      effect
      exercises hereunder, the Holder shall not be required to physically surrender
      this Warrant unless the aggregate Warrant Shares represented by this Warrant
      is
      being exercised. Upon delivery of the Exercise Notice (in the form attached
      hereto) to the Company at its address for notice set forth herein and upon
      payment of the Exercise Price multiplied by the number of Warrant Shares that
      the Holder intends to purchase hereunder, the Company shall promptly (but in
      no
      event later than five Trading Days after the Date of Exercise (as defined
      herein)) issue and deliver to the Holder, a certificate for the Warrant Shares
      issuable upon such exercise, which, unless otherwise required by the Purchase
      Agreement, shall be free of restrictive legends. The Company shall, upon request
      of the Holder and subsequent to the date on which a registration statement
      covering the resale of the Warrant Shares has been declared effective by the
      Securities and Exchange Commission, use its commercially reasonable efforts
      to
      deliver Warrant Shares hereunder electronically through the Depository Trust
      Corporation or another established clearing corporation performing similar
      functions, if available, provided, that, the Company may, but will not be
      required to change its transfer agent if its current transfer agent cannot
      deliver Warrant Shares electronically through the Depository Trust Corporation.
      A "Date of Exercise" means the date on which the Holder shall have delivered
      to
      the Company: (i) the Exercise Notice, appropriately completed and duly signed
      and (ii) if such Holder is not utilizing the cashless exercise provisions set
      forth in this Warrant, payment of the Exercise Price for the number of Warrant
      Shares so indicated by the Holder to be purchased.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (b)
       If
      by the
      fifth Trading Day after a Date of Exercise (“Warrant Delivery Date”) the Company
      fails to deliver the required number of Warrant Shares in the manner required
      pursuant to Section 5(a), then the Holder will have the right to rescind such
      exercise.

    


    (c)
       The
      Company's obligations to issue and deliver Warrant Shares in accordance with
      the
      terms hereof are absolute and unconditional, irrespective of any action or
      inaction by the Holder to enforce the same, any waiver or consent with respect
      to any provision hereof, the recovery of any judgment against any Person or
      any
      action to enforce the same, or any setoff, counterclaim, recoupment, limitation
      or termination, or any breach or alleged breach by the Holder or any other
      Person of any obligation to the Company or any violation or alleged violation
      of
      law by the Holder or any other Person, and irrespective of any other
      circumstance which might otherwise limit such obligation of the Company to
      the
      Holder in connection with the issuance of Warrant Shares. Nothing herein shall
      limit a Holder's right to pursue any other remedies available to it hereunder,
      at law or in equity including, without limitation, a decree of specific
      performance and/or injunctive relief with respect to the Company's failure
      to
      timely deliver certificates representing Warrant Shares upon exercise of the
      Warrant as required pursuant to the terms hereof.

    


    (d)In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise on or before the Warrant
      Share Delivery Date, and if after such date the Holder is required by its broker
      to purchase (in an open market transaction or otherwise) shares of Common Stock
      to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
      the Holder anticipated receiving upon such exercise (a “Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (excluding brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (B) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (2) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the Holder in respect of the Buy-In, together with applicable
      confirmations and other evidence reasonably requested by the Company. Nothing
      herein shall limit a Holder’s right to pursue any other remedies available to it
      hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief with respect to the Company’s
      failure to timely deliver certificates representing shares of Common Stock
      upon
      exercise of the Warrant as required pursuant to the terms hereof.

     

    6. Charges,
      Taxes and Expenses.
      Issuance and delivery of Warrant Shares upon exercise of this Warrant shall
      be
      made without charge to the Holder for any issue or transfer tax, transfer agent
      fee or other incidental tax or expense in respect of the issuance of such
      certificates, all of which taxes and expenses shall be paid by the Company;
      provided, however, that the Company shall not be required to pay any tax which
      may be payable in respect of any transfer involved in the registration of any
      certificates for Warrant Shares or Warrants in a name other than that of the
      Holder. The Holder shall be responsible for all other tax liability that may
      arise as a result of holding or transferring this Warrant or receiving Warrant
      Shares upon exercise hereof.

    


    7. Replacement
      of Warrant.
      If this
      Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or
      cause to be issued in exchange and substitution for and upon cancellation
      hereof, or in lieu of and substitution for this Warrant, a New Warrant, but
      only
      upon receipt of evidence reasonably satisfactory to the Company of such loss,
      theft or destruction and customary and reasonable indemnity (which shall not
      include a surety bond), if requested. Applicants for a New Warrant under such
      circumstances shall also comply with such other reasonable regulations and
      procedures and pay such other reasonable third-party costs as the Company may
      prescribe. If a New Warrant is requested as a result of a mutilation of this
      Warrant, then the Holder shall deliver such mutilated Warrant to the Company
      as
      a condition precedent to the Company's obligation to issue the New
      Warrant.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    8. Reservation
      of Warrant Shares.
      The
      Company covenants that it will at all times reserve and keep available out
      of
      the aggregate of its authorized but unissued and otherwise unreserved Common
      Stock, solely for the purpose of enabling it to issue Warrant Shares upon
      exercise of this Warrant as herein provided, the number of Warrant Shares which
      are then issuable and deliverable upon the exercise of this entire Warrant,
      free
      from preemptive rights or any other contingent purchase rights of Persons other
      than the Holder (taking into account the adjustments and restrictions of Section
      9). The Company covenants that all Warrant Shares so issuable and deliverable
      shall, upon issuance and the payment of the applicable Exercise Price in
      accordance with the terms hereof, be duly authorized, validly issued and fully
      paid and nonassessable.

    


    9. Certain
      Adjustments.
      The
      Exercise Price and number of Warrant Shares issuable upon exercise of this
      Warrant are subject to adjustment from time to time as set forth in this Section
      9.

    


    (a) Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding, (i) pays a stock
      dividend on its Common Stock or otherwise makes a distribution on any class
      of
      capital stock that is payable in shares of Common Stock, (ii) subdivides
      outstanding shares of Common Stock into a larger number of shares, or (iii)
      combines outstanding shares of Common Stock into a smaller number of shares,
      then in each such case the Exercise Price shall be multiplied by a fraction
      of
      which the numerator shall be the number of shares of Common Stock outstanding
      immediately before such event and of which the denominator shall be the number
      of shares of Common Stock outstanding immediately after such event. Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution, and any adjustment pursuant to clause
      (ii) or (iii) of this paragraph shall become effective immediately after the
      effective date of such subdivision or combination.

    


    (b) Fundamental
      Transactions.
      If, at
      any time while this Warrant is outstanding there is a Fundamental Transaction,
      then the Holder shall have the right thereafter to receive, upon exercise of
      this Warrant, the same amount and kind of securities, cash or property as it
      would have been entitled to receive upon the occurrence of such Fundamental
      Transaction if it had been, immediately prior to such Fundamental Transaction,
      the holder of the number of Warrant Shares then issuable upon exercise in full
      of this Warrant (the "Alternate Consideration"). For purposes of any such
      exercise, the determination of the Exercise Price shall be appropriately
      adjusted to apply to such Alternate Consideration based on the amount of
      Alternate Consideration issuable in respect of one share of Common Stock in
      such
      Fundamental Transaction, and the Company shall apportion the Exercise Price
      among the Alternate Consideration in a reasonable manner reflecting the relative
      value of any different components of the Alternate Consideration. If holders
      of
      Common Stock are given any choice as to the securities, cash or property to
      be
      received in a Fundamental Transaction, then the Holder shall be given the same
      choice as to the Alternate Consideration it receives upon any exercise of this
      Warrant following such Fundamental Transaction. The terms of any agreement
      pursuant to which a Fundamental Transaction is effected shall include terms
      requiring any such successor or surviving entity to comply with the provisions
      of this paragraph (b) and insuring that the Warrant (or any such replacement
      security) will be similarly adjusted upon any subsequent transaction analogous
      to a Fundamental Transaction.

    


    (c) Additional
      Issuances.
      Except
      as hereinafter provided, in case the Company shall at any time after the date
      hereof issue or sell any shares of Common Stock or securities convertible into
      or exercisable or exchangeable for shares of Common Stock (other than the
      issuance or sales referred to in Section 9(d) hereof), for a consideration
      per
      share less than the Exercise Price in effect immediately prior to the issuance
      or sale of such shares or without consideration (“Additional Shares of Common
      Stock”), then forthwith upon such issuance or sale, the Exercise Price shall be
      reduced to the price (calculated to the nearest full cent) determined by
      multiplying such Exercise Price by a fraction, the numerator of which shall
      be
      (x) the number of shares of Common Stock outstanding immediately prior to such
      issue plus the number of shares of Common Stock which the aggregate
      consideration received by the Company for the total number of Additional Shares
      of Common Stock so issued would purchase at such Exercise Price in effect
      immediately prior to such issuance, and the denominator of which shall be (y)
      the number of shares of Common Stock outstanding immediately prior to such
      issue
      plus the number of such Additional Shares of Common Stock so issued. For the
      purpose of the above calculation, the number of shares of Common Stock
      outstanding immediately prior to such issue shall be calculated on a fully
      diluted basis, as if all Convertible Securities had been fully converted into
      shares of Common Stock immediately prior to such issuance and any outstanding
      Options, including shares reserved for Options under the Company’s stock plans,
      or Options for Convertible Securities had been fully exercised immediately
      prior
      to such issuance (and the resulting securities fully converted into shares
      of
      Common Stock, if so convertible) as of such date; provided, however, that in
      no
      event shall the Exercise Price be adjusted pursuant to this computation to
      an
      amount in excess of the Exercise Price in effect immediately prior to such
      computation, except in the case of a combination of outstanding shares, as
      provided by Section 9(a) hereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    For
      the
      purposes of any computation to be made in accordance with this Section 9(c),
      in
      case of the issuance or sale (otherwise than as a dividend or other distribution
      on any stock of the Company) of shares of Common Stock for a consideration
      part
      or all of which shall be other than cash, the amount of the consideration
      therefor other than cash shall be deemed to be the value of such consideration
      as determined in good faith by the Board of Directors of the
      Company.

    


    For
      purposes of determining the adjusted Exercise Price under this Section 9(c),
      the
      following shall be applicable:

    


    (i) Issuance
      of Options.
      If the
      Company in any manner grants any rights, warrants or options to subscribe for
      or
      purchase Common Stock or Convertible Securities (as defined below) ("Options")
      and the lowest price per share for which one share of Common Stock is issuable
      upon the exercise of any such Option or upon conversion, exercise or exchange
      of
      any Convertible Securities issuable upon exercise of any such Option is less
      than the then current Exercise Price, then such share of Common Stock shall
      be
      deemed to be outstanding and to have been issued and sold by the Company at
      the
      time of the granting or sale of such Option for such price per share. For
      purposes of this Section 9(c)(i), the "lowest price per share for which one
      share of Common Stock is issuable upon exercise of such Options or upon
      conversion, exercise or exchange of such Convertible Securities" shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      granting or sale of the Option, upon exercise of the Option and upon conversion,
      exercise or exchange of any Convertible Security issuable upon exercise of
      such
      Option. No further adjustment of the Exercise Price or number of Warrant Shares
      shall be made upon the actual issuance of such Common Stock or of such
      Convertible Securities upon the exercise of such Options or upon the actual
      issuance of such Common Stock upon conversion, exercise or exchange of such
      Convertible Securities.

    


    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any securities (other than Options)
      directly or indirectly convertible into or exercisable or exchangeable for
      Common Stock ("Convertible Securities") and the lowest price per share for
      which
      one share of Common Stock is issuable upon the conversion, exercise or exchange
      thereof is less than the then current Exercise Price, then such share of Common
      Stock shall be deemed to be outstanding and to have been issued and sold by
      the
      Company at the time of the issuance or sale of such Convertible Securities
      for
      such price per share. For the purposes of this Section 9(c)(ii), the "lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange" shall be equal to the sum of the lowest
      amounts of consideration (if any) received or receivable by the Company with
      respect to one share of Common Stock upon the issuance or sale of the
      Convertible Security and upon conversion, exercise or exchange of such
      Convertible Security. No further adjustment of the Exercise Price or number
      of
      Warrant Shares shall be made upon the actual issuance of such Common Stock
      upon
      conversion, exercise or exchange of such Convertible Securities, and if any
      such
      issue or sale of such Convertible Securities is made upon exercise of any
      Options for which adjustment of this Warrant has been or is to be made pursuant
      to other provisions of this Section 9(c), no further adjustment of the Exercise
      Price or number of Warrant Shares shall be made by reason of such issue or
      sale.

    


    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exercise or exchange of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exercisable or exchangeable for Common Stock increases or decreases at any
      time, the Exercise Price and the number of Warrant Shares in effect at the
      time
      of such increase or decrease shall be adjusted to the Exercise Price and the
      number of Warrant Shares which would have been in effect at such time had such
      Options or Convertible Securities provided for such increased or decreased
      purchase price, additional consideration or increased or decreased conversion
      rate, as the case may be, at the time initially granted, issued or sold. For
      purposes of this Section 9(c)(iii), if the terms of any Option or Convertible
      Security that was outstanding as of the date of issuance of this Warrant are
      increased or decreased in the manner described in the immediately preceding
      sentence, then such Option or Convertible Security and the Common Stock deemed
      issuable upon exercise, conversion or exchange thereof shall be deemed to have
      been issued as of the date of such increase or decrease. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (iv) Recomputation
      of Adjustment as a Result of Expiration of Options or Convertible
      Securities.
      Upon
      expiration of any Options or any rights of conversion or exchange under
      Convertible Securities that have not been exercised or converted, the Exercise
      Price and the number of Warrant Shares in effect at the time of such expiration
      shall be adjusted to the Exercise Price and the number of Warrant Shares which
      would have been in effect at such time as if (a) in the case of Convertible
      Securities or Options for Common Stock, the only Additional Shares of Common
      Stock issued were shares of Common Stock, if any, actually issued upon the
      exercise of such Options or the conversion or exchange of such Convertible
      Securities and the consideration received therefore was the consideration
      actually received by the Company for the issuance of all such Options, whether
      or not exercised, plus the consideration actually received by the Company upon
      such exercise, or the consideration that was actually received by the Company
      for the issuance of all such Convertible Securities, whether or not converted
      or
      exchanged, plus the additional consideration, if any, actually received by
      this
      Company upon such conversion or exchange, and (b) in the case of Options for
      Convertible Securities, only the Convertible Securities, if any, actually issued
      upon the exercise thereof were issued at the time of issuance or deemed issuance
      of such Options, and the consideration received by the Company for the
      Additional Shares of Common Stock deemed to have been then issued was the
      consideration actually received by the Company for the issuance of all such
      Options, whether or not exercised, plus the consideration deemed to have been
      received by the Company upon the issuance of the Convertible Securities with
      respect to which such Options were actually exercised.

    


    (iv) Calculation
      of Consideration Received.
      If any
      Option is issued in connection with the issue or sale of other securities of
      the
      Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. If any Common
      Stock, Options or Convertible Securities are issued or sold or deemed to have
      been issued or sold for cash, the consideration received therefor will be deemed
      to be the net amount received by the Company therefor. If any Common Stock,
      Options or Convertible Securities are issued to the owners of the non-surviving
      entity in connection with any merger in which the Company is the surviving
      entity, the amount of consideration therefor will be deemed to be the fair
      value
      of such portion of the net assets and business of the non-surviving entity
      as is
      attributable to such Common Stock, Options or Convertible Securities, as the
      case may be.

    


    (d) No
      Adjustment of Exercise Price in Certain Cases.
      No
      adjustment of the Exercise Price shall be made upon the issuance or sale of:
      (a)
      shares of Common Stock and options, warrants or other rights to purchase Common
      Stock issued to employees, officers or directors of, or consultants or advisors
      to the Company or any subsidiary pursuant to restricted stock purchase
      agreements, stock option plans or similar arrangements; (b) shares of Common
      Stock issued upon the exercise or conversion of options or convertible
      securities; (c) shares of Common Stock issued or issuable pursuant to the
      acquisition of another corporation by the Company by merger, purchase of
      substantially all of the assets or other reorganization or to a joint venture
      agreement, provided, that such issuances are approved by the Board of Directors;
      (d) shares of Common Stock issued or issuable to banks, equipment lessors or
      other commercial financial institutions pursuant to a commercial debt financing
      or commercial leasing transactions approved by the Board of Directors; (e)
      shares of Common Stock issued or issuable in connection with sponsored research,
      collaboration, technology license, development, OEM, marketing or other similar
      agreements or strategic partnerships approved by the Board of Directors; and
      (f)
      shares of Common Stock issued or issuable to suppliers or third party service
      providers in connection with the provision of goods or services pursuant to
      transactions approved by the Board of Directors. Notwithstanding the foregoing,
      the total issuance of securities as set forth in this Section 9(d) shall not
      exceed 10% of the total outstanding shares of Common Stock on a fully diluted
      basis.

    


    (e) Number
      of Warrant Shares.
      Simultaneously with any adjustment to the Exercise Price pursuant to Section
      9(a), the number of Warrant Shares that may be purchased upon exercise of this
      Warrant shall be increased or decreased proportionately, so that after such
      adjustment the aggregate Exercise Price payable hereunder for the adjusted
      number of Warrant Shares shall be the same as the aggregate Exercise Price
      in
      effect immediately prior to such adjustment.

    


    (f) Calculations.
      All
      calculations under this Section 9 shall be made to the nearest cent or the
      nearest 1/100th of a share, as applicable. The number of shares of Common Stock
      outstanding at any given time shall not include shares owned or held by or
      for
      the account of the Company, and the disposition of any such shares shall be
      considered an issue or sale of Common Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (g) Notice
      of Adjustments.
      Upon
      the occurrence of each adjustment pursuant to this Section 9, the Company at
      its
      expense will promptly compute such adjustment in accordance with the terms
      of
      this Warrant and prepare a certificate setting forth such adjustment, including
      a statement of the adjusted Exercise Price and adjusted number or type of
      Warrant Shares or other securities issuable upon exercise of this Warrant (as
      applicable), describing the transactions giving rise to such adjustments and
      showing in detail the facts upon which such adjustment is based. Upon written
      request, the Company will promptly deliver a copy of each such certificate
      to
      the Holder and to the Company's Transfer Agent.

    


    (h) Notice
      of Corporate Events.
      If the
      Company (i) declares a dividend or any other distribution of cash, securities
      or
      other property in respect of its Common Stock, including without limitation
      any
      granting of rights or warrants to subscribe for or purchase any capital stock
      of
      the Company or any Subsidiary, (ii) authorizes or approves, enters into any
      agreement contemplating or solicits stockholder approval for any Fundamental
      Transaction or (iii) authorizes the voluntary dissolution, liquidation or
      winding up of the affairs of the Company, then the Company shall deliver to
      the
      Holder a notice describing the material terms and conditions of such
      transaction, it being understood that if such disclosure would result in the
      dissemination of material, non-public information to the Holder, then the Holder
      shall be required to execute a customary non-disclosure agreement on terms
      and
      conditions reasonably acceptable to the Holder), at least 10 calendar days
      prior
      to the consummation of such transaction.

    


    10. Payment
      of Exercise Price.
      The
      Holder may pay the Exercise Price in one of the following manners:

    


    (a) Cash
      Exercise.
      The
      Holder may deliver immediately available funds; or

    


    (b) Cashless
      Exercise.
      If
      commencing one year after the original issuance date of this Warrant an Exercise
      Notice is delivered at a time when a registration statement permitting the
      Holder to resell the Warrant Shares is not then effective or the prospectus
      forming a part thereof is not then available to the Holder for the resale of
      the
      Warrant Shares, then the Holder may notify the Company in an Exercise Notice
      of
      its election to utilize cashless exercise, in which event the Company shall
      issue to the Holder the number of Warrant Shares determined as
      follows:

    


    X
      = Y
      [(A-B)/A]

    


    where:

    


    X
      = the
      number of Warrant Shares to be issued to the Holder.

    


    Y
      = the
      number of Warrant Shares with respect to which this Warrant is being
      exercised.

    


    A
      = the
      average of the VWAP for the five Trading Days immediately prior to (but not
      including) the Exercise Date.

    


    B
      = the
      Exercise Price.

    


    For
      purposes of Rule 144 promulgated under the Securities Act, it is intended,
      understood and acknowledged that the Warrant Shares issued in a cashless
      exercise transaction shall be deemed to have been acquired by the Holder, and
      the holding period for the Warrant Shares shall be deemed to have commenced,
      on
      the date this Warrant was originally issued. 

    


    11. Limitations
      on Exercise.
      Notwithstanding anything to the contrary contained herein, the number of Warrant
      Shares that may be acquired by the Holder upon any exercise of this Warrant
      (or
      otherwise in respect hereof) shall be limited to the extent necessary to insure
      that, following such exercise (or other issuance), the total number of shares
      of
      Common Stock then beneficially owned by such Holder and its Affiliates and
      any
      other Persons whose beneficial ownership of Common Stock would be aggregated
      with the Holder's for purposes of Section 13(d) of the Exchange Act, does not
      exceed 4.99% of the total number of issued and outstanding shares of Common
      Stock (including for such purpose the shares of Common Stock issuable upon
      such
      exercise). For such purposes, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Exchange Act and the rules and regulations
      promulgated thereunder. This provision shall not restrict the number of shares
      of Common Stock which a Holder may receive or beneficially own in order to
      determine the amount of securities or other consideration that such Holder
      may
      receive in the event of a Fundamental Transaction as contemplated in Section
      9
      of this Warrant. This restrictions contained in this Section 11 may be waived
      at
      the election of the Holder upon 61 days' prior written notice to the
      Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    12. No
      Fractional Shares.
      No
      fractional shares of Warrant Shares will be issued in connection with any
      exercise of this Warrant. In lieu of any fractional shares which would,
      otherwise be issuable, the Company shall round up the number of Warrant Shares
      issued to the Holder to the nearest whole number.

    


    13. Notices.
      Any and
      all notices or other communications or deliveries hereunder (including, without
      limitation, any Exercise Notice) shall be in writing and shall be deemed given
      and effective on the earliest of (i) the date of transmission, if such notice
      or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii)
      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 6:30 p.m. (New York City time)
      on
      any Trading Day, (iii) the Trading Day following the date of mailing, if sent
      by
      nationally recognized overnight courier service, or (iv) upon actual receipt
      by
      the party to whom such notice is required to be given. The addresses for such
      communications shall be the registered address of the Company or the Holder,
      as
      applicable, or such other address as either party may provide the other in
      writing.

    


    14. Warrant
      Agent.
      The
      Company shall serve as warrant agent under this Warrant. Upon 10 calendar days'
      notice to the Holder, the Company may appoint a new warrant agent. Any
      corporation into which the Company or any new warrant agent may be merged or
      any
      corporation resulting from any consolidation to which the Company or any new
      warrant agent shall be a party or any corporation to which the Company or any
      new warrant agent transfers substantially all of its corporate trust or
      shareholders services business shall be a successor warrant agent under this
      Warrant without any further act. Any such successor warrant agent shall promptly
      cause notice of its succession as warrant agent to be mailed (by first class
      mail, postage prepaid) to the Holder at the Holder's last address as shown
      on
      the Warrant Register.

    


    15. Miscellaneous.

    


    (a) This
      Warrant shall be binding on and inure to the benefit of the parties hereto
      and
      their respective successors and assigns. Subject to the preceding sentence,
      nothing in this Warrant shall be construed to give to any Person other than
      the
      Company and the Holder any legal or equitable right, remedy or cause of action
      under this Warrant. This Warrant may be amended only in writing signed by the
      Company and the Holder and their successors and assigns.

    


    (b)
       All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be governed by and construed and enforced in accordance
      with the internal laws of the State of California (except for matters governed
      by corporate law in the State of Delaware), without regard to the principles
      of
      conflicts of law thereof. Each party agrees that all legal proceedings
      concerning the interpretations, enforcement and defense of this Warrant and
      the
      transactions herein contemplated ("Proceedings") (whether brought against a
      party hereto or its respective Affiliates, employees or agents) shall be
      commenced exclusively in the California Courts. Each party hereto hereby
      irrevocably submits to the exclusive jurisdiction of the California Courts
      for
      the adjudication of any dispute hereunder or in connection herewith or with
      any
      transaction contemplated hereby or discussed herein, 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 California 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 Warrant
      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 Warrant or the transactions contemplated hereby. If either
      party shall commence a Proceeding to enforce any provisions of this Warrant,
      then the prevailing party in such Proceeding shall be reimbursed by the other
      party for its attorney's fees and other costs and expenses incurred with the
      investigation, preparation and prosecution of such Proceeding.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (c) The
      headings herein are for convenience only, do not constitute a part of this
      Warrant and shall not be deemed to limit or affect any of the provisions
      hereof.

    


    (d) In
      case
      any one or more of the provisions of this Warrant shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Warrant shall not in any way be affected or
      impaired thereby and the parties will attempt in good faith to agree upon a
      valid and enforceable provision which shall be a commercially reasonable
      substitute therefor, and upon so agreeing, shall incorporate such substitute
      provision in this Warrant.

    


    (e) Prior
      to
      exercise of this Warrant, the Holder hereof shall not, by reason of being a
      Holder, be entitled to any rights of a stockholder with respect to the Warrant
      Shares.

    


    (f) Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

    


    (g) Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date.

    


    (h) Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

    


    (i) Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant or purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

    


    (j) Transfer; Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and all rights hereunder are
      transferable, in whole or in part, by the Holder upon surrender of this Warrant
      and an opinion of legal counsel at the principal office of the Company, together
      with a written assignment of this Warrant. Subject to applicable securities
      laws, this Warrant and the rights and obligations evidenced hereby shall inure
      to the benefit of and be binding upon the successors of the Company and the
      successors and permitted assigns of Holder. The provisions of this Warrant
      are
      intended to be for the benefit of all Holders from time to time of this Warrant
      and shall be enforceable by any such Holder or holder of Warrant
      Shares.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
      its
      authorized officer as of the date first indicated above.

    


    CHINA
      NATURAL GAS, INC.

    


    


    


    By:
      _________________________________________

    Name:

    Title:


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    EXERCISE
      NOTICE

    CHINA
      NATURAL GAS, INC.


    


    The
      undersigned Holder hereby irrevocably elects to purchase _____________ shares
      of
      Common Stock pursuant to the above referenced Warrant. Capitalized terms used
      herein and not otherwise defined have the respective meanings set forth in
      the
      Warrant.

    


    (1) The
      undersigned Holder hereby exercises its right to purchase _________________
      Warrant Shares pursuant to the Warrant.

    


    (2) The
      Holder intends that payment of the Exercise Price shall be made as (check
      one):

    


    ____"Cash
      Exercise" under Section 10

    


    ____"Cashless
      Exercise" under Section 10

    


    (3) If
      the
      holder has elected a Cash Exercise, the holder shall pay the sum of
      $____________ to the Company in accordance with the terms of the
      Warrant.

    


    (4) Pursuant
      to this Exercise Notice, the Company shall deliver to the holder _______________
      Warrant Shares in accordance with the terms of the Warrant.

    


    (5) By
      its
      delivery of this Exercise Notice, the undersigned represents and warrants to
      the
      Company that in giving effect to the exercise evidenced hereby the Holder will
      not beneficially own in excess of the number of shares of Common Stock
      (determined in accordance with Section 13(d) of the Securities Exchange Act
      of
      1934) permitted to be owned under Section 11 of this Warrant to which this
      notice relates. Notwithstanding the foregoing, in the event the Holder waived
      the restriction contained in Section 11 of the Warrant and such waiver occurred
      at least 61 days prior to the date hereof, the representation in this Section
      5
      shall be deemed not to have been given by the Holder.

    


    Dated:_____________
      , _________

    


    Name
      of
      Holder:

    


    __________________________________________

    (Print)

    


    By:_______________________________________

    


    Name:_____________________________________

    


    Title:____________________________________

    (Signature
      must conform in all respects

    to
      name
      of holder as specified on the

    face
      of
      the Warrant)


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    CHINA
      NATURAL GAS, INC.

    


    FORM
      OF ASSIGNMENT

    


    [To
      be
      completed and signed only upon transfer of Warrant]

    


    FOR
      VALUE
      RECEIVED, the undersigned hereby sells, assigns and transfers unto
      ________________________________ the right represented by the above-captioned
      Warrant to purchase ____________ shares of Common Stock to which such Warrant
      relates and appoints ________________ attorney to transfer said right on the
      books of the Company with full power of substitution in the

    premises.

    


    Dated:
      _______________, ____

    


    


    _________________________________________

    (Signature
      must conform in all respects

    to
      name
      of holder as specified on the

    face
      of
      the Warrant)

    


    _________________________________________

    Address
      of Transferee

    


    _________________________________________

    


    _________________________________________

    


    


    In
      the
      presence of:

    


    ________________________________

    


    (1) A
      number
      of shares as equals 30% of the Investment Amount (as defined in the Purchase
      Agreement), divided by $___________.

    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      B

    


    FORM
      OF OPINION

     

    August
      2,
      2007

    


    To
      Brean
      Murray, Carret & Co., LLC and

    the
      Investors listed on

    the
      signature page to the 

    China
      Natural Gas, Inc.

    Securities
      Purchase
      Agreement

    Dated
      as
      of August 2, 2007

     

    Ladies
      and Gentlemen:

    


    Reference
      is made to the Securities
      Purchase Agreement dated as of August
      2,
      2007 (the “Agreement”), by and among China Natural Gas, Inc., a Delaware
      corporation (the “Company”), and the Investors listed on the signature page to
      the Agreement (the “Investors”), which provides for the issuance by the Company
      to the Investors of (i) 4,615,385 shares of the Company Common Stock, par value
      $0.001 per share (“Common Stock”) and (ii) warrants to purchase an aggregate of
      up to 692,308 shares of Common Stock (subject to adjustment) (the “Warrants”).
Reference
      is also made to the agreement by and between Brean Murray, Carret & Co., LLC
      (“BMC”) dated as of July 31, 2007, which provided for the issuance by the
      Company to BMC Warrants to purchase up to 75,000 shares of Common Stock. This
      opinion is rendered to BMC and the Investors pursuant to Section
      2.2(vii) of the Agreement, and all
      capitalized terms used herein have the meanings assigned
      thereto in the Agreement unless otherwise defined herein. Reference in this
      opinion to the Agreement excludes any schedule or substantive agreement attached
      as an exhibit to the Agreement, unless otherwise indicated herein.

    


    We
      have
      acted as counsel for the Company in connection with the negotiation of the
      Agreement, and the related Warrants, Registration Rights Agreement and Escrow
      Agreement (collectively, the "Transaction Documents") and the issuance of the
      Common
      Stock and the Warrants (the “Securities”).
      As such counsel, we have made such legal and factual examinations and inquiries
      as we have deemed advisable or necessary for the purpose of rendering this
      opinion. In addition, we have examined originals or copies of such corporate
      records of the Company, certificates of public officials and such other
      documents which we consider necessary or advisable for the purpose of rendering
      this opinion. In such examination we have assumed the genuineness of all
      signatures on original documents, the authenticity and completeness of all
      documents submitted to us as originals, the conformity to original documents
      of
      all copies submitted to us and the due execution and delivery of all documents
      (except as to due execution and delivery by the Company) where due execution
      and
      delivery are a prerequisite to the effectiveness thereof.

    


    As
      used
      in this opinion, the expression “to our knowledge,” “known to us” or similar
      language with reference to matters of fact refers to the current actual
      knowledge of our attorneys working on the transaction contemplated by the
      Transaction Documents. Except to the extent expressly set forth herein or as
      we
      otherwise believe to be necessary to our opinion, we have not undertaken any
      independent investigation to determine the existence or absence of any fact,
      and
      no inference as to our knowledge of the existence or absence of any fact should
      be drawn from our representation of the Company or the rendering of the opinion
      set forth below.

    


    For
      purposes of this opinion, we are assuming that the Investor has all requisite
      power and authority, and have taken any and all necessary corporate or
      partnership action, to execute and deliver the Transaction Documents, and we
      are
      assuming that the representations and warranties made by the Investor in the
      Agreement and pursuant thereto are true and correct. We are also assuming that
      the Investor has purchased the Securities for value, in good faith and without
      notice of any adverse claims within the meaning of the California Uniform
      Commercial Code.

    


    We
      are
      members of the Bar of the State of California and we express no opinion as
      to
      any matter relating to the laws of any jurisdiction other than the federal
      laws
      of the United States of America and the laws of the State of
      California.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
      opinions hereinafter expressed are subject to the following additional
      qualifications:

    


    	(a)  	
            We
              express no opinion as to the effect of applicable bankruptcy, insolvency,
              reorganization,
              moratorium or other similar federal or state laws affecting the rights
              of
              creditors;

          


     

    	(b)  	
            The
              enforceability of the Company’s obligations under the Transaction
              Documents is subject to general principles of equity, including without
              limitation, concepts of materiality, reasonableness, good faith and
              fair
              dealing and the possible unavailability of specific performance, or
              injunctive relief regardless of whether any such remedy is considered
              in a
              proceeding at law or in equity;

          


     

    	(c)  	
            We
              express no opinion as to the effect of any state or federal laws relating
              to usury or permissible rates of interest upon the transactions
              contemplated by the Transaction
              Documents;

          


     

    	(d)  	
            This
              opinion is qualified by the limitations imposed by statutes and principles
              of law and equity that provide that certain covenants and provisions
              of
              agreements are unenforceable where such covenants or provisions are
              unconscionable or contrary to public policy or where enforcement of
              such
              covenants or provisions under the circumstances would violate the
              enforcing party’s implied covenant of good faith and fair
              dealing;

          


     

    	(e)  	
            The
              opinion regarding enforceability of the Transaction Documents is subject
              to the qualification that certain provisions of Transaction Documents
              may
              be unenforceable, but such enforceability may not, subject to the other
              exceptions, qualifications, and limitations in this opinion letter,
              render
              the contract invalid as a whole or substantially interfere with
              realization of the principle benefits provided by the
              contract;

          


     

    	(f)  	
            We
              express no opinion as to compliance with the anti-fraud provisions
              of
              applicable securities laws; and

          


     

    	(g)  	
            We
              express no opinion as to the enforceability of the indemnification
              and
              contribution provisions of the Registration Rights Agreement to the
              extent
              the provisions thereof may be subject to limitations of public policy
              and
              the effect of applicable statutes and judicial
              decisions.

          


     

    Based
      upon and subject to the foregoing, we are of the opinion that:

    


    1.  The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of Delaware.

     

    2.  The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents and to issue the Shares,
      the Warrants and the Warrant Shares as contemplated therein. The execution
      and
      delivery of the Agreements by the Company and the consummation by it of the
      transactions contemplated thereby have been duly authorized by all necessary
      corporate action and no further consent or authorization of the Company or
      its
      Board of Directors or stockholders is required. Except for the Warrants which
      are to be delivered on the Second Closing, each of the Transaction Documents
      has
      been duly executed and delivered by the Company and constitutes valid and
      binding obligations of the Company enforceable against the Company in accordance
      with their respective terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, or similar laws relating to, or affecting
      generally the enforcement of, creditors’ rights and remedies or by other
      equitable principles of general application.

     

    3.  The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated thereby,
      including, without limitation, the issuance of the Shares, the Warrants and
      the
      Warrant Shares, do not and will not (i) result in a violation of the Company’s
      Certificate of Incorporation or By-Laws, (ii) conflict with, or constitute
      a
      default (or an event which with notice or lapse of time or both would become
      a
      default) under, or given to others any rights of termination, amendment,
      acceleration or cancellation of any agreement, indenture or other written
      instrument of the Company or other written agreement or understanding to which
      the Company is a party attached as an exhibit to the SEC reports, or (iii)
      result in a violation of any U.S. federal or state law, rule or regulation
      applicable to the Company or by which any property or asset of the Company
      is
      bound or affected, except for such violations as would not, individually or
      in
      the aggregate, have a Material Adverse Effect. To our knowledge, the Company
      is
      not in violation of any terms of its Certificate of Incorporation or Bylaws.
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    4.  Based
      in
      part on the representations of the Investors contained in the Purchase
      Agreement, the issuance of the Shares, Warrants and Warrant Shares in accordance
      with the Purchase Agreement will be exempt from registration under Section
      5 of
      the Securities Act of 1933, as amended. When so issued, the Shares, the Warrants
      and Warrant Shares will be duly and validly issued, fully paid and
      nonassessable, and free of any liens, encumbrances and preemptive or similar
      rights contained in the Company’s Certificate of Incorporation or
      Bylaws.

     

    5.  To
      our
      knowledge, no claims, actions, suits, proceedings or investigations are pending
      against the Company or its properties, or against any officer or director of
      the
      Company in his or her capacity as such. To our knowledge, the Company is not
      a
      party to or subject to the provisions of any order, writ, injunction, judgment
      or decree of any court or government agency or instrumentality except as set
      forth in the disclosure schedules to the Purchase Agreement.

     

    6.  No
      consent, approval or authorization of or designation, declaration of filing
      with
      any governmental authority or Trading Market on the part of the Company is
      required under federal, state or local law, rule or regulation in connection
      with the valid execution, delivery and performance of the Transaction Documents,
      or the offer, sale or issuance of the Shares, the Warrants and the Warrant
      Shares other than (i) those that have been obtained or made and to our knowledge
      are in full force and effect, and (ii) the filing of Form D and Form 8-K under
      the Securities Act and Exchange Act, respectively, with the SEC (iii) filing
      under applicable state securities or blue sky laws, and (iv) filing required
      under the Registration Rights Agreement.

     

    Very
      truly yours,

     

    CRONE
      ROZYNKO. LLP