Jinhao Motor Company - Exhibit 10.3 - Filed by newsfilecorp.com






Exhibit 10.3

INVESTORS’ RIGHTS AGREEMENT 

          THIS
INVESTORS’ RIGHTS AGREEMENT is made as of the 2nd day of September 2010, by and
among Jinhao Motor Company (the “Company”), the investors listed on the
Schedule of Series A Preferred Investors attached hereto as Exhibit A and
identified on the signature pages hereto (each, an “Investor” and
collectively, the “Investors”) and Mr. Tsoi Chak Shing (the “Major
Shareholder”). 

RECITALS

          WHEREAS,
the Company, the Major Shareholder, the subsidiaries of the Company and the
Investors are parties to the Securities Purchase Agreement for the sale and
purchase of units comprise of Series A Preferred Stock and Warrants dated as of
August 11, 2010 (the “Purchase Agreement”); and 

          WHEREAS,
in order to induce the Company to enter into the Purchase Agreement and to
induce the Investors to invest funds in the Company pursuant to the Purchase
Agreement, the Investors and the Company hereby agree that this Agreement shall
govern the rights of the Investors to cause the Company to register shares of
Common Stock issuable to the Investors, to receive certain information from the
Company, and to participate in future equity offerings by the Company, and shall
govern certain other matters as set forth in this Agreement; 

          NOW,
THEREFORE, the parties hereby agree as follows: 

          1.      Definitions.
For purposes of this Agreement: 

	 	(a) 	
      Capitalized terms that are not otherwise defined herein
      have the meanings given to such terms in the Purchase Agreement.

	 	 	 
	 	(b) 	
      For purpose of this Agreement:



          “Additional
Selling Shareholder Transfer Notice” has the meaning set forth in Section
5(c). 

          “After
Tax Net Profit” means the Company’s consolidated operating profit after
taxes and minority interests for a given fiscal year determined in accordance
with IFRS as audited by a any Big Four Accounting Firm, excluding extraordinary
and non-recurring gains. 

          “Big
Four Accounting Firm” means KPMG, PricewaterhouseCoopers, Deloitte Touche
Tohmatsu or Ernst & Young, including their respective member firms in the
PRC and Hong Kong, or any other global accounting firm agreed to by the
Investors and the Company, in each case so long as it is registered with the
Public Company Accounting Oversight Board. 

          “Certificate
of Designation” means the certificate of designation of series A redeemable
convertible preferred stock of the Company, as may be amended from time to
time.

          “Co-Sale
Right Holder” has the meaning set forth in Section 6(a). 




          “Core
Business” means the production and distribution of motorcycles, small
engines and electric vehicles and the relevant related activities. 

          “Effectiveness
Period” means, as to any registration statement required to be filed
pursuant to this Agreement, the period commencing on the date when such
registration statement is declared effective by the Commission and ending on the
earlier to occur of (a) the second anniversary of such effective date, or (b)
such time as all of the Registrable Securities covered by such registration
statement have been publicly sold by the Investors included therein. 

          “Exempt
Issuance” has the meaning set forth in Section 4(f). “Exercise
Notice” has the meaning set forth in Section 5(b). “Family Members”
has the meaning set forth in Section 6(f). “Guarantors” has the meaning
set forth in Section 7(a). 

          “Guaranteed
Obligations” has the meaning set forth in Section 7(a). 

          “Holder”
means any holder of Registrable Securities. 

          “Holders’
Expenses” has the meaning set forth in Section 2(d). 

          “Investment
Amount” means, with respect to each Investor, the Investment Amount
indicated on such Investor’s signature page and set forth opposite such
Investor’s name on Exhibit A to the Purchase Agreement.

          “Investor
Director” has the meaning set forth in Section 7(e). 

          “Lead
Investor” means DBS Nominees (Private) Limited, a Singapore company. 

          “Liquidation
Event” has the meaning set forth in Section 2(i). 

          “New
Securities” means, subject to the terms of Section 4 hereof, any newly
issued shares of Common Stock or Common Stock Equivalent. 

          “Offered
Sharers” has the meaning set forth in Section 5(a). “Piggyback
Notice” has the meaning set forth in Section 2(b). “Pre-Notice” has
the meaning set forth in Section 4(a). 

          “Prohibited
Transfer” has the meaning set forth in Section 6(g). 

          “Pro
Rata Portion” has the meaning set forth in Section 4(a). 

          “Qualified
IPO” means the sale by the Company of shares of the Common Stock in a
registered public offering on a Qualified Trading Market in which the Company
sells shares of its stock, based on a post-money valuation of no less than
US$400,000,000 and the holders of the Series A Preferred Stock are able to offer and sell at least
50% of the Common Stock that would be received upon the Forced Conversion
pursuant to subparagraph 6(b)(i) of the Certificate of Designation.

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          “Qualified
Trading Day” means a day on which the Common Stock is traded on a Qualified
Trading Market. 

          “Qualified
  Trading Market” means whichever of the New York Stock Exchange, the
  NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital
  Market.

          “Registrable
Securities” means (i) the Shares, (ii) any shares of Common Stock owned or
hereafter acquired by the Investors, and (iii) shares of Common Stock issued as
a dividend or other distribution with respect to, in exchange for, or in
replacement of, the shares referred to in (i) and (ii) herein. 

          “Remaining
  Offered Shares” has the meaning set forth in Section 5(c).

          “Sale
Proceeds” has the meaning set forth in Section 6(d). 

          “Selling
Shareholder” has the meaning set forth in Section 5(a). 

          “Selling
Shareholder Transfer” has the meaning set forth in Section 5(a). 

          “Selling
Shareholder Transfer Notice” has the meaning set forth in Section 5(a). 

          “Special
Voting Transactions” has the meaning set forth in Section 8. 

          “Subsequent
Financing” has the meaning set forth in Section 4(a). 

          “Subsequent
Financing Notice” has the meaning set forth in Section 4(a). 

          “Variable
Rate Transaction” has the meaning set forth in Section 7(f). 

          2.      Registration
Rights. The Company covenants and agrees as follows: 

                    (a)      The
Company shall file a registration statement as soon as commercially reasonable,
but in any event within thirty (30) days of the Closing Date, on Form S-1, or
such other form that is appropriate, covering the resale of the Shares and cause
such registration statement to become effective as soon as commercially
reasonable, but in any event within one hundred and fifty (150) days of the
Closing Date (which period shall be extended by thirty (30) additional days in
the event such registration statement shall be the subject of a full review).
The Company shall pay each Investor a compensation equal to 1% of such
Investor’s Investment Amount for each month of delay in the effectiveness of the
registration statement up to the greater of (i) 8% of such Investor’s Investment
Amount, and (ii) the amount of damages that such Investor incurs as a result of
such delay if the delay is attributable to the willful misconduct or intentional
breach of either the Company or the Major Shareholder, provided that the Company
shall not be obligated to pay such compensation for shares for which the Company
is unable to fulfill its registration obligations as a result of rules,
regulations, positions or releases issued or actions taken by the Commission pursuant to its
authority with respect to “Rule 415,” and the Company registers at such time the
maximum number of shares of Common Stock permissible upon consultation with the
staff of the Commission. 

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                    (b)      If
the Company or any shareholder of the Company proposes to register any of its
Common Stock or any Common Stock Equivalents under the Securities Act (other
than pursuant to an offering of securities in connection with an employee
benefit, share dividend, share ownership or dividend reinvestment plan or
registration of securities in connection with a business combination
transaction) and the registration form to be used may be used by the Company for
the registration of the Registrable Securities, the Company shall give prompt
written notice to the Holders of its intention to effect such a registration
(each a “Piggyback Notice”) and shall include in such registration
statement all Registrable Securities then required to be registered that are not
then covered by an effective registration statement with respect to which the
Company has received written request from the Holders for inclusion therein
within ten (10) days after the date of sending the Piggyback Notice to the
Holders; provided that if the Company and any underwriter reduce the number of
shares proposed to be registered under such registration statement, the shares
to be registered by holders of the Registrable Securities will be reduced
proportionately based on the relative number of Registrable Securities requested
to be registered under such registration statement only after all other
stockholders’ shares are reduced. 

                    (c)      In
connection with any registration, the Company shall: 

                               (i)      prepare
and file with the Commission a registration statement in a commercially
reasonable time with respect to such securities and use its commercially
reasonable efforts to cause such registration statement to become and remain
effective for the Effectiveness Period, in either case subject however to the
requirements of subparagraph (a) above; 

                               (ii)    
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities covered by such registration statement until the such time as
all of such securities have been disposed of in a public offering; 

                               (iii)    furnish
to the Holders, at the option of the Company in electronic format, such number
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents, as the
Holders may reasonably request; 

                               (iv)     register
or qualify the securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as the Holders shall reasonably request (provided, however, that
it shall not be obligated to qualify as a foreign corporation to do business
under the laws of any jurisdiction in which it is not then qualified or to file
any general consent to service or process); 

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                               (v)     
furnish, at the request of the Holders, a legal opinion of the counsel
representing the Company for the purposes of such registration, addressed to the
Holders, in customary form and covering matters of the type customarily covered
in such legal opinions; 

                               (vi) 
   otherwise use its commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, at the option of the Company in electronic format, as
soon as reasonably practicable, but not later than eighteen (18) months after
the effective date of the Registration Statement, an earnings statement covering
the period of at least twelve (12) months beginning with the first full month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
provided, however, that the Company shall have no such obligation if the
Effectiveness Period has expired; 

                               (vii)  
 notify the Holders, at any time when the offering documents include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and at the request of the Holders,
prepare and furnish to such Person(s) such reasonable number of copies of any
amendment or supplement to the offering documents as may be necessary so that,
as thereafter delivered to the Holders of such shares, such offering documents
shall not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and to
deliver to the Holders of any other securities of the Company included in the
offering copies of such offering documents as so amended or supplemented; 

                               (viii)  
keep the Holders informed of the Company’s best estimate of the earliest date on
which the offering documents will become effective, and promptly notify the
Holders of (A) the effectiveness of such offering documents, (B) a request by
the Commission for an amendment or supplement to such offering documents, (C)
the issuance by the Commission of an order suspending the effectiveness of the
offering documents, or of the threat of any proceeding for that purpose, and (D)
the suspension of the qualification of any securities to be included in the
offering documents for sale in any jurisdiction or the initiation or threat of
any proceeding for that purpose; and 

                               (ix)     before
filing any registration statement as contemplated by Section 2 hereof and any
amendment or supplement thereto (including any documents incorporated by
reference therein), the Company shall furnish to the Holders copies of all such
offering documents, at the option of the Company in electronic format to the
email address for each Holders specified on the signature pages hereto, which
offering documents shall be subject to the review of such Holders and, where
feasible, the Company shall make such changes in the offering documents as are
promptly and reasonably requested by any Holder. The Holders shall provide their
comments to the offering documents, if any, within 2 Business Days after the
receipt of such offering documents. 

                    (d)      All
registrations (piggyback or otherwise) made by the Holders will be made solely
at the Company’s expense, other than (i) if an underwritten offering is
consented to by the Company, the underwriters’, broker-dealers’ and placement
agents’ selling discounts, commissions and fees relating to the sale of the Holders’
securities, (ii) any costs and expenses of counsel, accountants or other
advisors retained by the Holders other than reasonable fees and expenses of one
counsel to represent all Holders in connection with a registration statement
filed pursuant hereto, and (iii) all transfer, franchise, capital stock and
other taxes, if any, applicable to the Holders’ securities (collectively,
“Holders’ Expenses”) which shall be paid by the Holders. 

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                    (e)     
In the event of any registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, the Company shall indemnify and hold
harmless each Holder holding such Registrable Securities, such Holder’s
directors and officers, and each other Person (including each underwriter) who
participated in the offering of such Registrable Securities and each other
Person, if any, who controls such Holder or such participating Person within the
meaning of the Securities Act, against any losses, claims, damages, liabilities,
costs (including, without limitation, reasonable costs of preparation and
reasonable attorneys’ fees), or expenses, joint or several, to which such Holder
or any such director or officer or participating Person or controlling Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or any
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any other violation of any
applicable securities laws, and in each of the foregoing circumstances shall
reimburse such Holder or such director, officer or participating person or
controlling person for any legal or any other expenses reasonably incurred by
such Holder or such director, officer or participating person or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any actual or alleged untrue statement
or actual or alleged omission made in such registration statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Holder
specifically for use therein. 

                    (f)     
In the event of any registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, each Holder holding Registrable
Securities agrees to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company within the
meaning of the Securities Act and any other Holder selling securities in
connection with such registration, against any losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys’ fees), or expenses, joint or several, to
which the Company or any such director or officer or any such Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or any alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any omission or any alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in either case only to the extent that such untrue
statement or omission is (A) made in reliance on and in conformity with any information
furnished in writing by such Holder to the Company concerning such Holder
specifically for inclusion in the offering documents relating to such offering,
and (B) is not corrected by such Holder and distributed to the Holders within a
reasonable period of time. Notwithstanding the provisions of this paragraph, no
Holder shall be required to indemnify any Person pursuant to this paragraph or
to contribute pursuant to paragraph (g) below in an amount in excess of the
amount of the aggregate net proceeds received by such Holder in connection with
any such registration under the Securities Act. 

6 




                    (g)      If
the indemnification provided for above from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. 

                    (h)      In
order to permit the Holders to sell the Registrable Securities, if so desired,
pursuant to any applicable resale exemption under applicable securities laws and
regulations, the Company shall: 

                               (i)      comply
with all rules and regulations of the Commission in connection with use of any
such resale exemption; 

                               (ii)    
make and keep available adequate and current public information regarding the
Company; 

                               (iii)   
file with the Commission in a timely manner, all reports and other documents
required to be filed under the Securities Act, the Exchange Act, or other
applicable securities laws and regulations; 

                               (iv)    
upon written request from any Holder, furnish to such Holder copies of annual
reports required to be filed under the Exchange Act and other applicable
securities laws and regulations; and 

7 




                               (v)     
upon written request from any Holder, furnish to such Holder, upon written
request (A) a copy of the most recent quarterly report of the Company and such
other reports and documents filed by the Company with the Commission and (B)
such other information as may be reasonably required to permit the Holders to
sell pursuant to any applicable resale exemption under the Securities Act or
other applicable securities law and regulations, if any. 

                    (i)     
Notwithstanding anything to the contrary herein, any and all of the Company’s
obligations under this Section 2 shall terminate upon (x) the expiration of the
fifth (5th) anniversary of the date of this Agreement; or (y) the
consummation of a Liquidation Event (the “Liquidation Event”), as such
term is defined in the Certificate of Designation. 

                    (j)      The
Company shall not grant any registration rights without the consent of the
Holders holding a majority in interest of the then outstanding Registrable
Securities prior to the effectiveness of the registration statement referred to
in subparagraph (a) above. Notwithstanding the foregoing, this restriction shall
not apply to the registration rights granted in connection with the shares
issued in an Exempt Issuance prior to the Qualified IPO, provided that each such
issuance shall be subject to the prior written approval of the Lead Investor.


          3.     
Information Rights. 

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

                    (b)     
As long as any Investor owns any Securities and provided that the Company is not
publicly reporting, the Company shall deliver to each Investor the following
documents or reports:

                         
     (i)      within ninety
(90) days after the end of each fiscal year of the Company, consolidated audited
annual financial statements for the Companies Entities for such fiscal year and
a consolidated balance sheet for the Company Entities as of the end of the
fiscal year, audited and certified by an accounting firm selected by the Company
and approved by the Investors, a copy of the Company Entities’ annual operating
plan and budget, and a management report including a comparison of the financial
results of such fiscal year with the corresponding business plan, all prepared
in accordance with IFRS; and 

                           
   (ii)     within forty-five (45) days of
the end of each quarter (which is not a fiscal year end), a consolidated
unaudited income statement and statement of cash flows for such quarter and a
consolidated balance sheet for the Company Entities as of the end of such quarter, and a management report which will disclose all
material activities (financial or otherwise) of the Company Entities including a
comparison of the financial results against the Company’s business plan, all
prepared in accordance with IFRS (except for year-end adjustments and except for
the absence of notes). 

8 




                    
(c)      Notwithstanding anything to the contrary
herein, any and all of the Company’s obligations under this Section 3 shall
terminate upon the consummation of a Liquidation Event. 

          4.      Rights
to Future Stock Issuances. 

                    (a)     
From the date hereof, upon any issuance by the Company of any New Securities (a
“Subsequent Financing”), each Investor who owns at least 10% of the
number of shares of the Securities originally issued to such Investor shall have
the right to purchase up to its Pro Rata Portion of such New Securities. An
Investor’s “Pro Rata Portion” for the purposes of this purchase right
shall be determined according to the number of shares of Common Stock owned by
such Investor immediately prior to the issuance of the New Securities (assuming
the exercise, conversion or exchange of all then outstanding Common Stock
Equivalents) in relation to the total number of shares of Common Stock of the
Company outstanding immediately prior to the issuance of the New Securities
(assuming the exercise, conversion or exchange of all then outstanding Common
Stock Equivalents).

                    (b)     
At least ten (10) Trading Days prior to the closing of the Subsequent Financing,
the Company shall deliver to each Investor a written notice requesting their
written approval to receive nonpublic information regarding the Company
(“Pre-Notice”), which Pre-Notice shall ask such Investor if it wants to
review the details of such information (such additional notice, a “Subsequent
Financing Notice”). Upon the request of an Investor, and only upon a request
by such Investor, for a Subsequent Financing Notice, the Company shall promptly,
but no later than one (1) Trading Day after such request, deliver a Subsequent
Financing Notice to such Investor. The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the person with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto. The Company may
deliver the Pre-Notice and Subsequent Financing Notice to such Investor by
e-mail to the e-mail address specified on the signature pages hereto. 

                    (c)     
Any Investor desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the 5th Trading Day after all of the Investors have received the
Pre-Notice that the Investor is willing to participate in the Subsequent
Financing, the amount of the Investor’s participation, and that the Investor has
such funds ready, willing, and available for investment on the terms set forth
in the Subsequent Financing Notice. If the Company receives no notice from an
Investor as of such 5th Trading Day, such Investor shall be deemed to
have notified the Company that it does not elect to participate.

                    (d)      Each
Holder shall have a right of reallotment such that, if any other Holder fails to
exercise the right to purchase its full Pro Rata Portion of the New Securities,
the other participating Holders may exercise an additional right to
purchase, on a pro rata basis, the New Securities not previously purchased.

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                    (e)      The
Company must provide the Investors with a second Subsequent Financing Notice,
and the Investors will again have the right of participation set forth above in
this Section 4, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice. 

                    (f)     
The rights contained in this Section shall not apply to the issuance and sale by
the Company of: 

                         
     (i)      shares of Common
Stock or Common Stock Equivalents to employees, officers, or directors of the
Company, as compensation for their services to the Company or any of its direct
or indirect Subsidiaries pursuant to arrangements approved by the Board of
Directors of the Company (including approval of the Investor Director); 

                           
   (ii)     shares of Common Stock or
Common Stock Equivalents issued as consideration for the acquisitions of or
strategic transactions with another company or business where the primary
purpose is not to raise capital for the Company or any Subsidiary, which
acquisition or strategic transaction has been approved by the Board of Directors
of the Company (including approval of the Investor Director); 

                         
     (iii)    shares of Common Stock or
Common Stock Equivalents issued in a Qualified IPO;

                         
     (iv)     shares of Common
Stock issued upon conversion or exercise of Series A Preferred Stock or Warrants
issued pursuant the Purchase Agreement, or any agents’ warrants issued in
conjunction with the units purchased pursuant to the Purchase Agreement; and


                          
    (v)      additional shares
issued in connection with a financing immediately prior to the Qualified IPO,
provided that each such issuance shall be subject to the prior written approval
of the Lead Investor. 

Any of the foregoing transactions is referred to as an
“Exempt Issuance.” 

                    (g)      Notwithstanding
anything to the contrary herein, any and all of the Company’s obligations under
this Section 4 shall terminate upon the earlier to occur of: (x) the
consummation of a Liquidation Event; or (y) an Investor ceases to hold at least
10% of the number of shares of the Securities originally issued to such
Investor. 

          5.     
Rights of First Refusal. 

                    (a)     
Transfer Notice. If at any time the Major Shareholder (the “Selling
Shareholder”) proposes to transfer shares to one or more third parties
pursuant to an understanding with such third parties (a “Selling Shareholder
Transfer”), then the Selling Shareholder shall deliver to the Secretary of
the Company and each Holder written notice of the Selling Shareholder’s
intention to make the Selling Shareholder Transfer (the “Selling Shareholder Transfer Notice”), which Selling Shareholder
Transfer Notice shall include (i) a description of the shares to be transferred
(“Offered Shares”), and (ii) the consideration and the material terms and
conditions upon which the proposed Selling Shareholder Transfer is to be made.
The Selling Shareholder Transfer Notice shall certify that the Selling
Shareholder has received an offer from the prospective transferee(s) and in good
faith believes a binding agreement for the Selling Shareholder Transfer is
obtainable on the terms set forth in the Selling Shareholder Transfer Notice.
The Selling Shareholder Transfer Notice shall also include a copy of any written
proposal, term sheet or letter of intent or other agreement relating to the
proposed Selling Shareholder Transfer. 

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                    (b)     
Company’s Option. The Company shall have an option for a period of ten
(10) days from receipt of the Selling Shareholder Transfer Notice to elect to
purchase the Offered Shares subject to the same material terms and conditions as
described in the Selling Shareholder Transfer Notice. The price at which the
Company may exercise its right of first refusal will be the price offered by the
prospective purchaser. The Company may exercise such purchase option and,
thereby, purchase all (or a portion of) the Offered Shares by notifying the
Selling Shareholder in writing before expiration of the such thirty (30) day
period as to the number of such shares that it wishes to purchase (the
“Exercise Notice”). If the Company gives the Selling Shareholder the
Exercise Notice, then payment for the Offered Shares shall be by check or wire
transfer, against delivery of the Offered Shares to be purchased at a place
agreed upon between the parties and at the time of the scheduled closing
therefor, which shall be no later than five (5) Business Days after the
Company’s delivery of the Exercise Notice, unless the value of the purchase
price has not yet been established pursuant to Section 5(e) hereof. If the
Company fails to purchase all of the Offered Shares by exercising the option
granted in this Section 5(b) within the thirty (30) day period provided, the
Offered Shares shall be subject to the options granted to the Holders pursuant
to Section 5(d) and Section 6 hereof. 

                    (c)      Additional
Selling Shareholder Transfer Notice. Subject to the Company’s right set
forth in Section 5(b) hereof, if at any time the Selling Shareholder proposes a
Selling Shareholder Transfer, then, after the Company has failed or declined to
purchase all, or a portion of, the Offered Shares, the Selling Shareholder shall
give each Holder an “Additional Selling Shareholder Transfer Notice”
which shall notify each Holder of the Company’s failure to exercise its right
with respect to the Offered Shares, and include all of the information and
certifications required in a Selling Shareholder Transfer Notice and shall
additionally identify the Offered Shares which the Company has declined to
purchase (the “Remaining Offered Shares”). 

                    (d)     
Holders’ Option. The Holders shall have an option for a period of twenty
(20) Business Days from the Holders’ receipt of the Additional Selling
Shareholder Transfer Notice from the Selling Shareholder set forth in Section
5(c) hereof to elect to purchase their respective pro rata shares of the
Remaining Offered Shares at the same price and subject to the same material
terms and conditions as described in the Additional Selling Shareholder Transfer
Notice. Each Holder may exercise such purchase option and, thereby, purchase all
or any portion of its pro rata share (with any reallotments as provided below)
of the Remaining Offered Shares, by notifying the Selling Shareholder and the
Company in writing, before expiration of the twenty (20) Business Day period as
to the number of such shares which it wishes to purchase (including any
reallotment, up to an indicated share limit). Each Holder’s pro rata share of
the Remaining Offered Shares shall be a fraction of the Remaining
Offered Shares, of which the number of shares of Common Stock (including shares
of Common Stock issuable upon conversion of Preferred Stock) owned by such
Holder on the date of the Selling Shareholder Transfer Notice shall be the
numerator and the total number of shares of Common Stock (including shares of
Common Stock issuable upon conversion of shares of Series A Preferred Stock)
held by all Holders on the date of the Selling Shareholder Transfer Notice shall
be the denominator. Each Holder shall have a right of reallotment such that, if
any other Holder fails to exercise the right to purchase its full pro rata share
of the Remaining Offered Shares, the other participating Holders may exercise an
additional right to purchase, on a pro rata basis, the Remaining Shares not
previously purchased. If a Holder gives the Selling Shareholder notice that it
desires to purchase its pro rata share of the Remaining Offered Shares and, as
the case may be, its reallotment, then payment for the Remaining Offered Shares
shall be by check or wire transfer, against delivery of the Remaining Offered
Shares to be purchased at a place agreed upon between the parties and at the
time of the scheduled closing therefor, which shall be no later than forty-five
(45) days after the Company’s receipt of the Selling Shareholder Transfer
Notice, unless the Selling Shareholder Transfer Notice contemplated a later
closing with the prospective third party transferee(s) or unless the value of
the purchase price has not yet been established pursuant to Section 5(e) hereof. 

11 




                    (e)     
Valuation of Property. Should the purchase price specified in the Selling
Shareholder Transfer Notice or Additional Selling Shareholder Transfer Notice be
payable in property other than cash or evidences of indebtedness, the Company
(or the Holders) shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If the Selling Shareholder
and the Company (or the Holders) cannot agree on such cash value within ten (10)
Business Days after the Company’s receipt of the Selling Shareholder Transfer
Notice (or the Holders’ receipt of the Additional Selling Shareholder Transfer
Notice), the valuation shall be made by an appraiser of recognized standing
selected by the Selling Shareholder and the Company (or the Holders) or, if they
cannot agree on an appraiser within twenty (20) days after the Company’s receipt
of the Selling Shareholder Transfer Notice (or the Holders’ receipt of the
Additional Selling Shareholder Transfer Notice), each shall select an appraiser
of recognized standing and the two appraisers shall designate a third appraiser
of recognized standing, whose appraisal shall be determinative of such value.
The cost of such appraisal shall be shared equally by the Selling Shareholder
and the Company (or the Holders), with the half of the cost borne by the Company
and the Holders borne pro rata by each based on the number of shares such
parties were interested in purchasing pursuant to this Section 5. If the time
for the closing of the Company’s purchase or Holders’ purchase has expired but
for the determination of the value of the purchase price offered by the
prospective transferee(s), then such closing shall be held on the later of (a)
the fifth (5th) Business Day following delivery of the Exercise
Notice or (b) the fifteenth (15th) day after such valuation shall
have been made pursuant to this subsection. 

          6.      Right
of Co-Sale. 

                    (a)     
To the extent the Company and the Holders do not exercise their respective
rights of refusal as to all of the Offered Shares pursuant to Section 5 hereof,
then each Holder (a “Co-Sale Right Holder” for purposes of this Section
6) which notifies the Selling Shareholder in writing within fifteen (15) days
after receipt of the Additional Selling Shareholder Transfer Notice referred to in Section 5(c) hereof, shall have
the right to participate in such sale of Offered Shares on the same terms and
conditions as specified in the Selling Shareholder Transfer Notice. Such Co-Sale
Right Holder’s notice to the Selling Shareholder shall indicate the number of
shares of Series A Preferred Stock (or shares of Common Stock issued or issuable
upon conversion thereof) the Co-Sale Right Holder wishes to sell under its right
to participate. To the extent one or more of the Holders exercise such right of
participation in accordance with the terms and conditions set forth below, the
number of shares of Offered Shares that the Selling Shareholder may sell in the
Selling Shareholder Transfer shall be correspondingly reduced. 

12 




 

                    (b)      Each
Co-Sale Right Holder may sell all or any part of that number of shares of Series
A Preferred Stock (or shares of Common Stock issued or issuable upon conversion
thereof) equal to the product obtained by multiplying (i) the aggregate number
of shares of Offered Shares covered by the Transfer Notice less any shares
purchased by the Company or Holders pursuant to Section 5 by (ii) a fraction,
the numerator of which is the number of shares of Common Stock (including shares
of Common Stock issuable upon conversion of shares of Series A Preferred Stock),
owned by the Co-Sale Right Holder on the date of the Selling Shareholder
Transfer Notice and the denominator of which is the total number of shares of
Common Stock (including shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock) owned by the Selling Shareholder and all of
the Co-Sale Right Holders on the date of the Selling Shareholder Transfer
Notice. 

                    (c)      Each
Co-Sale Right Holder shall effect its participation in the sale by promptly
delivering to the Selling Shareholder for transfer to the prospective purchaser:


                         
     (i)      a
certificate certifying that such Co-Sale Right Holder owns the shares to be sold
free and clear of liens, claims and encumbrances, and has the full right and
power to transfer such shares; and 

                         
     (ii)     one or more stock
certificates, properly endorsed for transfer, which represent: 

                
                    
     (A)      the number of
shares of Common Stock which such Co-Sale Right Holder elects to sell; or 

             
                       
     (B)      the number
of shares of Series A Preferred Stock which are at such time convertible into
the number of shares of Common Stock which such Co-Sale Right Holder elects to
sell; provided, however, that if the prospective third-party purchaser objects
to the delivery of Series A Preferred Stock in lieu of Common Stock, such
Co-Sale Right Holder shall convert such Series A Preferred Stock into Common
Stock and deliver Common Stock as provided in this Section 6. The Company agrees
to make any such conversion concurrent with the actual transfer of such shares
to the purchaser and contingent on such transfer. 

                    (d)      The
stock certificate or certificates that the Co-Sale Right Holder delivers to the
Selling Shareholder pursuant to Section 6(c) shall be transferred to the
prospective purchaser in consummation of the sale of the Series A Preferred
Stock (or Common Stock issued or issuable upon conversion thereof) pursuant to
the terms and conditions specified in the Selling Shareholder Transfer Notice,
and the Selling Shareholder shall concurrently therewith remit to such Co-Sale Right Holder that portion of the sale proceeds to
which such Co-Sale Right Holder is entitled by reason of its participation in
such sale (the “Sale Proceeds”); provided, however, that the Selling
Shareholder shall not be obligated to issue any Sale Proceeds to the Co-Sale
Right Holder unless the certificates evidencing the Series A Preferred Stock (or
Common Stock issued or issuable upon conversion thereof) are either delivered to
the Selling Shareholder, or the Co-Sale Right Holder notifies the Selling
Shareholder that such certificates have been lost, stolen or destroyed and
executes an agreement reasonably satisfactory to the prospective purchaser to
indemnify the prospective purchaser from any loss incurred in connection with
such certificates. To the extent that any prospective purchaser or purchasers
prohibits such assignment or otherwise refuses to purchase shares or other
securities from a Co-Sale Right Holder exercising its rights of co-sale
hereunder, the Selling Shareholder shall not sell to such prospective purchaser
or purchasers any Offered Shares unless and until, simultaneously with such
sale, the Selling Shareholder shall purchase such shares or other securities
from such Co-Sale Right Holder for the same consideration and on the same terms
and conditions as the proposed transfer described in the Selling Shareholder
Transfer Notice. 

13 




                    (e)      Non-Exercise
of Rights. To the extent that the Company and the Holders have not exercised
their right to purchase the Offered Shares or the Remaining Offered Shares
within the time periods specified in Section 5 hereof and the Holders have not
exercised their rights to participate in the sale of the Offered Shares or the
Remaining Offered Shares within the time periods specified in Section 6 hereof,
the Selling Shareholder shall have a period of sixty (60) days from the
expiration of such rights in which to sell the Offered Shares or the Remaining
Offered Shares, as the case may be, upon terms and conditions (including the
purchase price) no more favorable than those specified in the Selling
Shareholder Transfer Notice to the third-party transferee(s) identified in the
Selling Shareholder Transfer Notice. The third-party transferee(s) shall acquire
the Remaining Offered Shares free and clear of subsequent rights of first
refusal and co-sale rights under this Agreement. In the event Selling
Shareholder does not consummate the sale or disposition of the Remaining Offered
Shares within the sixty (60) day period from the expiration of these rights, the
Company’s first refusal rights and the Holders’ first refusal rights and co-sale
rights shall continue to be applicable to any subsequent disposition of the
Offered Shares or the Remaining Offered Shares by the Selling Shareholder until
such right lapses in accordance with the terms of this Agreement. Furthermore,
the exercise or non-exercise of the rights of the Company and the Holders under
this Section 6(e) to purchase Offered Shares from the Selling Shareholder or
participate in sales of Offered Shares by the Selling Shareholder shall not
adversely affect their rights to make subsequent purchases from the Selling
Shareholder of Offered Shares or subsequently participate in sales of Offered
Shares by the Selling Shareholder. 

                    (f)      Exempt
Transfers. 

                             
 (i)      Notwithstanding the foregoing, the
provisions of Sections 5 and 6 hereof shall not pertain or apply to any pledge,
transfer or gift to the ancestors, descendants, spouses of descendants, or
spouse of a Selling Shareholder (the “Family Members”), or to trusts,
funds, partnerships or limited liability companies for the benefit of such
Family Members or a Selling Shareholder; provided, however, that the Selling
Shareholder shall inform the Holders of such pledge, transfer or gift prior to
effecting it and the pledgee, transferee or donee shall furnish the Holders with
a written agreement to be bound by and comply with all provisions of this
Agreement. Such transferred Offered Shares shall remain “Offered Shares”
hereunder, and such pledgee, transferee or donee shall be treated as a
“Selling Shareholder” for purposes of this Agreement.

14 




                         
     (ii)     Notwithstanding
the foregoing, the provisions of Section 5 and 6 hereof shall not apply to (i)
the sale of any Offered Shares to the public pursuant to a registration
statement filed with, and declared effective by, the Securities Act; or (ii) the
sale of any Offered Shares to the Company. 

                    (g)     
Prohibited Transfers. In the event a Selling Shareholder sells any
Offered Shares in contravention of the co-sale rights of the Holders under
Section 6 hereof (a “Prohibited Transfer”), the Holders, in addition to
such other remedies as may be available at law, in equity or hereunder, shall
have the put option provided below, and such Selling Shareholder shall be bound
by the applicable provisions of such option. In the event of a Prohibited
Transfer, each Holder shall have the right to sell to such Selling Shareholder
the number of shares of Series A Preferred Stock (or Common Stock issued or
issuable upon conversion thereof) equal to the number of shares each Holder
would have been entitled to transfer to the third-party transferee(s) under
Section 6 hereof had the Prohibited Transfer been effected pursuant to and in
compliance with the terms hereof. Such sale shall be made on the following terms
and conditions: 

                         
     (i)      The price
per share at which the shares are to be sold to such Selling Shareholder shall
be equal to the price per share paid by the third-party transferee(s) to such
Selling Shareholder in the Prohibited Transfer. Such Selling Shareholder shall
also reimburse each Holder for any and all fees and expense, including legal
fees and expenses, incurred pursuant to the exercise or the attempted exercise
of the Holder’s rights under Section 5 or 6 hereof. 

                         
     (ii)     Within ninety
(90) days after the later of the dates on which the Holder (A) received notice
of the Prohibited Transfer or (B) otherwise became aware of the Prohibited
Transfer, each Holder shall, if exercising the option created hereby, deliver to
such Selling Shareholder the certificate or certificates representing shares to
be sold, each certificate to be properly endorsed for transfer. 

                         
     (iii)    Such Selling Shareholder
shall, upon receipt of the certificate or certificates for the shares to be sold
by a Holder, pursuant to this Section 6(g)(iii), pay the aggregate purchase
price therefor and the amount of reimbursable fees and expenses, as specified in
Section 6(g)(i) hereof, in cash or by other means acceptable to the Holder. 

                               (iv)     Notwithstanding
the foregoing, any attempt by the Selling Shareholder to transfer Offered Shares
in violation of Section 5 or 6 hereof shall be void and the Company hereby
agrees not to effect such a transfer and not to treat any alleged transferee(s)
as the holder of such shares without the written consent of Holders holding a
majority in interest of the then outstanding Series A Preferred Stock. 

                    (h)      Notwithstanding
anything to the contrary herein, any and all of the Company’s obligations under
Sections 5 and 6 shall terminate upon the consummation of a Liquidation Event.


15 




          7.     
Other Covenants. 

                    (a)      Joint
Guaranty. Each Company Entities and the Major Shareholder (collectively, the
“Guarantors”) shall jointly and severally guarantee to the Investors the
timely payment by the Company of any dividends on, and any redemption price
payable for the redemption of, the Series A Preferred Stock pursuant to the
Certificate of Designation, their obligations under Section 7(d) hereof (such
obligations, collectively, the “Guaranteed Obligations”). If the Company
defaults in the payment when due of all or any part of the Guaranteed
Obligations, including, without limitation, default in the payment of interest
and costs which become payable under the Guaranteed Obligations, the Guarantors
shall in lawful money of the United States pay to the Investors or order, on
demand, all sums due and owing on the Guaranteed Obligations, including all
principal, interest, charges, costs, and fees. Without limiting the Guarantor’s
own defenses and rights hereunder, each Guarantor reserves to itself all rights,
setoffs, counterclaims and other defenses that such Guarantor may have to
payment of all or any portion of the Guaranteed Obligations. The Guarantors
shall not be released from its obligations under this Section 7(a) until the
fulfillment in full of all Guaranteed Obligations. 

                    (b)      Transfer
Restrictions on the Major Shareholder and Company Entities. 

                          
    (i)      Direct
Transfers. The Major Shareholder shall not, directly or indirectly, sell,
assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise dispose
through one or a series of transactions the shares of Common Stock held by the
Major Shareholder to any Person any time prior to the Qualified IPO. 

                         
     (ii)     Indirect
Transfers. Except as part of those transactions as a necessity to comply
with PRC’s foreign investment restrictions subject to and contingent on the
Closing or contemplated under a series of agreements known as the “VIE
Agreements” entered into by and among the WFOE, SFJV and its shareholders, as
the case may be, without the prior written consent of Investors holding at least
66 2/3% of the issued and outstanding shares of Series A Preferred Stock, prior
to the Qualified IPO: 

                                     
     (1)      None of the
Major Shareholder or the Company shall directly or indirectly, sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or otherwise dispose of
through one or a series of transactions any equity interest held, directly or
indirectly, by him/it in HK, WFOE or SFJV to any Person; 

                                       
   (2)      None of the Major
Shareholder or the Company shall cause or permit HK, WFOE or SFJV to, issue to
any Person any equity or any options for, or any other securities exchangeable
for or convertible into, such shares of such Company Entities; and 

                                     
     (3)      Neither the
Company nor HK shall, directly or indirectly, sell, assign, transfer, pledge,
hypothecate, mortgage, encumber or otherwise dispose through one or a series of
transactions any equity interest held or controlled, directly or indirectly, by
the Company, in HK to any person or dispose of the Core Business or substantial
assets of the Company or HK. 

                    (c)     
Lead Investor’s Right of First Refusal to Provide Loan Facility. The
Company here agrees to give the Lead Investor a right of first refusal to
provide loan facilities to the Company and/or any Company Entity on the same commercial
terms as offered by other lenders. 

16 




                    (d)     
Undertakings Related to Financial and Operational Benchmarks. In the
event the After Tax Net Profit for the years ending December 31, 2010, December
31, 2011 and December 31, 2012, respectively, shall be less than $35,000,000,
$48,000,000 and $68,000,000, respectively, the Company agrees to pay the
Investors an aggregate amount equal to the cash compensation calculated as
follows, respectively, pro rata to their respective Investment Amount: 

               
                (i)      2010
Cash Compensation = Investment Amount x ($35,000,000 – actual 2010 After Tax Net
Profit)/$35,000,000; 

               
                (ii)    
2011 Cash Compensation = Investment Amount x ($48,000,000 – actual 2011 After
Tax Net Profit)/$48,000,000; 

                  
             (iii)    2012
Cash Compensation = Investment Amount x ($68,000,000 – actual 2012 After Tax Net
Profit)/$68,000,000. 

          The
Company shall have its financial statements audited by a Big Four Account Firm
each year so that the After Tax Net Profit for such year is available within 90
days after the end of such year. If there is an After Tax Net Profit shortage
for any of the years ending December 31, 2010, December 31, 2011 and December
31, 2012, the Company shall pay to the Investors the cash compensation
calculated pursuant to this Section 7(d) within 10 days after the date on which
the After Tax Net Profit for such year becomes available.

          For
the avoidance of doubt, this Section 7(d) and the guarantee obligations of the
Major Shareholder with respect to this Section 7(d) (as set forth in Section
7(a)) shall survive the completion of a Qualified IPO. 

                    (e)     
Board Representation. Immediately following the Closing, the Board of
Directors of the Company shall comprise of not less than five (5) and not more
than seven (7) directors, of which a majority shall be non-executive or
independent directors and at least one (1) (the “Investor Director”)
shall be exclusively appointed and removed by the Lead Investor prior to the
earlier occurrence of the Qualified IPO or the full redemption of the Series A
Preferred Stock. The Company shall be responsible for all the out-of-pocket
travel and accommodation expenses of the Investor Director for attendance of the
board meetings. 

                    (f)     
Subsequent Equity Sales. From the date hereof until such time as no
Investor holds any of the Securities, the Company shall be prohibited from
effecting or entering into an agreement to effect any issuance by the Company or
any of its Subsidiaries of securities involving a Variable Rate Transaction.
“Variable Rate Transaction” means a transaction in which the Company (i)
issues or sells any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive, additional
shares of Common Stock either (A) at a conversion price, exercise price or
exchange rate or other price that is based upon, and/or varies with, the trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the occurrence
of specified or contingent events directly or indirectly related to the business
of the Company or the market for the shares of Common Stock or (ii) enters into
any agreement, including, but not limited to, an equity line of credit, whereby
the Company may sell securities at a future determined price. No Variable Rate
Transaction shall be deemed an Exempt Issuance. Any Investor shall be entitled
to obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages. 

17 




                    (g)     
Core Business. Prior to the completion of a Qualified IPO, the Company
agrees that the Company Entities shall focus on the Core Business. 

          8.      
Protective Provisions. So long as any shares of Series A Preferred Stock
are outstanding, the Company shall not, and the Company and the Major
Shareholder shall take all actions within their power to ensure that, no
Subsidiary shall take any of the actions set forth below (the “Special Voting
Transactions”) without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a 66 2/3% majority of
the then outstanding shares of Series A Preferred Stock, voting as a separate
class, it being understood that in the event of any conflict in the Special
Voting Transactions set forth in the Certificate of Designation and this
Agreement, this Agreement shall prevail: 

                    (a)     
Amendment of any certificate of incorporation, certificate designation or
by-laws or other constitutional documents of any Company Entity that adversely
affect the Series A Preferred Stock; 

                    (b)     
Issuance of any securities and reclassification of any outstanding securities,
other than (i) the issuance and sale of shares of Common Stock in a Qualified
IPO, or (ii) the issuance and sale of securities to the executives and employees
of the Company pursuant to an option or stock plan approved by the Board of
Directors, provided that shares reserved to be issued under such plan do not
exceed 10% of the issued and outstanding shares of the Company immediately
following the Closing; 

                    (c)      Any
merger or consolidation of any Company Entity with one or more other
corporations in which the shareholders of such Company Entity immediately after
such merger or consolidation hold stock representing less than a majority of the
voting power of the outstanding stock of the surviving corporation; 

                    (d)     
The liquidation or dissolution of any Company Entity and any termination or
material modification of any Company Entity’s Subsidiaries; 

                    (e)      Acquisitions,
divestments or disposals where the aggregate consideration, in one transaction
or a series of related transactions, exceeds $5,000,000; 

                    (f)      Any
material change to the nature of business and strategic direction of any Company
Entity; 

                    (g)      Designating
any Company Entity other than the Company to be the listing entity for the
Qualified IPO; 

18 




                    (h)     
Incurrence of any capital expenditures for any project which exceeds $5,000,000;


                    (i)      Incurrence
of any new indebtedness which exceeds $3,800,000; 

                    (j)      Entering
any new related-party transactions or a series of related-party transactions
within any 12-month period, contracts and arrangements which exceed $1,000,000
million in consideration; and 

                    (k)      Any
payments outside the ordinary course of business and any payment of dividends.


          9.       Miscellaneous.


                    (a)     
Successors and Assigns. The rights under this Agreement may be assigned
(but only with all related obligations) by a Holder to a transferee of
Registrable Securities; provided, however, that (x) the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee and the Registrable Securities with respect to
which such rights are being transferred; and (y) such transferee agrees in a
written instrument delivered to the Company to be bound by and subject to the
terms and conditions of this Agreement. For the purposes of determining the
number of shares of Registrable Securities held by a transferee, the holdings of
a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a
Holder’s Family Member; or (3) that is a trust for the benefit of an individual
Holder or such Holder’s Family Member shall be aggregated together and with
those of the transferring Holder; provided further that all transferees who
would not qualify individually for assignment of rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices, or
taking any action under this Agreement. The terms and conditions of this
Agreement inure to the benefit of and are binding upon the respective successors
and permitted assignees of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and permitted assignees any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein. 

                    (b)      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. Any dispute, controversy or claim
arising out of or relating to this Agreement or the transactions contemplated
hereof, or the breach, termination or invalidity thereof, shall be settled by
arbitration in Hong Kong under the UNCITRAL Arbitration Rules in accordance with
the Hong Kong International Arbitration Centre Procedures for the Administration
of International Arbitration in force at the date hereof. The place of the
arbitration shall be Hong Kong and the language of the arbitration shall be
English. There shall be only one arbitrator. 

                    (c)     
Counterparts. 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. 

19 




                    (d)     
Titles and Subtitles. The titles and subtitles used in this Agreement are
for convenience only and are not to be considered in construing or interpreting
this Agreement. 

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

If to the Company: 

Jinhao Motor Company 
Dawang
Industrial Park 
Zhaoqing Hi-Tech Exploit Area 
Guangdong Province, PRC

Facsimile: (86) 0758-3625311 
Attention: Chief Executive Officer 

With a copy to: 

Pillsbury Winthrop Shaw Pittman LLP

50 Fremont 
San Francisco, CA 94105-2228 
Facsimile: (415)983-1200

Attn.: Scott Kline, Esq. 

If to an Investor: 

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

If to the Major Shareholder: 

20 




Mr. Tsoi Chak Shing 
Dawang
Industrial Park 
Zhaoqing Hi-Tech Exploit Area 
Guangdong Province, PRC

Facsimile: 86) 0758-3625311 
Attention: Mr. Tsoi Chak Shing 

With a copy to: 

Pillsbury Winthrop Shaw Pittman LLP

50 Fremont 
San Francisco, CA 94105-2228 
Facsimile: (415)983-1200

Attn.: Scott Kline, Esq. 

                    (f)      Amendments
and Waivers. No provision of this Agreement may be waived or amended except
in a written instrument signed by the Company, the Major Shareholder and the
Investors holding a 66 2/3% majority of the securities subscribed for by
Investors (excluding any Investors that are Affiliates of the Company). 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. 

                    (g)      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. 

                    (h)      Aggregation
of Stock. All shares of Registrable Securities held or acquired by
Affiliates shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement and such Affiliated persons may
apportion such rights as among themselves in any manner they deem appropriate.


                    (i)      Entire
Agreement. This Agreement, 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. 

                    (j)     
Delays or Omissions. No delay or omission to exercise any right, power,
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power, or
remedy of such nonbreaching or nondefaulting party, nor shall it be construed to
be a waiver of or acquiescence to any such breach or default, or to any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. All remedies, whether under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative. 

21 




[Remainder of Page Intentionally Left Blank]

22 




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

JINHAO MOTOR COMPANY 

 

By: /s/ Tsoi Chak Shing

Name: Tsoi Chak Shing 
Title: Chairman 


 

MAJOR SHAREHOLDER 

 

/s/ Tsoi Chak Shing 
Tsoi
Chak Shing 


JINHAO MOTOR COMPANY – SERIES A INVESTORS’ RIGHTS AGREEMENT

SIGNATURE PAGE 





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


	Name and Address of Investor: 
	  
	                                                                                                 
	 
	DBS Nominees (Private) Limited 
	  
	By: /s/ Stanley
      Leung                                                       
       
	 
	Authorized Signature 
	 
	Senior Vice
      President                                                       
	 
	Official Capacity or Title (please print) 
	 
	Stanley
      Leung                                                                    
	 
	(Please print name of signatory if different from the
      name of the Investor printed above.) 
	 
	Investor’s Address: 
	 
	6 Shenton Way, #30-01 
	DBS Building Tower One 
	Singapore 068809 
	                                                                                                 
	  
	Telephone Number: (+65)
      6878-6446                              
      
	Fax Number:
      (+65)6220-7487                                        
       
	E-mail
      Address:                                                                   
      
	 



JINHAO MOTOR COMPANY – SERIES A INVESTORS’ RIGHTS AGREEMENT

SIGNATURE PAGE 





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


	Name and Address of Investor: 
	The Islamic Bank of Asia Limited 
	                                                                                                 
	 
    
	By: /s/Tan Jeh
      Wuan                                       
      
	 
	       Authorized Signature 
	 
	Managing
      Director                                                                
	 
	Official Capacity or Title (please print) 
	 
	Tan Jeh
      Wuan                                                                         
      
	 
	(Please print name of signatory if different from the
      name of the Investor printed above.) 
	 
	Investor’s Address: 
	 
	6 Shenton Way 
	#01-01/02 
	DBS Building Tower 1 
	Singapore 068809 
	                                                                                                 
	 
    
	 
    
	Telephone Number: 65 6878
      5353                                     
	Fax Number: +65 6878
      5500                                               
	E-mail
      Address:                                                                     
	 



JINHAO MOTOR COMPANY – SERIES A INVESTORS’ RIGHTS AGREEMENT

SIGNATURE PAGE 





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


	Name and Address of Investor: 
	Profit Tone Global Investments Limited 
	                                                                                                 
      
	 
	 
	 
	By:   /s/Liu,
      Hao                                                   
	             
      Authorized Signature 
	 
	Sole
      Owner                                                                          
	 
	Official Capacity or Title (please print) 
	 
	Liu,
      Hao                                                                                
	 
	(Please print name of signatory if different from the
      name of the Investor printed above.) 
	 
	Investor’s Address: 
	 
	Suites 3702-04. 37/F, Tower 6,
      The                                
	Gateway, Harbour City, TST,
      Kowloon                           
	Hong Kong,
      China                                                             
	 
    
	Telephone Number:
      852.3719.9399                              
	Fax Number:
      852.3719.9328                                          
	E-mail
      Address:                                                                
      
	 







EXHIBIT A

______________________________________________ 

SCHEDULE OF INVESTORS 


	No. 	Investor Name 	Investor Address 
	1. 	DBS Nominees (Private) Limited 	
      6 Shenton Way, #30-01 
DBS Building Tower One
      
Singapore 068809 

	2. 	The Islamic Bank of Asia Limited 	
      6 Shenton Way 
#01-01/02 
DBS Building Tower 1
      
Singapore 068809 

	3. 	Profit Tone Global Investments Limited 	
      Suites 3702-04. 37/F, Tower 6, The Gateway, Harbour City,
      TST, Kowloon Hong Kong, China 

	4. 	 	  
	5. 	 	  
	6. 	 	  
	7. 	 	  
	8. 	 	  
	9. 	 	  
	10. 	 	  
	11. 	 	  
	12. 	 	  
	13. 	 	  
	14. 	 	  
	15. 	 	  
	16. 	 	  
	17. 	 	  
	18. 	 	  
	19. 	 	  
	20. 	 	  
	21. 	 	  
	22. 	 	  
	23. 	 	  









	No. 	Investor Name 	Investor Address 
	24. 	  	  
	25.