Unassociated Document


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    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of October 19, 2009, by and among China Agritech, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company
desires to issue and sell to each Purchaser, and each Purchaser, severally and
not jointly, desires to purchase from the Company, securities of the Company in
the amount set forth beside each Purchaser’s name on Schedule 2.1, as more
fully described in this Agreement, in reliance upon the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the “Securities Act”),
Rule 506 under Regulation D as promulgated by the United States Securities and
Exchange Commission (the “Commission”) under
the Securities Act (“Regulation D”) and
Rule 903 of Regulation S as promulgated by the Commission under the Securities
Act (“Regulation
S”).

     

    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 each Purchaser agree as
follows:

     

    ARTICLE
I

    DEFINITIONS

     

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

     

    “Action”
shall have the meaning ascribed to such term in Section 3.1(j).

     

    “Additional
Shares” shall have the meaning ascribed to such term in Section 2.4(d).

     

    “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 405 under the
Securities Act.  With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.

     

    “Agreement”
shall have the meaning ascribed to such term in the Preamble to this
Agreement.

     

    “Audited
2009 Financials” shall have the meaning ascribed to such term in Section 2.3(b).

     

    “Beneficial
Ownership Limitation” shall have the meaning ascribed to such term in Section 2.4(d).


    
      
         


      

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

     

    “Chosen
Court” shall have the meaning ascribed to such term in Section 5.9.

     

    “Closing”
means the closing of the purchase and sale of the Shares and the Warrants
pursuant to Section 2.1.

     

    “Closing
Date” means the Trading Day when all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all conditions
precedent to (a) the Purchasers’ obligations to pay the Subscription Amount and
(b) the Company’s obligations to deliver the Securities have been satisfied or
waived.

     

    “Commission”
shall have the meaning ascribed to such term in the Recitals to this
Agreement.

     

    “Common
Stock” means the common stock of the Company, $0.001 par value per share, and
any other class of securities into which such securities may hereafter be
reclassified or changed into.

     

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

     

    “Company”
shall have the meaning ascribed to such term in the Preamble to this
Agreement.

     

    “Company
Counsel” means Loeb & Loeb LLP, with offices located at 345 Park Avenue, New
York, New York 10154.

     

    “Continuous
Disclosure Reports” shall have the meaning ascribed to such term in Section 3.1(h).

     

    “DGCL”
shall have the meaning ascribed to such term in Section
3.1(e).

     

    “Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently
herewith.

     

    “Effective
Date” means the date that the initial Registration Statement filed by the
Company pursuant to the Registration Rights Agreement is first declared
effective by the Commission.

     

    “Environmental
Laws” shall have the meaning ascribed to such term in Section
3.1(jj).

     

    “Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).


    
      
         


      

      
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    “Exchange
Act” means the United States Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

     

    “GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

     

    “Hazardous
Substances” shall have the meaning ascribed to such term in Section
3.1(jj).

     

    “Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).

     

    “Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

     

    “Knowledge
of the Company” means with respect to any statement made to the knowledge of the
Company, that the statement is based upon the actual knowledge of the executive
officers of the Company after due inquiry.

     

    “Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

     

    “Liens”
means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.

     

    “Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

     

    “Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).

     

    “OFAC”
shall have the meaning ascribed to such term in Section 3.1(dd).

     

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

     

    “PRC”
means the People’s Republic of China, but solely for the purposes of this
Agreement, excluding Hong Kong, Macau Special Administrative Region and the
island of Taiwan.

     

    “PRC
Subsidiaries” shall have the meaning ascribed to such term in Section 3.1(a).

     

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

     

    “Purchaser”
and “Purchasers” shall have the meanings ascribed to such terms in the Preamble
to this Agreement.

     

    “Purchaser
Party” shall have the meaning ascribed to such term in Section 4.7.

     

    “Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the
Closing Date, by and among the Company and the Purchasers, in substantially the
form of Exhibit
A attached hereto.


    
      
         


      

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

     

    “Regulation
D” shall have the meaning ascribed to such term in the Recitals to this
Agreement.

     

    “Regulation
S” shall have the meaning ascribed to such term in the Recitals to this
Agreement.

     

    “Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

     

    “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.

     

    “Rule
144A” means Rule 144A 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.

     

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

     

    “Securities
Act” shall have the meaning ascribed to such term in the Recitals to this
Agreement.

     

    “Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under
the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable Common Stock).

     

    “Shares”
means the Common Stock issued or issuable to each Purchaser pursuant to Section 2.1 and
Section 2.4 of
this Agreement.

     

    “Stockholder
Approval” shall have the meaning ascribed to such term in Section
3.1(e).

     

    “Subscription
Amount” means, as to each Purchaser, the aggregate amount in United States
dollars to be paid in immediately available funds for Shares and Warrants
purchased hereunder as specified beside such Purchaser’s name on Schedule 2.1
hereto.

     

    “Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a),
and shall, where applicable, include any subsidiary of the Company formed or
acquired after the date hereof.

     

    “TS”
means Troutman Sanders LLP, with offices located at The Troutman Sanders
Building, 1001 Haxall Point, Richmond, Virginia 23219.


    
      
         


      

      
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    “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 listed or 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 OTC
Markets, Inc. (or any similar organization or agency succeeding to its functions
of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (i) or
(ii) hereof, then Trading Day shall mean a Business Day.

     

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

     

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

     

    “Voting
Agreement” shall mean the Voting Agreement, dated as of the Closing Date, by and
among the Company, the Purchasers and the other parties named therein, in
substantially the form of Exhibit B
attached hereto.

     

    “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)); (b) if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
is then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per Common Share so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchasers of a majority in
interest of the Shares then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the
Company.

     

    “Warrants”
means, collectively, the Common Stock purchase warrants, in substantially the
form of Exhibit
C attached hereto, delivered to the Purchasers at the Closing in
accordance with Section 2.2(a)
hereof, which Warrants shall be first exercisable six months after the Closing
Date and shall be exercisable for two years thereafter.

     

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

     

    “Wire
Transfer Instructions” shall have the meaning ascribed to such term in Section 2.1.


    
      
         


      

      
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    ARTICLE
II

    PURCHASE
AND SALE

     

    2.1.           Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
the Company shall sell, and each Purchaser shall purchase, (a) the number of
Shares set forth beside such Purchaser’s name in Column 2 of Schedule 2.1(a)
hereto and (b) a Warrant to purchase such number of Warrant Shares, subject to
adjustment as provided in the Warrant, set forth beside such Purchaser’s name in
Column 3 of Schedule
2.1(a) hereto.  Each Purchaser shall deliver to the Company,
via wire transfer of immediately available funds to such account designated by
the Company in accordance with the wire transfer instructions set forth on Schedule 2.1(b) (the
“Wire Transfer
Instructions”),
the Subscription Amount of such Purchaser and the Company shall deliver to each
Purchaser its respective Shares and a Warrant, and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and
2.3, the
Closing shall occur at the offices of TS, or such other location as the parties
shall mutually agree.

     

    2.2.           Deliveries.

     

    (a)           On
or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:

     

    (i)           the
legal opinion of Company Counsel, dated as of the Closing Date and in
substantially the form of Exhibit D
attached hereto, executed by Company Counsel and addressed to the
Purchasers;

     

    (ii)          one
or more stock certificates evidencing the number of Shares set forth in Column 2
of Schedule 2.1
beside such Purchaser’s name, registered in the name of such
Purchaser;

     

    (iii)         a
Warrant to purchase such number of Warrant Shares, subject to adjustment as
provided in the Warrant, set forth beside such Purchaser’s name in Column 3 of
Schedule 2.1
hereto;

     

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

     

    (v)          the
Voting Agreement, duly executed by each of the parties thereto (other than the
Purchasers);

     

    (vi)         a
good standing certificate for the Company, issued by a duly authorized person
within the office of the Secretary of State (or comparable office) of the state
of incorporation, as of a date within five days prior to the Closing
Date;

     

    (vii)        a
certificate, substantially in the form attached hereto as Exhibit E, executed
by the Secretary of the Company and dated as of the Closing Date, certifying as
to (A) the resolutions of the Company’s Board of Directors authorizing and
approving the transactions contemplated by the Transaction Documents, including
the issuance of the Shares and Warrants, (B) the certificate of incorporation of
the Company, as in effect as of the Closing Date, (C) the Bylaws, as in effect
as of the Closing Date and (D) as to signatures and authority of the
persons signing the Transaction Documents and related documents on behalf of the
Company; and


    
      
         


      

      
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    (viii)      a
certificate, substantially in the form attached hereto as Exhibit F, executed
by a duly authorized officer of the Company, dated as of the Closing Date,
certifying that the conditions precedent set forth in Section 2.3(b)(i),
Section
2.3(b)(ii) and Section 2.3(b)(iv)
are satisfied as of the Closing Date.

     

    (b)           On
or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

     

    (i)           such
Purchaser’s Subscription Amount by wire transfer of immediately available funds
in accordance with the Wire Transfer Instructions; and

     

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

     

    (iii)         the
Voting Agreement, duly executed by such Purchaser; and

     

    (iv)        a
certificate, substantially in the form attached hereto as Exhibit G, executed
by a duly authorized officer of the Purchaser, dated as of the Closing Date,
certifying that the conditions precedent set forth in Section 2.3(a)(i) and
Section
2.3(a)(ii) are satisfied as of the Closing Date.

     

    2.3.           Closing
Conditions.

     

    (a)           The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

     

    (i)           the
representations and warranties of each Purchaser shall be true and correct in
all material respects (except for those representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date);

     

    (ii)         all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed;

     

    (iii)         each
Purchaser shall have delivered each of the items set forth in Section 2.2(b)
of this Agreement that are required to be delivered by such Purchaser on or
prior to the Closing Date; and

     

    (iv)         there
must not have been commenced or threatened any Proceeding or Action
(A) involving any challenge to, or seeking damages or other relief in
connection with, the transactions contemplated by the Transaction Documents or
(B) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with the transactions contemplated by the Transaction
Documents.


    
      
         


      

      
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    (b)           The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

     

    (i)           the
representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date);

     

    (ii)         all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;

     

    (iii)         the
Company shall have delivered each of the items set forth in Section 2.2(a)
of this Agreement required to be delivered by the Company on or prior to the
Closing Date;

     

    (iv)        there
shall have been no Material Adverse Effect with respect to the Company and its
Subsidiaries since the date hereof;

     

    (v)         from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market, at
any time prior to the Closing Date, trading in securities generally as reported
by Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Shares and the Warrants at the Closing;

     

    (vi)         there
must not have been commenced or threatened any Proceeding or Action
(A) involving any challenge to, or seeking damages or other relief in
connection with, the transactions contemplated by the Transaction Documents or
(B) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with the transactions contemplated by the Transaction
Documents.

     

    2.4.           Additional Issuance of
Shares.

     

    (a)           If
the audited, consolidated financial statements (the “Audited 2009
Financials”) of the Company and its Subsidiaries filed in 2010 by the
Company with the Commission as part of the Company’s Annual Report on Form 10-K
reflects Net Income of less than US$11,500,000, then the Company, within ten
days after the date of such filing and without any further action or payment on
the part of the Purchasers, shall issue to each Purchaser, in a transaction that
does not require registration under the Securities Act, a stock certificate
representing such number of duly authorized, validly issued, fully-paid and
non-assessable Shares calculated as follows; provided, however that in no
event shall the Company issue in excess of 3,500,000 Shares in the aggregate
under this Section
2.4:


    
      
         


      

      
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    X =
(((P*O) – S) / (1-P)) * Z

    


    Where:

    


    
      	
              X = 

            	
              the
      number of Shares to be issued to the Purchasers in accordance with this
      Section 2.4

            


    

    
      	
              P = 

            	
              (aggregate
      Subscription Amount of the Purchasers) / (Net Income *
  7.9)

            


    

    
      	
              O
      =

            	
              Number
      of shares of Common Stock outstanding immediately after the issuance of
      the Shares to be issued pursuant to Section 2.1

            


    

    
      	
              S
      =

            	
              Shares
      issued to the Purchasers pursuant to Section 2.1

            


    

    
      	
              Z
      =

            	
              (Number
      of Shares issued to such Purchaser pursuant to Section 2.1)
      / S

            


    

    


    (b)           For
purposes of this Section 2.4, “Net Income” means the
consolidated net income of the Company and its Subsidiaries for the calendar
year ending December 31, 2009 as reported in the Audited 2009 Financials,
excluding any income attributable to non-recurring, extraordinary transactions,
including acquisitions and divestitures engaged in by the Company and its
Subsidiaries, but increased by (i) any non-cash charges incurred as a
result of the transactions contemplated hereunder and by the other Transaction
Documents, including without limitation, the issuance of the Warrants and any
Warrant Shares issued thereunder, and any issuance of Shares pursuant to this
Section 2.4 and
(ii) reasonable expenses incurred in connection with any bona fide public offering of
the Company’s securities.

     

    (c)           The
Company shall use its best efforts to ensure that each and every representation
and warranty in Section 3.1 of this
Agreement is true and correct on and as of the date of issuance of any Shares
pursuant to this Section 2.4 with the
same force and effect as though made on and as of such date.  In
connection with the issuance of any Shares pursuant to this Section 2.4, the
Company shall deliver to the Purchasers an opinion of Company Counsel, dated as
of such issuance date and in form and substance satisfactory to the Purchasers,
that the Shares issued pursuant to this Section 2.4 have been
duly authorized and such Shares will be validly issued, fully paid and
nonassessable prior to or on such issuance date.


    
      
         


      

      
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    (d)           The
Company shall not issue any Shares pursuant to Section 2.4(a) or any
Warrant Shares pursuant to the Warrants (together, “Additional Shares”),
and the Purchasers shall not have the right to be issued any Additional Shares
pursuant to Section
2.4(a) or to exercise any portion of the Warrants, to the extent that
after giving effect to such issuance under Section 2.4(a) or the
Warrants, the Purchasers (together with the Purchasers’ Affiliates, and any
other Person acting as a group together with such Purchasers or any of the
Purchasers’ Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Purchasers and their Affiliates (together with any other Person acting as a
group together with the Purchasers or any of the Purchasers’ Affiliates) shall
include the number of shares of Common Stock issuable in accordance with Section 2.4(a) and
issuable upon exercise of the Warrants with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) exercise of the remaining, nonexercised portion of
the Warrants beneficially owned by the Purchasers or any of their Affiliates
(together with any other Person acting as a group together with the Purchasers
or any of the Purchasers’ Affiliates) and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) beneficially
owned by the Purchasers or any of their Affiliates (together with any other
Person acting as a group together with the Purchasers or any of the Purchasers’
Affiliates) that are subject to a limitation on conversion or exercise analogous
to the limitation contained in this Section
2.4(d).  Except as set forth in the preceding sentence, for
purposes of this Section 2.4(d),
beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated
thereunder.  To the extent that the limitation contained in this Section 2.4(d)
applies or the similar limitation contained in the Warrants applies, the
determination of whether any Additional Shares are issuable pursuant to Section 2.4(a) or
whether the Warrants are exercisable for Additional Shares (in relation to other
securities owned by the Purchasers together with any Affiliates and any other
Person acting as a group together with the Purchasers or any of the Purchasers’
Affiliates) and of which portion of the Additional Shares issuable pursuant to
Section 2.4(a)
or upon exercise of the Warrants, shall be mutually determined and agreed upon
by the Purchasers and the Company.  In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  The “Beneficial Ownership
Limitation” shall be 19.99% of the number of shares of Common Stock
outstanding immediately prior to giving effect to the issuance of the Shares
pursuant to Section
2.4(a).  The parties agree that the number of shares of Common
Stock outstanding as of the date hereof is 7,048,063.  The Beneficial
Ownership Limitation provisions of this Section 2.4(d) and
the similar provision in the Warrants shall no longer apply and there shall be
no such restrictions with respect to the issuance of Additional Shares upon the
Company satisfying in full the provisions of Regulation 14C with respect to the
Stockholder Approval.

     

    ARTICLE
III

    REPRESENTATIONS
AND WARRANTIES

     

    3.1.           Representations and
Warranties of the Company.  Matters disclosed with respect to
one Disclosure Schedule shall be deemed disclosed on another section of the
Disclosure Schedule if the relevance of such matter to such other section is
appropriately cross-referenced or is evident from the context of such
disclosure. Except as set forth in the Disclosure Schedules  which
Disclosure Schedules shall be deemed a part hereof and which shall qualify any
representation or warranty set forth in this Article III , the
Company hereby represents and warrants to each Purchaser as
follows:

     

    (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  Except
as set forth on Schedule 3.1(a),
the Company owns, directly or indirectly, all of the issued and outstanding
capital shares or other equity interests of each Subsidiary free and clear of
any Liens, and all of the issued and outstanding capital shares of each
Subsidiary have been duly authorized, are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for or
purchase securities.  With respect to Beijing Agritech Fertilizer
Ltd., Pacific Dragon Fertilizers Co. Ltd., Anhui Agritech Development Co. Ltd.
and Xingjiang Agritech Agricultural Materials Co. Ltd. (the “PRC Subsidiaries”),
China Tailong Holdings Company Limited and CAI Investment Inc:

     

    (i)           the
registered capital of Beijing Agritech Fertilizer Ltd. is US$20,000,000, of
which $11,999,900 is paid up.  CAI Investment Inc. legally and
beneficially owns 100% of the equity interest in Beijing Agritech Fertilizer
Ltd. There are no outstanding rights or commitments made by CAI Investment Inc.
to sell any of its equity interest in Beijing Agritech Fertilizer
Ltd;


    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    (ii)          the
registered capital of Anhui Agritech Development Co., Ltd. is US$1,500,000, all
of which has been fully paid up.  The Company legally and beneficially
owns 100% of the equity interest in Anhui Agritech Development Co.,
Ltd.  There are no outstanding rights or commitments made by the
Company to sell any of its equity interest in Anhui Agritech Development Co.,
Ltd;

     

    (iii)         the
registered capital of Pacific Dragon Fertilizers Co., Ltd. is US$500,000, all of
which has been fully paid up.  China Tailong Holdings Company Limited
legally and beneficially owns 100% of the equity interest in Pacific Dragon
Fertilizers Co., Ltd.  There are no outstanding rights or commitments
made by China Tailong Holdings Company Limited to sell any of its equity
interest in Pacific Dragon Fertilizers Co., Ltd;

     

    (iv)         the
registered capital of Xingjiang Agritech Agricultural Materials Co. Ltd. is
RMB2,000,000, of which RMB400,000 has been paid up.  Beijing Agritech
Fertilizer Ltd. legally and beneficially owns 75% of the equity interest in
Xingjiang Agritech Agricultural Materials Co. Ltd., and Anhui Agritech
Development Co., Ltd. legally and beneficially owns 25% of the equity interest
in Xingjiang Agritech Agricultural Materials Co. Ltd.  There are no
outstanding rights or commitments made by Beijing Agritech Fertilizer Ltd. or
Anhui Agritech Development Co., Ltd. to sell any of its equity interest in
Xingjiang Agritech Agricultural Materials Co. Ltd;

     

    (v)         each
PRC Subsidiary has been conducting and will conduct its business activities
within the permitted scope of business set forth in its business license and is
otherwise operating its business in full compliance with all relevant legal
requirements and with all requisite licenses, permits and approvals granted by
competent governmental authority;

     

    (vi)         none
of the PRC Subsidiaries is in receipt of any notice from any relevant authority
notifying such PRC Subsidiary of any actual or threatened revocation of any
permits or licenses issued to it; and

     

    (vii)        all
filings and registrations with governmental authorities required in respect of
the PRC Subsidiaries and their operations, including, but not limited to,
registrations with the Ministry of Commerce of the PRC or its relevant
sub-branch, the PRC State Administration for Industry and Commerce or its
relevant sub-branch, the PRC State Administration of Foreign Exchange or its
relevant sub-branch, tax authorities, customs and other authorities, have been
duly completed in accordance with the relevant rules and
regulations.


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    (b)           Organization and
Qualification.  Except as set forth on Schedule 3.1(b), Company and
each of the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing 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
in all material respects as is currently conducted.  Neither the
Company nor any Subsidiary is in violation or default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.  Except as set forth on Schedule
3.1(b), each of the Company and the Subsidiaries is duly qualified to conduct
business and is 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 have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the operations, results of operations, assets,
properties, business, prospects or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
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
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals.  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 and thereof,
will constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by general equitable principles and laws relating to the availability
of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.

     

    (d)           No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
hereby and 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, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or, to
the Knowledge of the Company, 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) or other understanding 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 affected, or (iii) subject to
the Required Approvals, 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 foreign, federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or
affected.


    
      
         


      

      
        12

        
          

        

      

      
         


      

    

     

    (e)           Filings, Consents and
Approvals.  None of the Company or any of its Subsidiaries is
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 it of the Transaction Documents to
which it is a party, other than (i) filings required pursuant to Section 4.3 of
this Agreement, (ii) the filing with the Commission of a Registration Statement
pursuant to the Registration Rights Agreement, (iii) application to each
applicable Trading Market for the listing or quoting of the Securities for
trading thereon in the time and manner required thereby, (iv) the filing of Form
D with the Commission and such filings as are required to be made under
applicable state and foreign securities laws and (v) the Stockholder
Approval (collectively, the “Required
Approvals”).  This Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby have been
authorized and approved by the board of directors of the Company and by the
stockholders of the Company, acting by non-unanimous written consent of the
stockholders of the Company holding a majority of the shares of the Company’s
outstanding Common Stock (the “Stockholder
Approval”), in each case, in accordance with the Company’s certificate of
incorporation and bylaws and the General Corporation Law of the State of
Delaware (the “DGCL”), and in the
case of the Stockholder Approval, in satisfaction of Nasdaq Marketplace Rule
5635.

     

    (f)           Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the applicable Transaction Documents.  The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents.  The Company has reserved from its duly
authorized capital shares the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.

     

    (g)           Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule 3.1(g)
shall also include the number of shares of Common Stock owned beneficially, and
of record, by Affiliates of the Company as of the date hereof. Except as set
forth on Schedule 3.1(g),
the Company has not issued any capital shares since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option plans and pursuant to
the conversion or exercise of Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange
Act.  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 set forth on
Schedule 3.1(g)
and as a result of the purchase and sale of the Securities, 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 exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any Common Stock or any equity of
any Subsidiary of the Company, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional Common Stock or Common Stock Equivalents or equity in any
Subsidiary other than options with respect to options granted to employees,
consultants, officers and directors of the Company to purchase Common Stock of
the Company.  The issuance and sale of the Securities will not
obligate the Company to issue Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding capital shares of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all foreign, federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities.  Except as set forth
in Section 3.1(e)
above, no further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities.  There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
shares to which the Company is a party or, to the Knowledge of the Company,
between or among any of the Company’s stockholders.


    
      
         


      

      
        13

        
          

        

      

      
         


      

    

     

    (h)           Continuous Disclosure
Reports: Financial Statements.  The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the one year preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “Continuous Disclosure
Reports”) on a timely basis or has received a valid extension of such
time of filing and has filed any such Continuous Disclosure Reports prior to the
expiration of any such extension except as disclosed in Schedule 3.1(h).  As
of their respective dates, the Continuous Disclosure Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable, except as disclosed in Schedule 3.1(h)
and none of the Continuous Disclosure 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 the
light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
Continuous Disclosure Reports complied 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 United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“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, immaterial,
year-end audit adjustments.


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since
December 31, 2008, except as specifically disclosed in a subsequent Continuous
Disclosure Report filed prior to the date hereof, (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 and its Subsidiaries have
not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s consolidated financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any capital shares and (v)
the Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option
plans.  The Company does not have pending before the Commission any
request for confidential treatment of information.  Except for the
issuance of the Securities contemplated by this Agreement or as set forth on
Schedule 3.1(i),
no event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company or
any Subsidiary thereof under applicable foreign, federal or state securities
laws at the time this representation is made or deemed made that has not been
publicly disclosed at least one Trading Day prior to the date that this
representation is made.

     

    (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the Knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges or could reasonably be expected to affect or
challenge the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect
except as disclosed in Schedule 3.1(j)
or in the Continuous Disclosure Reports.  Neither the Company nor any
Subsidiary, nor to the Knowledge of the Company any director or officer thereof,
is or has been the subject of any Action involving a claim of violation of or
liability under foreign, federal or state securities laws or a claim of breach
of fiduciary duty.  There has not been, and to the Knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any Subsidiary thereof or any current or
former director or officer of the Company or any Subsidiary
thereof.  The Commission has not issued any stop order or other order
suspending the effectiveness of any document or registration statement filed by
the Company or any Subsidiary under the Exchange Act or the Securities
Act.

     

    (k)           Labor Relations; Employee
Benefits.  No material labor dispute exists or, to the
Knowledge of the Company, is imminent with respect to any of the employees of
the Company or its Subsidiaries.  None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relationships with their
employees are good.  No executive officer of the Company or any
Subsidiary, to the Knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters.  The Company and its Subsidiaries are
in compliance with all federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, welfare funds, social benefits, medical
benefits, insurance, retirement benefits and pensions, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  Other than statutory
social insurance plans operated under the applicable laws of the PRC, none of
the PRC Subsidiaries provides or is required to provide any retirement, social
insurance, life insurance, medical, dental or other welfare benefits provided on
ill-health, injury, death disability or on termination of employment (whether
voluntary or involuntary) to any current or former employees, officers,
consultants, independent contractors or agents of any PRC
Subsidiaries.


    
      
         


      

      
        15

        
          

        

      

      
         


      

    

     

    (l)           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 any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.

     

    (m)           Regulatory
Permits.  The Company and its 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 Continuous Disclosure Reports, except
where the failure to possess such certificates, authorizations and permits could
not 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 certificates, authorizations, and
permits.

     

    (n)           Title to
Assets.  Neither the Company nor any of its Subsidiaries
(i) owns any real property or (ii) owns or possesses any land use
rights to real property located in the PRC.  The Company and its
Subsidiaries have good and marketable title to all personal property owned by
the Company and its Subsidiaries and defensible title to all other property
owned by the Company and its Subsidiaries, free and clear of all Liens and no
royalty is payable in respect of any of them, except such as (i) are disclosed
on Schedule
3.1(n) and (ii) do not, singly or in the aggregate, materially affect the
value of such property and do not interfere with the use made and proposed to be
made of such property by the Company or any of its Subsidiaries.  Any
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable
leases.  All property, leases or claims in which the Company or any
Subsidiary has an interest or right have been validly located and recorded in
accordance with all applicable laws and are valid and subsisting where the
failure to be so would have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.


    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    (o)           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, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the Continuous Disclosure Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person, which could reasonably be expected to result in a Material Adverse
Effect.  To the Knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.  The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
the failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (p)           Insurance.  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 in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to $6,000,000.  Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
respective business without a significant increase in cost. The Company and, if
applicable, each of the Subsidiaries has sufficiently provided for an adequate
reserve related to present or future abandonment and related costs.

     

    (q)           Transactions with Affiliates
and Employees.  Except as set forth in the Continuous
Disclosure Reports, to the Knowledge of the Company, none of the officers,
directors or employees of the Company or any of its Subsidiaries is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as consultants, 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 such officer, director or
employee or, to the Knowledge of the Company, any entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $20,000 other than for
(i) payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company or any of its
Subsidiaries and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company or any of its
Subsidiaries.


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    (r)           Sarbanes-Oxley; Internal
Accounting Controls.  The Company and its Subsidiaries are in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are effective and applicable to it.  The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     

    (s)           Certain
Fees.  Other than a 5.0% cash fee payable by the Company to JP
Capital with respect to the US$15,000,000 of Shares and Warrants to be purchased
hereunder, no brokerage or finder’s fees or commissions are or will be payable
by the Company or any of its Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.

     

    (t)           Private Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated
hereby.  Subject to obtaining the required Stockholder Approval and
compliance with the provisions of the Exchange Act, including Schedule 14C
thereunder, the issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.

     

    (u)           Investment Company; PFIC and
CFC.  The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, (i) an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, or (ii) a “passive foreign investment company”
or a “controlled foreign corporation” as such terms are defined in the Internal
Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.

     

    (v)           Registration
Rights.  Except as disclosed in Schedule 3.1(v),
other than each of the Purchasers, no Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of the
Company.


    
      
         


      

      
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    (w)           Listing and Maintenance
Requirements.  The Company’s Common Stock is registered
pursuant to Section 12(b) 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 set forth on Schedule 3.1(w),
the Company has not, in the 12 months preceding the date hereof, received notice
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market.  The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance
requirements.

     

    (x)           Application of Takeover
Protections.  The Company and its board of directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

     

    (y)           Disclosure.  All
disclosure furnished by or on behalf of the Company to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.  The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2
hereof.

     

    (z)           No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its
behalf or their behalves 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 (i) within the last six months for purposes of the
Securities Act which would require the registration of any such securities under
the Securities Act, or (ii) within the last 12 months for the purposes of any
applicable shareholder approval provisions of any Trading Market on which any of
the securities of the Company are listed or designated.


    
      
         


      

      
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    (aa)           Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid.  Schedule 3.1(aa)
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments.  For the purposes of this Agreement,
“Indebtedness”
means (a) any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (bb)           Tax
Status.  The Company and its Subsidiaries (i) have prepared and
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which they are subject, (ii)
have 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, with respect to which
adequate reserves have been set aside on the books of the Company and its
Subsidiaries and (iii) have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply, except, in the case of
clauses (i) and (ii) above, where the failure to so pay or file any such tax,
assessment, charge or return would not have or reasonably be expected to have a
Material Adverse Effect.

     

    (cc)           No General Solicitation; No
Directed Selling Efforts.  Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the Shares or the
Warrants by any form of “general solicitation” or “general advertising” (as such
terms are defined in Regulation D) or has engaged in any “directed selling
efforts” (as such term is defined in Regulation S) in connection with the offer
and sale of the Shares and Warrants to the Purchasers.  The Company
has offered the Shares or the Warrants for sale only to the Purchasers and such
offers and sales have occurred outside the United States in an “offshore
transaction” (as defined in Regulation S).

     

    (dd)           Foreign Corrupt
Practices.  Neither the Company or any Subsidiary of the
Company, nor, to the Knowledge of the Company, any agent or other Person acting
on behalf of the Company or any Subsidiary of the Company, 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 or to any officers or employees of any state-owned
enterprises from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary thereof (or made by any
Person acting on the behalf of the Company or any Subsidiary thereof of which
the Company is aware) which is in violation of law, or (iv) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or of any
applicable anti-corruption, anti-bribery, anti-graft or similar such laws,
rules, regulations or ordinances.


    
      
         


      

      
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    (ee)           Accountants.  The
Company’s auditor is Crowe Horwath LLP.  Such accounting firm (i) is a
registered public accounting firm as required by the Exchange Act and (ii) has
expressed its opinion with respect to the financial statements included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.

     

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

     

    (gg)           Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities.  The Company further
represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

     

    (hh)           Acknowledgement Regarding
Purchaser’s Trading Activity.  Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Section 3.2(f)
hereof and except as set forth in the Registration Rights Agreement), it is
understood and acknowledged by the Company (i) that none of the Purchasers has
been asked by the Company to agree, nor has any Purchaser agreed, to desist from
purchasing or selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term; except for the Purchasers covenant to enter
into a lock-up agreement with respect to securities of the Company held by the
Purchasers, as contemplated in Section 4.17 hereof; (ii) that past or future
open market or other transactions by any Purchaser, including Short Sales, and
specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock; and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative”
transaction.  The Company further understands and acknowledges that
(a) one or more Purchasers may engage in hedging activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the Warrants are exercisable and (b) such
hedging activities (if any) could reduce the value of the existing stockholders’
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents; provided, however that such hedging activities are in
compliance with the Securities Act.


    
      
         


      

      
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    (ii)           Regulation M
Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid, or agreed to pay
to any Person, any compensation for soliciting another Person to purchase any
other securities of the Company.

     

    (jj)           Environmental
Matters.  With respect to the Company and each of its
Subsidiaries, except to the extent that any violation or other matter referred
to in this subparagraph does not have a Material Adverse Effect (i) the Company
and its Subsidiaries are not in violation of any applicable foreign, federal,
state or local laws, regulations, orders, government decrees or ordinances with
respect to environmental, health or safety matters (collectively, “Environmental Laws”);
(ii) the Company and its Subsidiaries have operated their business at all times
and have received, handled, used, stored, treated, shipped and disposed of all
contaminants without violation of Environmental Laws; (iii) the Company and its
Subsidiaries have had no spills, releases, deposits or discharges of hazardous
or toxic substances, contaminants or wastes into the earth, air or into any body
of water or any municipal or other sewer or drain water systems that have not
been remedied; (iv) no orders, directions or notices have been issued and remain
outstanding pursuant to any Environmental Laws relating to the business or
assets of the Company and its Subsidiaries; (v) the Company and its Subsidiaries
have not failed to report to the proper foreign, federal, state, local or other
political subdivision, government, department, commission, board, bureau, agency
or instrumentality, domestic or foreign, the occurrence of any event which is
required to be so reported under Environmental Laws; and (vi) the Company and
its Subsidiaries hold all licenses, permits and approvals required under any
Environmental Laws in connection with the operation of its business and the
ownership and use of its assets, all such licenses, permits and approvals are in
full force and effect, and except for (1) notifications and conditions of
general application to assets of the type owned by the Company or its
Subsidiaries, and (2) notifications relating to reclamation, remediation or
similar obligations under Environmental Laws, the Company and its Subsidiaries
have not received any notification pursuant to any Environmental Laws that any
work, repairs, construction or capital expenditures are required to be made by
it as a condition of continued compliance with any Environmental Laws, or any
license, permit or approval issued pursuant thereto, or that any license, permit
or approval referred to above is about to be reviewed, made subject to
limitation or conditions, revoked, withdrawn or terminated.

     

    (kk)           OFAC.  Neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the Company,
any director, officer, agent, employee, Affiliate or Person acting on behalf of
the Company or any Subsidiary thereof is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and the
Company will not knowingly directly or indirectly use the proceeds of the sale
of the Shares and Warrants, or lend, contribute or otherwise make available such
proceeds to any of its Subsidiaries, joint venture partners or other Persons or
entities, towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar
or any other country sanctioned by OFAC or for the purpose of financing the
activities of any Person currently subject to any U.S. sanctions administered by
OFAC.



    
      
         


      

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

     

    (mm)       ERISA.  The
Company is in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder (herein
called “ERISA”); no
“reportable event” (as defined in ERISA) has occurred with respect to any
“pension plan” (as defined in ERISA) for which the Company would have any
liability; the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any “pension plan”; or (ii) Section 412 or Section 4971 of the Internal Revenue
Code of 1986, as amended, including the regulations and published
interpretations thereunder; and each “Pension Plan” for which the Company would
have liability that is intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended, is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.

     

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

     

    (a)           Organization;
Authority.  Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full corporate or partnership power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser.  Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligations of such Purchaser, enforceable against it in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by general equitable
principles and laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.


    
      
         


      

      
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    (b)          Own
Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other Persons to distribute or regarding the distribution of such Securities
(this representation and warranty not requiring such Purchaser to hold the
Securities for any minimum or other specific term nor limiting such Purchaser’s
right to sell the Securities at any time pursuant to the Registration Statement
or otherwise in compliance with foreign, federal and state securities laws) in
violation of the Securities Act or any applicable state securities
law.  Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.

     

    (c)          Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any
Warrants, it will be an “accredited investor” as defined in Rule 501(a) under
the Securities Act and a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act.

     

    (d)           Experience of Such
Purchaser.  Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities and has so evaluated the merits and
risks of such investment.  Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment. Such Purchaser acknowledges that it
has been encouraged to obtain independent legal, income tax and investment
advice with respect to its subscription for, and the restrictions on resale of,
the Securities and accordingly, has had the opportunity to acquire an
understanding of the meanings of all terms contained herein relevant to such
Purchaser for purposes of giving representations, warranties and covenants under
this Agreement.

     

    (e)          General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any “general solicitation” or “general advertising,” as such
terms are defined in Regulation D, which includes, but is not limited to, any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or on the internet or
broadcast over television, radio or the internet or presented at any seminar or
any other general solicitation or general advertisement.

     

    (f)           Short Sales and
Confidentiality Prior To The Date Hereof.  Other than
consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion
Time”).  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction).


    
      
         


      

      
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    (g)          Reliance on
Exemptions.  Such Purchaser understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of foreign, federal and state securities laws and that
the Company is relying upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Securities.

     

    (h)          No Governmental
Review.  Such Purchaser understands that no federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.

     

    (i)           No
Conflicts.  The execution, delivery and performance by such
Purchaser of this Agreement and other Transaction Documents to which it is a
party and the consummation by such Purchaser of the transactions contemplated
hereby and thereby will not (i) result in a violation of the organizational
documents of such Purchaser (to the extent applicable) (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Purchaser is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment  or decree
(including foreign, federal and state securities laws) applicable to such
Purchaser, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Purchaser to perform its obligations hereunder.

     

    (j)           Brokers and
Finders.  No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company or such Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding with a
placement agent entered into by or on behalf of such Purchaser.

     

    (k)          Prior
Arrangements.  No Person has made to such Purchaser any written
or oral representations (i) that any Person will resell or repurchase the
Securities, (ii) that any Person will refund the purchase price of the
Securities, or (iii) as to the future price or value of the
Securities.

     

    (l)           Regulation S Representations
and Warranties.

     

    (i)           Such
Purchaser is not a “U.S. Person” (as such term is defined in Regulation S) and
such Purchaser is not acquiring the Shares or Warrants for the account or
benefit of any U.S. Person. At the time of (a) the offer by the Company and (b)
the acceptance of the offer by such Purchaser, of the Securities, such Purchaser
was outside the United States.

     


    
      
         


      

      
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    (ii)          Such
Purchaser is acquiring the Securities for its own account, for investment and
not for distribution or resale to others and is not purchasing the Securities
for the account or benefit of any U.S. person, or with a view towards
distribution to any U.S. person, in violation of the registration requirements
of the Securities Act.

     

    (iii)         Such
Purchaser will make all subsequent offers and sales of the Securities either (x)
outside of the United States in compliance with Regulation S; (y) pursuant to a
registration under the Securities Act; or (z) pursuant to an available exemption
from registration under the Securities Act.  Specifically, such
Purchaser will not resell the Securities to any U.S. person or within the United
States prior to the expiration of a period commencing on the Closing Date and
ending on the date that is six months thereafter (the “Distribution Compliance
Period”), except pursuant to registration under the Securities Act or an
exemption from registration under the Securities Act.

     

    (iv)        Such
Purchaser has no present plan or intention to sell the Securities in the United
States or to a U.S. person at any predetermined time, has made no predetermined
arrangements to sell the Securities and is not acting as a Distributor of such
securities.

     

    (v)         Such
Purchaser, its affiliates nor any person acting on behalf of such person or
entity, has entered into, has the intention of entering into, or will enter into
any put option, short position or other similar instrument or position in the
U.S. with respect to the Securities at any time after the Closing Date through
the Distribution Compliance Period except in compliance with the Securities
Act.

     

    ARTICLE
IV

    POST-CLOSING
COVENANTS AND AGREEMENTS OF THE PARTIES

     

    4.1.         Transfer
Restrictions.

     

    (a)           General.  The
Securities may only be disposed of in compliance with foreign, federal and state
securities laws.  In connection with any transfer of Securities other
than (i) pursuant to an effective registration statement, Rule 144 or Rule
144A, (ii) to the Company, (iii) to an Affiliate of a Purchaser or
(iv) 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 of recognized standing and reasonably acceptable to the Company, 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 and stating the exemption from
registration being relied upon by such transferor in the sale of the
Securities.  As a condition of transfer and pursuant to Section 5.7, any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.

     

    (b)           Legends.  The
Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of a legend
on any of the Securities in the following form:


    
      
         


      

      
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    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY FOREIGN ENTITY OR STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND
APPLICABLE FOREIGN OR STATE SECURITIES LAWS, AND, ACCORDINGLY, NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION
S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN OPINION OF COUNSEL,
WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THE
PROVISIONS OF REGULATION S HAVE BEEN SATISFIED, (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES
LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE AND FOREIGN SECURITIES LAWS.  THIS SECURITY AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.”

    


    The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide
margin agreement with a registered broker-dealer or grant a security interest in
some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) of Regulation D and who agrees to be bound
by the provisions of this Agreement and the Registration Rights Agreement and,
if required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties as long as such
transfer complies with applicable foreign, federal and state securities
laws.  Except as set forth herein, such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal counsel of
the pledgee, secured party or pledgor shall be required in connection therewith;
provided, however, with
respect to any such transfer, the Company may reasonably request information
from such transferee in order to satisfy itself that such transfer is exempt
from registration under the applicable foreign, federal and state securities
laws.  Notice shall be required of such pledge.  At the
appropriate Purchaser’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, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling shareholders thereunder.


    
      
         


      

      
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    (c)           Removal of
Legends.  Certificates evidencing the Shares and the Warrant
Shares shall not contain any legend (including the legend set forth in Section 4.1(b)
hereof):  (i) following any sale of such Shares or Warrant Shares
while a registration statement (including the Registration Statement) other than
on Form S-3 or Form S-1 covering the resale of such Shares or Warrant Shares is
effective under the Securities Act, (ii) following any sale of such Shares
or Warrant Shares pursuant to Rule 144 or 144A, or (iii) 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).  At any time that a registration statement (including the
Registration Statement) on Form S-1 or Form S-3 covering the resale of Shares or
Warrant Shares is effective under the Securities Act, the Company shall deliver
to its transfer agent a blanket authorization letter to remove any legend upon
the resale of any such Shares or Warrant Shares.  The Company shall
cause its counsel to issue a legal opinion to the Company’s transfer agent if
required by the Company’s transfer agent to effect the removal of legends
hereunder.  The Company agrees 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 a Purchaser to the
Company or the Company’s transfer agent of a certificate representing Shares or
Warrant Shares issued with a restrictive legend (such third Trading Day, the
“Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other legends;
provided, however that
the Legend Removal Date shall be tolled in the event the Company has not
received all of the documentation required or necessary for delivery of a legal
opinion to the Company’s transfer agent to effect the removal of the
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.  Certificates for Securities
subject to legend removal hereunder shall be transmitted by the transfer agent
of the Company to a Purchaser by crediting the account of such Purchaser’s prime
broker with the Depository Trust Company System or another established clearing
corporation performing similar functions as directed by such
Purchaser.

     

    (d)           Liquidated
Damages.  In addition to such Purchaser’s other available
remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, for each $1,000 of Shares or Warrant Shares (based
on the VWAP of the Common Stock on the date such Securities are submitted to the
Company’s transfer agent) delivered for removal of the restrictive legend and
subject to Section 4.1(c), $10 per
Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the 2nd Trading Day
following the Legend Removal Date until such certificate is delivered without a
legend.  Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing
any Securities as required by the Transaction Documents, and such Purchaser
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.


    
      
         


      

      
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    (e)           Agreement of the
Purchasers.  Each Purchaser, severally and not jointly with the
other Purchasers, agrees that such Purchaser will sell any Securities pursuant
to (i) Regulation S, (ii) the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or (iii) an exemption
from such registration requirements, and that if Securities are sold pursuant to
a Registration Statement, they will be sold in compliance with the plan of
distribution set forth therein, and acknowledges 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 upon this understanding.

     

    4.2.         Furnishing of
Information.  For so long as a Purchaser owns any Securities,
the Company shall use its best efforts 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 Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it will take such
further action as permitted under applicable laws as any holder of Securities
may reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act
within the requirements of the exemption provided by Rule 144 or Rule
144A.

     

    4.3.         Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue (i) a
Current Report on Form 8-K disclosing the material terms of the transactions
contemplated hereby and filing this Agreement, along with the exhibits hereto,
as exhibits to such Form 8-K.  Neither the Company nor any Purchaser
shall issue any press release regarding the transactions contemplated by this
Agreement or otherwise make any such public statement with respect thereto
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Further, the parties
acknowledge and agree that all such press releases shall conform with the
requirements of Rule 135c of the Securities Act. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with the
registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause (ii).

     

    4.4.         Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.


    
      
         


      

      
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    4.5.         Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information.  The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.

     

    4.6.         Use of
Proceeds.  Except as set forth on Schedule 4.6 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital and business expansion purposes and shall not use such
proceeds for the satisfaction of any portion of the Company’s debt (other than
payment of trade payables in the ordinary course of the Company’s business and
prior practices), or to redeem any Common Stock or Common Stock Equivalents or
to settle any outstanding litigation.

     

    4.7.         Indemnification of
Purchasers.   Subject to the provisions of this Section 4.7, the Company will
indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a “Purchaser 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 Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser Party in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state, federal or foreign securities laws or any conduct by such
Purchaser which constitutes fraud, gross negligence, willful misconduct or
malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser 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 reasonably acceptable to the Purchaser Party.  Any
Purchaser 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 Purchaser 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
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (i) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.


    
      
         


      

      
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    4.8.         Reservation of Common
Stock.  As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the purpose
of enabling the Company to issue Shares issuable pursuant to this Agreement and
Warrant Shares pursuant to any exercise of the Warrants.  If after the
Closing Date, the Company amends its certificate of incorporation or similar
charter document to limit the number of shares of Common Stock that the Company
is authorized to issue, it shall maintain a reserve from its duly authorized
Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations in full under the Transaction
Documents.

     

    4.9.         Listing of Common
Stock.  The Company hereby agrees to use best efforts to
maintain the listing or quotation of the Common Stock on the Trading Market on
which the Common Stock is currently listed or quoted and concurrently with the
Closing, the Company shall apply to list or quote all of the Shares and the
Warrant Shares on such Trading Market and promptly secure the listing or
quotation of all of the Shares and Warrant Shares on such Trading
Market.  The Company further agrees, if the Company applies to have
the Common Stock traded on any other Trading Market, it will include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed or quoted on such other Trading Market as promptly as
possible.  The Company will take all action reasonably necessary to
continue the listing or quotation and the trading of its Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of such Trading Market.

     

    4.10.       Short Sales and
Confidentiality After the Date Hereof.  Each Purchaser
severally and not jointly with the other Purchaser, covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing on the date hereof and
ending at the time that the transactions contemplated by this Agreement are
first publicly announced following their consummation as described in Section 4.3.  Each
Purchaser, severally and not jointly with the other Purchaser, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.3, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure
Schedules.  Each Purchaser understands and acknowledges, and agrees,
severally and not jointly with any other Purchaser, to act in a manner that will
not violate the positions of the Commission 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.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced following their consummation as described in Section 4.3.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.


    
      
         


      

      
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    4.11.       Delivery of Securities After
Closing.  The Company shall deliver, or cause to be delivered,
the respective Shares and Warrants purchased by each Purchaser to such Purchaser
within two Trading Days after the Closing Date.

     

    4.12.       Form D; Blue Sky and other
filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws, and shall provide
evidence of such actions promptly upon request of any Purchaser.

     

    4.13.       Exclusivity.  Until
the Closing or the termination of this Agreement pursuant to Section 5.1 hereof, the
Company shall not, directly or indirectly, through any Affiliate or any of its
consultants, counsel, accountants, investment bankers or other representatives
(a) initiate, solicit, pursue, discuss or encourage any inquiries or the making
of any proposal or offer with respect to a private sale, transfer or issuance of
any securities of the Company or any other private financing of the Company, (b)
continue or engage in negotiations or discussions concerning, or provide any
information to any Person relating to, any such transaction, or (c) agree to,
approve or recommend, or otherwise enter into any agreement with respect to, any
such transaction.  The Company agrees to notify the Purchasers
immediately if any Person makes any oral or written inquiry, proposal or offer
with respect to any such transaction.

     

    4.14.       Information
Statement.

     

    (a)           Distribution of Information
Statement.  As soon as practicable after the date hereof and,
in any event within two Business Days after the date hereof, the Company shall
prepare an information statement as contemplated by and in accordance with
Regulation 14C under the Exchange Act (an “Information
Statement”) and file the Information Statement with the Commission and
cause the definitive Information Statement to be mailed to the stockholders of
the Company in accordance with the provisions of the DGCL and Regulation 14C as
soon as possible after the preliminary Information Statement is cleared with the
Commission; provided,
however, that the Company shall provide the Purchasers with a draft of
the Information Statement prior to the filing thereof and the distribution
thereof to the Company’s stockholders and the Company shall give reasonable
consideration to any comments by the Purchasers and their counsel to such
Information Statement.


    
      
         


      

      
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    (b)           The
Information Statement shall 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 therein, in light of the circumstances under which
they are made, not false or misleading.  The Information Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.

     

    (c)           If
the Information Statement is reviewed by the Commission, the Company shall use
its best efforts to have the Information Statement cleared by the Commission and
its staff under the Exchange Act as promptly as practicable.  The
Company shall promptly notify the Purchasers of the receipt of any comments from
the Commission or its staff and of any request by the Commission or its staff
for amendments or supplements to the Information Statement or for additional
information and shall supply the Purchasers with copies of all correspondence
between the Company or any of its representatives and the Commission or its
staff.

     

    4.15.       Right to Participate in
Future Financing.  For a period of one year following the
Closing Date (the “Participation
Period”), the Purchasers shall have the right to participate and purchase
in the first Qualified Offering (defined below) during the Participation Period
(on a pro rata basis
based upon their original respective Subscription Amounts), collectively, no
less than $5 million and no more than $10 million (with the actual amount
purchased within such range to be subject to the sole discretion of the
Purchasers) of (a) shares of Common Stock, (b) debt or equity securities
convertible, exercisable or exchangeable into Common Stock or (c) debt
securities.  A “Qualified Offering”
shall mean an offer and sale to a third party, whether private or public and
whether underwritten or not, of securities of the Company of the type referenced
in (a) to (c) in the preceding sentence.  Any such purchase by the
Purchasers shall be on the same terms and conditions and at the same price such
securities are offered to the third party in the Qualified
Offering.  The Company covenants and agrees that it shall promptly
notify, in accordance and compliance with all applicable securities laws, each
Purchaser of the terms and conditions of any proposed Qualified Offering; provided, however, that if
the Qualified Offering is a public offering, the notice from the Company to each
Purchaser will set forth the anticipated price range, as opposed to the actual
offering price, which will not be determined until immediately prior to the
effectiveness of the Qualified Offering.  Within ten Business Days
after such notice, each Purchaser shall notify the Company of the amount it will
purchase in the Qualified Offering pursuant to the terms of this Section 4.15.  This
right shall terminate upon the consummation of a Qualified
Offering.

     

    4.16.       Investment Company, PFIC and
CFC.  The Company shall conduct its business in a manner so
that it will not become subject to the Investment Company Act of 1940, as
amended, and will not be deemed to be a “passive foreign investment company” or
a “controlled foreign corporation” as defined by the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder.


    
      
         


      

      
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    4.17.       Conduct of
Business.  Except as expressly approved by the Purchasers in
writing (which approval shall not be unreasonably withheld or delayed), during
the period between the date hereof and the Closing Date, the Company shall, and
the Company shall cause each of its Subsidiaries to, (a) operate its business
only in the ordinary course of business, not introduce any new method of
management or operation and use its reasonable best efforts to preserve its
business intact, (b) use its reasonable best efforts to keep available the
services of its current officers, employees and consultants and (c) use its
reasonable best efforts to preserve the goodwill and present relationships with
customers, vendors, distributors, licensors, licensees, creditors, business
partners and others with which the Company and its Subsidiaries have business
relations.  Without limiting the generality of the preceding sentence,
during the period between the date hereof through the Closing Date, the Company
shall not, and shall cause its Subsidiaries not to, except as expressly required
or permitted by the terms of this Agreement, do or propose or agree to do any of
the following without the prior written consent or direction of the
Purchasers:  (i) amend its certificate of incorporation, articles of
association, bylaws or other constitutional documents; (ii) merge with or
consolidate with any other Person; (iii) issue or sell any Common Stock or
Common Stock Equivalents to any Person other than the Purchasers.

     

    4.18.       Board of
Directors.  In accordance with the Voting Agreement, within 60
days after the Closing, the Company shall take all necessary corporate action to
cause (a) Anne Wang, as representative designated by the Purchasers, to serve as
a non-independent director on the Board of Directors of the Company and (b) an
individual, nominated by the Company and reasonably satisfactory to the
Purchasers, to serve as an independent director on the Board of Directors of the
Company.  The Purchasers agree that they shall not be unreasonable
with respect to the Company’s selection of the independent director referenced
in the prior sentence.  In accordance with the Voting Agreement, until
such date as the Purchasers, collectively, do not own at least 5.0% of the
shares of Common Stock of the Company, calculated on a fully diluted basis, (i)
the Purchasers shall be entitled to nominate one director to the Board of
Directors of the Company, and (ii) the Company shall nominate and recommend the
election of Anne Wang or such other nominee of the Purchasers to the Board of
Directors of the Company to its stockholders at any meeting of stockholders at
which members of the Board of Directors shall be elected.  Prior to
the date that Anne Wang is appointed as a director of the Company, the Company
shall have delivered to the Purchasers a director indemnification agreement, in
form and substance acceptable to the Purchasers, duly executed by the
Company.

     

    4.19.       Status of
Subsidiaries.

     

    (a)           Beijing Agritech Fertilizer
Ltd.  On and after the Closing Date, the Company shall cause
its Subsidiary, Beijing Agritech Fertilizer Ltd, to cease using the name “艾瑞泰克(中國)肥料有限公司”or
“Agritech (China) Fertilizer Co., Ltd.” and to instead use the name “艾瑞泰克(中國)肥料有限公司” or
“Beijing Agritech Fertilizer Ltd.,” including on all signage.

     

    (b)           SAFE Circular 75
Filing.  As soon as practicable after the Closing, the Company
shall cause Mr. Chang Yu, to effect any and all registrations required under the
rules and regulations promulgated, or applicable policies implemented, by the
PRC State Administration of Foreign Exchange or its relevant sub-branch,
including, without limitation, SAFE Circular 75.  The Company shall
provide the Purchasers with a complete true copy of the relevant documentation
relating to such registrations.

     

    (c)           Payments to the Bank Account
of Mr. Chang Yu.  On and after the Closing Date, the Company
shall not, and shall cause its Subsidiaries not to, arrange, allow or require
payments under sales contracts or payments made for the benefit of the Company
or any Subsidiary thereof, to be deposited in any personal bank account of Mr.
Chang Yu.


    
      
         


      

      
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    (d)           CAI Investment,
Inc.  The Company shall take such action as may be necessary to
have CAI Investment, Inc. declared in good standing under the laws of the State
of California and shall deliver a good standing certificate issued by a duly
authorized person within the office of the Secretary of State of California
promptly upon the notification from the Secretary of State’s Office that CAI
Investment, Inc. is in good standing.

     

    4.20.       Lock-Up
Agreement.  In the event the Company undertakes a bona fide public offering of
equity securities, the Purchasers shall agree at the request of the lead
underwriter to execute a lock-up agreement which shall provide that the
Purchasers will not sell, transfer or dispose of their shares of Common Stock
for a period of one hundred eighty days (180) after the effective date of the
registration statement filed in connection with the public offering, or such
shorter period as the underwriters may agree upon; provided, however, that any such
lock-up with respect to the Purchasers shall be on no less favorable terms than
any lock-up executed by any officer, director or 5% stockholder.

     

    ARTICLE
V

    MISCELLANEOUS

     

    5.1.         Termination.  This
Agreement may be terminated and the sale and purchase of the Shares and Warrants
abandoned at any time prior to the Closing by either the Company or any
Purchaser (with respect to itself only) upon written notice to the other, if the
Closing has not been consummated on or prior to 5:00 p.m., New York City time,
on October 31 ,2009; provided,
however, that the right to terminate this Agreement under this Section 5.1 shall not be
available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time.  Nothing in this Section 5.1 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents.  Upon a termination in accordance with this Section 5.1, the Company
and the terminating Purchaser(s) shall not have any further obligation or
liability (including arising from such termination) to the other, and no
Purchaser will have any liability to any other Purchaser under the Transaction
Documents as a result therefrom.

     

    5.2.         Fees and
Expenses.  The Company shall pay all fees and expenses it
incurs in connection with satisfying its obligations under this
Agreement.  The Company shall pay all transfer agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.  Additionally, the Company shall also
reimburse the Purchasers for up to $150,000 of the Purchasers’ reasonable
out-of-pocket expenses, including, without limitation, fees of legal counsel,
incurred by them in connection with the consummation of the transactions
contemplated by the Transaction Documents.

     

    5.3.         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 and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.


    
      
         


      

      
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    5.4.         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 at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd
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 set forth on the signature pages attached
hereto.

     

    5.5.         Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers holding a majority of the Shares at the time of
the amendment or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought.  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 any party to exercise any right hereunder in any
manner impair the exercise of any such right.

     

    5.6.         Headings.  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.

     

    5.7.         Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns; provided, however, the
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser.  Except as set
forth herein, any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents
that apply to the “Purchasers.”

     

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


    
      
         


      

      
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    5.9.         Governing
Law.  This Agreement, and the determination of any and all
claims arising out of, relating to or in connection with this Agreement and the
other Transaction Documents, shall in all respects and to the maximum extent
permitted by applicable law be governed by the laws of the State of New York,
including all matters of construction, enforcement, validity and performance
(including sections 5-1401 and 5-1402 of the New York General Obligations Law
but excluding all other choice of law and conflicts of law
rules).  EACH PARTY HERETO AGREES THAT IT SHALL BRING ANY AND ALL
ACTIONS OR PROCEEDINGS IN RESPECT OF ANY CLAIM ARISING OUT OF, RELATED TO, OR IN
CONNECTION WITH, THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, THE
TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS HEREBY OR THEREBY, OR THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN TORT OR CONTRACT OR AT LAW
OR IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (THE
“CHOSEN COURT”)
AND (A) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURT,
(B) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE
CHOSEN COURT, (C) WAIVES ANY OBJECTION THAT THE CHOSEN COURT IS AN INCONVENIENT
FORUM OR DOES NOT HAVE JURISDICTION OVER ANY PARTY HERETO AND (D) AGREES THAT
SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE
EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH SECTION 5.4 OF THIS
AGREEMENT.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY
WAY ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.  If any party shall commence an action or proceeding to enforce
any provisions of the Transaction Documents, then the prevailing party in such
action or proceeding shall be reimbursed by the losing party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

     

    5.10.       Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Shares and Warrants.

     

    5.11.       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 all parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, 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 or “.pdf” signature page were an original thereof.

     

    5.12.       Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     

    5.13.       Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the
case of a rescission of an exercise of a Warrant, the Purchaser shall be
required to return any Common Stock delivered in connection with any such
rescinded exercise notice.


    
      
         


      

      
        37

        
          

        

      

      
         


      

    


    5.14.       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 (in the case of mutilation), 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.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity and
bond) associated with the issuance of such replacement Securities.

     

    5.15.       Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers 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 contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

     

    5.16.       Payment Set
Aside.  To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
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.

     

    5.17.       Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers 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 Purchaser 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 Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.


    
      
         


      

      
        38

        
          

        

      

      
         


      

    


    5.18.       Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

     

    5.19.       Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.

     

    5.20.       Waiver of Jury
Trial.  In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and
intentionally, to the greatest extent permitted by applicable law, hereby
absolutely, unconditionally, irrevocably and expressly waives forever trial by
jury.

     

    (Signature
Pages Follow)


    
      
         


      

      
        39

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement
to be duly executed by its authorized signatory as of the date first indicated
above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  CHINA
      AGRITECH, INC.

                                	 
      	
                                  Address for
      Notice:

                                
	 	 	 	 
	
                                  By:  

                                	      
                                  /s/
      Yu Chang

                                	 
      	
                                  Room
      3F No. 11 Building

                                
	 
      	
                                  Name:
      Yu
      Chang

                                  
                                    Title:
      Chief
      Executive Officer

                                  

                                	 
      	
                                  Zhonghong
      International Business Garden,

                                  Future
      Business Center

                                
	 
      	
                                   

                                	 
      	
                                  Chaoyang
      North Road, Chaoyang District,

                                
	 
      	 
      	 
      	
                                  Beijing,
      China  100024

                                
	With
      a copy to (which shall not constitute notice):	 
      	
                                  Attention:                                          

                                
	 
      	 
      	 
      	
                                  Fax:                                           

                                
	Loeb
      & Loeb LLP	 
      	 
      
	345
      Park Avenue	 
      	 
      
	New
      York, New York  10154	 
      	 
      
	Attention:  Mr.
      Mitchell S. Nussbaum	 
      	 
      
	Fax:  (212)
      504-3013	 
      	 
      


                        

                      

                    

                  

                

              

            

          

        

      

    

    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES FOR PURCHASERS FOLLOW]


    
      
         


      

      
        40

        
          

        

      

      
         


      

    


    [PURCHASER
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

    


    IN
WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement
to be duly executed by its authorized signatory as of the date first indicated
above.

     

    
      
        
          
            
              
                
                  
                    
                      	
                              CARLYLE
      ASIA GROWTH PARTNERS IV, L.P.

                            	 
	 
      	 
      	 
	
                              By:

                            	
                              CAGP
      General Partner, L.P., as its General Partner

                            
	
                              By:

                            	
                              CAGP
      Ltd., as its General Partner

                            
	 
      	 
      	 
	
                              By:  

                            	      
                              /s/
      Curtis Buser

                            	 
	 
      	
                              Name:
      Curtis Buser

                            	 
	 
      	
                              Title:
      Director

                            	 


                    

                  

                

              

            

          

        

      

    

    


    
      
        
          	
                  Address
      for Notice of Purchaser:

                	
                  Suite
      2801, 28/F, Two Pacific Place

                
	 
      	
                  88
      Queensway, Hong Kong

                
	 
      	 
      
	
                  With
      a copy to

                	 
      
	
                  (which
      shall not constitute notice):

                	
                  Troutman
      Sanders LLP

                
	 
      	
                  34F
      Two Exchange Square

                
	 
      	
                  8
      Connaught Place, Central

                
	 
      	
                  Hong
      Kong

                
	 
      	
                  Attention:  Ms.
      Olivia S. Lee

                
	 
      	
                  Fax:  (852)
      2533-7898

                


        

      

    

    


    [SIGNATURE
PAGES CONTINUE]


    
      
         


      

      
        41

        
          

        

      

      
         


      

    


    [PURCHASER
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

    


    IN
WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement
to be duly executed by its authorized signatory as of the date first indicated
above.

     

    
      
        
          
            
              
                	
                        CAGP
      IV CO-INVESTMENT, L.P.

                      	 
	 
      	 
      	 
	
                        By:

                      	
                        CAGP
      General Partner, L.P., as its General Partner

                      
	
                        By:

                      	
                        CAGP
      Ltd., as its General Partner

                      
	 
      	 
      	 
	
                        By:  

                      	/s/
      Curtis Buser	 
	 
      	
                        Name:
      Curtis Buser

                      	 
	 
      	
                        Title:
      Director

                      	 


              

            

          

        

      

    

    


    
      
        
          	
                  Address
      for Notice of Purchaser:

                	
                  Suite
      2801, 28/F, Two Pacific Place

                
	 
      	
                  88
      Queensway, Hong Kong

                
	 
      	 
      
	
                  With
      a copy to

                	 
      
	
                  (which
      shall not constitute notice):

                	
                  Troutman
      Sanders LLP

                
	 
      	
                  34F
      Two Exchange Square

                
	 
      	
                  8
      Connaught Place, Central

                
	 
      	
                  Hong
      Kong

                
	 
      	
                  Attention:  Ms.
      Olivia S. Lee

                
	 
      	
                  Fax:  (852)
      2533-7898

                


        

      

    

    


    [SIGNATURE
PAGES CONTINUE]


    
      
         


      

      
        42