Document:

Exhibit
10.37

    

    REGISTRATION
RIGHTS AGREEMENT

     

    This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is made as of March 2, 2010, by and among (i) Manhattan Pharmaceuticals, Inc., a
Delaware corporation (the “Company”),
(ii) each person listed on Exhibit A
attached hereto, as may be amended from time to time (each an “Investor”
and, collectively, the “Investors”),
(iii) National Securities Corporation, a Washington corporation (the “Placement
Agent”) and (iv) each person or entity that subsequently becomes a party
to this Agreement pursuant to, and in accordance with, the provisions of Section 13 hereof
(each an “Investor
Permitted Transferee” and, collectively, the “Investor
Permitted Transferees”).

     

    WHEREAS,
the Company has agreed to issue and sell to the Investors (the “Offering”), and the Investors
have agreed to purchase from the Company, an aggregate of up to 160 units (each a “Unit”
and, collectively, the “Units”)
for an aggregate purchase price of $4,000,000 (the “Offering
Amount”), subject to an overallotment option to purchase up to an
additional 40 Units ($1,000,000) (the “Overallotment
Amount”), priced at $25,000 per Unit, with each Unit consisting of (i)
357,143 shares (each a “Unit
Share” and, collectively, the “Unit
Shares”) of the Company’s common stock, $0.001 par value per share (the
“Common
Stock”), and (ii) 535,714 warrants (each a “Warrant”
and, collectively, the “Warrants”),
each of which will entitle the holder to purchase one additional share of Common
Stock (each a “Warrant
Share” and collectively, the “Warrant
Shares”) as provided in the applicable subscription agreement between the
Company and each of the Investors (the “Subscription
Agreement”); and

    

    WHEREAS,
the Company has agreed to provide certain registration rights with respect to
the resale of the Unit Shares, all on the terms and conditions provided herein;
and

     

    WHEREAS,
the terms of the Subscription Agreement provide that it shall be a condition
precedent to the closing of the transactions thereunder, for the Company and the
Investors to execute and deliver this Agreement.

     

    NOW,
THEREFORE, in consideration of the promises and mutual covenants contained
herein, the parties hereto hereby agree as follows:

     

    1.  
DEFINITIONS.
The following terms shall have the meanings provided therefore below or
elsewhere in this Agreement as described below:

     

    “Business
Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.

    

    “Closing”
shall have the meaning ascribed to such term in the Subscription
Agreement.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    “Effectiveness
Date” means, (i) with respect to the Initial Registration Statement, as
soon as practicable, but if the Initial Registration Statement is not subject to
a SEC review no later than ninety (90) calendar
days after the Filing Date, and if the Initial Registration Statement is subject
to a SEC review no later than one hundred twenty (120) calendar days after the
Filing Date, and (ii) with respect to any additional Registration Statements
which may be required to be filed hereunder pursuant to Section 3(d) or
otherwise, not later than ninety (90) calendar days following the date on which
the additional Registration Statement is required to be filed hereunder if it is
not subject to a SEC review or if the additional Registration Statement is
subject to a SEC review one hundred twenty (120) calendar days after the date
such Registration Statement is required to be filed hereunder.

    

    “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and all
of the rules and regulations promulgated thereunder.

    

    “Filing
Date” shall mean, with respect to the Initial Registration Statement,
within sixty (60) calendar days after the Final Closing, provided, however, that if the
Filing Date falls on a Saturday, Sunday or other day, that the SEC is closed for
business the Filing Date shall be extended to the next Business
Day.

    

    “Final
Closing” shall mean the meaning ascribed to such term in the Confidential
Private Placement Memorandum.

    

    “First
Closing” shall have the meaning ascribed to such term in the Subscription
Agreement.

    

    “Holder”
or “Holders”
shall mean the holder or holders, as the case may be, from time to time of
Registrable Securities.

    

    “Initial
Nordic Registration Statement” shall mean the registration statement
filed by the Company with the SEC (File No. 333-150580), as amended or
supplemented from time to time.

    

     “Initial
Registration Statement” shall mean the initial Registration Statement
filed pursuant to this Agreement.

    

    “Investor
Permitted Transferees” as defined in the Preamble.

    

    “Investors”
shall mean, collectively, the Investors and the Investor Permitted Transferees;
provided, however, that the
term “Investors” shall not include any of the Investors or any of the Investor
Permitted Transferees that do not own or hold any Registrable
Securities.

    

    “Nordic
Registrable Securities” shall mean any securities held by Nordic which
the Company is required to register pursuant to the Registration Rights
Agreement dated February 25, 2008 by and among the Company and Nordic Biotech
Venture Fund II K/S (“Nordic”).

    

    “Nordic
Registration Statement” shall mean any registration statement filed
pursuant to the Registration Rights Agreement, dated February 25, 2008, by and
among the Company and Nordic Biotech Venture Fund II K/S, as amended from time
to time, including the Initial Nordic Registration Statement.

    
      
         

      

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

    

    “Placement
Agent” as defined in the Preamble.

    

    “Registrable
Securities” shall mean the Unit Shares.

     

    “Registration
Statement” means any one or more registration statements filed (and/or
required to be filed pursuant hereto) with the SEC by the Company on Form S-3,
or in the event the Company is not eligible to use Form S-3, on Form S-1, for
the purpose of registering the Registrable Securities, including (in each case)
the prospectus, amendments and supplements to such registration statement or
prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.  The term “Registration
Statement” shall include, but not be limited to, the Initial Registration
Statement and shall not include any Nordic Registration Statement.

     

    “Rule
144” shall mean Rule 144 promulgated by the SEC pursuant to the
Securities Act and any successor or substitute rule, law or
provision.

     

    “Rule 172”
means Rule 172 promulgated by the SEC pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same purpose and effect as
such Rule.

    

    “Rule
415” means Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC having substantially the same purpose
and effect as such Rule.

     

    “Rule 424”
means Rule 424 promulgated by the SEC pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same purpose and effect as
such Rule.

     

    “SEC”
shall mean the United States Securities and Exchange Commission.

     

    “SEC
Guidance” means (i) any publicly-available written guidance, or rule
of general applicability of the SEC staff, or (ii) oral or written
comments, requirements or requests of the SEC staff to the Company in connection
with the review of a Registration Statement.

     

    “Securities
Act” shall mean the Securities Act of 1933, as amended, and all of the
rules and regulations promulgated thereunder.

     

    “Trading
Day” means (a) if the Common Stock is listed or quoted on the
NASDAQ  Market, then any day during which securities are generally
eligible for trading on the NASDAQ Market, or (b) if the Common Stock is not
then listed or quoted and traded on the NASDAQ Market, then any Business
Day.

    
      
         

      

      
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    “Unit
Shares” as defined in the preamble.

    

    “Warrant
Shares” as defined in the preamble. 

     

    2.  
EFFECTIVENESS;
This Agreement shall become effective and legally binding only if the First
Closing occurs.

    

    3.   MANDATORY
REGISTRATION.

    

    (a)
  The Company shall be required to file an Initial Registration Statement
on or prior to the Filing Date registering the Registrable Securities for resale
by the Holders as selling stockholders thereunder.  On or prior to the
Filing Date, the Company shall prepare and file with the SEC an Initial
Registration Statement for the purpose of registering under the Securities Act
the resale of all, or such portion as permitted by SEC Guidance (and the Company
shall make a commercially reasonable effort to advocate with the SEC for the
registration of all or the maximum number of the Registrable Securities as
permitted by SEC Guidance) of the Registrable Securities by, and for the account
of, the Holders as selling stockholders thereunder, that are not then registered
on an effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415.  No other securities shall
be included in the Initial Registration Statement that is filed except for the
Registrable Securities and the Nordic Registrable Securities. Each Registration
Statement (including the Initial Registration Statement) shall contain the “Plan
of Distribution” included in the Investor Questionnaire, in substantially the
form of which was provided to Investors with the Subscription Agreement (except
if otherwise required pursuant to written comments received from the SEC upon a
review of such Registration Statement). The Company shall cause a Registration
Statement to be declared effective by the SEC under the Securities Act as
promptly as practicable after the filing thereof, but in any event on or prior
to the applicable Effectiveness Date.

     

    (b)
  The Company shall be required to keep a Registration Statement effective
until such date that is the earlier of (the “Effectiveness
Period”) (i) the date as of which all of the Holders as selling
stockholders thereunder may sell all of the Registrable Securities registered
for resale thereon without restriction pursuant to Rule 144 or (ii) the date
when all of the Registrable Securities registered thereunder shall have been
sold (such date is referred to herein as the “Mandatory
Registration Termination Date”). Thereafter, the Company shall be
entitled to withdraw such Registration Statement and the Holders shall have no
further right to offer or sell any of the Registrable Securities registered for
resale thereon pursuant to the respective Registration Statement (or any
prospectus relating thereto).

      

      
        
           

        

        
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    (c)
  Notwithstanding any other provision of this Agreement, if any SEC
Guidance sets forth a limitation on the number of Registrable Securities to be
registered in the Initial Registration Statement (and the Company has made a
commercially reasonable effort to advocate with the SEC for the registration of
all or a greater number of Registrable Securities), the number of Registrable
Securities to be registered on such Registration Statement will be reduced on a
pro rata basis among the Investors and Nordic based on the total number of
unregistered Unit Shares and Nordic Registrable Securities held by the Investors
and Nordic, respectively, on a fully diluted basis.  The Company shall
file a new registration statement as soon as reasonably practicable covering the
resale by the Holders and Nordic of not less than the number of such Registrable
Securities and Nordic Registrable Securities, respectively, that are not
registered in the Initial Registration Statement.  The Company shall
not be liable for liquidated damages under Section 5(a) as to
any Registrable Securities which are not permitted by the SEC to be included in
a Registration Statement due solely to SEC Guidance from time to
time.  In such case, any liquidated damages payable under Section 5(a) shall be
calculated to apply only the percentage of Registrable Securities which are
permitted in accordance with SEC Guidance to be included in such Registration
Statement.

    

    (d)
  If during the Effectiveness Period, subject to Section 3(a) and
Section 3(c),
the Company becomes aware that the number of Registrable Securities at any time
exceeds the number of Registrable Securities then registered for resale in a
Registration Statement, then the Company shall file as soon as reasonably
practicable an additional Registration Statement covering the resale by the
Holders of not less than the number of such Registrable Securities that are not
then registered.

    

    (e)           Notwithstanding
any other provision of this Agreement, if during the Effectiveness Period any of
the Registrable Securities become eligible for resale without restriction
pursuant to Rule 144 (the “Rule 144
Eligible Securities”) then the number of Registrable Securities
outstanding at any one time shall be reduced by the number of Rule 144 Eligible
Securities and the Company may at its option file an amendment to any
Registration Statement to reduce the number of Registrable Securities
accordingly.  The Company acknowledges that the Company’s obligation
to file its periodic disclosure documents for the twelve (12) month period
preceding the date of sale is a “restriction” as that term is used in the first
sentence of this Section
3(e).

    

    4.  
PIGGYBACK
REGISTRATION.

     

    (a)
  If, at any time, commencing on the date of the First Closing, the Company
proposes to prepare and file with the SEC a registration statement under the
Securities Act other than a Nordic Registration Statement, the Company will give
written notice to each Holder and the Placement Agent of its intention to do so
by certified mail and shall include all of the Registrable Securities in such
registration statement; provided, however, that in
connection with any offering involving an underwriting of shares of Common
Stock, the Company shall not be required to include the Registrable Securities
of any Holder in such registration statement unless they accept the terms of the
underwriting as agreed upon between the Company and its underwriters, and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company.  In
the event that the underwriters determine that less than all of the Registrable
Securities required to be registered can be included in such offering, then the
Registrable Securities that are included shall be apportioned, among the
Investors on a pro rata basis based on the total number of unregistered Unit
Shares held by such Investors and requested to be included in the Registration
Statement on a fully diluted basis.  The Company shall use its best
efforts to effect the registration under the Securities Act of the Registrable
Securities at the Company’s sole cost and expense and at no cost or expense to
the Holders (other than any commission, discounts or counsel fees payable by the
Holders, as further provided in Section 7
hereof).

    
      
         

      

      
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    (b)
  Notwithstanding the preceding provisions of this Section 4, the
Company shall have the right any time after it shall have given written notice
pursuant to this Section 4
(irrespective of whether any written request for inclusion of such securities
shall have already been made) to elect not to file any proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.

    

    (c)
  The Company shall use its commercially reasonable efforts to cause the
registration statement filed pursuant to this Section 4 to become
effective as promptly as possible under the circumstances at the time prevailing
and, if any stop order shall be issued by the SEC in connection therewith, to
use its reasonable efforts to obtain the removal of such order.

    

    (d)           To
the extent any Registrable Securities of the Holders are included in such
registration statement, the Company shall notify each Holder by facsimile or
e-mail as promptly as practicable, and in any event, within two (2) Trading
Days, after such registration statement is declared effective and shall
simultaneously provide the Holders with a copy of any related prospectus to be
used in connection with the sale or other disposition of the Registrable
Securities covered thereby.

    

    
      
        
        

      

      
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    5.  
PENALTIES/SUSPENSION
OF A REGISTRATION STATEMENT.

    (a)
  If: (i) the Initial Registration Statement and any other
Registration Statement other than a Nordic Registration Statement is not filed
on or prior to the Filing Date, or (ii) the Company fails to file with the
SEC a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act, within five (5) Trading Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the SEC that
the Initial Registration Statement or any other Registration Statement will not
be “reviewed” or not be subject to further review and the Company has obtained
any required clearance from the Financial Industry Regulatory Authority, Inc.
(“FINRA”),
or (iii) prior to the Effectiveness Date of the Initial Registration
Statement or any other Registration Statement, the Company fails to file a
pre-effective amendment and otherwise respond in writing to comments made by the
SEC in respect of such Initial Registration Statement or any other Registration
Statement within ten (10) Business Days after the receipt of comments by or
notice from the SEC that such amendment is required in order for such Initial
Registration Statement or any other Registration Statement to be declared
effective, or (iv) subject to the tolling provisions contained herein, as
to, in the aggregate among all Investors on a pro rata basis based on the amount
of Registrable Securities held by each of them, respectively, the lesser of (A)
all of the Registrable Securities and (B) the maximum number of Registrable
Securities permitted by SEC Guidance (collectively, the “Initial
Shares”), a Registration Statement registering for resale all of the
Initial Shares is not declared effective by the SEC by the Effectiveness Date,
or (v) after the Effectiveness Date of the Initial Registration Statement
or any other Registration Statement, subject to the tolling provisions contained
herein, such Initial Registration Statement or other Registration Statement
ceases for any reason to remain continuously effective as to all Registrable
Securities included in such Initial Registration Statement or other Registration
Statement, as applicable, or the Investors are otherwise not permitted to
utilize the Prospectus therein to resell such Registrable Securities, for more
than ten (10) consecutive Business Days or more than an aggregate of twenty (20)
Business Days during any twelve (12) month period (which need not be consecutive
Business Days), provided, however, that no such
payments shall be required in connection with a Suspension Period (as
hereinafter defined) (any such failure or breach being referred to as an “Event,”
and for purposes of clause (i), (iv) or (v) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five
(5) Trading Day period is exceeded, or for purposes of clause (iii) the
date which such ten (10) Business Day period is exceeded, or for purposes of
clause (v) the date on which such ten (10) or twenty (20) Business Day
period, as applicable, is exceeded being referred to as “Event
Date”), then, in addition to any other rights the Investors may have
hereunder or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been
cured by such date) until the applicable Event is cured, the Company shall,
subject to Section
3(c), pay to each Investor on a monthly basis within three (3) Business
Days of the end of the month an amount in cash, as partial liquidated damages
and not as a penalty, equal to one  (1.0%) percent of the aggregate
purchase price paid by such Investor pursuant to the Subscription Agreement for
any Registrable Securities then held by such Investor (as applicable under
clause (iv)) that are not then eligible for resale pursuant to the Initial
Registration Statement or other Registration Statement. The parties agree that
the maximum aggregate liquidated damages payable to an Investor under this
Agreement shall be ten (10%) percent of the aggregate amount paid by such
Investor for its respective Registrable Securities pursuant to the Subscription
Agreement. If the Company fails to pay any partial liquidated damages pursuant
to this Section
5(a) in full within ten (10) calendar days after the date payable, the
Company will be required to pay such liquidation damages in cash only and shall
pay interest thereon at a rate of eighteen (18%) percent per annum (or such
lesser maximum amount that is required to be paid by applicable law) to the
Investor, accruing daily from the date such partial liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full; provided, however, that if the
tenth calendar day after the date payable is not a Business Day then the payment
shall be due on the next Business Day. The partial liquidated damages pursuant
to the terms hereof shall apply on a daily pro-rata basis for any portion of a
month prior to the cure of an Event.

     

    (b)
  The Company shall notify the Placement Agent by facsimile or e-mail as
promptly as practicable, and in any event, within one (1) Trading Day, after a
Registration Statement is declared effective and shall simultaneously provide
the Placement Agent with an electronic copy of any related prospectus to be used
in connection with the sale or other disposition of the Registrable Securities
covered thereby.  The Placement Agent shall notify each Holder as
promptly as practicable, and in any event, within one (1) Trading Day, after
receipt of such notice and shall simultaneously provide each Holder with an
electronic copy of any such related prospectus to be used in connection with the
sale or other disposition of the Registrable Securities covered
thereby.   Failure to notify the Holders in accordance with this
Section 5(b)
shall be deemed an Event under Section
5(a).

    
      
         

      

      
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    (c)           No
Investor shall be entitled to a payment pursuant to this Section 5 if
effectiveness of a Registration Statement has been delayed or a prospectus has
been unavailable as a result of (i) a failure by such Investor to promptly
provide on request by the Company the information required under the
Subscription Agreement or this Agreement or requested by the SEC as a condition
to effectiveness of a Registration Statement; (ii) the provision of inaccurate
or incomplete information by such Investor; or (iii) a statement or
determination of the SEC that any provision of the rights of the Investor under
this Agreement are contrary to the provisions of the Securities
Act.

     

     6.
  OBLIGATIONS OF
THE COMPANY. In the event the Company files a Registration Statement with
the SEC in connection with Section 3 or Section 4 hereof that
covers the Registrable Securities and uses its commercially reasonable efforts
to cause a Registration Statement to become effective, the Company shall, as
expeditiously as reasonably possible:

     

    (a)
  Prepare and file with the SEC such amendments and supplements to a
Registration Statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by a Registration
Statement;

     

    (b)
  Furnish to the selling Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents (including, without limitation,
prospectus amendments and supplements as are prepared by the Company in
accordance with Section 6(a) above)
as the selling Holders may reasonably request in order to facilitate the
disposition of such selling Holders’ Registrable Securities;

     

    (c)
  Use commercially reasonable efforts to comply with all applicable rules
and regulations of the SEC under the Securities Act and the Exchange Act,
including, without limitation, Rule 172 under the Securities Act, file any final
prospectus, including any supplement or amendment thereof, with the SEC pursuant
to Rule 424 under the Securities Act, promptly inform the Holders in writing if,
at any time during a period of effectiveness, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Holders are
required to deliver a prospectus in connection with any disposition of
Registrable Securities; notify the selling Holders of the happening of any event
as a result of which the prospectus included in or relating to a Registration
Statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading; and, thereafter,
subject to Section
12 hereof, the Company will promptly prepare (and, when completed, give
notice and provide a copy thereof to each selling Holder) a supplement or
amendment to such prospectus so that such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading; provided, however, that upon
such notification by the Company (which shall be a Suspension pursuant to Section 12), the
selling Holders will not offer or sell Registrable Securities until the Company
has notified the selling Holders that it has prepared a supplement or amendment
to such prospectus and filed it with the SEC or, if the Company does not then
meet the conditions for the use of Rule 172, delivered copies of such supplement
or amendment to the selling Holders (it being understood and agreed by the
Company that the foregoing proviso shall in no way diminish or otherwise impair
the Company’s obligation to promptly prepare a prospectus amendment or
supplement as above provided in this Section 6(c) and
deliver copies of same as above provided in Section 6(b) hereof);
and

    
      
         

      

      
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    (d)
  Use its best efforts to register and qualify the Registrable Securities
covered by a Registration Statement under such other securities or Blue Sky laws
of such states as shall be reasonably appropriate in the opinion of the Company,
provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions, and provided further that
(notwithstanding anything in this Agreement to the contrary with respect to the
bearing of expenses) if any jurisdiction in which any of such Registrable
Securities shall be qualified shall require that expenses incurred in connection
with the qualification therein of any such Registrable Securities be borne by
the selling Holders, then the selling Holders shall, to the extent required by
such jurisdiction, pay their pro rata share of such qualification
expenses.

    

    (e)
  Subject to the terms and conditions of this Agreement, including Section 3 and Section 4 hereof, the
Company shall use its commercially reasonable efforts to (i) prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction in the United States, and
(ii) if such an order or suspension is issued, obtain the withdrawal of such
order or suspension at the earliest practicable moment and notify each holder of
Registrable Securities of the issuance of such order and the resolution thereof
or its receipt of notice of the initiation or threat of any proceeding such
purpose.

     

    (f)
  The Company shall (i) comply with all requirements of FINRA with regard
to the issuance of the Registrable Securities and the listing thereof on the OTC
Bulletin Board and such other securities exchange or automated quotation system,
as applicable, and (ii) engage a transfer agent and registrar to maintain the
Company’s stock ledger for all Registrable Securities covered by a Registration
Statement not later than the effective date of a Registration
Statement.

     

    (g)
  The Company will file a Registration Statement and all amendments and
supplements thereto electronically on EDGAR.

    

    7.  
OBLIGATIONS OF THE
PLACEMENT AGENT AND THE HOLDERS.

    

    (a)           It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Agreement that the selling Holders shall furnish to the
Company a completed Selling Stockholder Questionnaire in the form attached as
Exhibit B
hereto (the “Selling
Stockholder Questionnaire”) and such other information regarding them and
the securities held by them as the Company shall reasonably request and as shall
be required in order to effect any registration by the Company pursuant to this
Agreement. The Company shall not be required to include the Registrable
Securities of any Holder who fails to furnish to the Company a fully completed
Selling Stockholder Questionnaire at least three (3) Trading Days prior to the
Filing Deadline. Additionally, each Holder shall promptly notify the Company of
any changes in the information furnished in the Selling Stockholder
Questionnaire or otherwise to the Company.

    

    (b)           Each
Holder agrees to cooperate with the Company as reasonably requested by the
Company in connection with the filing of any Registration Statement hereunder,
unless such Holder has notified the Company in writing that such Holder elects
to exclude all of its Registrable Securities from such Registration
Statement.

    
      
         

      

      
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    (c)           Each
Holder agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 6(c), each
Holder shall immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement covering such Registrable Securities
until such Holders receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6(c) or
receipt of notice that no supplement or amendment is required.

    

    (d)           Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it or an exemption therefrom
in connection with sale of Registrable Securities pursuant to any Registration
Statement.

    

    (e)           Each
Holder and the Placement Agent who are members or affiliated or associated with
members of FINRA will agree, if requested by FINRA, to sign a lock-up, the form
of which shall be satisfactory to FINRA (the “FINRA
Lock-Up”), with respect to the Unit Shares, Warrant and Warrant Shares,
in case of the Holders or, in the case of the Placement Agent, the warrant
issued to the Placement Agent in connection with the transactions contemplated
by the Subscription Agreement (the “Placement
Agent Warrants”) and the shares of Common Stock issuable upon exercise
thereof.

     

    8.  
EXPENSES OF
REGISTRATION.

    

    (a)           Except
as set forth in Section 6(d), all
expenses incurred in connection with the registration of the Registrable
Securities pursuant to this Agreement (excluding underwriting, brokerage and
other selling commissions and discounts), including without limitation all
registration and qualification and filing fees, printing, fees and disbursements
of counsel for the Company shall be borne by the Company; provided, however, the Holders shall be
required to pay the expenses of counsel and any other advisors for the Holders
and any brokerage or other selling discounts or commissions and any other
expenses incurred by the Holders for their own account.

    

    (b)           Until
such time as all of the Registrable Securities have been sold pursuant to an
effective Registration Statement, the Company shall take such reasonable action
as the Holder may request (including, without limitation, promptly obtaining any
required legal opinions from Company counsel necessary to effect the sale of the
Registrable Securities under Rule 144 and paying the related fees and
expenses of such counsel), all to the extent required from time to time to
enable such Holder to sell the Registrable Securities without registration under
the Securities Act pursuant to the provisions of Rule 144 under the
Securities Act (or any successor provision). The Company further covenants to
take such action and to provide such legal opinions within five (5) Business
Days after receipt from such Holder (or its representative) of documentation
reasonably required by the Company counsel to provide such
opinion.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    9.  
DELAY OF
REGISTRATION. The Holders shall not take any action to restrain, enjoin
or otherwise delay any registration as the result of any controversy which might
arise with respect to the interpretation or implementation of this
Agreement.

     

    10.
  INDEMNIFICATION.

     

    (a)
  To the extent permitted by law, the Company will indemnify and hold
harmless each selling Holder, and each officer and director of such selling
Holder and each person, if any, who controls such selling Holder, within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue or alleged untrue statement of any material fact contained in a
Registration Statement, in any preliminary prospectus or final prospectus
relating thereto or in any amendments or supplements to a Registration Statement
or any such preliminary prospectus or final prospectus, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading; (ii) any blue sky application or other document executed by the
Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information herein called a “Blue Sky
Application”); (iii) the omission or alleged omission to state in a Blue
Sky Application a material fact required to be stated therein or necessary to
make the statements therein not misleading; (iv) any violation by the Company or
its agents of any rule or regulation promulgated under the Securities Act
applicable to the Company or its agents and relating to action or inaction
required of the Company in connection with such registration of the Registrable
Securities; or (v) any failure to register or qualify the Registrable Securities
included in any such Registration Statement in any state where the Company or
its agents has affirmatively undertaken or agreed in writing that the Company
will undertake such registration or qualification on a Holder’s behalf; and will
reimburse such selling Holder, or such officer, director or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the
indemnity agreement contained in this Section 10(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, damage, liability or
action to the extent that it arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission made in connection with a
Registration Statement, any preliminary prospectus or final prospectus relating
thereto or any amendments or supplements to a Registration Statement or any such
preliminary prospectus or final prospectus, in reliance upon and in conformity
with written information furnished expressly for use in connection with a
Registration Statement or any such preliminary prospectus or final prospectus by
the selling Holders or (ii) at any time when the Company has advised the Holder
in writing that the Company does not meet the conditions for use of Rule 172 and
as a result that the Holder is required to deliver a current prospectus in
connection with any disposition of Registrable Securities, an untrue statement
or alleged untrue statement or omission in a prospectus that is (whether
preliminary or final) corrected in any subsequent amendment or supplement to
such prospectus that was delivered to the selling Holder before the pertinent
sale or sales by the selling Holder.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    (b)
  To the extent permitted by law, each selling Holder will severally and
not jointly indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed a Registration Statement, each person, if any,
who controls the Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling person, may become subject to, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in a
Registration Statement or any preliminary prospectus or final prospectus,
relating thereto or in any amendments or supplements to a Registration Statement
or any such preliminary prospectus or final prospectus, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent and only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission (i) was
made in a Registration Statement, in any preliminary prospectus or final
prospectus relating thereto or in any amendments or supplements to a
Registration Statement or any such preliminary prospectus or final prospectus,
in reliance upon and in conformity with written information furnished by the
selling Holder expressly for use in connection with a Registration Statement, or
any preliminary prospectus or final prospectus or (ii) at any time when the
Company has advised the Holder in writing that the Company does not meet the
conditions for use of Rule 172 and as a result that the Holder is required to
deliver a current prospectus in connection with any disposition of Registrable
Securities, was corrected in any subsequent amendment or supplement to such
prospectus that was delivered to the selling Holder before the pertinent sale or
sales by the selling Holder; and such selling Holder will reimburse any legal or
other expenses reasonably incurred by the Company or any such director, officer,
controlling person, or other selling Holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however, that the
liability of each selling Holder hereunder shall be limited to the net proceeds
received by such selling Holder from the sale of Registrable Securities giving
rise to such liability, and provided further,  that
the indemnity agreement contained in this Section 10(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of those
selling Holder(s) against which the request for indemnity is being made (which
consent shall not be unreasonably withheld).

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (c)
  Promptly after receipt by an indemnified party under this Section 10 of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section 10, notify
the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party desires, jointly with any other indemnifying party similarly
noticed, to assume at its expense the defense thereof with counsel satisfactory
to the indemnifying party or indemnifying parties, but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party for contribution or otherwise under the indemnity
agreement contained in this Section 10 (except to
the extent that such omission materially and adversely affects the indemnifying
person’s ability to defend such action). In the event that the indemnifying
party assumes any such defense, the indemnified party may participate in such
defense with its own counsel and at its own expense, provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded,
based on an opinion of counsel reasonably satisfactory to the indemnifying
party, that there may be a conflict of interest between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 10 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless the indemnified party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel and one local counsel, reasonably satisfactory to
such indemnifying party, representing all of the indemnified parties who are
parties to such action in which case the reasonable fees and expenses of counsel
shall be at the expense of the indemnifying party.

    

    (d)
  Notwithstanding anything to the contrary herein, the indemnifying party
shall not be entitled to settle any claim, suit or proceeding unless in
connection with such settlement the indemnified party receives an unconditional
release with respect to the subject matter of such claim, suit or proceeding and
such settlement does not contain any admission of fault by the indemnified
party.

     

    (e)
  If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Holders on
the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or a Holder on the other and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement. The Company and the Holders agree that it would
not be just and equitable if contribution pursuant to this subsection (e) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. 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. The Holders’ obligations in this
subsection to contribute are several in proportion to their sales of Registrable
Securities to which such loss relates and not joint. In no event shall the
contribution obligation of a Holder be greater in amount than the dollar amount
of the net proceeds (net of all expenses paid by such Holder in connection with
any claim relating to this Section 10 and the
amount of any damages such Holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission)
received by it upon the sale of the Registrable Securities giving rise to such
contribution obligation.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (f)
  The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 10, and are
fully informed regarding said provisions. They further acknowledge that the
provisions of this Section 10 fairly
allocate the risks in light of the ability of the parties to investigate the
Company and its business in order to assure that adequate disclosure is made in
a Registration Statement as required by the Securities Act and the Exchange
Act.

     

     11.
  REPORTS UNDER
THE EXCHANGE ACT. With a view to making available to the Holders the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit the Holders to sell the Registrable Securities to the public without
registration, the Company agrees: (i) to make and keep public information
available as those terms are understood in Rule 144, (ii) to file with the SEC
in a timely manner all reports and other documents required to be filed by an
issuer of securities registered under the Securities Act or the Exchange Act
pursuant to Rule 144, (iii) as long as any Holder owns any Registrable
Securities, to furnish in writing upon such Holder’s request a written statement
by the Company that it has complied with the reporting requirements of Rule 144
and of the Securities Act and the Exchange Act, and to furnish to such Holder a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as may be reasonably
requested in availing such Holder of any rule or regulation of the SEC
permitting the selling of any such Registrable Securities without registration
and (iv) undertake any additional actions reasonably necessary to maintain the
availability of the use of Rule 144.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    12.
  SUSPENSION.
Notwithstanding anything in this Agreement to the contrary, in the event (i) of
any non-voluntary demand on the Company by the SEC or any other federal or state
governmental authority during the period of effectiveness of a Registration
Statement for amendments or supplements to a Registration Statement or related
prospectus or for additional information; (ii) of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose; (iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose; or (iv) of any event or
circumstance which requires to comply with applicable law the making of any
changes in a Registration Statement or related prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of a Registration Statement, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, then the Company shall
furnish to the selling Holders a certificate signed by the President or Chief
Executive Officer of the Company setting forth in detail the facts relating to
one or more of the above described circumstances, and the right of the selling
Holders to use a Registration Statement (and the prospectus relating thereto)
shall be suspended for a period (the “Suspension
Period”) of not more than ten (10) days after delivery by the Company of
the certificate referred to above in this Section 12. During
the Suspension Period, none of the Holders shall offer or sell any Registrable
Securities pursuant to or in reliance upon a Registration Statement (or the
prospectus relating thereto). The Company shall use its best efforts to
terminate any Suspension Period as promptly as practicable.

     

    13.
  TRANSFER OF
REGISTRATION RIGHTS. A Holder shall have the right and may transfer or
assign, at any time and from time to time, in whole or in part, to one or more
Persons its rights hereunder in connection with the transfer of the Registrable
Securities by such Holder to such person, provided that (a) such Holder complies
with all laws applicable thereto, (b) the Company is furnished with written
notice of the name and address of such transferee or assignee and the
Registrable Securities to which such registration rights are being transferred,
(c) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing (i)
that it is an “accredited investor” as that term is defined in Rule 501 of
Regulation D, (ii) to be bound by, all of the terms and conditions of, this
Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit C hereto
and (iii) agree to deliver the FINRA Lock-Up if so requested by
FINRA.

     

    14.
  ENTIRE
AGREEMENT. This Agreement, the Warrants, the Placement Agency Agreement,
the Subscription Agreement and other documents relating to the Offering (and all
exhibits and supplements to such documents) constitute and contain the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and supersede any and all prior negotiations, correspondence, agreements
or understandings with respect to the subject matter hereof.

      

    15.
  MISCELLANEOUS.

     

    (a)
  This Agreement may not be amended, modified or terminated, and no rights
or provisions may be waived, except with the written consent of the Company and
the holders of a majority of the Registrable Securities issued and outstanding
or issuable upon exercise of the Warrants; provided, that, no consent
shall be required in order to add additional Investors as parties hereto in
accordance with the Offering.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    (b)
  This Agreement shall be governed by and construed and enforced solely and
exclusively in accordance with the internal laws of the State of New York and
without regard to any conflicts of laws principles thereof, and shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, permitted transferees, successors or assigns. This
Agreement shall also be binding upon and inure to the benefit of any transferee
of any of the Registrable Securities.

     

    (c)
  Each of the parties hereto irrevocably and expressly submits to the
exclusive and sole jurisdiction of the courts of the State of New York located
in New York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated
hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement. Each of
the parties hereto irrevocably consents to the jurisdiction of any such court in
any such suit, action or proceeding and to the laying of venue in such court.
Each party hereto irrevocably waives any objection to the laying of venue of any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY
RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.

     

    (d)
  Any notices, reports or other correspondence (hereinafter collectively
referred to as “correspondence”) required or permitted to be given hereunder
shall be in writing and shall be sent by postage prepaid first class mail,
courier or telecopy or delivered by hand to the party to whom such
correspondence is required or permitted to be given hereunder, and shall be
deemed sufficient upon receipt when delivered personally or by courier,
overnight delivery service or confirmed facsimile, or three (3) business days
after being deposited in the regular mail as certified or registered mail
(airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address or facsimile
number as set forth below:

     

    (i) All
correspondence to the Company shall be addressed as follows:

     

    Manhattan Pharmaceuticals,
Inc.

    48 Wall Street, Suite
1100

    New York, New York 10005

    
      
        	 	
                Attention:

              	
                Michael
      McGuinness

              

      

    

    
      	 	
              
                 

              

            	
              
                Chief
      Operating and Financial
Officer

              

            

    

    
      	 	
              Facsimile:

            	
              (212)
      582-3957

            

    

     

    with a
copy to:

     

    Lowenstein
Sandler PC

    65
Livingston Avenue

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    Roseland,
New Jersey 07068

    
      	 	
              Attention:

            	
              Anthony
      Pergola, Esq.

            

    

    
      	 	
              Facsimile:

            	
              (973)
      597-2300

            

    

     

    (ii) All
correspondence to any Investor shall be sent to such Investor at the address set
forth in the Investor Counterpart Signature Page to the Subscription
Agreement.

     

    (iii) Any
entity may change the address to which correspondence to it is to be addressed
by written notification as provided for herein.

     

    (e)
  The parties acknowledge and agree that in the event of any breach of this
Agreement, remedies at law may be inadequate, and each of the parties hereto
shall be entitled to seek specific performance of the obligations of the other
parties hereto and such appropriate injunctive relief as may be granted by a
court of competent jurisdiction.

     

    (f)
  Should any part or provision of this Agreement be held unenforceable or
in conflict with the applicable laws or regulations of any jurisdiction, the
invalid or unenforceable part or provisions shall be replaced with a provision
which accomplishes, to the extent possible, the original business purpose of
such part or provision in a valid and enforceable manner, and the remainder of
this Agreement shall remain binding upon the parties hereto.

     

    (g)
  This Agreement may be executed in a number of counterparts, any of which
together shall for all purposes constitute one Agreement, binding on all the
parties hereto notwithstanding that all such parties have not signed the same
counterpart.

     

    [Signature
Page to Follow]

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement as of the date and year first above written.

    

    
      
        
          
            	
                    MANHATTAN
      PHARMACEUTICALS, INC.

                  
	 
      	 
      
	
                    By:

                  	
                    /s/
      Michael McGuinness

                  
	 
      	
                    Michael
      McGuinness

                  
	 
      	
                    Chief
      Financial Officer

                  
	 
      	 
      
	
                    NATIONAL
      SECURITIES CORPORATION

                  
	 
      	 
      
	
                    By:

                  	
                    /s/
      Jonathan C. Rich

                  
	 
      	
                     Jonathan
      C. Rich

                  
	 
      	
                     Executive
      V.P. &

                  
	  
      	
                     Head
      of Investment
Banking

                  

          

        

      

    

     

    THE
INVESTOR’S SIGNATURE TO THE APPLICALBE SUBSCRIPTION AGREEMENT DATED OF EVEN DATE
HEREWITH SHALL CONSTITUTE THE INVESTOR’S SIGNATURE TO THIS REGISTRATION RIGHTS
AGREEMENT.

    

    Signature
Page to Registration Rights Agreement

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    INVESTOR
LIST

    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

    Selling Stockholder
Questionnaire

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
C

     

    Instrument of
Adherence

     

    Reference
is hereby made to that certain Registration Rights Agreement, dated as of March
2, 2010, among Manhattan Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
the Investors and the Investor Permitted Transferees, as amended and in effect
from time to time (the “Registration
Rights Agreement”). Capitalized terms used herein without definition
shall have the respective meanings ascribed thereto in the Registration Rights
Agreement.

     

    The
undersigned, in order to become the owner or holder of [___________] shares of
common stock, par value $0.001 per share of the Company (the “Common
Stock”), or a Warrant or Warrants to purchase [_______] Warrant Shares,
hereby agrees that, from and after the date hereof, the undersigned has become a
party to the Registration Rights Agreement in the capacity of an Investor
Permitted Transferee, and is entitled to all of the benefits under, and is
subject to all of the obligations, restrictions and limitations set forth in,
the Registration Rights Agreement that are applicable to Investor Permitted
Transferees. This Instrument of Adherence shall take effect and shall become a
part of the Registration Rights Agreement immediately upon
execution.

     

    Executed
as of the date set forth below under the laws of the State of New
York.

     

    
      
        	
                Signature:

              	
                  

              
	 
      	
                Name:

              
	 
      	
                Title:

              

      

    

    

    Accepted:

    [___________________]

    

    
      
        	
                By:

              	
                  

              
	
                Name:

              
	
                Title:

              

      

    

    

    Date:______________,
20__

    
      
         

      

      
        C-1GRANTO,
INC.

     

    SERIES
A PREFERRED STOCK PURCHASE AGREEMENT

     

    This
SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”) is made
as of the 29th day of March, 2010, among Granto, Inc., a Nevada corporation (the
“Company”), and
the investors listed on the signature page to this Agreement (each an “Investor”).

     

    Recitals

     

    WHEREAS,
the Company desires to sell and issue to each Investor, and each Investor
desires to purchase from the Company, shares of the Company’s Series A Preferred
Stock (the “Series A
Preferred”) convertible into shares of the Company’s common stock, par
value $0.001 per share (“Common
Stock”).

     

    WHEREAS,
in connection with the sale of Series A Preferred, the Company shall issue to
the Investors Series A share purchase warrants (the “Series A Warrants”)
in the form attached hereto as Exhibit A and Series
B share purchase warrants (the “Series B Warrants”)
in the form attached hereto as Exhibit B
(collectively, the “Warrants”), with the Series A Warrants entitling the
Investors to purchase one (1) share of the Company’s Common Stock (the “A Warrant Shares”)
for every Four Dollars and forty four and eight tenth Cents ($4.448) paid by the
Investor for Series A Preferred, and with the Series B Warrants entitling the
Investors to purchase one (1) share of the Company’s Common Stock (the “B Warrant Shares” and
together with the A Warrant Shares, the “Warrant Shares”) for
every Four Dollars and forty four and eight tenth Cents ($4.448) paid by the
Investor for Series A Preferred (collectively the  Series A Preferred
and Warrants are  referred to as the “Purchased
Securities”).

     

    NOW,
THEREFORE, in consideration of the mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

     

    Terms
of Agreement

     

    1.           Defined
Terms.  The terms defined in this Section 1 shall have
such defined meaning throughout this Agreement.

     

    1.1           “Affiliate” of a
Person means any Person that directly or indirectly, Controls, is Controlled by,
or is under common Control with, the Person in question.

     

    1.2           “Certificate” means the Certificate of
Designations, Preferences and Rights of Series A Preferred Stock of the Company
attached to this Agreement as Exhibit
C, as the same may be
amended from time to time.

     

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

     

    1.3           
“Control” or
“Controlled”
means the power to direct the management and policies of a Person, directly or
indirectly, whether through the ownership of voting securities, by contract, or
otherwise.

     

    1.4           “Lien” shall mean,
with respect to any property or asset (whether tangible or intangible), any
mortgage, lien, pledge, charge, security interest, encumbrance, or other adverse
claim of any kind in respect of such property or asset.

     

    1.5           “Material Adverse
Effect” means any material adverse change in, or material adverse effect
on, the business, assets, prospects, results of operations, value, financial or
other condition of the Company and its Subsidiaries taken as a whole, or any
event or circumstance that could reasonably be expected to have any such effect
or that could reasonably be expected to prevent, hinder or delay the
consummation of any of the transactions contemplated by this Agreement or any of
the other documents, instruments or agreements contemplated hereby and
thereby.

     

    1.6           “Person” means an
individual, corporation, partnership, limited liability company, association,
trust, or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

     

    1.7           “Subsidiary” means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity of which more than 30% of (i) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate, association,
joint venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such
entity.

     

    1.8           “Taxes” means any
federal, state, local, or foreign income, gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer, registration, value
added, excise, severance, stamp, occupation, premium, windfall profit, customs,
duties, real property, personal property, capital stock, intangibles, social
security, unemployment, disability, payroll, license, employee, or other tax or
levy, of any kind whatsoever, including any interest, penalties, or additions to
tax in respect of the foregoing.

     

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

     

    1.10          “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.

     

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

     

    2.           Purchase and Sale of
Stock.

     

    2.1           Authorization.  On
or prior to the Closing Date, the Company shall have (i)  authorized
the sale and issuance to the Investors of up to 3,000,000 shares of Series A
Preferred,  (ii) reserved 3,000,000 shares of the Company’s
Common Stock to be issued upon conversion of the Series A Preferred (the “Conversion Shares”)
and (iii) reserved 4,000,000 shares of the Company’s Common Stock to be
issued upon exercise of the Warrants.  The Series A Preferred Stock
shall have the rights, preferences, privileges and restrictions set forth in the
Certificate of in the form attached hereto as Exhibit
C.

     

    2.2           Sale and
Issuance.  Subject to the terms and conditions set forth in
this Agreement, each Investor agrees, severally and not jointly, to purchase at
the Closing, and the Company agrees to sell and issue to each Investor at the
Closing, that number of shares (the “Purchased Shares”) of
the Company’s Series A Preferred Stock set forth opposite such Investor’s name
on the signature page to this Agreement, for the purchase price of $2.78107 per
share (the “Purchase
Price”).  Upon the following terms and conditions and for no
additional consideration, each of the Investors shall be issued Series A
Warrants in the form attached hereto as Exhibit A and Series B Warrants in
the form attached hereto as Exhibit B with the
Series A Warrants entitling the Investors to purchase one (1) share of the
Company’s Common Stock for every for every Four Dollars and forty four and eight
tenth  Cents ($4.448) paid by the Investor for Purchased Shares, and
with the Series B Warrants entitling the Investors to purchase one (1) share of
the Company’s Common Stock for every Four Dollars and forty four and eight tenth
Cents ($4.448) paid by the Investor for Purchased Shares as set forth on the
signature pages hereto. The Warrants shall expire five (5) years following the
Closing Date, and the Series A Warrants and Series B Warrants shall have an
initial exercise price of $3.47 and $4.17, respectively.

     

    2.3           Closing; Delivery of
Certificates.

     

    (a)           Closing.  The
purchase and sale of the Series A Preferred and Warrants (the “Closing”) shall take
place on March 26, 2010 (the “Closing Date”) at the
offices of The Crone Law Group, 101 Montgomery Street, Suite 1950, San
Francisco, CA 94104, or at such other time and place mutually agreeable to the
Company and Investors acquiring a majority of the Purchased Shares to be issued
and sold at the Closing.

     

    (b)           Delivery.  At
each Closing, the Company shall deliver to each Investor participating therein a
certificate or certificates, registered in the name or names directed by each
such Investor, representing the number of Purchased Shares to be purchased by
such Investor together with Warrants to purchase such number of shares of Common
Stock as set forth in Section 2.2, against
payment of the Purchase Price, by check, wire transfer or any combination
thereof.  The Company and the Investors shall, upon request, on or
after the Closing Date, cooperate with each other (specifically, the Company
shall cooperate with the Investors, and the Investors shall cooperate with the
Company) by furnishing any additional information, executing and delivering any
additional documents and/or other instruments and doing any and all such things
as may be reasonably required by the parties or their counsel to consummate or
otherwise implement the transactions contemplated by this
Agreement.

     

    
      
        
           

        

        
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    3.           Representations and
Warranties of the Company.  Except as set forth on the Schedule
of Exceptions attached hereto as Schedule 1 (the
“Schedule of
Exceptions”), which exceptions shall be deemed to be representations and
warranties as if made under this Section 3, the
Company hereby makes the following representations and warranties to each
Investor as of the Closing Date.  The Schedule of Exceptions will be
arranged in paragraphs corresponding to the numbered and lettered paragraphs in
this Section
3.

     

    3.1           Organization, Good Standing
and Qualification.  The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted.  The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to so qualify,
individually or in the aggregate, would have a Material Adverse
Effect.  The Company has delivered to the Investors true and complete
copies of its Articles of Incorporation and Bylaws, as amended through the date
hereof.

     

    3.2           Capitalization and Voting
Rights.  The authorized capital stock of the Company consists
of the following:

     

    (a)           Preferred
Stock.  The rights, privileges and preferences of the Preferred
Stock will be as stated in the Certificate.  No shares of preferred
stock are issued and outstanding.

     

    (b)           Common Stock.
90,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), of
which 21,286,789 shares are issued and outstanding.

     

       
(c)           Other
Rights.  Except for the conversion privileges of the Series A
Preferred, the Class A Warrants and Class B Warrants being issued pursuant to
this Agreement,  Class C Warrants to purchase an aggregate of
333,333shares of Common Stock of the Company at $2.44 per share and Class D
Warrants to purchase an aggregate of 333,333 shares of Common Stock of the
Company at $2.93 per share, there are no outstanding options, warrants, rights
(including purchase, conversion or preemptive rights), calls, commitments,
subscription rights, exchange rights, profit participation, or other agreements
for the purchase or acquisition from the Company, or similar rights to acquire
from the Company or similar obligations of the Company to issue, any shares of
its capital stock.  The Company is not a party or subject to any
agreement or understanding, and, to the Company’s knowledge, there is no
agreement or understanding between any Persons that affects or relates to the
voting or giving of written consents with respect to any security of the Company
or by a director of the Company.

     

    (d)           Valid
Issuance.  The outstanding shares of Common Stock and
Series A Preferred, and all warrants and options to purchase the capital
stock of the Company were duly and validly authorized and issued, fully paid and
nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the “1933 Act”) and any
relevant state securities laws or pursuant to valid exemptions
therefrom.

     

    
      
        
           

        

        
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    3.3           Subsidiaries.   Except
as set forth in Schedule 1, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, association, or other business entity, and is not a
participant in any joint venture, partnership, or similar
arrangement.

     

    3.4           Authorization.  The
Company has all requisite power and authority to execute, deliver and perform
this Agreement, the transactions contemplated by this Agreement, the
Certificate, the Escrow Agreement dated as of the date of this Agreement among
the Company, certain officers of the Company and the escrow agent named therein
in the form attached hereto as Exhibit E (the
“Escrow Agreement”) and the Warrants (collectively the “Transaction
Agreements”).  All corporate action on the part of the Company
and its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the performance of all obligations
of the Company hereunder and the authorization, issuance, sale and delivery of
the Purchased Securities being sold at the Closing and the Common Stock issuable
upon conversion of such Series A Preferred and exercise of the Warrants has been
taken or will be taken prior to the Closing.  The Transaction
Agreements have been duly executed and delivered by the Company, and constitute
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.

     

    3.5           Valid Issuance of Preferred
and Common Stock.  The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
set forth herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of all Liens and restrictions on transfer other
than the restrictions on transfer contained in this Agreement and under
applicable state and federal securities laws.  The Conversion Shares
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate, will be duly and validly issued,
fully paid, and nonassessable and will be free of all Liens and restrictions on
transfer other than the restrictions on transfer contained in this Agreement and
under applicable state and federal securities laws. The Warrant Shares have been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Warrants, will be duly and validly issued, fully paid, and
nonassessable and will be free of all Liens and restrictions on transfer other
than the restrictions on transfer contained in this Agreement and under
applicable state and federal securities laws.

     

    
      
        
           

        

        
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    3.6           Governmental and Third Party
Consents; Compliance with Laws and Court Orders.  No consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority or any third party on the part of the Company is required
in connection with the consummation of the transactions contemplated by this
Agreement, except qualification or filings under applicable securities laws as
may be required in connection with the transactions contemplated by this
Agreement.  The Company is not in violation of any provisions of any
laws, statutes, ordinances, regulations, administrative interpretations,
judgements, injunctions, orders, policies or decrees of any court or
governmental or administrative authority that are applicable to the Company or
its assets, except for violations that have not had and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.

     

    3.7           Offering.  Subject
in part to the truth and accuracy of each Investor’s representations set forth
in Section 4 of
this Agreement, the offer, sale and issuance of the Purchased Securities are
exempt from the registration requirements of any applicable state and federal
securities laws.

     

    3.8           Litigation.  There
is no action, suit, proceeding, arbitration, complaint, charge or investigation
pending or, to the Company’s knowledge, currently threatened against the Company
or any of its Affiliates that questions the validity of this Agreement or the
right of the Company to enter into such agreement, or to consummate the
transactions contemplated hereby, or that might result, either individually or
in the aggregate, in a Material Adverse Effect.  Neither the Company,
nor to the Company’s knowledge, any of its Affiliates, is a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality.  There is no action, suit,
proceeding or investigation by the Company or its Affiliates currently
pending.

     

    3.9           Intellectual
Property. There is no trademark, copyright, service mark, trade name,
patent (including any registrations or applications for registration of any of
the foregoing), or trade secret, including, but not limited to, any such legal
rights included in any schematics, technology, know-how, computer software
programs or applications (in both source code and object code form) and in other
tangible or intangible information or material not currently owned or licensed
to the Company that are necessary for the operation of the business of the
Company or its Subsidiaries as presently conducted and as presently contemplated
to be conducted, and none of the Company’s owned or licensed trademarks,
copyrights, service marks, trade names, patents or trade secrets conflict with
or infringe the rights of others.  There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses, encumbrances, claims or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, domain names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other Person.  The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, domain names, copyrights, trade secrets
or other proprietary rights or processes of any other Person.  The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee’s best efforts to
promote the interest of the Company or that would conflict with the Company’s
business.  The Company’s registered copyrights, unregistered and
registered trademarks, patents and patent applications owned, or under license
to, the Company (“Company IP Rights”)
will be owned or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing.  The Company has
taken all actions reasonably necessary to protect the Company IP
Rights.  The Company does not believe it is or will be necessary to
use any inventions of any of its employees made prior to or outside the scope of
their employment by the Company.

     

    
      
        
           

        

        
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    3.10           Compliance with Other
Instruments.  The Company is not in violation or default of any
provision of its Articles of Incorporation or its Bylaws, or, in any material
respect, of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound, or of any provision of any federal or
state statute, rule or regulation applicable to it.  The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a material default under any such instrument, judgment, order,
writ, decree or contract, or an event that results in the creation of any Lien
upon any material assets of the Company, or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to the Company, its business, operations,
assets or properties.

     

    3.11           Permits.  The
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business, the lack of which could have a
Material Adverse Effect.  The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.

     

    3.12           Employee Benefit
Plans.  All pension, profit-sharing, deferred compensation,
bonus, stock option, share appreciation right, severance, group or individual
health, dental, medical, life insurance, survivor benefit, and similar plans,
policies and arrangements, whether formal or informal, established or maintained
by the Company for the benefit of any director, officer, consultant, or employee
of the Company  (collectively, “Employee Benefit
Plans”) is, and has been, maintained and operated in compliance in all
material respects with the terms of such plan and with the requirements
prescribed (whether as a matter of substantive law or as necessary to secure
favorable tax treatment) by any and all statutes, governmental or court orders,
or governmental rules or regulations in effect from time to time, including but
not limited to ERISA, except where the failure would not cause a Material
Adverse Effect.

     

    3.13           Tax Returns, Payments and
Elections.  The Company has timely filed, or timely filed for
an extension which extension has not lapsed, all Tax Returns required to be
filed by it, each such Tax Return has been prepared in compliance with all
applicable laws and regulations, and all such Tax Returns are true and accurate
in all respects.  All Taxes due and payable by the Company and each of
its Subsidiaries have been paid.  No claim has ever been made by a
taxing authority in a jurisdiction where the Company does not pay Taxes or file
Tax Returns that the Company is, or may be subject to, Taxes assessed by such
jurisdiction.  There are no Liens for Taxes (other than current Taxes
not yet due and payable) on the assets of the Company.  The Company
has withheld and paid all Taxes required to have been withheld and paid by it in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other Person, except where the failure would not cause a Material
Adverse Effect.

     

    
      
        
           

        

        
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    3.14           Full
Disclosure.  No representation or warranty of the Company made
in this Agreement, including any schedules or exhibits hereto or thereto, nor
any written statement furnished by the Company to the Investors pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading.  There is no fact or information known to the
Company which the Company has not disclosed to the Investors in writing which
the Company presently believes has or could have a Material Adverse Effect other
than any changes in the prospects of the Company which result from developments
affecting general economic or industry conditions.

     

    3.15      Agreements;
Actions.

     

    (a)           Other
than (i) standard employee benefits generally made available to all employees,
(ii) standard director and officer indemnification agreements approved by the
Board of Directors, (iii) the purchase of shares of the Company’s capital stock
and the issuance of options to purchase shares of the Company’s Common Stock, in
each instance, approved by the Board of Directors (all of which purchases and
issuances are reflected in the capitalization representations set forth in
Section 3.2) and (iv) the transactions contemplated by the Transaction
Agreements, there are no agreements, understandings or proposed transactions
between the Company and any of its Affiliates.

     

    (b)           Except
for the Transaction Agreements, there are no agreements,
understandings,  instruments, contracts or proposed transactions to
which the Company or any of its Subsidiaries is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to,
the Company or any of its Subsidiaries in excess of, $15,000, (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from the Company or any of its Subsidiaries other than the license to the
Company of standard, generally commercially available “off-the-shelf”
third-party products that are not and will not to any extent be a part of or
influence the development of any product or service or intellectual property of
the Company or any of its Subsidiaries, or (iii) the grant of rights to
manufacture, produce, assemble, license, market, or sell its products to any
other Person or affect the Company’s or any of its Subsidiaries’ exclusive right
to develop, manufacture, assemble, distribute, market or sell its
products.

     

    (c)           The
Company has not (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or incurred any
other liabilities individually in excess of $15,000 or in excess of $50,000 in
the aggregate, (iii) made any loans or advances to any Person, other than
ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.

     

    
      
        
           

        

        
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    (d)           For
the purposes of subsections (b) and (c) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same Person (including Persons the Company has reason to believe
are Affiliated with that Person) shall be aggregated for the purposes of meeting
the individual minimum dollar amounts of each such subsection.

     

    3.16       
Related-Party
Transactions.  No employee, officer or director of the Company
(a “Related
Party”) or member of such Related Party's immediate family, or any
corporation, partnership or other entity in which such Related Party is an
officer, director or partner, or in which such Related Party has an ownership
interest or otherwise controls, is indebted to the Company or any of its
Subsidiaries, nor is the Company or any of its Subsidiaries indebted (or
committed to make loans or extend or guarantee credit) to any of
them.  To the Company’s knowledge, no Related Party or member of their
immediate families is directly or indirectly interested in any material contract
with the Company or any of its Subsidiaries.  The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.

     

    3.17        Rights of Registration and
Voting Rights.  Except as provided in Section 7.1, the Company
is not under any obligation to register under the 1933 Act any of its currently
outstanding securities or any securities issuable upon exercise or conversion of
its currently outstanding securities.  To the Company’s knowledge, no
stockholder of the Company has entered into any agreements with respect to the
voting of capital shares of the Company.

     

    3.18        Title to Property and
Assets.  The Company and each of its Subsidiaries owns its
property and assets free and clear of all mortgages, deeds of trust, liens,
loans and encumbrances, except for statutory liens for the payment of current
taxes that are not yet delinquent and encumbrances and liens that arise in the
ordinary course of business and do not materially impair the Company’s
ownership or use of such property or assets.  With respect to the
property and assets it leases, the Company and each of its Subsidiaries is in
material compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.

     

    3.19   
Financial
Statements.  Except as set forth on the (a) Company’s balance
sheet as of December 31, 2009, and (b) the consolidated balance sheet of Rongfu
Aquaculture, Inc. (“Rongfu”) and its subsidiaries as of September 30, 2009,
neither the Company nor any of its Subsidiaries has any material liabilities,
contingent or otherwise, other than (i) in the case of the Company, liabilities
incurred after December 31, 2009 in the ordinary course of business that are not
material, individually or in the aggregate, , (ii) in the case of Rongfu,
liabilities incurred after September 30, 2009 in the ordinary course of its
business and (iii) obligations under contracts and commitments incurred in the
ordinary course of business which would not be required under generally accepted
accounting principles to be reflected in financial statements of the Company
prepared in accordance with generally accepted accounting principles, if such
financial statements had been prepared as of the date hereof.

     

    
      
        
           

        

        
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    3.20        Changes.  Since
September 30, 2009 there has not been:

     

    (a)           any
change in the assets, liabilities, financial condition or operating results of
the Company or any of its Subsidiaries, except changes in the ordinary course of
business that have not been, in the aggregate, materially adverse;

     

    (b)           any
damage, destruction or loss, whether or not covered by insurance, that
constitutes a Material Adverse Effect;

     

    (c)           any
waiver or compromise by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it;

     

    (d)           any
satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company or any of its Subsidiaries, except in the ordinary
course of business and the satisfaction or discharge of which would not have a
Material Adverse Effect;

     

    (e)           any
material change to a material contract or agreement by which the Company, any of
its Subsidiaries or any of their assets are bound or subject;

     

    (f)           any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;

     

    (g)           any
sale, assignment, license or transfer by the Company or any of its Subsidiaries
of any patents, trademarks, copyrights, trade secrets or other intangible
assets;

     

    (h)           any
resignation or termination of employment of any officer or key employee of the
Company and the Company is not aware of any impending resignation or termination
of employment of any such officer or key employee;

     

    (i)           any
material change, except in the ordinary course of business, in a contingent
obligation of the Company or any of its Subsidiaries by way of guaranty,
endorsement, indemnity, warranty or otherwise;

     

    (j)           any
mortgage, pledge, transfer of a security interest in, or Lien, created by the
Company or any of its Subsidiaries, with respect to any of its material
properties or assets, except Liens for taxes not yet due or payable and liens
that arise in the ordinary course of business and do not materially impair the
Company’s or any of its Subsidiaries’ ownership or use of such property or
assets (owned or leased);

     

    (k)           any
loans or guarantees made by the Company or any of its Subsidiaries to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;

     

    (l)           any
declaration, setting aside or payment or other distribution in respect to any of
the Company’s capital stock, or any direct or indirect redemption, purchase, or
other acquisition of any of such stock by the Company;

     

    
      
        
           

        

        
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    (m)           to
the Company’s knowledge, any other event or condition of any character, other
than events affecting the economy or the Company’s industry generally, 
that could reasonably be expected to result in a Material Adverse Effect;
or

     

    (n)           any
arrangement or commitment by the Company or any of its Subsidiaries to do any of
the things described in this Section 3.20.

     

    3.21        Employee Benefit
Plans.  The Schedule of Exceptions sets forth all employee
benefit plans maintained, established or sponsored by the Company, or in or to
which the Company participates or contributes, which is subject to the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”).

     

    3.22        Employment
Matters.  The Company is not aware that any officer or key
employee intends to terminate his or her employment with the Company, nor does
the Company have any present intention to terminate the employment of any
officer or key employee.  The employment of each officer and employee
of the Company is terminable at the will of the Company.  To its
knowledge, the Company has complied in all material respects with all applicable
state and federal equal employment opportunity laws and with other laws related
to employment.  The Company is not a party to or bound by any
currently effective employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, severance, retirement agreement, or
other employee compensation agreement not described in
Section 3.21.

     

    3.23        Confidential Information and
Invention Assignment Agreements.  Each current and former
employee, consultant and officer of the Company has executed an agreement with
the Company regarding confidentiality and proprietary information substantially
in the form or forms delivered to the counsel for the Investors.  The
Company is not aware that any of its employees or consultants is in violation
thereof, and the Company will use its best efforts to prevent any such
violation.

     

    3.24        [Reserved]

     

    3.25        Corporate
Documents.  The Articles of Incorporation and Bylaws of the
Company are in the forms provided to counsel for the Investors.  The
copy of the minute books of the Company provided to the Investors’ counsel
contains minutes of all meetings of directors and stockholders and all actions
by written consent without a meeting by the directors and stockholders since the
date of incorporation and reflects all actions by the directors (and any
committee of directors) and stockholders with respect to all transactions
referred to in such minutes accurately in all material respects.

     

    3.26        No
Brokers.  Neither the Company nor any Subsidiary has taken any
action which would give rise to any claim by any person for brokerage
commissions, finder’s fees or similar payments relating to this Agreement or the
transactions contemplated hereby.

     

    
      
        
           

        

        
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    4.           Representations and
Warranties of the Investors.  Each Investor, severally but not
jointly, hereby represents and warrants that:

     

    4.1           Authorization.  It
has the full power and authority to enter into this Agreement and (assuming due
execution by the Company and the other parties hereto) this Agreement
constitutes its valid and legally binding obligation, enforceable against it in
accordance with its terms.

     

    4.2           Purchase Entirely for Own
Account.   The Purchased Shares are being acquired for
investment for such Investor’s own account, not as a nominee or agent and not
with a view to the resale or distribution of any part thereof.

     

    4.3           Disclosure of
Information.   It has received all the information it
considers necessary or appropriate for deciding whether to purchase the
Purchased Shares and that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of this offering and
the business, properties, prospects and financial condition of the
Company.  The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of
this Agreement or the right of the Investor to rely thereon.

     

    4.4           Investment
Experience.  Such Investor understands that the purchase of the
Purchased Shares involves substantial risk.  It is an investor in
securities of companies in the developmental stage and acknowledges that it can
bear the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of its investment in the Purchased Shares.  If other than an
individual, such Investor also represents it has not been organized for the
purpose of acquiring the Purchased Shares.

     

    4.5           Accredited
Investor.  It is an “accredited investor” within the meaning of
Securities Exchange Commission (“SEC”) Rule 501 of Regulation D, as presently in
effect.

     

    4.6           Restricted
Securities.  It understands that the Purchased Shares are
characterized as “restricted securities” under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act only in certain
limited circumstances.  In this connection, such Investor represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby, including Rule 144(i).

     

    4.7           Legends.  It
understands that the certificates evidencing the Purchased Shares may bear a
legend substantially similar to the following:

     

    “THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT.”

     

    
      
        
           

        

        
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    5.           Conditions of Investors’
Obligations at the Closing.  The obligations of each Investor
participating in the Closing are subject to the fulfillment, on or before the
Closing, of each of the following conditions, the waiver of which shall not be
effective against any Investor who does not consent thereto:

     

    5.1           Authorization.  The
Company shall have authorized (a) the sale and issuance to the Investors of up
to 3,000,000 shares of the Series A Preferred and (ii) the issuance of the
Warrants and the Conversion Shares.

     

    5.2           Representations and
Warranties.  The representations and warranties of the Company
contained in Section
3 shall be true and correct as of the Closing Date.

     

    5.3           Performance.  The
Company shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on, or prior to, the Closing Date.

     

    5.4           Compliance
Certificate.  The President of the Company shall deliver to the
Investors at the Closing a certificate certifying that the conditions specified
in Sections 5.2 and 5.3 have been fulfilled.

     

    5.5           Opinion of Company
Counsel.  The Investors shall have received from counsel for
the Company an opinion, dated as of the Closing, in substantially the form
of Exhibit D.

     

    5.6           Share
Exchange.  The Company and the stockholders of Rongfu shall
have entered into and consummated a Share Exchange Agreement in the form
attached hereto as Exhibit F pursuant to
which all of the outstanding shares of common stock shall have been transferred
to the Company in exchange for the issuance of shares of the Company’s Common
Stock.

     

    5.7           Transaction
Agreements.  The Company shall have filed the Certificate with
the Secretary of State of Nevada, the Company shall have executed the Warrants
and Company, and each Investor and certain other parties shall have executed and
delivered the Escrow Agreement in substantially the form attached as Exhibit
E.

     

    5.8           [Reserved]

     

    5.9           Secretary’s
Certificate.  The Secretary of the Company shall deliver to the
Investors at the Closing a certificate certifying (i) the Articles of
Incorporation, (ii) the Bylaws of the Company, and (iii) resolutions of the
Board of Directors of Company approving the Transaction Agreements and the
transactions contemplated hereby and thereby.

     

    
      
        
           

        

        
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    5.10           Qualifications.  All
authorizations, approvals, consents or permits, if any, of any Person that are
required in connection with the lawful issuance and sale of the Purchased Shares
pursuant to this Agreement shall be duly obtained and effective as of the
Closing Date.

     

    5.11           No Material Adverse
Change.  Nothing shall have occurred or be threatened that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

     

    5.12           Delivery of
Certificates.  The Company shall have delivered to each
Investor a certificate representing the number of Purchased Shares to be
purchased by such Investor at the Closing together with Warrant certificates in
the amounts set forth in Section 2.2.

     

    6.           Conditions of the Company’s
Obligations at Closing.  The obligations of the Company to each
Investor participating in the Closing are subject to the fulfillment on or prior
to the Closing of each of the following conditions by that
Investor:

     

    6.1           Representations and
Warranties.   The representations and warranties of the
Investor contained in Section 4 shall be
true and correct as of the Closing.

     

    6.2           Payment of Purchase
Price.   The Investor shall have delivered the Purchase
Price for the number of shares listed opposite such Investor’s name on the
signature page hereof.

     

    
      
        
           

        

        
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      7.           Covenants of the
Company.  The Company covenants and agrees with the Investors
as follows:

    

    

    7.1    
  Registration
Rights.

     

    (a)     Registration Statement
Requirements.  Subject to the next sentence, the Company will
register for resale not less than 100% of the Conversion Shares and the Warrant
Shares (the “Registrable Shares”).
The Company shall file with the SEC a Form S-1 registration statement (the
“Registration
Statement”) (or such other form that it is eligible to use) in order to
register all or such portion of the Registrable Shares as permitted by the SEC
(provided that the Company shall use reasonable efforts to advocate with the SEC
for the registration of all of the Registrable Shares) pursuant to Rule 415 for
resale and distribution under the 1933 Act on or before the date (the “Required Filing
Date”) which is forty five (45) calendar days after the Closing Date, and
use its best efforts to cause the Registration Statement to be declared
effective by the date (the “Required Effective
Date”) which is not later than (x) one hundred fifty (150) calendar days
after the Closing Date, or (y) if the SEC performs a “full review” of the
Registration Statement, two hundred and ten (210) calendar days after the
Closing Date.  In the event that the Company is required by the SEC to
cut back the number of shares being registered in the Registration Statement
pursuant to Rule 415, then the Company shall reduce each Investor’s Registrable
Shares on a pro rata basis based on the total Registrable Shares of all
Investors.  The Registration Statement shall also state that, in
accordance with Rules 416 and 457 under the 1933 Act, it also covers such
indeterminate number of additional shares of common stock as may become issuable
with respect to the Registrable Shares to prevent dilution resulting from stock
splits, stock dividends or similar transactions. Notwithstanding anything to the
contrary contained in this Section 7.1, if the Company receives comments on the
Registration Statement from the SEC (“SEC Comments”), and
following discussions with and responses to the SEC in which the Company uses
its reasonable best efforts and time to cause as many Registrable Shares for as
many Investors as possible to be included in the Registration Statement filed
pursuant to Section 7.1(a) without characterizing any Investor as an
underwriter, the Company is unable to cause the inclusion of all Registrable
Shares in such Registration Statement, then the Company may, following not less
than three (3) Trading Days prior written notice to the Investors, (x) remove
from the Registration Statement such Registrable Shares (the “Cut Back Shares”)
and/or (y) agree to such restrictions and limitations on the registration and
resale of the Registrable Shares, in each case as the SEC may require in order
for the SEC to allow such Registration Statement to become effective
(collectively, the “SEC Restrictions”);
provided, that
in no event may the Company name any Investor as an underwriter without such
Investor’s prior written consent and provided, further,
that unless the SEC Restrictions shall otherwise require, any cut-back imposed
by the SEC shall first consist of Registrable Shares consisting of Conversion Shares,
then, if all Conversion Shares have been removed from the Registration
Statement, any additional cut-back shall be of B Warrant Shares and finally, if
all Conversion Shares and B Warrant Shares have been removed from the
Registration Statement, any additional cut-back shall be of the A Warrant
Shares.  Unless the SEC Restrictions otherwise require, any cut-back
imposed pursuant to this Section 7.1(a) shall be allocated among the Registrable
Shares of the Investors on a pro rata basis. No liquidated damages under Section
7.1(d) shall accrue on or as to any Cut Back Shares, and the required SEC
Effectiveness Date for such additional Registration Statement including the
Cutback Shares will be tolled, until such time as the Company is able to effect
the registration of the Cut Back Shares in accordance with any SEC Restrictions
(such date, the “Restriction Termination
Date”). From and after the Restriction Termination Date, all provisions
of this Section 7.1 (including, without limitation, the liquidated damages
provisions, subject to tolling as provided above) shall again be applicable to
the Cut Back Shares (which, for avoidance of doubt, retain their character as
“Registrable Shares”) so that the Company will be required to file with and
cause to be declared effective by the SEC such additional Registration
Statements in the time frames set forth herein as necessary to ultimately cause
to be covered by effective Registration Statements all Registrable Shares (if
such Registrable Shares cannot at such time be resold by the Investors thereof
pursuant to Rule 144). The Company will offer to a single firm of counsel
designated by the Investors ( “Investor’s Counsel”)
an opportunity to review and comment on the Registration Statement and all
amendments and supplements thereto between three and five business days prior to
the proposed filing date thereof, and not file any document in a form to which
such counsel reasonably objects. Upon the initial filing of the Registration
Statement, the Company shall pay to Investor’s Counsel a fee of $5,000 as
reimbursement for services rendered to the Investors in connection with the
Registration Statement and all amendments and supplements thereto.

     

    
      
        
           

        

        
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    (b)           Registration
Procedures. If and whenever the Company is required by the provisions of
Section 7.1(a) to effect the registration of any Registrable Shares under the
1933 Act, the Company will, as expeditiously as possible:

     

    (i)           subject
to the timelines provided in this Agreement, prepare and file with the SEC a
registration statement required by Section 7.1(a), with respect to such
securities and use its best commercially reasonable efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to Investor’s Counsel copies of all filings and SEC letters of comment
and notify the Investors (by telecopier and by e-mail addresses provided by the
Investors) and Investor’s Counsel (by telecopier and by email) on or before the
second  business day thereafter that the Company receives notice that
(i) the SEC has no comments or no further comments on the registration
statement, and (ii) the registration statement has been declared
effective;

     

    (ii)           prepare
and file with the SEC 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 until such registration statement has
been effective for the later of (a) a period of two (2) years, or (b) until the
Purchased Securities can been sold by the Investors pursuant to Rule 144
without volume restrictions (the “Effectiveness
Period”);

     

    (iii) furnish
to the Investors, at the Company’s expense, such number of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as such Investors reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement or make them electronically available;

     

    (iv)         use
its reasonable best efforts to register or qualify the Registrable Shares
covered by such registration statement under the securities or “blue sky” laws
of such jurisdictions as the Investors shall request in writing, provided, however,
that the Company shall not for any such purpose be required to qualify to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to service of process in any such
jurisdiction;

     

    (v)          list
the Registrable Shares covered by such registration statement with any
securities exchange on which the common stock of the Company is then
listed;

     

    
      
        
           

        

        
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    (vi)         notify
the Investors within twenty-four hours of the Company’s becoming aware that a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits 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 or which
becomes subject to a SEC, state or other governmental order suspending the
effectiveness of the registration statement covering any of the Registrable
Shares. Each Investor hereby covenants that it will not sell any Registrable
Shares pursuant to such prospectus during the period commencing at the time at
which the Company gives such Investor notice of the suspension of the use of
such prospectus in accordance with this Section 7.1(b)(vi) and ending at the
time the Company gives such Investor notice that such Investor may thereafter
effect sales pursuant to the prospectus, or until the Company delivers to such
Investor or files with the SEC an amended or supplemented
prospectus;

     

    (vii) provided
same would not be in violation of the provision of Regulation FD under the
Securities Exchange Act of 1934, make available for inspection by the Investors
during reasonable business hours,  and any attorney, accountant or
other agent retained by the Investors or underwriter, all publicly available,
non-confidential financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the Investors, or their attorneys, accountants or agents
in connection with such registration statement at such requesting Investor’s
expense; and

     

    (viii)  provide
to the Investors copies of the Registration Statement and amendments thereto
five business days prior to the filing thereof with the SEC.  Any
Investor’s failure to comment on any registration statement or other document
provided to an Investor or its counsel shall not be construed to constitute
approval thereof nor the accuracy thereof.

     

    (c)           Provision of
Documents.  It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Shares of a
particular Investor that such Investor shall furnish to the Company in
writing such information and representation letters, with respect to itself and
the proposed distribution by it as the Company may reasonably request to assure
compliance with federal and applicable state securities laws.

    

    
      
        
           

        

        
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    (d)           Non-Registration
Events.  The Company and the Investors agree that the Investors
will suffer damages if the Registration Statement is not filed by the Required
Filing Date and not declared effective by the SEC by the Required Effective Date
or if, after it is declared effective, its effectiveness is not maintained in
the manner and within the time periods contemplated by Section 7.1(a), and it
would not be feasible to ascertain the extent of such damages with
precision.  Accordingly, if (A) the Registration Statement is not
filed on or before the Required Filing Date, (B) the Registration Statement is
not declared effective on or before the Required Effective Date, (C) the
Registration Statement is not declared effective within five
(5)  Trading Days after receipt by the Company or its attorneys of a
written or oral communication from the SEC that the Registration Statement will
not be reviewed or that the SEC has no further comments, (D) any registration
statement described in Section 7.1(a) is declared effective, but shall
thereafter cease to be effective during the Effectiveness Period for a period of
time which shall exceed 20 days in the aggregate per year (defined as a period
of 365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses A through D of this Section
7.1(d), a “Non-Registration
Event”), then the Company shall deliver to the Investors, as liquidated
damages (“Liquidated
Damages”), an amount equal to one percent (1.0%) of the Purchase Price of
the Purchased Shares owned of record by such holder on the first business day
after the Non-Registration Event and for each subsequent thirty (30) day period
(pro rata for any period less than thirty days) which are subject to such
Non-Registration Event.  The maximum aggregate Liquidated Damages
payable to the Investors under this Agreement shall be six percent (6.0%) of the
aggregate Purchase Price paid by the Investor pursuant to this Agreement. The
Company must pay the Liquidated Damages in cash. In the event a Registration
Statement is filed by the Required Filing Date, but is withdrawn prior to being
declared effective by the SEC without the consent of Investors holding a
majority of the Registrable Shares, then such Registration Statement will be
deemed to have not been filed.

     

    (e)           Expenses.  All
expenses incurred by the Company in complying with Section 7.1, including,
without limitation, all registration and filing fees, printing expenses (if
required), fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or “blue sky” laws, fees of
the FINRA, transfer taxes, and fees of transfer agents and registrars, are
called “Registration
Expenses.” The Company will pay all Registration Expenses in connection
with any registration statement described in Section 7.1.

     

    (f)           Indemnification and
Contribution.

     

    (i)   In
the event of a registration of any Registrable Shares under the 1933 Act
pursuant to Section 7.1, the Company will, to the extent permitted by law,
indemnify and hold harmless the Investor, each of the officers, directors,
agents, Affiliates, members, managers, control persons, and principal
shareholders of the Investor, each underwriter of such Registrable Shares
thereunder and each other person, if any, who controls such Investor or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Investor, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Shares was registered under the 1933 Act pursuant
to Section 7.1, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will, subject to the provisions of
Section 7.1(f)(iii), reimburse the Investor, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however,
that the Company shall not be liable to the Investor solely to the extent
that any such damages arise out of or are based upon an untrue statement or
omission made in any preliminary prospectus if (i) (A) the Investor failed to
send or deliver a copy of the final prospectus delivered by the Company to the
Investor with or prior to the delivery of written confirmation of the sale by
the Investor to the person asserting the claim from which such damages arise and
(B) the final prospectus would have corrected such untrue statement or alleged
untrue statement or such omission or alleged omission, or (ii) any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Investor in writing specifically for use
in such registration statement or prospectus.

     

    
      
        
           

        

        
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    (ii)  In
the event of a registration of any of the Registrable Shares under the 1933 Act
pursuant to Section 7.1, each Investor, severally but not jointly, will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter
within the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Shares were registered under the 1933 Act pursuant
to Section 7.1, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however,
that the Investor will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Investor, as such, furnished in writing to the Company by such Investor
specifically for use in such registration statement or prospectus, and provided, further,
however, that the liability of the Investor hereunder shall be limited to
the net proceeds actually received by the Investor from the sale of Registrable
Shares pursuant to such registration statement.

     

    
      
        
           

        

        
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    (iii) Promptly
after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 7.1(f)(iii) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 7.1(f)(iii),
except and only if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7.1(f)(iii) for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected,
provided,
however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnifying party shall
have reasonably concluded that there may be reasonable defenses available to
indemnified party which are different from or additional to those available to
the indemnifying party or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified parties, as a group, shall have the right to select one separate
counsel, reasonably satisfactory to the indemnified and indemnifying party, and
to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.

     

    (iv) In
order to provide for just and equitable contribution in the event of joint
liability under the 1933 Act in any case in which either (i) a Investor, or any
controlling person of a Investor, makes a claim for indemnification pursuant to
this Section 7.1(f) but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 7.1(f) provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Investor or
controlling person of the Investor in circumstances for which indemnification is
not provided under this Section 7.1(f); then, and in each such case, the Company
and the Investor will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Investor is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Investor will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation and provided, further, however,
that the liability of the Investor hereunder shall be limited to the net
proceeds actually received by the Investor from the sale of Registrable Shares
pursuant to such registration statement.

     

    
      
        
           

        

        
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    7.2     Listing.  The
Company will use its best efforts to achieve the quotation or listing of its
common stock (the “Uplisting”) on the
American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq
Global Select Market or New York Stock Exchange (the “Uplisted Market”), by
the one year anniversary of the Closing Date (the “Uplisting
Date”).  If the Company does not achieve Uplisting on an
Uplisted Market by the Uplisting Date, the Company shall pay to each Investor,
an amount in cash, as partial liquidated damages and not as a penalty, equal to
0.5% of the Purchase Price paid by such Investor pursuant to this Agreement on
the Uplisting Date and an additional 0.5% of the aggregate Purchase Price paid
for each thirty (30) day period that this Section is not complied with until the
Uplisting is completed; provided, however, in
no event shall the penalty payable under this Section 7.2 together with the
penalty paid under Section 7.1 exceed 6% of the Purchase Price.

    

    7.3   
Right of First
Refusal.   During the period from the Closing Date through
and including the second anniversary of the effective date of the
Registration Statement, the Investors shall be given not less than ten business
days prior written notice (the “Notice of Sale”) of
any proposed sale by the Company of its common stock or other securities or debt
obligations, except in connection with (i) full or partial consideration in
connection with a strategic merger, acquisition, consolidation or purchase of
substantially all of the securities or assets of corporation or other entity
which holders of such securities or debt are not at any time granted
registration rights, (ii) the Company’s issuance of securities in connection
with strategic license agreements and other partnering arrangements so long as
such issuances are not for the purpose of raising capital and which holders of
such securities or debt are not at any time granted registration rights, (iii)
the Company’s issuance of common stock or the issuances or grants of options to
purchase common stock to employees, directors, and consultants, and (iv)
securities upon the exercise or exchange of or conversion of any securities
exercisable or exchangeable for or convertible into shares of common stock
issued and outstanding on the date of this Agreement and described on Schedule 1
(collectively the foregoing are “Excepted
Issuances”).  The Investors shall have the right during the ten
business days following receipt of the Notice of Sale (the “Notice Period”) to
purchase in the aggregate such offered common stock, debt or other securities
strictly in accordance with the terms and conditions set forth in the Notice of
Sale in the same proportion as that of the Investor’s Purchase Shares in the
Offering.  In the event such terms and conditions are modified during
the Notice Period, the Investors shall be given prompt notice (the “Notice of
Modification”) of such modification and shall have the right during the
ten business days following the Notice of Modification to exercise such purchase
right strictly in accordance with the terms and conditions set forth in the
Notice of Modification in the same proportion as that of the Investor’s Purchase
Shares in the Offering.

     

    7.4     Termination
Fee.  The Investors shall be entitled to a fee in the amount of
$500,000 as liquidated damages and not as a penalty if (i) prior to the Closing
Date, the Company or any of its Affiliates accepts or approves any proposal
(other than that of the Investors) that provides equity of debt financing to the
Company (an “Alternative
Transaction”) or (ii) the Company fails to meet any of the Closing
conditions set out in Section 5 within 30 days after the Investors are ready,
willing and able to consummate this Agreement in accordance with the terms
hereof.  The fee payable under this Section 7.4(i) shall be payable on
the date of acceptance or approval of the Alternate Transaction and the fee
payable under this Section 7.4(ii) shall be payable 30 days after the Investors
are ready, willing and able to consummate this Agreement in accordance with the
terms hereof.  Notwithstanding the foregoing provisions of this
Section 7.4, no fee will be payable to Investors under this Section 7.4 if the
Investors terminate this Agreement prior to the Closing Date for any reason
other than (a) due to the Company’s willful failure to meet any of the Closing
conditions set out in Section 5, which, in
the opinion of the Investors is for the purpose of delaying or preventing the
Closing or (b) the Company’s failure to adhere to the Closing Date.

     

    
      
        
           

        

        
          21

          
            

          

        

        
           

        

      

    

     

    7.5     Indemnification.    Each
Investor understands that the Purchased Securities are being offered and sold in
reliance on a transactional exemption from the registration requirement of
Federal and state securities laws and the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of the Investor to acquire
the Purchased Securities. The Company agrees to indemnify, hold harmless,
reimburse and defend the Investors, the Investors’ officers, directors, agents,
Affiliates, members, managers, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Investors or any such person which results, arises out of or is based upon (i)
any material misrepresentation by the Company or breach of any representation or
warranty by the Company in this Agreement or in any Exhibits or Schedules
attached hereto in any Transaction Agreements, or (ii) after any applicable
notice and/or cure periods, any breach or default in performance by the Company
of any material covenant or undertaking to be performed by the Company
hereunder, or any other material agreement entered into by the Company and
Investors relating hereto.

     

    7.6    Publicity.     The
Company undertakes to file a Form 8-K describing the Offering on the fourth
business day after the Closing Date.  Such Form 8-K will be provided
to Investors for their review and approval (which shall not be unreasonably
withheld or delayed) at least one Trading Day before filing
thereof.  The Company agrees to timely file a Form D with respect to
the Purchased Securities if required under Regulation D and to provide a copy
thereof to each Investor promptly after such filing.

     

    7.7    Board of
Director and
CFO.  The Company shall promptly appoint an independent
director to its board as designated by the Investors Guerrilla Partners, LP
(“Guerrilla”) and Hua-Mei 21st Century
Partners, LP (“Hua-Mei”) and such Investors shall have the right to approve
(such approval not to be unreasonably withheld or delayed) the hiring of an
English speaking CFO after the Closing.

     

    
      
        
           

        

        
          22

          
            

          

        

        
           

        

      

    

     

    8.           Miscellaneous.

     

    8.1           Survival of
Warranties.  The warranties, representations and covenants of
the Company and the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing for a
period of three years.

     

    8.2           Successors and
Assigns.  Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of, and be binding upon,
the respective successors and assigns 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 assigns any rights,
remedies, obligations, or liabilities under, or by reason of, this Agreement,
except as expressly provided in this Agreement.

     

    8.3           Governing
Law.  This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law.  Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New
York or in the federal courts located in the state and county of New
York.  The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non
conveniens.  The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in personam jurisdiction of such
courts and hereby irrevocably waive trial by jury.  If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, or the Certificate, the substantially prevailing party shall be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be
entitled.   In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform to such statute or rule of law.  Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Agreements by mailing
a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
other manner permitted by law.  To the maximum extent permitted by
law, in no event will the Investors be liable for punitive damages arising out
of this Agreement or any of the Transaction Agreements.

     

    8.4           Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which, together, shall constitute one and the same
instrument.

     

    
      
        
           

        

        
          23

          
            

          

        

        
           

        

      

    

     

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

     

    8.6           Notices.  Except
as otherwise provided herein, all notices, requests, waivers and other
communications made pursuant to this Agreement shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the
other party, (b) when received by facsimile at the address and number for
such party set forth on the signature page hereto, (c) three (3) business
days after deposit in the U.S. mail with first class or certified mail receipt
requested, postage prepaid, and addressed to the other party as set on the
signature page hereto, or (d) the next business day after deposit with a
national overnight delivery service, postage prepaid, addressed to the parties
as set forth on the signature page below, with next business day delivery
guaranteed.  A party may change or supplement its addresses for the
purposes of receiving notice pursuant to this Section 8.6 by giving
the other parties written notice of the new address in the manner set forth
above.

     

    8.7           Finder’s
Fee.  Each party represents that it neither is nor will be
obligated for any finders’ fee or commission in connection with this
transaction.  Each Investor agrees to indemnify and hold harmless the
Company from any liability for any commission or compensation in the nature of a
finders’ fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees or representatives is responsible, and the Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finder’s fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.

     

    8.8           Expenses.  The
Company and the Investors shall each bear their own expenses and legal fees
incurred on the behalf of each with respect to this Agreement and the
transactions contemplated hereby; provided, however,
that the Company shall pay Guerrilla and Hua-Mei an aggregate of $40,000 on or
before the Closing Date to cover reasonable fees and actual out-of-pocket
expenses incurred by the Investors for due diligence and investment
documentation, including legal expenses.

     

    8.9           Amendments and
Waivers.  Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the shares of
Series A Preferred then outstanding.  Any amendment or waiver effected
in accordance with this Section 8.9 shall be
binding upon each holder of outstanding shares of Series A
Preferred.

     

    8.10           Severability.  If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

     

    
      
        
           

        

        
          24

          
            

          

        

        
           

        

      

    

     

    8.11           Further
Assurances.  The Company and the Investors shall take all
further actions and execute and deliver all further documents that are
reasonably be required to effect the transactions contemplated by this
Agreement.

     

    8.12           Entire
Agreement.  This Agreement and the documents referred to herein
constitute the entire agreement and understanding among the parties hereto and
supercede all prior negotiations and agreements, whether oral or
written.

     

    *           *           *

    

    
      
        
           

        

        
          25

          
            

          

        

        
           

        

      

    

     

    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        GRANTO,
      INC.

                                      	 
      	
                                        INVESTORS:

                                      
	 
      	 
      	 
      	 
      
	
                                        By:

                                      	
                                        /s/
      Kelvin Chan 

                                      	 
      	
                                        Guerrilla
      Partners, LP

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	
                                        Name:
      Kelvin Chan

                                      	 
      	
                                        By:

                                      	
                                        /s/
      Leigh S. Curry

                                      
	 
      	
                                        Title:
      President

                                      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Name:
      Managing Director

                                      
	Address:	 
      	 
      
	Dongdu
      Room 321,	 
      	
                                        Number
      of Shares:

                                      
	No.475
      Huanshidong Road	 
      	 
      
	Guangzhou
      City	 
      	
                                        Total
      Purchase Price:

                                      
	People’s
      Republic of China 510075	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Address:

                                      
	Phone:
      011-86-20-8762-1778	 
      	 
      	
                                        237
      Park Avenue 9th Floor

                                      
	 	 
      	 
      	
                                        New
      York, NY 10017

                                      
	Fax:
      011-86-20-8762-2136  	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Hua-Mei
      21st
      Century Partners, LP

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        By:

                                      	
                                        /s/
      Leigh S. Curry

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Name:
      Managing Director

                                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Number
      of Shares:

                                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Total
      Purchase Price:

                                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Address:

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                                        237
      Park Avenue 9th Floor

                                      
	 
      	 
      	 
      	 
      	
                                        New
      York, NY 10017

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        [          ]

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        By:

                                      	  
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Name:

                                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Number
      of Shares:

                                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Total
      Purchase Price:

                                      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                                        Address:

                                      

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
      
        	
                Exhibit A

              	 
      	
                Series
      A Warrant

              
	 
      	 
      	 
      
	
                Exhibit
      B

              	 
      	
                Series
      B Warrant

              
	 
      	 
      	 
      
	
                Exhibit
      C

              	 
      	
                Certificate
      of Designations, Preferences and Rights of Series A preferred Stock the
      Company

              
	 
      	 
      	 
      
	
                Exhibit
      D

              	 
      	
                Form
      of Legal Opinion

              
	 
      	 
      	 
      
	
                Exhibit E

              	 
      	
                Escrow
      Agreement

              
	 
      	 
      	 
      
	
                Exhibit
      F

              	 
      	
                Share
      Exchange Agreement

              

      

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
1

    

    Schedule of
Exceptions

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    GRANTO,
INC.

     

    PREFERRED
STOCK PURCHASE AGREEMENT

     

    March
__, 2010

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