chxd_8k-ex4x1.htm


    Exhibit 4.1

     

    
 


    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

     

    China
XD Plastics Company Limited

     

    Warrant
To Purchase Common Stock

     

    


    Warrant
No.:  [●]

    Number of
Shares of Common Stock:  [●]

    Date of
Issuance:  December 1, 2009 ("Issuance Date")

    


     

    China XD
Plastics Company Limited, a Nevada corporation, (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [INSERT BUYER NAME] the
registered holder hereof or its permitted assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the date immediately after the six month anniversary of the
Issuance Date (the "Initial
Exercisability Date"), but not after 11:59 p.m., New York time, on the
Expiration Date (as defined below), [INSERT NUMBER OF SHARES]
fully paid nonassessable shares of Common Stock (as defined below), as
adjusted pursuant to the terms hereof (the "Warrant
Shares").  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
20.  This Warrant is one of the Warrants to purchase Common Stock (the
"SPA Warrants") issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of
November 27, 2009 (the "Subscription Date"), by and
among the Company and the investors (individually, a "Buyer" and collectively, the
"Buyers") referred to
therein (the "Securities
Purchase Agreement").

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1. EXERCISE OF
WARRANT.

     

    (a) Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any time or times on or after the
Initial Exercisability Date in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the
Holder's election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in
cash or by wire transfer of immediately available funds or (B) by notifying the
Company that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)).  The Holder shall not be required to deliver
the original Warrant in order to effect an exercise
hereunder.  Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares.  On or
before the first (1st) Business Day following the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the "Exercise Delivery Documents"),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company's
transfer agent (the "Transfer
Agent").  On or before the third (3rd)Trading
Day following the date on which the Company has received all of the Exercise
Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent
is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the Holder's or its designee's balance account with DTC through
its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is
not participating in the DTC Fast Automated Securities Transfer Program, issue
and dispatch by overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company's share register in the name of
the Holder or its designee, for the number of Warrant Shares to which the Holder
is entitled pursuant to such exercise.  Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date such Warrant Shares
are credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be.  If
this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three (3) Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares issuable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised.  No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the nearest whole
number.  The Company shall pay any and all taxes which may be payable
with respect to the issuance and delivery of Warrant Shares upon exercise of
this Warrant.

     

     

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    (b) Exercise
Price.  For purposes of this Warrant, "Exercise Price" means $5.50,
subject to adjustment as provided herein.

     

    (c) Company's Failure to Timely
Deliver Securities. If the Company shall fail for any reason or for no
reason to issue to the Holder within three (3) Trading Days of receipt
of the Exercise Delivery Documents, a certificate for the number of shares of
Common Stock to which the Holder is entitled and register such shares of Common
Stock on the Company's share register or to credit the Holder's balance account
with DTC for such number of shares of Common Stock to which the Holder is
entitled upon the Holder's exercise of this Warrant, then, in addition to all
other remedies available to the Holder, the Company shall pay in cash to the
Holder on each day after such third (3rd) Trading Day that the
issuance of such shares of Common Stock is not timely effected an amount equal
to one and one percent (1.0%), but in no event in excess of an aggregate of five
percent (5.0%), of the product of (A) the sum of the number of shares of Common
Stock not issued to the Holder on a timely basis and to which the Holder is
entitled and (B) the Closing Sale Price of the shares of Common Stock on the
Trading Day immediately preceding the last possible date which the Company could
have issued such shares of Common Stock to the Holder without violating Section
1(a).  In addition to the foregoing, if within three (3) Trading Days after the
Company's receipt of the facsimile copy of a Exercise Notice the Company shall
fail to issue and deliver a certificate to the Holder and register such shares
of Common Stock on the Company's share register or credit the Holder's balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder's exercise hereunder or pursuant to the Company's
obligation pursuant to clause (ii) below, and if on or after such Trading Day
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving
from the Company (a "Buy-In"), then the Company
shall, within three (3) Business Days after the Holder's request and in the
Holder's discretion, either (i) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the "Buy-In Price"), at which point
the Company's obligation to deliver such certificate (and to issue such shares
of Common Stock) or credit such Holder's balance account with DTC shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such shares of Common Stock or credit
such Holder's balance account with DTC and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid Price on the date of
exercise.

     

    (d) Cashless Exercise.
 Notwithstanding
anything contained herein to the contrary, if a Registration Statement (as
defined in the Registration Rights Agreement) covering the resale of the Warrant
Shares that are the subject of the Exercise Notice (the "Unavailable Warrant Shares")
is not available for the resale of such Unavailable Warrant Shares, the Holder
may, in its sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless
Exercise"):

     

     

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              Net
      Number =

            	
              (A x B) - (A x C)

              B

            


    

    


     

    For purposes of the foregoing
formula:

     

    A = the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B = the
arithmetic average of the Weighted Average Price of the shares of Common Stock
(as reported by Bloomberg) for each Trading Day during the five (5) consecutive
Trading Days ending on the date immediately preceding the date of the Exercise
Notice.

     

    C = the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

     

    (e) Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.

     

    (f) Limitations on
Exercises.  The Company shall not effect the exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to
the extent that after giving effect to such exercise, such Person (together with
such Person's affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage") of the
shares of Common Stock outstanding immediately after giving effect to such
exercise.  For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (A) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (B) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein.  Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934
Act").  For purposes of this Warrant, in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  For any reason at any time, upon the written or oral
request of the Holder, the Company shall within one (1) Business Day confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the SPA Securities and the SPA Warrants, by
the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  By written notice to
the Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.  The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 1(f)(i) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.

     

     

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    (g) Insufficient Authorized
Shares.  If at any time while this Warrant remains outstanding
the Company does not have a sufficient number of authorized and unreserved
shares of Common Stock to satisfy its obligation to reserve for issuance upon
exercise of this Warrant at least a number of shares of Common Stock equal to
130% (the "Required Reserve
Amount") of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of all of this Warrant then outstanding
(an "Authorized Share
Failure"), then the Company shall immediately take all action necessary
to increase the Company's authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for this
Warrant then outstanding.  Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its shareholders for the approval of an increase in the number of
authorized shares of Common Stock.  In connection with such meeting,
the Company shall provide each shareholder with a proxy statement and shall use
its best efforts to solicit its shareholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the shareholders that they approve such proposal. Notwithstanding
the foregoing, if at such time of an Authorized Share Failure, the Company is
able to obtain the written consent of a majority of the shares of its issued and
outstanding Common Stock to approve the increase in the number of authorized
shares of Common Stock, the Company may satisfy this obligation by obtaining
such consent and submitting for filing with the SEC an Information Statement on
Schedule 14C.

     

    2. ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.  The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:

     

    (a) Adjustment upon Issuance of
shares of Common Stock.  If and whenever on or after the
Subscription Date, the Company issues or sells, or in accordance with this
Section 2 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to
have been issued or sold by the Company in connection with any Excluded
Securities for a consideration per share (the "New Issuance Price") less than
a price (the "Applicable
Price") equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the New Issuance Price.  For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:

     

     

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     (i)           Issuance of
Options.  If the Company in any manner grants any Options and
the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share.  For
purposes of this Section 2(a)(i), the "lowest price per share for which one
share of Common Stock is issuable upon exercise of such Options or upon
conversion, exercise or exchange of such Convertible Securities issuable upon
exercise of any such Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option.  No further adjustment
of the Exercise Price shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.

     

     (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 2(a)(ii), the "lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible
Security.  No further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise Price
shall be made by reason of such issue or sale.

     

     

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     (iii)           Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section 2(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the date of issuance
of this Warrant are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
shares of Common Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such increase or
decrease.  No adjustment pursuant to this Section 2(a) shall be made
if such adjustment would result in an increase of the Exercise Price then in
effect.

     

    (iv)           Calculation of Consideration
Received.  In case any Option is issued in connection with the
issue or sale of other securities of the Company, together comprising one
integrated transaction, (x) the Options will be deemed to have been issued for a
value determined by use of the Black Scholes Option Pricing Model (the "Option Value") and (y) the
other securities issued or sold in such integrated transaction shall be deemed
to have been issued for the difference of (I) the aggregate consideration
received by the Company, less (II) the Option value.  If any shares of
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor.  If any
shares of Common Stock, Options or Convertible Securities are issued or sold for
a consideration other than cash, the amount of such consideration received by
the Company will be the fair value of such consideration, except where such
consideration consists of publicly traded securities, in which case the amount
of consideration received by the Company will be the Closing Sale Price of such
security on the date of receipt.  If any shares of Common Stock,
Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities,
as the case may be.  The fair value of any consideration other than
cash or publicly traded securities will be determined jointly by the Company and
the Required Holders.  If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the
fair value of such consideration will be determined within five (5) Business
Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders.  The determination
of such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the
Company.

     

     

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    (v)           Record
Date.  If the Company takes a record of the holders of shares
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in shares of Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase shares of Common
Stock, Options or Convertible Securities, then such record date will be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

    


    (v)           Floor
Price.  No adjustment pursuant to Section 2(a) shall cause the
Exercise Price to be less than $4.40 (as adjusted after the Subscription Date
for stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other similar
events).]

    


    (b) Adjustment upon Subdivision
or Combination of shares of Common Stock.  If the Company at
any time on or after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased.  If
the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased.  Any adjustment under this Section 2(b) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

     

    (c) Other
Events.  If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.

     

    (d) Voluntary Adjustment By
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

     

    3. RIGHTS UPON DISTRIBUTION OF
ASSETS.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case:

    
 

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    (a) any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company's Board of Directors and approved by the Required Holders)
applicable to one share of Common Stock, and (ii) the denominator shall be the
Closing Bid Price of the shares of Common Stock on the Trading Day immediately
preceding such record date; and

     

    (b) the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of common stock ("Other Shares of Common Stock")
of a company whose common shares are traded on a national securities exchange or
a national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the number of shares
of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this paragraph (b).

     

    4. PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

     

    (a) Purchase
Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the "Purchase
Rights"), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

     

     

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    (b) Fundamental
Transactions.  The Company shall not enter into or be party to
a Fundamental Transaction unless (i)  the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance satisfactory to the
Required Holders and such written agreements approved by the Required Holders
prior to such Fundamental Transaction, including agreements to deliver to each
holder of the SPA Warrants in exchange for such Warrants a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible
Market.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the "Company" shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) issuable upon the exercise of this Warrant prior to such
Fundamental Transaction, such shares of the publicly traded common stock or
common shares (or its equivalent) of the Successor Entity (including its Parent
Entity) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant.  In addition to and not in substitution
for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a "Corporate
Event"), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Corporate Event but prior to
the Expiration Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable upon the exercise of this
Warrant prior to such Corporate Event, such shares of stock, securities, cash,
assets or any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Corporate Event had this Warrant been exercised
immediately prior to such Corporate Event.  Provision made pursuant to
the preceding sentence shall be in a form and substance reasonably satisfactory
to the Required Holders.  The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.

     

     

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    (c) Notwithstanding
the foregoing, in the event of a Change of Control other than one in which a
Successor Entity that is a publicly traded corporation whose stock is quoted or
listed for trading on an Eligible Market assumes this Warrant such that the
Warrant shall be exercisable for the publicly traded Common Stock of such
Successor Entity, at the request of the Holder delivered before the ninetieth
(90th) day after the consummation of the Change of Control, the Company (or the
Successor Entity) shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days of such request (or, if later, on the
effective date of the Change of Control), cash in an amount equal to the Black
Scholes Value of the remaining unexercised portion of this Warrant on the date
of such Change of Control.

     

    5. WARRANT HOLDER NOT DEEMED A
SHAREHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a shareholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a shareholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 5, the Company
shall provide the Holder with copies of the same notices and other information
given to the shareholders of the Company generally, contemporaneously with the
giving thereof to the shareholders.

     

    6. NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, 130% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).

     

     

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    7. REISSUANCE OF
WARRANTS.

     

    (a) Transfer of
Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

     

    (b) Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

     

    (c) Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 7(d)) representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given.

     

    (d) Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and (iv)
shall have the same rights and conditions as this Warrant.

     

    8. NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.  The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefor.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen (15)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.

     

     

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    9. AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder.

     

    10. GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     

    11. CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and all the Buyers and shall not be construed against any person
as the drafter hereof.  The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

     

    12. DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder.  If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three (3)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2) Business Days
submit via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder  or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company's independent, outside accountant.  The Company
shall cause the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder
of the results no later than ten Business Days from the time it receives the
disputed determinations or calculations.  Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error. The reasonable expenses of such
investment bank or accountant in making such determination shall be paid by the
Company in the event the Holder's calculation was correct, or by the Holder in
the event the Company's calculation was correct, or equally by the Company and
the Holder in the event that neither the Company's or the Holder's calculation
was correct.

     

     

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    13. REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue actual damages for
any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.

     

    14. TRANSFER.  This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f) of
the Securities Purchase Agreement.

     

    15. SEVERABILITY.  If
any provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    16. CURRENCY.  All
amounts owing under this Warrant or any Transaction Document that, in accordance
with their terms, are paid in cash shall be paid in US
dollars.   All amounts denominated in other currencies shall be
converted in the US dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation (for the purpose of Section 2 hereof, the date
of calculation shall equal the date of such event resulting in the adjustment of
the Exercise Price thereunder). 

     

    17. TAXES.

     

    (a) Any and
all payments by the Company hereunder, including any amounts received on a
exercise or redemption of the Warrant and any amounts on account of interest or
deemed interest, shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto ("Taxes").  If the
Company shall be required to deduct any Taxes from or in respect of any sum
payable hereunder to the Holder, (i) the sum payable shall be increased by the
amount necessary to ensure that after making all required deductions (including
deductions applicable to such amount) the Holder would receive an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Company shall make such deductions and (iii) the Company shall pay the full
amount withheld or deducted to the applicable governmental authority within the
time required.

     

     

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    (b) In
addition, the Company agrees to pay to the relevant governmental authority in
accordance with applicable law any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or in connection with the execution, delivery,
registration or performance of, or otherwise with respect to, this Warrant
("Other
Taxes").  The Company shall deliver to the Holder official
receipts, if any, in respect of any International Taxes and Other Taxes payable
hereunder promptly after payment of such International Taxes, Other Taxes or
other evidence of payment reasonably acceptable to the Holder.

     

    (c) The
obligations of the Company under this Section 17 shall survive the termination
of this Warrant and the payment of the Warrant and all other amounts payable
hereunder.

     

    18. PAYMENTS.  Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Warrant, such payment shall be made in lawful money of the United States of
America by a check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Buyers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement); provided that the Holder may elect to receive a payment of
cash via wire transfer of immediately available funds by providing the Company
with prior written notice setting out such request and the Holder's wire
transfer instructions.  Whenever any amount expressed to be due by the
terms of this Warrant is due on any day which is not a Trading Day, the same
shall instead be due on the next succeeding day which is a Trading
Day.

     

    19. JUDGMENT
CURRENCY.

     

    (a) If for
the purpose of obtaining or enforcing judgment against the Company in any court
in any jurisdiction it becomes necessary to convert into any other currency
(such other currency being hereinafter in this Section 19 referred to as the
"Judgment Currency") an
amount due in US dollars under this Warrant, the conversion shall be made at the
Exchange Rate prevailing on the business day immediately preceding:

     

     (i)           the
date actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

     

     (ii)           the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made
pursuant to this Section 19(a)(ii) being hereinafter referred to as the "Judgment Conversion
Date").

     

     

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    (b) If in the
case of any proceeding in the court of any jurisdiction referred to in Section
19(a)(ii) above, there is a change in the Exchange Rate prevailing between the
Judgment Conversion Date and the date of actual payment of the amount due, the
applicable party shall pay such adjusted amount as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the Exchange
Rate prevailing on the date of payment, will produce the amount of US dollars
which could have been purchased with the amount of Judgment Currency stipulated
in the judgment or judicial order at the Exchange Rate prevailing on the
Judgment Conversion Date.

     

    (c) Any
amount due from the Company under this provision shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Warrant.

     

    20. CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a) "Approved Stock Plan" means any
employee benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer or director for services provided to the Company.

     

    (b) "Black Scholes Value" means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day of the
closing of the applicable Fundamental Transaction for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of this Warrant as of such date of
request, (ii) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of the day
immediately following the public announcement of the applicable Fundamental
Transaction, (iii) the underlying price per share used in such calculation shall
be the sum of the price per share being offered in cash, if any, plus the value
of any non cash consideration, if any, being offered in the Fundamental
Transaction and (iv) a 365 day annualization factor.

     

     

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    (c) "Bloomberg" means Bloomberg
Financial Markets.

     

    (d) "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    (e) "Change of Control" means any
Fundamental Transaction other than (i) a Fundamental Transaction in which
holders of the Company's voting power immediately prior to the Fundamental
Transaction continue after the Fundamental Transaction to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

     

    (f) "Certificate of Designations"
means the certificate of designations for the Series C Convertible Preferred
Stock in the form attached as Exhibit A to the
Securities Purchase Agreement.

     

    (g) "Closing Bid Price" and "Closing Sale Price" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the applicable Eligible Market, as
reported by Bloomberg, or, if the applicable Eligible Market begins to operate
on an extended hours basis and does not designate the closing bid price or the
closing trade price, as the case may be, then the last bid price or the last
trade price, respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the bid
prices, or the ask prices, respectively, of any market makers for such security
as reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).  If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case
may be, of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder.  If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 12.  All such
determinations are to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

     

    (h) "Common Stock" means
(i) the Company's shares of Common Stock, par value $0.0001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.

     

     

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    (i) "Convertible Securities" means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

     

    (j) "Eligible Market" means the OTC
Bulletin Board, The New York Stock Exchange, Inc., The NYSE Amex Equities, The
NASDAQ Capital Market, The NASDAQ Global Market or The NASDAQ Global Select
Market.

     

    (k) "Excluded Securities" means any
Common Stock issued or issuable or deemed to be issued in accordance with
Section 2(a) hereof by the Company: (A) in connection with any Approved Stock
Plan; (B) upon conversion of the SPA Securities or upon the exercise of the SPA
Warrants; (C) upon conversion, exercise or exchange of any Options or
Convertible Securities which are outstanding on the day immediately preceding
the Subscription Date, provided that such issuance of Common Stock upon exercise
of such Options or Convertible Securities is made pursuant to the terms of such
Options or Convertible Securities in effect on the date immediately preceding
the Subscription Date and such Options or Convertible Securities are not
amended, modified or changed on or after the Subscription Date; (D) in
connection with any stock split, stock dividend, recapitalization or similar
transaction by the Company for which adjustment is made pursuant to Section
2(b); and (E) in connection with mergers, acquisitions, strategic business
partnerships or joint ventures, in each case with non-affiliated third parties
and otherwise on an arm's-length basis, the primary purpose of which is not to
raise additional capital.

     

    (l) "Expiration Date" means the
date that is sixty (60) months after the Issuance Date or, if such date falls on
a day other than a Business Day or on which trading does not take place on the
applicable Eligible Market (a "Holiday"), the next day that
is not a Holiday.

     

    (m) "Fundamental Transaction" means
that (A) the Company shall directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such stock purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Common Stock, or (B) any "person" or "group" (as
these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act),
become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.

     

     

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    (n)  [Intentionally
Omitted]

     

    (o) "Options" means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    (p) "Parent Entity" of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

     

    (q) "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (r) "Registration Rights Agreement"
means that certain Registration Rights Agreement dated as of the Subscription
Date by and among the Company and the Buyers.

     

    (s) "Required Holders" means the
holders of the SPA Warrants representing at least two-thirds (2/3) of the shares
of Common Stock underlying the SPA Warrants then outstanding.

     

    (t) "SPA Securities" means the
Preferred Shares issued pursuant to the Securities Purchase
Agreement.

     

    (u) "Successor Entity" means the
Person (or, if so elected by the Required Holders, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

     

    (v) "Trading Day" means any day on
which the Common Stock is traded on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
"Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

     

     

     

     

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    (w) "Weighted Average Price" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the applicable Eligible Market during the period beginning at
9:30:01 a.m., New York City time (or such other time as the applicable Eligible
Market publicly announces as the official open of trading), and ending at
4:00:00 p.m., New York City time (or such other time as the applicable Eligible
Market publicly announces is the official close of trading) as reported by
Bloomberg through its "Volume at Price" function, or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York City time (or such other
time as such market publicly announces is the official open of trading), and
ending at 4:00:00 p.m., New York City time (or such other time as such market
publicly announces is the official close of trading) as reported by Bloomberg,
or, if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).  If the Weighted Average Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Weighted Average Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder.  If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 12 with
the term "Weighted Average Price" being substituted for the term "Exercise
Price".  All such determinations are to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

     

    [Signature
Page Follows]

    
 

     

     

     

     

    20


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.

    


     

    
       

      
        
          	 	
                  COMPANY:

                   

                  CHINA XD PLASTICS COMPANY
      LIMITED

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	 	Name:
      Jie Han	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 


        

      

       

       

       

       

       

       

       

       

      21

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

    
 

     EXHIBIT
A

    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

     

    
      China
XD Plastics Company Limited

    

    


    
 

    The undersigned holder hereby exercises
the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of China XD
Plastics Company Limited, a Nevada corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant").  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     

    1.           Form
of Exercise Price.  The Holder intends that payment of the Exercise
Price shall be made as:

     

    
      	
               
      

            	
              ____________

            	
              a
      "Cash
      Exercise" with respect to _________________ Warrant Shares;
      and/or

            


    

     

    
      	
               
      

            	
              ____________

            	
              a
      "Cashless
      Exercise" with respect to _______________ Warrant
      Shares.

            


    

     

    2.           Payment
of Exercise Price.  In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

     

    3.           Delivery
of Warrant Shares.  The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.

     

    


     

    Date:
_______________ __, ______

     

    


       Name
of Registered Holder

     

    


     

    By:                                                                     


    Name:

    Title:

    
 

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGMENT

     

    The Company hereby acknowledges this
Exercise Notice and hereby directs Interwest Transfer Company, Inc. to issue the
above indicated number of shares of Common Stock in accordance with the Transfer
Agent Instructions dated November 27, 2009 from the Company and acknowledged and
agreed to by Interwest Transfer Company, Inc.

     

     

    
       

      
        
          	 	
                  COMPANY:

                   

                  CHINA XD PLASTICS COMPANY
      LIMITED

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	 	Name:
      	 
	 	 	Title: