SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of March 7, 2007, among Equicap, Inc., a Nevada corporation, and all
      predecessors thereto (collectively, the “Company”),
      Usunco
      Automotive Limited, a British Virgin Islands corporation (“Usunco”),
      Usunco’s 75% owned subsidiary, Zhejiang Zhongchai Machinery Co., Ltd., a
      corporation organized under the laws of the People’s Republic of China
      (“Zhongchai”),
      and
      the investors identified on the signature pages hereto (each, an “Investor”
      and
      collectively, the “Investors”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
      thereunder, the Company desires to issue and sell to each Investor, and each
      Investor, severally and not jointly, desires to purchase from the Company
      certain securities of the Company, as more fully described in this
      Agreement.

     

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

     

    ARTICLE
      1.

    DEFINITIONS

     

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

     

    “2007
      Guaranteed ATNI” has
      the
      meaning set forth in Section 4.11(a).

     

    “2007
      Make Good Shares” has
      the
      meaning set forth in Section 4.11(a).

     

    “2008
      Guaranteed ATNI” has
      the
      meaning set forth in Section 4.11(a).

     

    “2008
      Guaranteed EPS” has
      the
      meaning set forth in Section 4.11(a).

     

    “2008
      Make Good Shares” has
      the
      meaning set forth in Section 4.11(a). 

     

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

     

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

     

    
      
        
          
          

        

        
          
          

          
            

          

        

         

      

    

     

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

     

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

     

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

     

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

     

    “Commission”
      means
      the Securities and Exchange Commission.

     

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

     

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

     

    “Company
      Counsel”
      means
      Graubard Miller.

     

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

     

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

     

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

     

    "Escrow
      Deposit Agreement"
      means
      the Escrow Deposit Agreement, dated as of the date hereof, between the Company,
      vFinance Investments, Inc. and Signature Bank, as the escrow agent (the
“Escrow
      Agent”),
      in the
      form of Exhibit
      A
      attached
      hereto.

     

    “Evaluation
      Date” has
      the
      meaning set forth in Section 3.1(s).

     

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

     

    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers,
      directors or consultants of the Company pursuant to any stock or option plan
      duly adopted by the Board of Directors of the Company or a majority of the
      members of a committee of directors established for such purpose, (b) securities
      upon the exercise or exchange of or conversion of any Shares issued hereunder
      or
      to any placement agents in connection with the transactions contemplated hereby
      and/or securities exercisable or exchangeable for or convertible into shares
      of
      Common Stock issued and outstanding on the date of this Agreement, provided
      that
      such securities have not been amended since the date of this Agreement to
      increase the number of such securities or to decrease the exercise, exchange
      or
      conversion price of any such securities, and (c) securities issued pursuant
      to
      acquisitions or strategic transactions, provided any such issuance shall only
      be
      to a Person which is, itself or through its subsidiaries, an operating company
      in a business synergistic with the business of the Company and in which the
      Company receives benefits in addition to the investment of funds, but shall
      not
      include a transaction in which the Company is issuing securities primarily
      for
      the purpose of raising capital or to an entity whose primary business is
      investing in securities.

     

    
      
        
          
          

        

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

     

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

     

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

     

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

     

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

     

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

     

    “Lockup
      Agreement”
      means
      the Lockup Agreement, in the form of Exhibit
      B
      attached
      hereto, dated as of the date hereof, by and between the Company and each officer
      and each member of the board of directors of the Company, in the form
      satisfactory to the Investors in their sole discretion.

     

    “Make
      Good Escrow Agreement” means
      the
      Make Good Escrow Agreement, dated as of the date hereof, among the Company,
      the
      Investors and Sinoquest Management Ltd. (BVI), Jason Lu, SIJ Holding Ltd, Philip
      Widmann, Solaris Capital Limited, Gong Chen, Ruth Kirshner and Thomas Hsu
      (collectively the “Make
      Good Escrowees”),
      vFinance Investments, Inc. and Securities Transfer Corporation, in the form
      of
Exhibit
      C
      attached
      hereto.

     

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

     

    “Minority
      Interest 2007 Guaranteed EBT” has
      the
      meaning set forth in Section 4.11(a).

     

    “Minority
      Interest 2008 Guaranteed EBT” has
      the
      meaning set forth in Section 4.11(a).

    


    
      
        
          
          

        

        
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    “Minority
      Interest 2008 Guaranteed EPS” has
      the
      meaning set forth in Section 4.11(a).

     

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

     

    “Outside
      Date”
      means
      the fifteenth calendar day (if such calendar day is a Trading Day and if not,
      then the first Trading Day following such fifteenth calendar day) following
      the
      date of this Agreement.

     

    “Per
      Share Purchase Price”
      equals
      $1.42.

     

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

     

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

     

    “Registration
      Rights Agreement”
      means
      the Registration Rights Agreement, dated as of the date hereof, to which the
      Company, the Investors, vFinance Investments, Inc. and certain other Persons
      named therein are party, in the form of Exhibit
      D
      attached
      hereto. 

     

    “Registration
      Statement”
      means a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering, without limitation, the resale by the Investors
      of the Shares.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
          
          

        

        
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    “Subsidiary”
      means
      any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
      promulgated by the Commission under the Exchange Act, and irrespective of the
      foregoing, without limitation, Usunco and Zhongchai.

     

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

     

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

     

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

     

    “Xinchai”
      has the
      meaning set forth in Section 4.16.

     

    ARTICLE
      2.

    PURCHASE
      AND SALE

     

    2.1. 
Closing.
      Subject to the terms and conditions set forth in this Agreement, at the Closing
      the Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, the Shares representing
      such Investor’s Investment Amount. The Closing shall take place at the offices
      of Graubard Miller, 405 Lexington Avenue, New York, NY 10174 on the Closing
      Date
      or at such other location or time as the parties may agree.

     

    2.2. 
Closing
      Deliveries. 

     

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

     

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

     

    (ii) the
      Registration Rights Agreement, duly executed by each party thereto;


     

    (iii) the
      Make
      Good Escrow Agreement,
      duly
      executed by each party thereto; 

    


    
      
        
          
          

        

        
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    (iv) the
      Escrow Deposit Agreement, duly executed by each party thereto;

     

    (v) the
      Lockup Agreement, duly executed by each party thereto; 

     

    (vi) the
      legal
      opinion of special British Virgin Islands counsel to the Company and Usunco,
      in
      agreed form, addressed to the Investors; 

     

    (vii) the
      legal
      opinion of special PRC counsel to the Zhongchai, in the agreed form, addressed
      to the Investors; and

     

    (vii) the
      legal
      opinion of Company Counsel, in agreed form, addressed to the
      Investors.

     

    (b) Following
      its execution of this Agreement, each Investor shall deliver or cause to be
      delivered the following (the “Investor
      Deliverables”):

     

    (i) to
      the
      Escrow Agent for deposit and disbursement in accordance with the Escrow Deposit
      Agreement, its Investment Amount, in United States dollars and in immediately
      available funds, by wire transfer to an account designated in writing by the
      Company for such purpose; 

     

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

     

    (iii) the
      Make
      Good Escrow Agreement, duly executed by such Investor.

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1. 
Representations
      and Warranties of the Company. The Company, Usunco and Zhongchai hereby
      jointly and severally make the following representations and warranties to
      each
      Investor:

     

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

     

    (b) Organization
      and Qualification.
      The
      Company and each Subsidiary are 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
      as currently conducted. Neither the Company nor any Subsidiary is in violation
      of any of the provisions of its respective certificate or articles of
      incorporation, bylaws or other organizational or charter documents. The Company
      and each Subsidiary are duly qualified to conduct its respective businesses
      and
      are in good standing as a foreign corporation or other entity in each
      jurisdiction in which the nature of the business conducted or property owned
      by
      it makes such qualification necessary, except where the failure to be so
      qualified or in good standing, as the case may be, could not, individually
      or in
      the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.

    


    
      
        
          
          

        

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

     

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

     

    (e) Filings,
      Consents and Approvals.
      Neither
      the Company, nor any Subsidiary, is required to obtain any consent, waiver,
      authorization or order of, give any notice to, or make any filing or
      registration with, any United States or People’s Republic of China court or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company and
      each
      Subsidiary to the extent a party thereto of the Transaction Documents, other
      than (i) the filing with the Commission of one or more Registration Statements
      in accordance with the requirements of the Registration Rights Agreement, (ii)
      filings required by state securities laws, (iii) the filing of a Notice of
      Sale
      of Securities on Form D with the Commission under Regulation D of the Securities
      Act, (iv) the filings required in accordance with Sections 4.5, 4.16 and 4.20
      and (v) those that have been made or obtained prior to the date of this
      Agreement.

     

    
      
        
          
          

        

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

     

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

     

    (h) SEC
      Reports; Financial Statements.
      Except
      as set forth in Schedule
      3.1(h),
      the
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the twelve months preceding the date hereof (or such shorter period as
      the
      Company was required by law to file such reports) (the foregoing materials
      being
      collectively referred to herein as the “SEC
      Reports”
      and,
      together with the Schedules to this Agreement (if any), the “Disclosure
      Materials”)
      on a
      timely basis or has timely filed a valid extension of such time of filing and
      has filed any such SEC Reports prior to the expiration of any such extension.
      Except as set forth in Schedule
      3.1(h),
      as of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company and
      each
      Subsidiary included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with GAAP applied on
      a
      consistent basis during the periods involved, except as may be otherwise
      specified in such financial statements or the notes thereto, 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.

     

    
      
        
          
          

        

        
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    (i) Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports and as set forth
      in
Schedule
      3.1(i),
      (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) neither
      the
      Company nor any Subsidiary of the Company has incurred any liabilities
      (contingent or otherwise) other than (A) trade payables, accrued expenses and
      other liabilities incurred in the ordinary course of business consistent with
      past practice and (B) liabilities not required to be reflected in the Company’s
      or its Subsidiaries’ financial statements pursuant to GAAP or required to be
      disclosed in filings made with the Commission, (iii) neither the Company nor
      any
      of its Subsidiaries has altered its method of accounting or the identity of
      its
      auditors, (iv) neither the Company nor any of its Subsidiaries has declared
      or
      made any dividend or distribution of cash or other property to its stockholders
      or purchased, redeemed or made any agreements to purchase or redeem any shares
      of its capital stock, and (v) neither the Company nor any of its Subsidiaries
      has 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.

     

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

     

    (k) Labor
      Relations.
      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 any of its
      Subsidiaries.

     

    (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 relating to taxes,
      environmental protection, occupational health and safety, product quality and
      safety and employment and labor matters, except in each case as could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect. The Company is in compliance with all effective
      requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
      regulations thereunder, that are applicable to it, except where such
      noncompliance could not have or reasonably be expected to result in a Material
      Adverse Effect.

    


    
      
        
          
          

        

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

     

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

     

    (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,
      copyrights, licenses and other similar rights that are necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports and which the failure to so have could, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse Effect
      (collectively, the “Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a written notice that the
      Intellectual Property Rights used by the Company or any Subsidiary violates
      or
      infringes upon the rights of any Person. Except as set forth in the SEC Reports,
      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.

     

    (p) Insurance.
      The
      Company and the Subsidiaries have no insurance in respect of its business.
      The
      Company has no reason to believe that it will not be able to obtain insurance
      coverage as and when such coverage is sought.

     

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

     

    
      
        
          
          

        

        
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    (r) Internal
      Accounting Controls.
      The
      Company and the 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 its Subsidiaries and designed such disclosure
      controls and procedures to ensure that material information relating to the
      Company, including its Subsidiaries, is made known to the certifying officers
      by
      others within those entities, particularly during the period in which the
      Company’s Form 10-KSB or 10-QSB, as the case may be, is being prepared. The
      Company’s certifying officers have evaluated the effectiveness of the Company’s
      controls and procedures in accordance with Item 307 of Regulation S-B under
      the
      Exchange Act for the Company’s most recently ended fiscal quarter or fiscal
      year-end (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed Form 10-KSB or Form 10-QSB 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 significant changes in the
      Company’s or its Subsidiaries’ internal controls (as such term is defined in
      Item 308(c) of Regulation S-B under the Exchange Act) or, to the Company’s
      knowledge, in other factors that could significantly affect the Company’s or its
      Subsidiaries’ internal controls.

     

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

     

    (t) Certain
      Fees.
      Except
      as described in Schedule
      3.1(t),
      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 this Agreement. The Investors shall have no
      obligation with respect to any fees or with respect to any claims (other than
      such fees or commissions owed by an Investor pursuant to written agreements
      executed by such Investor which fees or commissions shall be the sole
      responsibility of such Investor) made by or on behalf of other Persons for
      fees
      of a type contemplated in this Section that may be due in connection with the
      transactions contemplated by this Agreement.

     

    
      
        
          
          

        

        
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    (u) Certain
      Registration Matters.
      Assuming the accuracy of the Investors’ representations and warranties set forth
      in Section 3.2(b)-(e), no registration under the Securities Act is required
      for
      the offer and sale of the Shares by the Company to the Investors under the
      Transaction Documents. The Company is eligible to register its Common Stock
      for
      resale by the Investors under Form S-1 promulgated under the Securities Act.
      Except as specified in Schedule
      3.1(u),
      the
      Company has not granted or agreed to grant to any Person any rights (including
      “piggy-back” registration rights) to have any securities of the Company
      registered with the Commission or any other governmental authority that have
      not
      been satisfied.

     

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

     

    (w) Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately following the
      Closing will not have become, an “investment company” within the meaning of the
      Investment Company Act of 1940, as amended.

     

    (x) No
      Additional Agreements.
      Neither
      the Company nor any Subsidiary has any agreement or understanding with any
      Investor with respect to the transactions contemplated by the Transaction
      Documents other than as specified in the Transaction Documents.

     

    (y) Consultation
      with Auditors.
      The
      Company and each Subsidiary a party hereto have consulted with their respective
      independent auditors concerning the accounting treatment of the transactions
      contemplated by the Transaction Documents, and in connection therewith has
      furnished such auditors complete copies of the Transaction
      Documents.

     

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

     

    
      
        
          
          

        

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
          
          

        

        
          13

          
            

          

        

         

      

    

     

    (f) Certain
      Trading Activities.
      Such
      Investor has not directly or indirectly, and no Person acting on behalf of
      or
      pursuant to any understanding with such Investor, engaged in any transactions
      in
      the securities of the Company (including, without limitations, any Short Sales
      involving the Company’s securities) since the earlier to occur of (1) the time
      that such Investor was first contacted by the Company or vFinance Investments,
      Inc. regarding an investment in the Company and (2) the 30th
      day
      prior to the date of this Agreement. Such Investor covenants that neither it
      nor
      any Person acting on its behalf or pursuant to any understanding with it will
      engage in any transactions in the securities of the Company (including Short
      Sales) prior to the time that the transactions contemplated by this Agreement
      are publicly disclosed.

     

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

     

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

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

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

     

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

    


    
      
        
          
          

        

        
          14

          
            

          

        

         

      

    

     

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

     

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

     

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

     

    
      
        
          
          

        

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

     

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

     

    4.4. 
Subsequent
      Registrations. Other than pursuant to the Registration Statement, prior to
      the Effective Date, the Company may not file any registration statement (other
      than on Form S-4 or Form S-8 or such similar forms or successor forms) with
      the
      Commission with respect to any securities of the Company.

     

    4.5. 
Securities
      Laws Disclosure; Publicity. By 9:30 a.m. (New York time) on the Trading Day
      following the execution of this Agreement, and by 9:30 a.m. (New York time)
      on
      the Trading Day following the Closing Date, the Company shall issue press
      releases disclosing the transactions contemplated hereby and the Closing. On
      the
      Trading Day following the execution of this Agreement the Company will file
      a
      Current Report on Form 8-K disclosing the material terms of the Transaction
      Documents, including details with respect to the make good provision contained
      in Section 4.11 herein (and attach as exhibits thereto the Transaction
      Documents), and on the Trading Day following the Closing Date the Company will
      file an additional Current Report on Form 8-K to disclose the Closing. In
      addition, the Company will make such other filings and notices in the manner
      and
      time required by the Commission and the Trading Market on which the Common
      Stock
      is listed. Notwithstanding the foregoing, the Company shall not publicly
      disclose the name of any Investor, or include the name of any Investor in any
      filing with the Commission (other than the Registration Statement and any
      exhibits to filings made in respect of this transaction in accordance with
      periodic filing requirements under the Exchange Act) or any regulatory agency
      or
      Trading Market, without the prior written consent of such Investor, except
      to
      the extent such disclosure is required by law or Trading Market
      regulations.

     

    
      
        
          
          

        

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

     

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

     

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

     

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

     

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

     

    4.11. 
Make
      Good Shares.

    


    
      
        
          
          

        

        
          17

          
            

          

        

         

      

    

     

    (a) 
The
      Make
      Good Escrowees
      agree
      that in
      the
      event that the after tax net income reported in the Annual Report on Form 10-KSB
      of the Company for the fiscal year ending June 30, 2007, as filed with the
      Commission, is less than $2,320,000 (the “2007
      Guaranteed ATNI”)
      or the
      earnings before income tax provision and before minority interest reported
      in
      the Annual Report on Form 10-KSB of the Company for the fiscal year ending
      June
      30, 2007, as filed with the Commission, is less than $3,200,000 (the
“Minority
      Interest 2007 Guaranteed EBT”),
      the Make
      Good Escrowees will
      transfer (in accordance with the Make Good Escrow Agreement) to the Investors
      on
      a pro-rata basis
      (determined by dividing each Investor’s Investment Amount by the aggregate of
      all Investment Amounts delivered to the Company by the Investors hereunder)
      for
      no consideration other than their part of their respective Investment Amount
      at
      Closing, 3,042,254
      shares of Common Stock (the “2007
      Make Good Shares”).
      In
      the
      event that either (i) the earnings per share reported in the Annual Report
      on
      Form 10-KSB of the Company for the fiscal year ending June 30, 2008, as filed
      with the Commission, is less than $0.343 on a fully diluted basis (as equitably
      adjusted for any stock splits, stock combinations, stock dividends or similar
      transactions) (the “2008
      Guaranteed EPS”),
      (ii)
      the earnings per share before income tax provision and before minority interest
      of the Company for the fiscal year ending June 30, 2008, is less than $0.446
      on
      a fully diluted basis (as equitably adjusted for any stock splits, stock
      combinations, stock dividends or similar transactions) (the “Minority
      Interest 2008 Guaranteed EPS”),
      (iii)
      the after tax net income reported in the Annual Report on Form 10-KSB of the
      Company for the fiscal year ending June 30, 2008, as filed with the Commission,
      is less than $10,000,000
      (the
“2008
      Guaranteed ATNI”)
      or
      (iv) the earnings before income tax provision and before minority interest
      reported in the Annual Report on Form 10-KSB of the Company for the fiscal
      year
      ending June 30, 2008, as filed with the Commission, is less than $13,020,000
      (the “Minority
      Interest 2008 Guaranteed EBT”),
      the
      Make Good Escrowees will transfer (in accordance with the Make Good Escrow
      Agreement) to the Investors on a pro rata basis (determined by dividing each
      Investor’s Investment Amount by the aggregate of all Investment Amounts
      delivered to the Company by the Investors hereunder) for no consideration other
      than their part of their respective Investment Amount at Closing, 7,098,592
      shares of Common Stock (the “2008
      Make Good Shares”).
      In
      the
      event that the after tax net income reported in the Annual Report on Form 10-KSB
      of the Company for the fiscal year ending June 30, 2007, as filed with the
      Commission, is equal to or greater than the 2007 Guaranteed ATNI and the
      earnings before income tax provision and before minority interest reported
      in
      the Annual Report on Form 10-KSB of the Company for the fiscal year ending
      June
      30, 2007, as filed with the Commission, is equal to or greater than the Minority
      Interest 2007 Guaranteed EBT,
      no
      transfer of the 2007 Make Good Shares shall be required by the Make Good
      Escrowees to the Investors and such 2007 Make Good Shares shall be returned
      to
      the Make Good Escrowees in accordance with the Make Good Escrow
      Agreement. In
      the
      event that (i) the earnings per share reported in the Annual Report on Form
      10-KSB of the Company for the fiscal year ending June 30, 2008, as filed with
      the Commission, is equal to or greater than the 2008 Guaranteed EPS and the
      earnings per share before income tax provision and before minority interest
      of
      the Company for the fiscal year ending June 30, 2008 is equal to or greater
      than
      the Minority Interest 2008 Guaranteed EPS and (ii) the after tax net income
      reported in the Annual Report on Form 10-KSB of the Company for the fiscal
      year
      ending June 30, 2008, as filed with the Commission, is equal to or greater
      than
      the 2008 Guaranteed ATNI and the earnings before income tax provision and before
      minority interest reported in the Annual Report on Form 10-KSB of the Company
      for the fiscal year ending June 30, 2008, as filed with the Commission, is
      equal
      to or greater than the Minority Interest 2008 Guaranteed EBT,
      no
      transfer of the 2008 Make Good Shares shall be required by the Make Good
      Escrowees to the Investors and such 2008 Make Good Shares shall be returned
      to
      the Make Good Escrowees in accordance with the Make Good Escrow Agreement.
      Any
      such
      transfer of the 2007 Make Good Shares or the 2008 Make Good Shares shall be
      made
      to an Investor or the Make Good Escrowees, as applicable, within 10
      Business
      Days after
      the date
which
      the
      2007
      or 2008, as applicable, Annual Report on Form 10-KSB for the
      Company
      is filed
      with the Commission and otherwise in accordance with the Make Good Escrow
      Agreement. Notwithstanding
      the foregoing, the parties agree that for purposes of determining whether or
      not
      the 2007 Guaranteed ATNI, the Minority Interest 2007 Guaranteed EBT, the 2008
      Guaranteed EPS, the Minority Interest 2008 Guaranteed EPS, the 2008 Guaranteed
      ATNI or the Minority Interest 2008 Guaranteed EBT have been achieved, (i) the
      release of the 2007 Make Good Shares or the 2008 Make Good Shares to the Make
      Good Escrowees, or any other Person designated by the Make Good Escrowees,
      as a
      result of the operation of the Make Good Escrow Agreement shall not be deemed
      to
      be an expense, charge, or other deduction from revenues even though GAAP may
      require contrary treatment, (ii) any registration penalties (other than
      penalties which may be owing by the Company due to the Company’s failure to file
      a Registration Statement by the applicable Filing Date (as defined in the
      Registration Rights Agreement)) accrued or paid by the Company for any
      registration rights will be excluded from the calculation of earnings before
      income tax provision and before minority interest, after-tax net income and
      earnings per share amounts, as applicable, and (iii) any increase in taxes
      payable by the Company or any Subsidiary as a result of PRC tax laws or
      implementing regulations promulgated for the purpose of making more equal the
      tax treatment of foreign invested entities (including sino-foreign joint
      ventures) and domestic entities which may become effective and applicable to
      the
      Company after the date of this Agreement shall not be included as an expense.
      

     

    
      
        
          
          

        

        
          18

          
            

          

        

         

      

    

     

    (b) 
In
      connection with the foregoing,
      the Make
      Good Escrowees
      agree
      that within three Trading Days following execution of this Agreement,
the
      Make
      Good Escrowees will
      deposit all potential 2007 Make Good Shares and 2008 Make Good Shares into
      escrow in accordance with the Make Good Escrow Agreement along with bank
      signature stamped stock powers executed in blank (or such other signed
      instrument of transfer acceptable to the Company’s transfer agent), and the
      handling and disposition of the 2007 Make Good Shares and 2008 Make Good Shares
      shall be governed by this Section 4.11 and the Make Good Escrow
      Agreement.
      The Make
      Good Escrowees
      hereby
      agree that their obligation to transfer shares of Common Stock to Investors
      pursuant to this Section 4.11 and the Make Good Escrow Agreement shall continue
      to run to the benefit of any Investor who shall have transferred or sold all
      or
      any portion of its Shares, and that each Investor shall have the right to assign
      its rights to receive all or any such shares of Common Stock to other Persons
      in
      conjunction with negotiated sales or transfers of any of its
      Shares.

     

    (c) 
The
      Company covenants and agrees that upon any transfer of 2007 Make Good Shares
      or
      2008 Make Good Shares to the Investors in accordance with the Make Good Escrow
      Agreement, the Company shall promptly instruct its transfer agent to reissue
      such 2007 Make Good Shares or 2008 Make Good Shares in the applicable Investor’s
      name and deliver the same as directed by such Investor.

     

    (d) 
If
      any
      term or provision of this Section 4.11 is in contradiction or conflicts with
      any
      term or provision of the Make Good Escrow Agreement, the terms of the Make
      Good
      Escrow Agreement shall control.

     

    
      
        
          
          

        

        
          19

          
            

          

        

         

      

    

     

    4.12. 
Independent
      Board of Directors. The Company covenants and agrees that no later than 150
      days following the Closing Date, the Board of Directors of the Company shall
      be
      comprised of a minimum of five members, a majority of which shall be
“independent directors” as such term is defined in NASDAQ Marketplace Rule
      4200(a)(15).

     

    4.13. 
Investor
      Relations. By the thirtieth day following the Closing Date, the Company
      shall hire either of CCG Investor Relations, Hayden Communications or Integrated
      Corporate Relations, Inc. as the Company’s investor relations firm.

     

    4.14. 
Right
      of First Refusal. 

     

    (a) 
From
      the
      date hereof until the one year anniversary of the Effective Date (the
      "Trigger
      Date"),
      the
      Company will not, directly or indirectly, offer, sell, grant any option to
      purchase, or otherwise dispose of (or announce any offer, sale, grant or any
      option to purchase or other disposition of) any of its or its Subsidiaries'
      equity or equity equivalent securities, including without limitation any debt,
      preferred stock or other instrument or security that is, at any time during
      its
      life and under any circumstances, convertible into or exchangeable or
      exercisable for shares of Common Stock or Common Stock Equivalents (any such
      offer, sale, grant, disposition or announcement being referred to as a
      "Subsequent
      Placement")
      unless
      the Company shall have first complied with this Section 4.14.

     

    (b) 
The
      Company shall deliver to each Investor hereunder a written notice
      (the "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (w) identify and describe the
      Offered Securities, (x) describe the price and other terms upon which they
      are to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, (y) identify the persons or
      entities (if known) to which or with which the Offered Securities are to be
      offered, issued, sold or exchanged and (z) offer to issue and sell to or
      exchange with such Investors all of the Offered Securities, allocated among
      such
      Investors (a) based on such Investor's pro rata portion of the total Investment
      Amount hereunder (the "Basic
      Amount"),
      and
      (b) with respect to each Investor that elects to purchase its Basic Amount,
      any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Investors as such Investor shall indicate it will purchase or acquire
      should the other Investors subscribe for less than their Basic Amounts (the
      "Undersubscription
      Amount"),
      which
      process shall be repeated until the Investors shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    (c) 
To
      accept
      an Offer, in whole or in part, such Investor must deliver a written notice
      to
      the Company prior to the end of the tenth (10th)
      Business Day after such Investor's receipt of the Offer Notice (the
      "Offer
      Period"),
      setting forth the portion of such Investor's Basic Amount that such Investor
      elects to purchase and, if such Investor shall elect to purchase all of its
      Basic Amount, the Undersubscription Amount, if any, that such Investor elects
      to
      purchase (in either case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Investors are less than the total of
      all
      of the Basic Amounts, then each Investor who has set forth an Undersubscription
      Amount in its Notice of Acceptance shall be entitled to purchase, in addition
      to
      the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Investor who has subscribed for any Undersubscription Amount shall be entitled
      to purchase only that portion of the Available Undersubscription Amount as
      the
      Basic Amount of such Investor bears to the total Basic Amounts of all Investors
      that have subscribed for Undersubscription Amounts, subject to rounding by
      the
      Company to the extent its deems reasonably necessary.

     

    
      
        
          
          

        

        
          20

          
            

          

        

         

      

    

     

    (d) 
The
      Company shall have twenty (20) Business Days from the expiration of the Offer
      Period above to (i) offer, issue, sell or exchange all or any part of such
      Offered Securities as to which a Notice of Acceptance has not been given by
      the
      Investors (the "Refused
      Securities"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement (as defined below), and (b) either (x) the consummation of the
      transactions contemplated by such Subsequent Placement Agreement or (y) the
      termination of such Subsequent Placement Agreement, which shall be filed with
      the Commission on a Current Report on Form 8-K with such Subsequent Placement
      Agreement and any documents contemplated therein filed as exhibits thereto.
      If
      no disclosure has been made by the Company by the end of the twenty (20)
      Business Day period referred to in this subsection (d), the Subsequent Placement
      shall be deemed to have been abandoned and the Investors shall no longer be
      deemed to be in possession of any non-public information with respect to the
      Company.

     

    (e) 
In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in this Section
      4.14), then each Investor may, at its sole option and in its sole discretion,
      reduce the number or amount of the Offered Securities specified in its Notice
      of
      Acceptance to an amount that shall be not less than the number or amount of
      the
      Offered Securities that such Investor elected to purchase pursuant to Section
      4.14(c) above multiplied by a fraction, (i) the numerator of which shall be
      the
      number or amount of Offered Securities the Company actually proposes to issue,
      sell or exchange (including Offered Securities to be issued or sold to Investors
      pursuant to Section 4.14(c) above prior to such reduction) and (ii) the
      denominator of which shall be the original amount of the Offered Securities.
      In
      the event that any Investor so elects to reduce the number or amount of Offered
      Securities specified in its Notice of Acceptance, the Company may not issue,
      sell or exchange more than the reduced number or amount of the Offered
      Securities unless and until such securities have again been offered to the
      Investors in accordance with Section 4.14(b) above.

     

    (f) 
Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Investors shall acquire from the Company, and the Company shall
      issue to the Investors, the number or amount of Offered Securities specified
      in
      the Notices of Acceptance, as reduced pursuant to Section 4.14(e) above if
      the
      Investors have so elected, upon the terms and conditions specified in the Offer.
      The purchase by the Investors of any Offered Securities is subject in all cases
      to the preparation, execution and delivery by the Company and the Investors
      of a
      purchase agreement relating to such Offered Securities reasonably satisfactory
      in form and substance to the Investors and their respective counsel (such
      agreement, the “Subsequent
      Placement Agreement”).

     

    
      
        
          
          

        

        
          21

          
            

          

        

         

      

    

     

    (g) 
Any
      Offered Securities not acquired by the Investors or other persons in accordance
      with Section 4.14(f) above may not be issued, sold or exchanged until they
      are
      again offered to the Investors under the procedures specified in this
      Agreement.

     

    (h) 
In
      exchange for the Company’s willingness to agree to these procedures, each
      Investor hereby irrevocably agrees that it will hold in strict confidence any
      and all Offer Notices, the information contained therein, and the fact that
      the
      Company is contemplating a Subsequent Placement, until such time as the Company
      is obligated to make the disclosures required by Section 4.14(d), or unless
      it
      notifies the Company in writing that it no longer desires to receive Offer
      Notices. 

     

    (i) 
Notwithstanding
      the foregoing, this Section 4.14 shall not apply in respect of an Exempt
      Issuance. 

     

    4.15. 
Chief
      Financial Officer. No later than 150 days following the Closing Date, the
      Company covenants and agrees to hire and/or retain on a full time basis an
      English speaking chief financial officer who is an expert in (i) GAAP and (ii)
      auditing procedures and compliance for United States public companies, who
      has
      (x) either previously acted as chief financial officer of a United States public
      company or (y) been a partner in a United States accounting firm and in such
      capacity was an audit partner for United States public companies. Upon
      employment of such chief financial officer, the Company shall permit and the
      chief financial officer shall be required, to hire additional employees who
      shall assist the chief financial officer with such chief financial officer’s
      daily responsibilities, to the extent he deems necessary for the proper
      execution of his responsibilities. Such employees shall be English speaking
      and
      have the requisite experience in (i) GAAP and (ii) auditing procedures and
      compliance for United States public companies and shall have previously been
      employed in a United States accounting firm in a comparable capacity for a
      period of at least two years.

     

    4.16. 
Capital
      Deficit. Within three days following the Closing Date, (i) Usunco shall have
      deposited into a PRC foreign currency account of Zhongchai an amount equal
      to
      $8,000,000 and (ii) concurrently therewith Zhejiang Xinchai Holding Group Co.,
      Ltd. (“Xinchai”)
      shall
      have deposited into a PRC foreign currency account of Zhongchai an amount equal
      to $2,600,000 which in the aggregate shall represent the unpaid registered
      capital of Zhongchai. The Company shall provide the Investors with evidence
      that
      the aggregate registered capital deficit has been paid by providing a copy
      of a
      capital verification report and a copy of the new business license showing
      that
      the aggregate capital deficit has been paid to the Investors on or before the
      one month anniversary of the Closing. 

     

    4.17. 
Delivery
      of Price List. On or before the 45th
      day
      following the Closing, the Company shall obtain and deliver to the Investors
      a
      copy of the then current price list applicable to the sale of products by
      Xinchai to Zhongchai under the distribution agreement between the parties dated
      as of January 28, 2007. 

     

    4.18. 
Delivery
      of Financial Statements of Xinchai. On or before March 31, 2007 and within
      90 days of the end of each fiscal year of Xinchai thereafter, the Company shall
      obtain a copy of the financial statements of Xinchai in such form as such
      financial statements have been prepared by management of Xinchai (including,
      audited financial statements, if available) and promptly deliver the same to
      the
      Investors. 

     

    
      
        
          
          

        

        
          22

          
            

          

        

         

      

    

     

    4.19. 
Xinchai
      Funding of Zhongchai. The Company shall use its reasonable best efforts to
      ensure that at any time that Usunco makes a capital contribution to Zhongchai
      that Xinchai or its successor or permitted assign shall concurrently therewith
      make a pro rata capital contribution to Zhongchai (based upon its percentage
      ownership in Zhongchai) using the same form of contribution or, if Xinchai
      (or
      such successors or permitted assigns) makes no such capital contribution, then
      the Company shall use reasonable best efforts to ensure that Usunco’s ownership
      interest in Zhongchai is increased in a proportionate manner to the additional
      capital contribution made by Usunco.

     

    4.20. 
Extend
      Term of Joint Venture. The Company shall extend the term of Zhongchai (a
      sino-foreign joint venture) to at least twenty-five years and shall provide
      the
      Investors with written evidence of such extension no later than 90 days
      following the Closing.

     

    4.21. 
Insurance.
      The Company shall obtain business insurance in respect of itself and its
      Subsidiaries as would be obtained by a reasonably prudent business person for
      the operations of the Company, such insurance to be fully obtained and initially
      paid for within 180 days following the Closing.

     

    ARTICLE
      5.

    CONDITIONS
      PRECEDENT TO CLOSING

     

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

     

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

     

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

     

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

     

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

     

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

    


    
      
        
          
          

        

        
          23

          
            

          

        

         

      

    

     

    (f) 
Exchange
      Agreement Form 8-K.
      Concurrently with or immediately prior to the Closing, the Company shall have
      acquired all of the outstanding capital stock of Usunco pursuant to a Share
      Exchange Agreement which is attached to the Company’s Current Report on Form
      8-K, and the Company shall provide the Investors with the Current Report on
      Form
      8-K to be filed in accordance with the Share Exchange Agreement containing
      the
      audited financial statements of Usunco and other required disclosure with
      respect to Usunco;

     

    (g) 
PRC
      and BVI Opinions.
      The
      Company shall have delivered to the Investors, and the Investors shall be able
      to rely upon, the legal opinions that the Company shall have received from
      its
      legal counsel in the People's Republic of China and in the British Virgin
      Islands, with such legal opinions being in a form acceptable to the Investors
      in
      their sole discretion; 

     

    (h) 
Funding
      of Escrow.
      The
      Escrow Agent shall have received Investment Amounts in the aggregate sum of
      no
      less than $12,000,000 as evidenced by written notice to the Company, a copy
      of
      which shall be immediately provided to the Investors; and

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
      6.

    MISCELLANEOUS

     

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

     

    
      
        
          
          

        

        
          24

          
            

          

        

         

      

    

     

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

     

    6.3. 
Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile (provided the sender receives a
      machine-generated confirmation of successful transmission) at the facsimile
      number specified in this Section prior to 6:30 p.m. (New York City time) on
      a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      specified in this Section on a day that is not a Trading Day or later than
      6:30
      p.m. (New York City time) on any Trading Day, or (c) upon actual receipt by
      the
      party to whom such notice is required to be given, if sent by any means other
      than facsimile transmission. The address for such notices and communications
      shall be as follows:

     

    
      
        	
              	If
                to the Company:	
                Equicap,
                  Inc. 
                  c/o
                    Usunco Automotive Limited

                  10510
                    Hillsboro Road

                  Santa
                    Ana, CA 92705

                  Att:
                    Peter Wang

                  Tel:
                    904-507-4937

                  Fax:
                    904-507-9151

                

              


      

    

     

    
      	
            	With
              a copy to:	
              Graubard
                Miller 
                19th
                  Floor

                405
                  Lexington Avenue

                New
                  York, New York 10174

                Att:
                  Andrew Hudders

                Tel:
                  212-818-8614

                Fax:
                  212-818-8881

              

            


    

    


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

            


    

     

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

     

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

    


    
      
        
          
          

        

        
          25

          
            

          

        

         

      

    

     

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

     

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

     

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

     

    In
      the
      event of a termination pursuant to Section 6.5(a) upon delivery of a joint
      written notice from the Company and the Investors to the Escrow Agent or in
      the
      event of a termination pursuant to Section 6.5(b) upon delivery of written
      notice by an Investor to the Escrow Agent, such Investor shall have the right
      to
      a return of up to its entire Investment Amount deposited with the Escrow Agent
      pursuant to Section 2.2(b)(i), without interest or deduction. The Company
      covenants and agrees to cooperate with such Investor in obtaining the return
      of
      its Investment Amount, and shall not communicate any instructions to the
      contrary to the Escrow Agent.

     

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

     

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

     

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

     

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

     

    
      
        
          
          

        

        
          26

          
            

          

        

         

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
          
          

        

        
          27

          
            

          

        

         

      

    

     

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

     

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

     

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

     

    
      
        
          
          

        

        
          28

          
            

          

        

         

      

    

     

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

     

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

     

    
      
        
          
          

        

        
          29

          
            

          

        

         

      

    

    


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

     

    
      	 	 	 
	 	
              EQUICAP,
                INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Mr. Peter
                Wang

            
	 	
              Title:
                Chairman and President

            


    

     

    
      	 	 	 
	 	
              USUNCO
                AUTOMOTIVE LIMITED

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

            


    

     

    
      	 	 	 
	 	
              ZHEJIANG
                ZHONGCHAI MACHINERY CO., LTD.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Peter Wang

            
	 	
              Title:
                Authorized Signatory

            


    

    


    
      	 	 	 
	 	
              The
                following Persons only as to Section 4.11 herein:

            
	 	 
	 	 
	 	
              SINOQUEST
                MANAGEMENT LTD.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                

            
	 	
              Title:
                

            


    

     

      	 	 	 
	
            	
            	
            
	 	
              

              JASON
                LU

            


    

     

    
      
        
          
          

        

        
          30

          
            

          

        

         

      

    

     

    
      	 	 	 
	 	
              SIJ
                HOLDING LTD.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

            


    

    

      	 	 	 
	 	
              

              PHILIP
                WIDMANN

            


    

    


    
      	 	 	 
	 	
              SOLARIS
                CAPITAL LIMITED

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

            


    

     

    
      	 	 	 
	 	
              

              GONG
                CHEN

            
	 	
            
	 	 
	 	
              

              RUTH
                KIRSHNER

            
	 	 
	 	 
	 	
              

              THOMAS
                HSU

            


    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOR INVESTORS FOLLOW]

    


    
      
        
          
          

        

        
          31

          
            

          

        

         

      

    

    


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

    

      
        	 	
                NAME
                  OF INVESTOR

              
	 	 
	 	
                By:

                
                  

                

                 

              
	 	
                Investment
                  Amount: $

                
                  

                

              
	 	
                Tax
                  ID No.: 

                
                  

                

                
                

              
	 	 
	 	 
	 	
                ADDRESS
                  FOR NOTICE

              
	 	 
	 	
                c/o:  

                
                  

                

                 

                
                

              
	 	
                Street:

                
                  

                

                 

              
	 	
                City/State/Zip:

                
                  

                

                 

              
	 	
                Attention:

                
                  

                

              
	 	
                Tel:

                
                  

                

              
	 	
                Fax:

                
                  

                

              
	 	 
	 	
                DELIVERY
                  INSTRUCTIONS 

              
	 	
                (if
                  different from above)

              
	 	 
	 	
                c/o:

                
                  

                

              
	 	
                Street: 

                
                  

                

                 

              
	 	
                City/State/Zip: 

                
                  

                

              
	 	
                Attention: 

                
                  

                

              
	 	
                Tel: 

                
                  

                

              


      

    

     

    
      
        
          
          

        

        
          32