Document:

Longhai Steel Inc.: Exhibit 4.3 - Filed by newsfilecorp.com

Exhibit 4.3

WARRANT

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. 

LONGHAI STEEL INC. 

COMMON STOCK PURCHASE WARRANT 

1.     Issuance; Certain Definitions. In consideration of
good and valuable consideration as of May 11, 2012, the receipt of which is
hereby acknowledged by LONGHAI STEEL INC., a Nevada corporation (the
"Company"), the investors signatory hereto or registered assigns (the "Holder")
is hereby granted the right to purchase at any time until 5:00 p.m., New York
City time, on May 11, 2015, __________________ fully paid and
non-assessable shares of the Company's Common Stock, $0.001 par value per share
(the "Common Stock"), at an initial exercise price per share (the "Exercise
Price") of $1.00 per share, subject to further adjustment as set forth
herein.

2.     Exercise of Warrants.

        Method of Exercise.

	 	(a) 	
      This Warrant is exercisable in whole or in part at any
      time and from time to time. Such exercise shall be effectuated by
      submitting to the Company (either by delivery to the Company or by
      facsimile transmission as provided in Section 8 hereof) a completed and
      duly executed Notice of Exercise (substantially in the form attached to
      this Warrant) as provided in this paragraph. The date such Notice of
      Exercise is faxed to the Company shall be the "Exercise Date," provided
      that the Holder of this Warrant tenders this Warrant Certificate to the
      Company within five (5) business days thereafter. The Notice of Exercise
      shall be executed by the Holder of this Warrant and shall indicate the
      number of shares then being purchased pursuant to such exercise. Upon
      surrender of this Warrant Certificate, together with appropriate payment
      of the Exercise Price for the shares of Common Stock purchased, the Holder
      shall be entitled to receive a certificate or certificates for the shares
      of Common Stock so purchased.

	 	 	 
	 	(b) 	
      The Holder shall be deemed to be the holder of the shares
      issuable to it in accordance with the provisions of this Section 2.1 on
      the Exercise Date.

3.     Reservation of Shares. The Company hereby agrees that
at all times during the term of this Warrant there shall be reserved for
issuance upon exercise of this Warrant such number of shares of its Common Stock
as shall be required for issuance upon exercise of this Warrant (the "Warrant
Shares"). 

1 

4.     Mutilation or Loss of Warrant. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction)
receipt of reasonably satisfactory indemnification, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver a duplicate Warrant and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void. 

5.     Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein. 

6.     Transfer to Comply with the Securities Act; Registration
Rights. 

6.1     Transfer. This Warrant has not been registered under
the Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Except for transfers to officers, employees and
affiliates of the Holder, neither this Warrant nor any of the Warrant Shares or
any other security issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement under the Act relating to such security or an opinion of counsel
satisfactory to the Company that registration is not required under the Act.
Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section. 

6.2     Registration Rights. It is the Company’s intent to
grant the Holder Piggyback Registration Rights upon exercise of the underlying
warrants. 

7.     Certain Adjustments. The exercise price and number of
warrant shares issuable upon exercise of this warrant are subject to adjustment
from time to time as set forth in this section 8. 

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

(b)     Fundamental Transactions. If, at any time while this
Warrant is outstanding there is a Fundamental Transaction (as defined below),
then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). “Fundamental Transaction” means any of the following:
(1) the Company effects any merger or consolidation of the Company with or into
another person, (2) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (3) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (4) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property. For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. At the Holder's option and request, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant substantially in the form of this
Warrant and consistent with the foregoing provisions and evidencing the Holder's
right to purchase the Alternate Consideration for the aggregate Exercise Price
upon exercise thereof. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(b) and insuring that the Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

(c)     Number of Warrant Shares. Simultaneously with any
adjustment to the Exercise Price pursuant to this Section 7, the number of
Warrant Shares that may be purchased upon exercise of this Warrant shall be
increased or decreased proportionately, so that after such adjustment the
aggregate Exercise Price payable hereunder for the adjusted number of Warrant
Shares shall be the same as the aggregate Exercise Price in effect immediately
prior to such adjustment. 

(d)     Calculations. All calculations under this Section 8
shall be made to the nearest cent or the nearest 1/100th of a share,
as applicable. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock. 

(d)     Notice of Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 7, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent. 

(f)     Notice of Corporate Events. If the Company (i)
declares a dividend or any other distribution of cash, securities or other
property in respect of its Common Stock, including without limitation any
granting of rights or warrants to subscribe for or purchase any capital stock of
the Company or any Subsidiary, except for grants of options to management (ii)
authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction (but only to the extent such disclosure
would not result in the dissemination of material, non-public information to the
Holder) at least 10 calendar days prior to the applicable record or effective
date on which a Person would need to hold Common Stock in order to participate
in or vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the practical
opportunity to exercise this Warrant prior to such time so as to participate in
or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice. 

8.     Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, four days after the date of deposit in the United States mails,
as follows: 

If to the Company, to: 

LONGHAI STEEL INC. 
Attention: Mr.
Steve Ross 

with a copy to: 

Pillsbury Winthrop Shaw Pittman LLP

2300 N Street, N.W. 
Washington, D.C 20037 
Phone 202-663-8000 
Fax
202-663-8007 

Any party may give notice in accordance with this Section to
designate to another address or person for receipt of notices hereunder. 

9.     Supplements and Amendments; Whole Agreement. This
Warrant may be amended or supplemented only by an instrument in writing signed
by the parties hereto. This Warrant contains the full understanding of the
parties with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein. 

10.     Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Nevada. The Company and each
Purchaser hereby submit to the jurisdiction of any state court of competent
jurisdiction in and for Nevada, or in the United States District Court for the
District of Nevada in any action or proceeding arising out of or relating to
this Agreement and agree that all claims in respect of the action or proceeding
may be heard and determined in any such court; agree not to bring any action or
proceeding arising out of or relating to this Agreement in any other court;
waive any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waive any bond, surety, or other security that might
be required of any other Party with respect thereto; and agree that a final
judgment in any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law or in
equity. 

11.     Jury Trial Waiver. The Company and the Holder
hereby waive a trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other in respect of any matter
arising out or in connection with this Warrant. 

12.     Counterparts. This Warrant may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument. 

13.     Descriptive Headings. Descriptive headings of the
several Sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the Company has executed this Warrant as of
the 11th day of May, 2012. 

LONGHAI STEEL INC. 

By:
______________________________
Name: ____________________________
Title:
_____________________________Longhai Steel Inc.: Exhibit 10.1 - Filed by newsfilecorp.com

Exhibit 10.1

Securities Purchase Agreement 

THIS SECURITIES PURCHASE AGREEMENT, dated as of May 11, 2012
(the “Agreement”), is entered into by and between LONGHAI STEEL INC., a Nevada
corporation, with headquarters located at No. 1 Jingguang Rd., Neiqiu County,
Xintai City, Hebei Province, China (the “Company”), and the investors signatory
hereto (the "Purchaser"). 

R E C I TA L S: 

WHEREAS, the Company is making a private offering of its
Common Stock, $.001 par value (“Common Stock”) to certain qualified investors on
a “best efforts basis,” up to $2,000,000 in gross proceeds; and warrants to
purchase 1,333,333 common shares at $1.00 for three years; 

WHEREAS, all the subscriptions for Common Stock received
by the Company will be accepted on a rolling basis, meaning that investor
subscriptions will be accepted promptly after receipt by the Company, from time
to time, and any one investor subscription will not be dependant on any other
investor subscriptions being offered or accepted; 

WHEREAS, the subscription amounts submitted with this
form of subscription agreement (“Agreement”) will not be held in escrow before
acceptance but deposited into the general deposit accounts of the Company, and
therefore, such amounts will be vulnerable to the claims of creditors of the
Company, even though the Company has not accepted the subscription; 

WHEREAS, the Company and the Purchaser are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales (i) in the United States to
accredited investors afforded by Rule 506 under Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section
4(2) of the 1933 Act (ii) outside the United States, in compliance with local
jurisdictional requirements, to investors that are not U.S. Persons pursuant to
Regulation S under the 1933 Act; and 

WHEREAS, the Company wishes to sell to the Purchaser and
the Purchaser wishes to buy from the Company, Common Stock subscribed for in
this Agreement; 

NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows: 

ARTICLE 1 

AGREEMENT TO PURCHASE; PURCHASE PRICE. 

Purchase; Purchase Requirements; Acceptance. 

1 

Subscription Agreement and Tender of Payment. Subject to
the terms and conditions of this Agreement, the Purchaser is hereby submitting
this subscription to acquire the number of shares of Common Stock set forth on
the signature page of this Agreement (“Shares”), at a purchase price of $0.75
per share, and together with the Agreement, is tendering payment to the Company
of the subscription amount also set forth on the signature page of this
Agreement (the “Purchase Price”). The subscription is irrevocable once submitted
to the Company, and the Purchaser hereby agrees to pay to the Company the
Purchase Price. The Purchase Price, pending acceptance by the Company of a
subscription, will not be placed in any escrow or other separate account, but
placed in an account of the Company. 

Investor Questionnaire and Suitability Determination.
Together with the tendered subscription agreement and subscription funds, the
Purchaser is tendering a completed “Accredited Investor Questionnaire” in the
form attached hereto as Annex I. The Purchaser understands that a subscription
is not complete until the completed Accredited Investor Questionnaire, signed by
Purchaser, is provided to the Company and until the Placement Agent has made a
suitability determination that this Private Placement is suitable for Purchaser.

Rolling Acceptance of Subscriptions; Acceptance and
Certificates. From time to time, the Company will accept subscriptions
tendered to it, at which time the Purchaser will be considered a holder of the
Shares subscribed for in this Agreement. As promptly as practical, the Company
will return a copy of this Agreement to the Purchaser, executed by the Company,
together with the Certificates (as defined below) representing the number of
shares of Common Stock, for the accepted subscription.

Method of Payment of Subscription Amount. The Purchase
Price shall be payable in United States Dollars, and may be made by personal
check, bank check, or wire transfer. The Purchase Price will not be deemed paid
under the terms of this Agreement until the funds are considered good and
collected funds into the account into which the funds are paid. Any costs
associated with the failure to make payment of the full Purchase Price,
including incoming wire fees assessed against the Company, will be the
responsibility of the subscribing Purchaser. 

Checks should be made payable to
“Longhai Steel Inc.” 

Wire transfers should be sent to: 

HSBC Bank USA. N. A. 
Account Name:
Longhai Steel Inc. 
ACCOUNT No.: 
SWIFT: 
A/B/A No: 

Payment of Commission and Expenses. The Company will pay
to the Broker, after acceptance of subscriptions, for its own account or for the
account of other selling Persons, the agreed upon commission and reimbursement
of expenses as described in the Private Placement Memorandum of the Company,
dated the _______ day of March, 2012 (“Placement Memorandum”). 

Certain Definitions. As used herein, each of the
following terms has the meaning set forth below, unless the context otherwise
requires: 

"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute. 

"1934 Act" means the Securities Act of 1934, as amended, and
the rules and regulations thereunder, or any similar successor statute. 

“Affiliate” means, with respect to a specific Person referred
to in the relevant provision, another Person who or which controls or is
controlled by or is under common control with such specified Person. 

"Broker" means Network 1 Financial Securities, Inc., as the
exclusive selling agent of the Common Stock offered by the Company through the
Placement Memorandum, pursuant to the separate Placement Agent’s Agreement. 

“Certificates” means the stock certificate(s) representing the
Shares for which subscriptions have been accepted by the Company, duly executed
by the Company in the name of the Purchaser. 

“Closing Date” means the date of the closing of the purchase
and sale of the Shares to which this subscription agreement relates, as provided
herein. 

“Company Control Person” means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

“Holder” means the Person holding the relevant Securities at
the relevant time. 

“Material Adverse Effect” means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(x) adversely affect the legality, validity or enforceability of the Agreement,
(y) have or result in a material adverse effect on the results of operations,
assets, or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole, and as described in the Placement Memorandum,
(z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under the Agreement. 

“Person” means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust. 

“Purchaser Control Person” means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
relevant Purchaser pursuant to Rule 405 under the 1933 Act or Section 20 of the
1934 Act. 

“Securities” means the Common Stock and the Shares subject to
this Agreement, as the context indicates. 

“State of Incorporation” means Nevada. 

ARTICLE 2 

PURCHASER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION. 

The Purchaser represents and warrants to, and covenants and
agrees with, the Company as follows: 

Without limiting Purchaser's right to sell any of the
Securities in compliance with the 1933 Act, the Purchaser is purchasing the
Securities and will be acquiring the Shares for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof. 

The Purchaser is (i) an “accredited investor” as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the Placement Memorandum, (iii) able, by reason
of the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement and
the Placement Memorandum, and (iv) able to afford the loss of the entire
Purchase Price. 

All subsequent offers and sales of the Securities by the
Purchaser shall be made pursuant to a registration of the Shares under the 1933
Act or pursuant to an exemption from registration. The Purchaser understands
that the Company has no obligation to take any action to register the Shares
with the United States or any state authority for the resale or transfer of the
Shares by any Purchaser, now or in the future. 

The Purchaser understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the Securities. 

The Purchaser and its advisors, if any, have been furnished
with the Placement Memorandum and all additional materials relating to the
business, finances and operations of the Company and materials relating to the
offer and sale of the Securities which have been requested by the Purchaser. The
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. 

The Purchaser understands that its investment in the Securities
is an investment in a start up company and involves a high degree of risk. The
Purchaser understands that the investment in the Securities may not provide any
return and a return, if any, is likely to be well in the future. 

The Purchaser hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or any of its officers, directors and employees or any of its
attorneys or agents, except as specifically set forth in this Agreement or the
Placement Memorandum. 

The Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities. 

This Agreement to which the Purchaser is a party, and the
transactions contemplated thereby, have been duly and validly authorized,
executed and delivered on behalf of the Purchaser and are valid and binding
agreements of the Purchaser enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally. 

The Purchaser has taken no action which would give rise to any
claim by any Person for brokerage commissions and expense, other than Network 1
Financial Securities, Inc., Broker's fees or similar payments by the Company
relating to this Agreement or the transactions contemplated hereby. The Company
shall have no obligation with respect to such fees and expenses or with respect
to any claims made by or on behalf of other Persons for fees and expenses of a
type contemplated in this paragraph that may be due in connection with the
transactions contemplated hereby. The Purchaser shall indemnify and hold
harmless each of the Company, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees and expenses,
as and when incurred. 

The Purchaser hereby covenants and warrants that, between the
Closing Date and the date on which he or she no longer holds any of the
Securities, Purchaser will not engage in any hedging transactions or shorting
transactions in any securities of the Company, including the Securities. 

The Purchaser hereby covenants and warrants that he or she is
not acting as a "group" for purposes of Section 13 of the Securities Exchange
Act of 1934. 

ARTICLE 3 

COMPANY REPRESENTATIONS, ETC. 

The Company represents and warrants to the Purchaser as of the
date hereof and as of the Closing Date that, except as otherwise provided in the
Placement Memorandum and herein: 

Rights of Others Affecting the Transactions. There are
no preemptive rights of any shareholder of the Company, as such, to acquire the
Shares. No party has a currently exercisable right of first refusal with respect
to the sale of the Shares. 

Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Nevada and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
or result in a Material Adverse Effect. 

Authorized Shares. The authorized capital stock of the
Company is as described in the Placement Memorandum, subject to the sale of the
Common Stock offered hereby from time to time since the date of the Placement
Memorandum. All the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid. The
Company has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Securities. The Securities have been
duly authorized and, when issued, in accordance with their terms, will be duly
and validly issued, fully paid and non-assessable and, except to the extent, if
any, provided by the law of the State of Incorporation, will not subject the
Holder thereof to personal liability by reason of being such Holder. 

Transaction Agreements and Stock. This Agreement and the
transactions contemplated thereby, have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the Company, and
this Agreement is, and the Certificates when executed and delivered by the
Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally. 

Non-contravention. The execution and delivery of this
Agreement by the Company, the issuance of the Securities being offered by the
Placement Memorandum, and the consummation by the Company of the other
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the certificate of incorporation or by-laws of
the Company, each as currently in effect, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound except as herein set
forth, or (iii) to its knowledge, any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except where such conflict, breach or default which would not have or
result in a Material Adverse Effect.

Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Shares to the Purchaser
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained. 

Absence of Certain Changes. Since the date of the
unaudited balance sheet included in the Placement Memorandum, the Company has
not (i) incurred or become subject to any material liabilities (absolute or
contingent) except liabilities incurred in the ordinary course of business
consistent with past practices; (ii) discharged or satisfied any material lien
or encumbrance or paid any material obligation or liability (absolute or
contingent), other than current liabilities paid in the ordinary course of
business consistent with past practices; (iii) declared or made any payment or
distribution of cash or other property to shareholders with respect to its
capital stock, or purchased or redeemed, or made any agreements to purchase or
redeem, any shares of its capital stock; (iv) sold, assigned or transferred any
other tangible assets, or canceled any debts or claims, except in the ordinary
course of business consistent with past practices; (v) suffered any substantial
losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of existing
business; (vi) made any changes in employee compensation, except in the ordinary
course of business consistent with past practices; or (vii) experienced any
material problems with labor or management in connection with the terms and
conditions of their employment. 

Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Placement Memorandum) that has not been disclosed in writing to
the Purchaser that would reasonably be expected to have or result in a Material
Adverse Effect. 

Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
this Agreement. The Company is not aware of any valid basis for any such claim
that (either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect. 

Absence of Certain Company Control Person Actions or
Events. Except as disclosed in the Placement Memorandum, none of the
following actions has been taken during the past ten (10) years with respect to
a Company Control Person: 

A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such Company
Control Person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years before
the time of such filing; 

Such Company Control Person was convicted in a criminal
proceeding or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses); 

Such Company Control Person was the made the subject of or
consented to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining him from, or otherwise limiting, the following activities: 

acting, as an investment advisor, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, as
a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person regulated by the
Commodity Futures Trading Commission (“CFTC”) or engaging in or continuing any
conduct or practice in connection with such activity; 

engaging in any type of business practice; or 

engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of federal
or state securities laws or federal commodities laws; or 

Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended, or
vacated. 

Prior Issues. During the twelve (12) months preceding
the date hereof, the Company has not issued any stock option grants, convertible
securities or any shares of its Common Stock, except as disclosed in the
Placement Memorandum. 

No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Placement
Memorandum or those incurred in the ordinary course of the Company's business
since the date of the unaudited balance sheet included in the Placement
Memorandum, or which individually or in the aggregate, do not or would not have
a Material Adverse Effect. There are no proposals currently under consideration
or currently anticipated to be under consideration by the Board of Directors or
the executive officers of the Company which proposal would (y) change the
certificate of incorporation or other charter document or by-laws of the
Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (z) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.

No Default. Neither the Company nor any of its
subsidiaries is in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound. 

No Integrated Offering. Neither the Company nor any of
its Affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since January 1, 2009, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby. 

Fees to Brokers, and Others. Except for payment of fees
and commissions to the Broker for itself and other selling agents, payment of
which is the sole responsibility of the Company, the Company has taken no action
which would give rise to any claim by any Person for brokerage commission,
Broker's fees or similar payments by Purchaser relating to this Agreement or the
transactions contemplated hereby. Purchaser shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this paragraph that may be due in
connection with the transactions contemplated hereby. The Company shall
indemnify and hold harmless each Purchaser, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.

ARTICLE 4 

CERTAIN COVENANTS AND ACKNOWLEDGMENTS. 

4.1     Transfer Restrictions. The Purchaser acknowledges
that (1) the Securities have not been and are not being registered under the
provisions of the 1933 Act and the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Purchaser shall have delivered to
the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder or under state securities laws. 

4.2     Restrictive Legend. The Purchaser acknowledges and
agrees that the certificates and other instruments representing any of the
Securities shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of any such
Securities): 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED. 

4.3     Rule 144 Resale. The Purchaser has read and
understands that Rule 144 promulgated under the Securities Act requires, among
other conditions, a six (6) month holding period prior to the resale of
securities acquired in a non-public offering without having to satisfy the
registration requirements under the Securities Act. The Purchaser understands
that the Company makes no representation or warranty regarding its fulfillment
in the future of any reporting requirements under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or its dissemination to the public of any
current financial or other information concerning the Company, as is required by
Rule 144 as one of the conditions of its availability. The Purchaser is aware
that the safe harbor provided by Rule 144 of the Securities Act is not now
available for Purchaser’s resale of the Securities and Rule 144 may never become
available for Purchaser’s resale of the Securities or any portion thereof. 

4.4     Deposit and Resale of Securities. Purchaser
understands that, in addition to the restricted stock requirements of Rule 144
set forth in Section 3.12, above, clearing brokers may decline to deposit into
Purchaser’s account a stock certificate for a security that (1) has a closing
price below one cent ($0.01) and/or (2) has stale or incomplete filings with the
U.S. Securities and Exchange Commission (SEC) or with Canada’s System for
Electronic Document Analysis and Retrieval (SEDAR). Moreover, in the event that
Company files with Pink Sheets, clearing brokers may decline to even consider
depositing Company’s securities. In addition to these conditions and
limitations, Purchaser understands that clearing brokers may subject Company’s
securities to additional review before accepting such securities for deposit.
This review process may (1) take up to two weeks or longer and (2) may include
research into Company and/or Purchaser. Purchaser understands that the
characteristics triggering additional review include but may not be limited to:
(1) low price of the security or securities under review; (2) large number of
shares being deposited with clearing broker into Purchaser’s account; (3) the
securities in question are non-exchange traded; (4) the stock certificates are
recently issued; (5) recent merger activity of underlying Company; and/or (6)
change of name of the underlying Company issuing these stock certificates.
Clearing brokers may also charge a fee to Purchaser’s account for this review.
Finally, Purchaser understands that all of the aforementioned conditions,
limitations, and characteristics triggering review may apply to Purchaser’s
Deposit/Withdrawal At Custodian (DWAC) requests, Automated Customer Account
Transfer Account Service (ACATS) requests, and Depository Trust Company (DTC)
receipts for deposit requests. 

4.5     Filings. The Company undertakes and agrees to make
all necessary filings in connection with the sale of the Securities to the
Purchaser under any United States laws and regulations applicable to the Company
and to provide a copy thereof to the Purchaser promptly after such filing. 

4.6     Use of Proceeds. The Company shall use the proceeds
received hereunder as set forth in the Placement Memorandum, including as
follows payment of certain fees and expenses to the Broker for itself and any
other selling agents as provided herein. 

4.7     Publicity, Filings, Releases, Etc. Each of the
parties agrees that it will not disseminate any information relating to the
Transaction Agreements or the transactions contemplated thereby, including
issuing any press releases, holding any press conferences or other forums, or
filing any reports (collectively, “Publicity”), without giving the other party
reasonable advance notice and an opportunity to comment on the contents thereof.
Neither party will include in any such Publicity any statement or statements or
other material to which the other party reasonably objects. Notwithstanding the
foregoing, each of the parties hereby consents to the disclosure of the
transactions contemplated hereby in required filings with the SEC and any state
securities departments and any other regulatory authorities. 

4.8     Broker Fees. The Company shall pay to the Broker
(for itself and for any other selling agents) a commission in the form of cash
equal in value to ten percent (10%) of the gross proceeds from the sale of the
Common Stock under this Agreement, three percent (3%) unaccountable, as well as
warrants totaling ten percent (10%) of the common stock sold. Such commission is
more fully described in the Broker Commission Agreement between the Company and
the Broker of even date herewith. 

4.9     Attorneys' Fees. The Company shall bear its legal
fees and expenses incurred in connection with the preparation and negotiation of
the documents contemplated by this transaction. Other than the amounts
contemplated in the immediately preceding sentence, each party shall pay the
fees and expenses of its advisers, counsel, accountants, and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. 

4.10     Right of First Refusal.

(a)     From the date hereof until the one (1) year anniversary of
the Closing Date, the Company will not, directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its or its
subsidiaries’ equity or equity equivalent securities, including, without
limitation, any debt, preferred stock or other instrument or security that is,
at any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a “Subsequent Placement”) unless the Company shall have first
complied with this Section. If the Company desires to engage in a Subsequent
Placement it shall deliver to each of the Purchasers a written notice to such
effect specifying the general terms of the offering the Company desires to make
(including, without limitation, all information relating to price, structure and
amount of such offering) and for a period of at least twenty Business Days after
the giving of such notice the Company agrees to negotiate in good faith with any
Investors responding to such notice the terms of a sale of the Company’s
securities to such responding Purchasers. 

(b)     In the event that the Company shall receive an offer
regarding the purchase of the Company’s securities or a Subsequent Placement
contemplated in the last sentence of Section 4.10(a) shall not have closed by
the 45th business day following the delivery to the Purchasers of the
written notice for such Subsequent Placement, and in either event prior to any
Subsequent Placement, the Company shall deliver to each Purchaser hereunder a
written notice (the ”Offer Notice”) of any proposed or intended issuance or sale
or exchange (the ”Offer”) of the securities being offered (the “Offered
Securities”) in a Subsequent Placement, which offer notice shall (v) identify
and describe the offered securities, (w) include the final form of documents and
agreements governing the Subsequent Placement, (x) specify the price and other
terms upon which the offered securities are to be issued, sold or exchanged, and
the number or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the persons or entities (if known) to which or with which the
offered securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such investors all of the offered securities,
allocated among such Purchasers (the “Basic Amount”), and (b) with respect to
each investor that elects to purchase its basic amount, any additional portion
of the offered securities attributable to the Basic Amounts of other Purchasers
as such Purchaser shall indicate it will purchase or acquire should the other
investors subscribe for less than their Basic Amounts (the “Under-subscription
Amount”), which process shall be repeated until the investors shall have an
opportunity to subscribe for any remaining Under-subscription Amount. 

(c)     To accept an offer, in whole or in part, such investor must
deliver a written notice to the Company prior to the end of the fifth business
day after such Purchaser’s receipt of the offer notice (the “Offer Period”),
setting forth the portion of such Purchaser’s Basic Amount that such Purchaser
elects to purchase and, if such Purchaser shall elect to purchase all of its
Basic Amount, the Under-subscription Amount, if any, that such Purchaser elects
to purchase (in either case, the “notice of acceptance”). If the Basic Amounts
subscribed for by all Purchasers are less than the total of all of the basic
amounts, then each Purchaser who has set forth an Under-subscription Amount in
its notice of acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, the Under-subscription Amount it has subscribed for;
provided, however, that if the Under-subscription Amounts
subscribed for exceed the difference between the total of all the Basic Amounts
and the Basic Amounts subscribed for (the “Available Under-subscription
Amount”), each Purchaser who has subscribed for any Under-subscription amount
shall be entitled to purchase only that portion of the available
Under-subscription Amount as the basic amount of such Purchaser bears to the
total basic amounts of all Purchasers that have subscribed for
Under-subscription Amounts, subject to rounding by the company to the extent its
deems reasonably necessary. 

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

(e)     In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the terms
specified in this Section 4.10), then each Purchaser may, at its sole option and
in its sole discretion, reduce the number or amount of the offered securities
specified in its notice of acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Purchaser elected to
purchase pursuant to section 4.10(c) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including offered
securities to be issued or sold to Purchasers pursuant to section 4.10(c) above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Purchaser so elects to
reduce the number or amount of Offered Securities specified in its notice of
acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Purchasers in accordance with Section 4.10(b) above.

(f)     Upon the closing of the issuance, sale or exchange of all
or less than all of the refused Securities, the Purchasers shall acquire from
the Company, and the Company shall issue to the Purchasers, the number or amount
of Offered Securities specified in the notices of acceptance, as reduced
pursuant to Section 4.10(e) above if the Purchasers have so elected, upon the
terms and conditions specified in the offer. The purchase by the Purchasers of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Purchasers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel (such agreement, the “Subsequent
Placement Agreement”). 

(g)     Any Offered Securities not acquired by the Purchasers or
other persons in accordance with Section 4.10(f) above may not be issued, sold
or exchanged until they are again offered to the Purchasers under the procedures
specified in this Agreement. 

(h)     In exchange for the Company’s willingness to agree to these
procedures, each Purchaser hereby irrevocably agrees that it will hold in strict
confidence any and all offer notices, the information contained therein, and the
fact that the Company is contemplating a subsequent Placement, until such time
as the Company is obligated to make the disclosures required by Section 4.10(d),
or unless it notifies the Company in writing that it no longer desires to
receive offer notices.

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

(a)     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,

(b)     shares of Common Stock or Common Stock Equivalents issued
as consideration for the acquisition of another company or business in which the
shareholders of the Company do not have an ownership interest, and where the
primary purpose is not to raise capital for the Company or any Subsidiary, which acquisition
has been approved by the Board of Directors of the Company, or

(c)     up to an aggregate of $250,000 worth of shares of Common
Stock or Common Stock Equivalents issued to non-Affiliates in connection with
services rendered to the Company pursuant to arrangements approved by the Board
of Directors of the Company. 

ARTICLE 5 

CONDITIONS PRECEDENT TO CLOSING 

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

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

(b)     Performance. The existing company entities shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the transaction documents to be
performed, satisfied or complied with by it at or prior to the closing; 

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

(d)     Adverse Changes. Since the date of execution of this
agreement, no event or series of events shall have occurred that reasonably
could have or result in a material adverse effect or a material adverse change
with respect to the company or the subsidiaries; 

(e)     Company Agreements. The company shall have
delivered:

(i)     This Agreement, duly executed by
the Company;
(ii)     The Registration Rights Agreement, duly executed by the
Company; 
(iii)     Warrants, duly executed by the Company; 

(f)     Company Deliverables. The Company shall have
delivered to each Purchaser:

(i)     a certificate, executed on behalf of the Company by its
Chief Executive Officer or its Chief Financial Officer, dated as of the Closing
Date, certifying the fulfillment of the condition specified in Section 5.1(b);

(ii)     a certificate, executed on behalf of the Company by its
Secretary or other authorized person, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by the Agreement, certifying the current versions of the Articles of
Incorporation and Bylaws of the Company and certifying as to the signatures and
authority of Persons signing the transaction documents and related documents on
behalf of the Company; 

(iii)     a certificate, processed by the transfer agent,
representing the number of shares set forth below such Purchaser’s name on the
signature pages hereto, registered in the name of such Purchaser against payment
of such Purchaser’s purchase price in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing by the
Company; and 

(iv)     the legal opinion of Company U.S. counsel, in agreed form,
addressed to the Purchasers. 

5.2     Conditions precedent to the obligations of the company
to sell securities. The obligation of the Company to sell securities at the
closing is subject to the satisfaction or waiver by the Company, at or before
the closing, of each of the following conditions: 

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

(b)     Performance. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the transaction documents to be performed, satisfied
or complied with by such Purchaser at or prior to the closing; 

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

(d)     Purchaser deliverables. Each Purchaser shall have
delivered the Securities Purchase Agreement and the Registration Rights
Agreement, each duly executed by such Purchaser and a completed Accredited
Investor Questionnaire attached hereto as Annex I. 

ARTICLE 6 

MISCELLANEOUS 

TRANSFER AGENT INSTRUCTIONS. 

The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Article 4 hereof, it
will give its transfer agent no instructions inconsistent with instructions to
issue Common Stock from time to time bearing the restrictive legend specified in
Article 4 of this Agreement. Except as so provided, the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement. Nothing in this Section shall affect in any
way the Purchaser's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Purchaser
provides the Company with an opinion of counsel reasonably satisfactory to the
Company that registration of a resale by the Purchaser of any of the Securities
in accordance with Article 4 of this Agreement is not required under the 1933
Act, the Company shall (except as provided in Article 4 of this Agreement)
permit the transfer of the Securities, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without legend in such
name and in such denominations as specified by the Purchaser. 

CLOSING DATE. 

The Closing Date with respect to this Agreement and the
subscription of the Purchase at such time as the subscription agreement is
accepted by the Company. There will be similar closing dates as to other
subscriptions, from time to time, but each will not be dependant on any other
closing date being scheduled or occurring. 

INDEMNIFICATION. 

The Company agrees to indemnify and hold harmless each
Purchaser and its officers, directors, employees, and agents, and each Purchaser
Control Person from and against any losses, claims, damages, liabilities or
expenses incurred (collectively, “Damages”), joint or several, and any action in
respect thereof to which Purchaser, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Purchaser Control
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or non-fulfillment of or failure to
perform any covenant or agreement on the part of Company contained in this
Agreement, except to the extent such Damages result primarily from Purchaser's
failure to perform any covenant or agreement contained in this Agreement,
including the provision of current and accurate information in its Investor
Questionnaire, or Purchaser's or its officers', directors', employees', agents'
or Purchaser Control Persons' negligence, recklessness or bad faith in
performing its obligations under this Agreement. 

JURY TRIAL WAIVER. 

The Company and the Purchaser hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with
this Agreement and the Placement Memorandum. 

GOVERNING LAW; MISCELLANEOUS. 

This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. The Company and each Purchaser hereby submit to
the jurisdiction of any state court of competent jurisdiction in and for New
York County, New York, or in the United States District Court for the Southern
District of New York sitting at New York City in any action or proceeding
arising out of or relating to this Agreement and agree that all claims in
respect of the action or proceeding may be heard and determined in any such
court; agree not to bring any action or proceeding arising out of or relating to
this Agreement in any other court; waive any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waive any bond,
surety, or other security that might be required of any other party with respect
thereto; and agree that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or in equity. 

Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. 

This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto. 

All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require. 

A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto. 

This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original. 

The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction. 

This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof. 

This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. 

NOTICES. Any notice required or permitted hereunder
shall be given in writing (unless otherwise specified herein) and shall be
deemed effectively given on the earliest of: 

the date delivered, if delivered by personal delivery as
against written receipt therefore or by confirmed facsimile transmission, 

the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or 

the third business day after mailing by domestic or
international express courier, with delivery costs and fees prepaid, 

in each case, addressed to each of the other parties thereunto
entitled at the following addresses (or at such other addresses as such party
may designate by ten (10) days’ advance written notice similarly given to each
of the other parties hereto): 

	Company: 	Longhai Steel Inc 
	  	Attention: Steven J. Ross 
	  	  
	  	  
	  	  
	  	with a copy to: 
	  	  
	  	  
	  	Pillsbury Winthrop Shaw Pittman LLP 
	  	2300 N Street, N.W. 
	  	Washington, D.C 20037 
	  	Tel: 202-663-8000 
	  	Fax: 202-663-8007 
	  	  
	  	  
	  	  
	Purchaser: 	To the addresses set forth on the Investor
      Questionnaire attached hereto as Annex I. 
	  	  
	  	with a copy to: 
	  	  
	  	Network 1 Financial Securities, Inc.
  

SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

The Company’s and the Purchaser' representations and warranties
herein shall survive the execution and delivery of this Agreement and the
delivery of the Certificates and the payment of the Purchase Price, and shall
inure to the benefit of the Purchaser and the Company and their respective
successors and assigns. 

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK] 

IN WITNESS WHEREOF, this Securities Purchase Agreement
has been duly executed by the Purchaser, for the amount of shares and
subscription amount, as of the date set forth below. 

Purchaser is subscribing for ________________________ shares of
Class A Common Stock, price per share $0.75, and a warrant to purchase 1⁄2 share
at $1.00 for three years. 

Purchaser is submitting payment to the Company in the amount of
$__________________. 

	 	______________________ 
	  	Signature of Subscriber 
	 	______________________ 
	  	Print Name of Subscriber 
	 	 
	Date: ______________________ 2012 	By: ______________________ 
	  	Its: ______________________

As of the date set forth below, the undersigned hereby accepts
this Agreement and that it have caused this Securities Purchase Agreement to be
duly executed on its behalf. 

Longhai Steel Inc. 

__________________________________
By: Mr. Chaojun Wang

Title: CEO 

Date: ___________ 2012.

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