Document:

chxd_8k-10x1.htm

    Exhibit 10.1

     

    SECURITIES
PURCHASE AGREEMENT

     

    SECURITIES
PURCHASE AGREEMENT (the "Agreement"), dated as of
November 27, 2009, by and among China XD Plastics Company Ltd., a Nevada
corporation, with headquarters located at No. 9 Qinling Road, Yingbin Road
Centralized Industrial Park Harbin Development Zone, Heilongjiang, China 150078
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" and collectively, the "Buyers").

    

    WHEREAS:

     

    A. The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC") under the 1933
Act.

     

    B. The
Company has authorized a new series of convertible preferred stock of the
Company designated as Series C Convertible Preferred Stock, the terms of which
are set forth in the certificate of designation for such series of preferred
stock (the "Certificate of
Designations") in the form attached hereto as Exhibit A (together
with any convertible preferred shares issued in replacement thereof in
accordance with the terms thereof, the "Preferred Shares"), which
Preferred Shares shall be convertible into the Company's common stock, par value
$0.0001 per share (the "Common
Stock"), in accordance with the terms of the Certificate of Designations
(as converted, collectively, the "Conversion
Shares").

     

    C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of Preferred
Shares set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate number for all Buyers shall be 15,188) and (ii) (A) a
Series A Warrant representing the right to acquire initially up to that number
of additional shares of Common Stock set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers (the "Series A Warrants"), in
substantially the form attached hereto as Exhibit B-1 (as
exercised, collectively, the "Series A Warrant Shares"), (B)
a Series B Warrant representing the right to acquire initially up to that number
of additional shares of Common Stock set forth opposite such Buyer's name in
column (5) on the Schedule of Buyers (the "Series B Warrants", and
together with the Series A Warrant, the "Warrants"), in substantially
the form attached hereto as Exhibit B-2 (as
exercised, collectively, the "Series B Warrant Shares", and
together with the Series A Warrant Shares, the "Warrant Shares").

     

    D. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the
form attached hereto as Exhibit C (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement), under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities
laws.

     

    E. The
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities".

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    NOW, THEREFORE, the Company
and each Buyer hereby agree as follows:

     

    1. PURCHASE
AND SALE OF PREFERRED STOCK AND WARRANTS.

     

    (a) Preferred Shares and
Warrants.  Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and sell
to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), (i) the number of
Preferred Shares as is set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers and (ii) (A) Series A Warrants to acquire initially up to
that number of Warrant Shares as is set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers and (B) Series B Warrants to acquire
initially up to that number of Warrant Shares as is set forth opposite such
Buyer's name in column (5) on the Schedule of Buyers.

     

    (b) Closing.  The
closing (the "Closing")
of the purchase of the Preferred Shares and the Warrants by the Buyers shall
occur at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New
York, New York 10022.  The date and time of the Closing (the "Closing Date") shall be 10:00
a.m., New York City time, on the date hereof after the satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below (or such
other date and time as is mutually agreed to by the Company and each
Buyer).

     

    (c) Purchase
Price.  The aggregate purchase price for the Preferred Shares
and the Warrants to be purchased by each Buyer (the "Purchase Price") shall be the
amount set forth opposite such Buyer's name in column (6) on the Schedule of
Buyers.  Each Buyer shall pay $1,000 for each Preferred Share and
related Warrants to be purchased by such Buyer at the Closing.

     

    (d) Form of
Payment.  On the Closing Date, (A) each Buyer shall pay its
portion of the Purchase Price to the Company for the Preferred Shares and the
Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions (less, in the case of Empery Asset  Master Ltd. ("Empery") the amount withheld
pursuant to Section 4(g)) and (B) the Company shall deliver to each Buyer
the Preferred Shares (in such denominations as is set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers), along with the Warrants
(exercisable for the number of shares of Common Stock as is set forth opposite
such Buyer's name in columns (4) and (5) on the Schedule of Buyers), each duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.

     

    2. BUYER'S REPRESENTATIONS AND
WARRANTIES.

     

    Each
Buyer, severally and not jointly, represents and warrants with respect to only
itself that, as of the date hereof and as of the Closing Date:

     

    (a) Organization;
Authority.  Such Buyer is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.

     

     

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    (b) No Public Sale or
Distribution.  Such Buyer is (i) acquiring the Preferred Shares
and the Warrants, (ii) upon conversion of the Preferred Shares will acquire the
Conversion Shares and (iii) upon exercise of the Warrants will acquire the
Warrant Shares, in each case, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.  Such Buyer
is acquiring the Securities hereunder in the ordinary course of its
business.  Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person (as defined in Section
3(s)) to distribute any of the Securities.

     

    (c) Accredited Investor
Status.  Such Buyer is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D.

     

    (d) Reliance on
Exemptions.  Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

     

    (e) Information.  Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such
Buyer.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.  Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein.  Such Buyer understands that its investment in the Securities
involves a high degree of risk.  Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.

     

    (f) No Governmental
Review.  Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

     

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    (g) Transfer or
Resale.  Such Buyer understands that except as provided in the
Registration R 

      
      
ights Agreement: (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance,
including reasonable representations and warranties, that such Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
"Rule 144"); (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person) through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder.  Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined in Section
3(b)), including, without limitation, this Section 2(g).

     

    (h) Legends.  Such
Buyer understands that the certificates or other instruments representing the
Preferred Shares and the Warrants and, until such time as the resale of the
Conversion Shares and the Warrant Shares have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear a restrictive legend in substantially the following form (and
a stop-transfer order may be placed against transfer of such stock
certificates):

     

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

     

     

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    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company ("DTC"), if (i) such Securities
are registered for resale under the 1933 Act, (ii) in connection with a sale,
assignment or other transfer, provided such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) in connection with a
sale pursuant to Rule 144 if such holder provides the Company with reasonable
assurance, including reasonable representations and warranties, that the
Securities are being sold, assigned or transferred pursuant to Rule
144.  The Company shall be responsible for the fees of its transfer
agent, the costs of any legal opinions required by its transfer agent and all
DTC fees associated with such issuance.

     

    (i) Validity;
Enforcement.  This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.

     

    (j) No
Conflicts.  The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order,
judgment  or decree (including federal and state securities laws)
applicable to such Buyer, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of such Buyer to perform its obligations hereunder.

     

    (k) Residency.  Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.

     

    (l) Buyer’s Purchase of
Securities.  Such Buyer is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an "affiliate" of
the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) a
"beneficial owner" of more than 10% of the shares of Common Stock (as defined
for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "1934
Act")).  No Buyer is acting as a financial advisor or fiduciary
of the Company or any of its Subsidiaries (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer's purchase of
the Securities.

     

     

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    (m) Brokers and
Finders.  No Buyer will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding with a placement agent
entered into by or on behalf of such Buyer.

     

    (n) General
Solicitation.  Such Buyer, to its knowledge, is not purchasing
the Securities as a result of any “general solicitation” or “general
advertising,” as such terms are defined in Regulation D, which includes, but is
not limited to, any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or on the internet or broadcast over television, radio or the internet or
presented at any seminar or any other general solicitation or general
advertisement.

     

    (o) Short Sales and
Confidentiality Prior To The Date Hereof.  Other than
consummating the transactions contemplated hereunder, such Buyer has not, nor
has any Person acting on behalf of or pursuant to any understanding with such
Buyer, directly or indirectly executed any purchases or sales, including "short
sales", as defined in Rule 200 of Regulation SHO under the 1934 Act, of the
Common Stock, of the securities of the Company during the period commencing from
the time that such Buyer first received a term sheet (written or oral) from the
Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder until the date hereof (“Discussion
Time”).  Notwithstanding the foregoing, in the case of a Buyer
that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Buyer’s assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Buyer’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.  Other than to other Persons party to this
Agreement, such Buyer has maintained the confidentiality of all disclosures made
to it in connection with this transaction (including the existence and terms of
this transaction).

     

    3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

     

    The
Company represents and warrants to each of the Buyers that, as of the date
hereof and as of the Closing Date:

     

    (a) Organization and
Qualification.  Each of the Company and its "Subsidiaries" (which for
purposes of this Agreement means any joint venture or any entity in which the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted.  Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect.  As used in
this Agreement, "Material
Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, individually or
taken as a whole, or on the transactions contemplated hereby or in the other
Transaction Documents or by the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Transaction Documents (as defined
below).  The Company has no Subsidiaries except as set forth on Schedule
3(a).

     

     

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    (b) Authorization; Enforcement;
Validity.  The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Certificate of Designations, the Warrants, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Lock-Up Agreements (as defined in Section 7(j)) and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents") and to
issue the Securities in accordance with the terms hereof and
thereof.  The execution and delivery of the Transaction Documents by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Preferred
Shares, the reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion of the Preferred Shares, the issuance of the Warrants
and the reservation for issuance and issuance of the Warrant Shares issuable
upon exercise of the Warrants have been duly authorized by the Company's board
of directors and (other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) the filing with the SEC of a Form D and (iii) any other
filings as may be required by any state securities agencies), no further filing,
consent, or authorization is required by the Company, its board of directors or
its stockholders.  This Agreement and the other Transaction Documents
of even date herewith have been duly executed and delivered by the Company, and
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.  The Certificate of Designations in the form
attached hereto as Exhibit A
has  been filed with the Secretary of State of the State of Nevada and
is in full force and effect, enforceable against the Company in accordance with
its terms and has not been amended.

     

    (c) Issuance of
Securities.  The issuance of the Preferred Shares and the
Warrants are duly authorized and upon issuance in accordance with the terms of
the Transaction Documents shall be free from all taxes, liens and charges with
respect to the issue thereof, and the Preferred Shares shall be entitled to the
rights and preferences set forth in the Certificate of
Designations.  As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which equals 130% of
the sum of (i) the maximum number of shares of Common Stock issuable upon
conversion of the Preferred Shares (assuming for purposes hereof, that the
Preferred Shares are convertible at the Conversion Price and without taking into
account any limitations on the conversion of the Preferred Shares set forth in
the Certificate of Designations) and (ii) the maximum number of shares of Common
Stock issuable upon exercise of the Warrants (without taking into account any
limitations on the exercise of the Warrants set forth in the
Warrants).  Upon issuance or conversion in accordance with the
Certificate of Designations or exercise in accordance with the Warrants, as the
case may be, the Conversion Shares and the Warrant Shares, respectively, will be
validly issued, fully paid and nonassessable and free from all preemptive or
similar rights, taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common
Stock.  Subject to the accuracy of the representations and warranties
of the Buyers in this Agreement, the offer and issuance by the Company of the
Securities is exempt from registration under the 1933 Act.

     

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    (d) No
Conflicts.  Except as set forth on Schedule 3(d), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Preferred Shares,
the Warrants, and reservation for issuance of the Conversion Shares and the
Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation (as defined in Section 3(r)) of the Company or any certificate of
incorporation, certificate of formation, any certificate of designations or
other constituent document of any of its Subsidiaries, any capital stock of the
Company or Bylaws (as defined in Section 3(r)) or the Certificate of
Designations or Existing Certificates of Designations (as defined in Section
3(r)) of the Company or any of its Subsidiaries bylaws, or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the national securities exchange or automated quotation system,
if any, upon which the Common Stock is then listed (the "Principal Market") and of the
People's Republic of China ("China")) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected.

     

    (e) Consents.  The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case in accordance with the terms hereof or
thereof, other than the consent of the holders of the Series B Preferred Stock
(as defined in Section 3(r) below) pursuant to Section 3(b) of the Series B
Certificate of Designations (as defined in Section 3(r) below).  All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date, and the Company and its Subsidiaries
are unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any consent, registration, application or filings
pursuant to the preceding sentence.  The Company is not in violation
of the requirements of the Principal Market and has no knowledge of any facts
that would reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.

     

    (f) Acknowledgment Regarding
Buyer's Purchase of Securities.  The Company acknowledges and
agrees that each Buyer is acting solely in the capacity of arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company or any of its Subsidiaries, (ii) an "affiliate" of the Company or
any of its Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of
the Company, a "beneficial owner" of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the "1934
Act")).  The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer's purchase of the Securities.  The
Company further represents to each Buyer that the Company's decision to enter
into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.

     

     

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    (g) No General Solicitation;
Placement Agent's Fees.  Neither the Company, nor any of its
Subsidiaries or affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the
Securities.  The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby.  The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney's fees and out-of-pocket expenses)
arising in connection with any such claim.  The Company acknowledges
that it has engaged Rodman & Renshaw, LLC as placement agent (the "Agent") in connection with the
sale of the Securities.  Other than the Agent, neither the Company nor
any of its Subsidiaries has engaged any placement agent or other agent in
connection with the sale of the Securities.

     

    (h) No Integrated
Offering.  None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of the
Securities under the 1933 Act, whether through integration with prior offerings
or otherwise, or cause this offering of the Securities to require the approval
of the stockholders of the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated.  None
of the Company, its Subsidiaries, their affiliates and any Person acting on
their behalf will take any action or steps referred to in the preceding sentence
that would require registration of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with other offerings for
purposes of any such applicable stockholder approval provisions.

     

    (i) Dilutive
Effect.  The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Preferred Shares,
and, the Warrant Shares issuable upon exercise of the Warrants, will increase in
certain circumstances.  The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Designations, and its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute and
unconditional (subject to  any restrictions and limitations on
convertibility or exercisability, as applicable, by the Buyers, as set forth in
the Warrants and Certificate of Designations).  regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.

     

     

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    (j) Application of Takeover
Protections; Rights Agreement.  The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or any
certificates of designations or the laws of the jurisdiction of its formation or
incorporation which is or could become applicable to any Buyer as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and any Buyer's ownership of the
Securities.  The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Stock or a change in control of the Company.

     

    (k) SEC Documents; Financial
Statements.  Since December 24, 2008, the Company has, and to
the Company's knowledge during the period beginning on the date two (2) years
prior to the date hereof and ending on December 23, 2008 (the "Pre-Merger Period"), the
Company has, timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof or prior to the Closing Date, and all exhibits included therein and
financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC
Documents").  The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of each of the SEC
Documents not available on the EDGAR system that have been requested by each
Buyer.  As of their respective filing dates, the SEC Documents filed
since December 24, 2008, and, to the Company's knowledge, the SEC Documents
filed during the Pre-Merger Period, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.  As of their respective dates, the financial statements of
the Company included in the SEC Documents filed since December 24, 2008, and, to
the Company's knowledge, the SEC Documents filed during the Pre-Merger Period,
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto as in effect as of the time of filing.  Such financial
statements filed since December 24, 2008, and, to the Company's knowledge, those
filed during the Pre-Merger Period, have been prepared in accordance with United
States generally accepted accounting principles, consistently applied, during
the periods involved ("GAAP"), (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided by or on behalf of the
Company to the Buyers which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(e) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made not misleading.

     

     

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    (l) Absence of Certain
Changes.  Except as disclosed in Schedule 3(l), since
December 31, 2008 there has been no material adverse change and no material
adverse development in the business, assets, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries.  Except as disclosed in Schedule 3(l), since
December 31, 2008, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
(iii) had capital expenditures, individually or in the aggregate, in excess of
$100,000.  Neither the Company nor any of its Subsidiaries has taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so.  The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing as of the Closing Date will not, be Insolvent (as defined
below).  For purposes of this Section 3(l), "Insolvent" means, with respect
to any Person (i) the present fair saleable value of such Person's assets is
less than the amount required to pay such Person's total Indebtedness (as
defined in Section 3(s)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

     

    (m) No Undisclosed Events,
Liabilities, Developments or Circumstances.  No event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.

     

    (n) Conduct of Business;
Regulatory Permits.  Neither the Company nor its Subsidiaries
is in violation of any term of or in default under its Certificate of
Incorporation, the Certificate of Designations, the Existing Certificates of
Designations (as defined below), any other certificate of designation,
preferences or rights of any other outstanding series of preferred stock of the
Company or Bylaws or their organizational charter or certificate of
incorporation or bylaws, respectively. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or its Subsidiaries, and
neither the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except in all cases for possible violations
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Without limiting the generality of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable
future.  During the two (2) years prior to the date hereof, (i) the
Common Stock has been designated for quotation on the Principal Market, (ii)
trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Common Stock from the Principal Market.  The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

     

     

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    (o) Foreign Corrupt
Practices.  Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

     

    (p) Sarbanes-Oxley
Act.  The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof.

     

    (q) Transactions With
Affiliates.  Except as set forth on Schedule 3(q), none
of the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.

     

    (r) Equity
Capitalization.  As of the date hereof, the authorized capital
stock of the Company consists of (i) 500,000,000 shares of Common Stock, of
which as of the date hereof, 40,809,898 are issued and outstanding and
6,076,667 shares are reserved for issuance pursuant to securities (other
than the Preferred Shares and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock, (ii) 50,000,000 shares
of  Preferred Stock, of which (a) 1,000,000 shares were designated as
series A preferred stock (the "Series A Preferred Stock", and
the certificate of designations with respect to the Series A Preferred Stock,
the "Series A Certificate of
Designations"), none of which, as of the date hereof, are issued and
outstanding and (b) 1,000,000 shares were designated as series B preferred stock
(the "Series B Preferred
Stock") and the certificate of designations with respect to the Series B
Preferred Stock, the "Series B
Certificate of Designations" and together with the Series A Certificate
of Designations, the "Existing
Certificates of Designations"), 1,000,000 of 

     

     

    
      
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      which, as
of the date hereof, are issued and outstanding.  All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable.  Except as set forth on Schedule 3(r): (i)
none of the Company's capital stock is subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.  The
Company has furnished to the Buyers true, correct and complete copies of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of
Incorporation"), and the Company's Bylaws, as amended and as in effect on
the date hereof (the "Bylaws"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect
thereto.

    

     

    (s) Indebtedness and Other
Contracts.  Except as set forth on Schedule 3(s),
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect.  Schedule 3(s)
provides a detailed description of the material terms of any such outstanding
Indebtedness.  For purposes of this Agreement:  (x) "Indebtedness" of any

     

     

    
      
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Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, "capital leases" in
accordance with GAAP) (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP is classified as a
capital lease, (G) all indebtedness referred to in clauses (A) through (F) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) "Contingent Obligation" means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof, including in China.

    

     

    (t) Absence of
Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company's Subsidiaries or any
of the Company's or its Subsidiaries' officers or directors, whether of a civil
or criminal nature or otherwise.

     

    (u) Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged in
China.  Neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for and neither the Company nor any
such Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

     

     

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    (v) Employee
Relations.  (i)  Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union.  The Company and its Subsidiaries believe that
their relations with their employees are good.  No executive officer
of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the 1933
Act) has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such
officer's employment with the Company or any such Subsidiary.  No
executive officer of the Company or any of its Subsidiaries is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.

     

    (ii) The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.

     

    (w) Title. The Company
and its Subsidiaries have land use rights as permitted under China law with
respect to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries.   Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.

     

    (x) Intellectual Property
Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, original works of
authorship, trade secrets and other intellectual property rights and all
applications and registrations therefor ("Intellectual Property Rights")
necessary to conduct their respective businesses as now
conducted.  All of the Company's material Intellectual Property Rights
and relevant applications therefor have been duly registered by the China Patent
and Trademark Office, or the equivalent offices of non-US jurisdictions, and
have been properly maintained in accordance with applicable law in China and
such other jurisdictions.  None of the Company's or its Subsidiaries'
material Intellectual Property Rights have expired or terminated or have been
abandoned or are expected to expire or terminate or are expected to be
abandoned, within three years from the date of this Agreement.  The
Company does not have any knowledge of any infringement by the Company or any of
its Subsidiaries of Intellectual Property Rights of others.  There is
no claim, action or proceeding being made or brought, or to the knowledge of the
Company or any of its Subsidiaries, being threatened, against the Company or any
of its Subsidiaries regarding its material Intellectual Property
Rights.  Neither the Company nor any of its Subsidiaries is aware of
any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property
Rights.

     

     

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    (y) Environmental
Laws.  The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws (as hereinafter defined), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.  The term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

     

    (z) Subsidiary
Rights.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

     

    (aa) Tax
Status.  The Company and each of its Subsidiaries (i) has made
or filed all China and other foreign, U.S. federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.  There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.

     

    (bb) Internal Accounting and
Disclosure Controls.  The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference.  The Company maintains disclosure controls and procedures
(as such term is defined in Rule 13a-14 under the 1934 Act) that are effective
in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed in to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is accumulated and
communicated to the Company's management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required
disclosure.  During the twelve months prior to the date hereof neither
the Company nor any of its Subsidiaries have received any notice or
correspondence from any accountant relating to any potential material weakness
in any part of the system of internal accounting controls of the Company or any
of its Subsidiaries.

     

     

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    (cc) Off Balance Sheet
Arrangements.  There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its 1934 Act
filings and is not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.

     

    (dd) Investment Company
Status.  The Company is not, and upon consummation of the sale
of the Securities, and for so long as any Buyer holds any Securities, will not
be, an "investment company," a company controlled by an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of  1940, as amended.

     

    (ee) Transfer
Taxes.  On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and all
laws imposing such taxes will be or will have been complied with.

     

    (ff) Acknowledgement Regarding
Buyers' Trading Activity.  The Company understands and
acknowledges (i) that, except as set forth in Section 4(p), none of the Buyers
have been asked by the Company or its Subsidiaries to agree, nor has any Buyer
agreed with the Company or its Subsidiaries, to desist from purchasing or
selling, long and/or short, securities of the Company, or "derivative"
securities based on securities issued by the Company or to hold the Securities
for any specified term and (ii) that each Buyer shall not be deemed to have any
affiliation with or control over any arm's length counterparty in any
"derivative" transaction.  The Company further understands and
acknowledges that (a) one or more Buyers may engage in hedging and/or trading
activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Conversion Shares and the Warrant Shares deliverable with respect to
Securities are being determined (except as set forth in Section 4(p) below) and
(b) such hedging and/or trading activities, if any, can reduce the value of the
existing stockholders' equity interest in the Company both at and after the time
the hedging and/or trading activities are being conducted.  The
Company acknowledges that such aforementioned hedging and/or trading activities
do not constitute a breach of this Agreement, the Certificate of Designations,
the Warrants or any of the documents executed in connection
herewith.

     

     

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    (gg) Manipulation of
Price.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities (except for the Agent) or (iii)
paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.

     

    (hh) U.S. Real Property Holding
Corporation.  The Company is not, has never been, and so long
as any Securities remain outstanding, shall not become, a U.S. real property
holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company shall so certify upon any Buyer's
request.

     

    (ii) Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries or
affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
"BHCA") and to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve").  Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.  Neither
the Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

     

    (jj) China
Subsidiaries.

     

    (i) Schedule 3(jj) sets
forth, for each Subsidiary that is incorporated in China, not including Hong
Kong (a "China
Subsidiary"), (i) the legal classification of such entity under the
applicable company laws and foreign investment laws of China, including true and
correct copies of the relevant currently effective business license by the
relevant China governmental approval authority for the location in which the
Subsidiary maintains an office or premises for business operations; (ii) the
total registered capital; (iii) the holders of record of the registered capital;
(iv) the authorized legal representative, directors, officers, legal address and
each business address, as well as the original China approval authority and
China governmental authority with current jurisdiction over the entity; and (v)
any agreements with respect to the registered capital, including outstanding
securities, contracts, commitments or arrangements granting any party the right
to obtain any equity ownership of the Subsidiary.

     

    (ii) For each
China Subsidiary the holders of record of its registered capital have
contributed in full its subscribed share of the entity's registered capital
pursuant to the articles of association and, as applicable, relevant joint
venture contracts, and all such contributions have been verified and certified
by a Chinese registered public accountant according to applicable China law,
approved by all relevant China governmental authorities and fully paid, and
verification certificates have been issued to each such holder of record or
previous investor accordingly.  All previous transfers or assignments
of registered capital have been approved by the relevant China governmental
authorities and all necessary corporate action.

     

     

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    (iii) Each
Subsidiary incorporated in China is a limited liability company duly organized,
validly existing and in good standing under the applicable company laws and, as
applicable, the foreign investment laws of China, has, as applicable, the status
of a foreign investment enterprise, and is a legal person with all requisite
corporate power to own (to the extent permitted under the laws of China), lease
and operate its properties and to carry on its business as now being conducted
in each place where its business is conducted.  Each China Subsidiary
and its business operations are in compliance with the terms and conditions of
its business license, joint venture contract (where applicable) and articles of
association.  The construction of the China Subsidiary's operating
facilities and operation of its business is and has been in full compliance with
its relevant feasibility study and business license, as
applicable.  Each Subsidiary has received all authorizations,
approvals, license, permits and other rights from China governmental authorities
necessary and appropriate for the continued operation of the Company's business,
except for such authorizations, approvals, license, permits and other rights
which would not result in a Material Adverse Effect.

     

    (iv) All
necessary approvals from China governmental authorities have been received to
ensure that each China Subsidiary will continue to enjoy, to the extent
permitted by applicable China law, all of the tax clearances, concessions and
other benefits available to such China Subsidiary prior to the Closing Date, or
otherwise available under applicable China law to foreign investment enterprises
similarly situated.

     

    (v) Each
Subsidiary is and has been in material compliance with applicable China laws
relating to its relationship to its employees or suppliers or to any
governmental taxing or customs authority, and relating to any other aspect of
its business.  Each Subsidiary is in compliance with applicable China
law relating to anti-competitive practices, price fixing, and environmental
matters, respectively, and, to its knowledge, there are no proceedings pending
or to the knowledge of the Company and the Subsidiaries, threatened regarding
any violation by it of applicable China law, including work safety,
environmental and employment laws.

     

    (vi) Each
Subsidiary has obtained all required China product registrations for the
products related to its business.

     

    (kk) Stock Option Plans.
Each stock option granted by the Company was granted (i) in accordance with the
terms of the applicable Company stock option plan and (ii) with an exercise
price at least equal to the fair market value of the Common Stock on the date
such stock option would be considered granted under GAAP and applicable law. No
stock option granted under the Company's stock option plan has been
backdated.  The Company has not knowingly granted, and there is no and
has been no Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options with, the
release or other public announcement of material information regarding the
Company or its Subsidiaries or their financial results or
prospects.

     

    (ll) Eligibility for
Registration.  Following the listing of the Common Stock on The
NASDAQ Global Market, which is anticipated to commence on or around November 27,
2009, the Company will be eligible to register the Conversion Shares and the
Warrant Shares for resale by the Buyers using Form S-3 promulgated under the
1933 Act.

     

     

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    (mm) Rule
144(i).  For purposes of confirming the availability to the
Buyers of Rule 144 upon satisfaction of the requisite holding period, the
Company hereby represents and warrants that it (i) has ceased to be an issuer
described in Rule 144(i)(1)(i); (ii) is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act; (iii) has filed all reports and other
materials required to be filed by Section 13 or 15(d) of the 1934 Act, as
applicable, during the preceding 12 months (or for such shorter period that the
Company was required to file such reports and materials), other than Form 8-K or
Form 6-K reports; and (iv) has filed current "Form 10 information" with the SEC
reflecting its status as an entity that is no longer an issuer described in Rule
144 (i)(1)(i) at least six months prior to the date hereof.

     

    (nn) Disclosure.  Other
than the terms of the transactions contemplated hereby, which shall be publicly
disclosed pursuant to Section 4(i), the Company confirms that neither it nor any
other Person acting on its behalf has or will provide any of the Buyers or their
agents or counsel with any information that constitutes or could reasonably be
expected to constitute material, nonpublic information, and if any such
disclosure were to occur the Company acknowledges and agrees that none of the
Buyers owes any duty of confidentiality to the Company or any such Person acting
on its behalf.  The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company.  All disclosure provided to the Buyers
regarding the Company and its Subsidiaries, their business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.  Each press release issued
by the Company or its Subsidiaries during the twelve (12) months preceding the
date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not
misleading.  No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or either of their
respective businesses, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.

     

    (oo) Accountants.  The
Company’s accounting firm is set forth on Schedule
3(oo).  To the knowledge of the Company, such accounting firm:
(i) is a registered public accounting firm as required by the 1934 Act and (ii)
issued its opinion with respect to the financial statements included in the
Company’s Annual Report for the year ending December 31, 2008.

     

    (pp) No Disagreements with
Accountants or
Lawyers.  There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise, between the Company
and the accountants or lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and
lawyers which could affect the Company’s ability to perform any of its
obligations under any of the Transaction Documents.

     

     

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    4. COVENANTS.

     

    (a) Best
Efforts.  Each party shall use its best efforts timely to
satisfy each of the covenants and conditions to be satisfied by it as provided
in Sections 4, 5, 6 and 7 of this Agreement.

     

    (b) Form D and Blue
Sky.  The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing.  The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.  The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.

     

    (c) Reporting
Status.  Until the earlier of (i) the date on which the Buyers
shall have sold all the Conversion Shares and Warrant Shares, and none of the
Preferred Shares or Warrants is outstanding
and (ii) the date on which the Buyers may sell all of the Common Shares,
Warrants and Warrant Shares without restriction or limitation pursuant to Rule
144 and without the requirement to be in compliance with Rule 144(c)(1) (or any
successor rule thereto) promulgated under the 1933 Act (the "Reporting Period"), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would no longer require or otherwise permit such
termination, and after the Company becomes eligible to register the Conversion
Shares and Warrant Shares for resale by the Buyers on Form S-3 as contemplated
in Section 3(ll) above, the Company shall take all actions necessary to maintain
its eligibility to register the Conversion Shares and Warrant Shares for resale
by the Buyers on Form S-3.

     

    (d) Use of
Proceeds.  The Company shall use the proceeds from the sale of
the Securities for general corporate and for working capital purposes and not
for (A) repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (B) redemption or repurchase of any of its or its Subsidiaries'
equity securities.

     

    (e) Financial
Information.  The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day
after the filing thereof with the SEC, (i) a copy of its Annual Reports and
Quarterly Reports on Form 10-K or 10-Q, any interim reports or any consolidated
balance sheets, income statements, stockholders' equity statements and/or cash
flow statements for any period other than annual, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, and (ii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.  As used herein "Business Day" means any day
other than a Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

     

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    (f) Listing.  The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) on the Principal Market
(subject to official notice of issuance) and shall maintain such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents.  The Company shall maintain the Common Stocks'
authorization for quotation on the Principal Market or any Eligible Market (as
defined in the Warrants).  Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal
Market.  The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 4(f).

     

    (g) Fees.  The
Company shall reimburse Empery or its designee(s) (in addition to any other
expense amounts paid to any Buyer prior to the date of this Agreement) for all
reasonable costs and expenses, in an amount not to exceed $75,000, incurred in
connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence expenses in connection therewith), which
amount may be withheld by such Buyer from its Purchase Price at the Closing or
paid by the Company upon termination of this Agreement.  The Company
shall be responsible for the payment of any placement agent's fees or
commissions, financial advisory fees, or broker's commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent.  The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to  any such payment.

     

    (h) Pledge of
Securities.  The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities.  The pledge
of Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(g) of this Agreement;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(g) of this Agreement in order to effect a sale, transfer
or assignment of Securities to such pledgee.  The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Securities
may reasonably request in connection with a pledge of the Securities to such
pledgee by an Investor.

     

    (i) Disclosure of Transactions
and Other Material Information.  On or before 8:30 a.m., New
York City time, on the first Business Day following the date of this Agreement,
the Company shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement, the form
of Certificate of Designations, the form of Warrant, the form of the

     

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Registration
Rights Agreement and the form of Lock-Up Agreement) as exhibits to such filing
(including all attachments, the "8-K Filing").  Upon
the filing of the 8-K Filing with the SEC, no Buyer shall be in possession of
any material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing.  The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide any Buyer with any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing with the SEC without the express
written consent of such Buyer or as may be required under the terms of the
Transaction Documents.  If a Buyer has, or believes it has, received
any such material, nonpublic information regarding the Company or any of its
Subsidiaries, it may provide the Company with written notice
thereof.  The Company shall, within five (5) Trading Days (as defined
in the Certificate of Designations) of receipt of such notice, make public
disclosure of such material, nonpublic information.  In the event of a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, a
Buyer shall have the right to make a public disclosure, in the form of a press
release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or
agents.  No Buyer shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
stockholders or agents for any such disclosure.  Subject to the
foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions (i)
in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the
case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its
release).  Without the prior written consent of any applicable Buyer,
neither the Company nor any of its Subsidiaries or affiliates shall disclose the
name of such Buyer in any filing, announcement, release or otherwise, unless
such disclosure is required by law, regulation or the Principal
Market.

    

     

    (j) Additional Preferred Shares;
Variable Securities; Dilutive Issuances.   So long as any
Buyer beneficially owns any Preferred Shares, the Company will not, without the
prior written consent of Buyers holding at least two-thirds of the Securities,
issue any shares of Series C Preferred Stock (other than to the Buyers as
contemplated hereby) and the Company shall not issue any other securities that
would cause a breach or default under the Certificate of Designations or the
Warrants.  For so long as any Warrants remain outstanding, the Company
shall not, in any manner, issue or sell any rights, warrants or options to
subscribe for or purchase Common Stock or directly or indirectly convertible
into or exchangeable or exercisable for Common Stock at a conversion, exchange
or exercise price which varies or may vary after issuance with the market price
of the Common Stock, including by way of one or more reset(s) to any fixed
price.

     

     

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    (k) Corporate
Existence.  So long as any Buyer beneficially owns any
Securities, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company's assets and shall not be party to
any Fundamental Transaction (as defined in the Certificate of Designations)
unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Certificate of Designations and the
Warrants.

     

    (l) Reservation of
Shares.  The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than
130% of the sum of (i) the maximum number of shares of Common Stock
issuable upon conversion of the Preferred Shares (assuming for purposes hereof,
that the Preferred Shares are convertible at the then current Conversion Price
and without taking into account any limitations on the conversion of the
Preferred Shares set forth in the Certificate of Designations) and (ii) the
maximum number of shares of Common Stock issuable upon exercise of the Warrants
(without taking into account any limitations on the exercise of the Warrants set
forth in the Warrants).

     

    (m) Conduct of
Business.  The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

     

    (n) Public
Information.  At any time during the period commencing from the
six (6) month anniversary of the Closing Date and ending at such time that all
of the Securities can be sold either pursuant to a registration statement, or if
a registration statement is not available for the resale of all of the
Securities, may be sold without the requirement for the Company to be in
compliance with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a "Public Information Failure")
then, as partial relief for the damages to any holder of Securities by reason of
any such delay in or reduction of its ability to sell the Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in cash equal to
two percent (2.0%) of the aggregate Purchase Price of such holder's Securities
on the day of a Public Information Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) thereafter until the earlier of (i)
the date such Public Information Failure is cured and (ii) such time that such
public information is no longer required pursuant to Rule 144.  The
payments to which a holder shall be entitled pursuant to this Section 4(n) are
referred to herein as "Public
Information Failure Payments."  Public Information Failure Payments shall be paid
on the earlier of (I) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (II) the third Business Day after the event or failure giving rise to the
Public Information Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full.

     

    (o) Additional Issuances of
Securities.

     

    (i) For
purposes of this Section 4(o), the following definitions shall
apply.

     

     

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    (1) "Common Stock Equivalents"
means, collectively, Options and Convertible Securities.

     

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

     

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

     

    (ii) From the
date hereof until the date seven months and six Trading Days after the Closing
Date (the "Trigger
Date"), the Company will not, directly or indirectly, file any
registration statement with the SEC other than the Registration Statement (as
defined in the Registration Rights Agreement), provided that any Buyer that
participates in a Subsequent Placement (as defined below) will be deemed to have
waived this provision with respect to the filing of a registration statement in
connection with such Subsequent Placement.  From the date hereof until
the Trigger Date and at any time thereafter if (a) a Public Information Failure
has occurred and is continuing and (b) there is not an effective Registration
Statement covering all of the Registrable Securities at that time, the Company
will not, directly or indirectly, (i) offer, sell, grant any Option, or
otherwise dispose of (or announce any offer, sale, grant or any Option or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement") or (ii)
be party to any solicitations, negotiations or discussions with regard to the
foregoing, to the extent registration rights or public resale rights are granted
in any such Subsequent Placement; provided, however, subject to clause (iii)
below, this restriction shall not apply to any Subsequent Placement with the
entity set forth on Schedule
4(o).

     

    (iii) In
addition to the provisions above, until the date eighteen (18) months after the
Closing Date, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4(o)(iii).

     

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

     

     

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

     

    (3) The
Company shall have ten (10) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers
(the "Refused
Securities") pursuant to a definitive agreement (the "Subsequent Placement
Agreement") but only to the offerees described in the Offer Notice (if so
described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring person or persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.

     

    (4) In the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified in
its Notice of Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that such Buyer elected to purchase pursuant to
Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of the
Offered Securities.  In the event that any Buyer so elects to reduce
the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Buyers in accordance with Section 4(o)(iii)(1)
above.

     

     

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    (5) Upon the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in the
Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(4) above if the
Buyers have so elected, upon the terms and conditions specified in the Offer.
Notwithstanding anything to the contrary contained in this Agreement, if the
Company does not consummate the closing of the issuance, sale or exchange of all
or less than all of the Refused Securities, within fifteen (15) Business Days of
the expiration of the Offer Period, the Company shall issue to the Buyers, the
number or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4(o)(iii)(4) above if the Buyers have so elected,
upon the terms and conditions specified in the Offer.  The purchase by
the Buyers of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Buyers of a purchase agreement
relating to such Offered Securities reasonably satisfactory in form and
substance to the Buyers and their respective counsel.

     

    (6) Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until they
are again offered to the Buyers under the procedures specified in this
Agreement.

     

    (7) The
Company and the Buyers agree that if any Buyer elects to participate in the
Offer, (x) neither the Subsequent Placement Agreement with respect to such Offer
nor any other transaction documents related thereto (collectively, the "Subsequent Placement
Documents") shall include any term or provisions whereby any Buyer shall
be required to agree to any restrictions in trading as to any securities of the
Company owned by such Buyer prior to such Subsequent Placement, and (y) any
registration rights set forth in such Subsequent Placement Documents shall be
similar in all material respects to the registration rights contained in the
Registration Rights Agreement.

     

    (8) Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to by
the Buyers, the Company shall either confirm in writing to the Buyers that the
transaction with respect to the Subsequent Placement has been abandoned or shall
publicly disclose its intention to issue the Offered Securities, in either case
in such a manner such that the Buyers will not be in possession of material
non-public information, by the fifteenth (15th)
Business Day following delivery of the Offer Notice.  If by the
fifteenth (15th)
following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by the Buyers,
such transaction shall be deemed to have been abandoned and the Buyers shall not
be deemed to be in possession of any material, non-public information with
respect to the Company.  Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company shall provide
each Buyer with another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(o)(iii).  The Company shall
not be permitted to deliver more than one such Offer Notice to the Buyers in any
60 day period.

     

     

    27

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
not apply in connection with the issuance of any Excluded Securities (as defined
in the Warrants) or any bona fide firm commitment underwritten public offering
with a nationally recognized underwriter (it being acknowledged among the
parties hereto that Rodman & Renshaw, LLC is a nationally recognized
underwriter) pursuant to an effective registration statement under the 1933 Act
which generates gross proceeds to the Company of at least $25,000,000 (other
than an "at-the-market offering" as defined in Rule 415(a)(4) under the 1933
Act, "equity lines" and products similar to so-called "CMPOs" (Confidentially
Marketed Public Offerings) where shares are sold off of a currently effective
registration statement as an underwritten offer after initially being marketed
as a "registered direct" offering with no bona fide firm commitment
underwriting).

     

    (p) Short Sales Prior to Reset
Dates.  During each of (i) the period commencing five (5)
Trading Days immediately preceding the First Reset Date (as defined in the
Series B Warrants) and ending with the close of trading on the Principal Market
on the First Reset Date (the "First Pricing Period") and
(ii) the period commencing five (5) Trading Days immediately preceding the
Second Reset Date (as defined in the Series B Warrants) and ending with the
close of trading on the Principal Market on the Second Reset Date (the "Second Pricing Period"), each
Buyer, severally and not jointly with the other Buyers, covenants that neither
it nor any of its Buyer Trading Affiliates will engage in any (x) "short sales",
as defined in Rule 200 of Regulation SHO under the 1934 Act, of the Common Stock
or (y) sales of Conversion Shares or Warrant Shares.  For purposes
hereof "Buyer Trading
Affiliates" means any Person acting on behalf of or pursuant to any
understanding with a Buyer which has knowledge of the transactions contemplated
hereby and (x) has or shares discretion relating to such Buyer's investments and
trading or information concerning such Buyer's investments or (y) is subject to
such Buyer's review or input concerning such Person's investments or
trading.

     

    (q) Purchases Prior to Reset
Dates.  During each of (i) the First Pricing Period and (ii)
the Second Pricing Period, the Company shall not, and shall cause each of its
Subsidiaries, officers, directors and its and each of their respective agents,
not to, directly or indirectly, purchase any shares of Common
Stock.

     

    (r) Lock-Up
Agreements.  The Company covenants (i) to enforce the
provisions of the Lock-Up Agreements and (ii) not to amend or waive any
provision of the Lock-Up Agreements.

     

    (s) U.S.
Bank.  For so long as any Preferred Shares are outstanding, the
Company shall keep cash in an amount equal to the sum of the maximum amount of
all Dividends and Make-Whole Additional Amounts (each as defined in the
Certificate of Designations) payable under the Certificate of Designations
deposited in a bank account located in the United States as set
forth on Schedule 4(s).

     

     

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    (t) Closing
Documents.  On or prior to fourteen (14) calendar days after
the Closing Date, the Company agrees to deliver, or cause to be delivered, to
each Buyer and Schulte Roth & Zabel LLP a complete closing set of the
Transaction Documents, Securities and any other document required to be
delivered to any party pursuant to Section 7 hereof or otherwise.

     

    5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.

     

    (a) Register.  The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Preferred Shares and the Warrants in which the
Company shall record the name and address of the Person in whose name the
Preferred Shares and the Warrants have been
issued (including the name and address of each transferee), the number of
Preferred Shares held by such Person, the number of Conversion Shares issuable
upon conversion of the Preferred Shares and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person.  The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.

     

    (b) Transfer Agent
Instructions.  The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at DTC, registered in the
name of each Buyer or its respective nominee(s), for the Conversion Shares and
the Warrant Shares in such amounts as
specified from time to time by each Buyer to the Company upon conversion of the
Preferred Shares or exercise of the Warrants in the form of Exhibit D attached
hereto (the "Irrevocable
Transfer Agent Instructions").  The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5(b), and stop transfer instructions to give effect to Section
2(g) hereof, will be given by the Company to its transfer agent with respect to
the Securities, and that the Securities shall otherwise be freely transferable
on the books and records of the Company, as applicable, and to the extent
provided in this Agreement and the other Transaction Documents.  If a
Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(g), the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer to effect such sale, transfer or
assignment.  In the event that such sale, assignment or transfer
involves Conversion Shares and Warrant Shares sold, assigned or transferred
pursuant to an effective registration statement or pursuant to Rule 144, the
transfer agent shall issue such Securities to the Buyer, assignee or transferee,
as the case may be, without any restrictive legend.  The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer.  Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 5(b), that a Buyer shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.

     

     

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    6. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.

     

    The
obligation of the Company hereunder to issue and sell the Preferred Shares and the related Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

     

    (a) Such
Buyer shall have executed each of the Transaction Documents to which it is a
party and delivered the same to the Company.

     

    (b) Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less any amounts withheld pursuant to Section 4(g)) for the Preferred
Shares and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.

     

    (c) The
representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.

     

    7. CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.

     

    The
obligation of each Buyer hereunder to purchase the Preferred Shares and the related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:

     

    (a) The
Company shall have duly executed and delivered to such Buyer (A) each of
the Transaction Documents and (B) the Preferred Shares (in such numbers as is
set forth across from such Buyer's name in column (3) of the Schedule of
Buyers) and the
related Warrants (in such numbers as is set forth across from such Buyer's name
in column (4) and column (5) of the Schedule of Buyers) being purchased by such
Buyer at the Closing pursuant to this Agreement.

     

    (b) Such
Buyer shall have received (i) the opinion of Lionel Sawyer & Collins
the Company's Nevada  counsel, dated as of the Closing Date, in
substantially the form of Exhibit E-1 attached
hereto and (ii) the opinion of Loeb & Loeb, LLP the Company's securities
counsel, dated as of the Closing Date, in substantially the form of Exhibit E-2 attached
hereto.

     

    (c) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.

     

     

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    (d) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in each
such entity's jurisdiction of formation issued by the Secretary of State (or
equivalent) of such jurisdiction of formation as of a date within ten (10) days
of the Closing Date, to the extent such a good standing is available in such
entity’s jurisdiction of formation.

     

    (e) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within 10
days of the Closing Date.

     

    (f) The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Nevada
within ten (10) days of the Closing Date.

     

    (g) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's board of
directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit
F.

     

    (h) The
representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date) and the Company shall have performed, satisfied and complied in material
all respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit
G.

     

    (i) The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date.

     

    (j) The
Company shall have delivered to each Buyer a lock-up agreement in the form
attached hereto as Exhibit H executed
and delivered by the Company and each of the Persons listed on Schedule 7(j) hereto
(collectively, the "Lock Up
Agreements").

     

    (k) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum maintenance requirements of the Principal
Market.

     

     

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    (l) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.

     

    (m) The
Certificate of Designations in the form attached hereto as Exhibit A shall have
been filed with the Secretary of State of the State of Nevada and shall be in
full force and effect, enforceable against the Company in accordance with its
terms and shall not have been amended.

     

    (n) The
Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

     

    8. TERMINATION.

     

    In the
event that the Closing shall not have occurred with respect to a Buyer on or
before five (5) Business Days from the date hereof due to the Company's or such
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, if this Agreement
is terminated pursuant to this Section 8, the Company shall remain obligated to
reimburse the non-breaching Buyers for the expenses described in Section 4(g)
above.

    

    9. MISCELLANEOUS.

     

    (a) Governing Law; Jurisdiction;
Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law.  The Company hereby appoints Loeb & Loeb LLP, with offices at
345 Park Avenue, New York, New York 10154, as its agent for service of process
in New York.  Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

     

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    (b) Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

     

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

     

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

     

    (e) Entire Agreement;
Amendments.  This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the
Company, their Affiliates and Persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters.  No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds of the Preferred Shares issued
and issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on all Buyers and
holders of Securities, as applicable.  No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.  The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.  Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, no Buyer has made
any commitment or promise or has any other obligation to provide any financing
to the Company or otherwise.

     

     

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    (f) Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) three Business Days after deposit with an overnight courier
service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile numbers for such communications
shall be:

     

    If to the
Company:

     

    
      	 	
              China
      XD Plastics Company Limited

              11
      Broadway STE 1004

              New
      York, NY 10004

              Telephone:   212-747-1118

              Facsimile:    212-747-1088

              Attention:   Taylor
      Zhang, Chief Financial Officer

              Email:   cxdc@chinaxd.net

            

    

     

     

    With a
copy (for informational purposes only) to:

     

    
      	 	
              Loeb
      & Loeb LLP

              345
      Park Avenue

              New
      York, New York 10154

              Telephone:  212-407-4159

              Facsimile:   212-407-4990

              Attention:    Mitchell
      S. Nussbaum, Esq.

            

    

    

     

    If to the
Transfer Agent:

    
    

     

    
      	 	
              Interwest
      Transfer Company, Inc

              1981
      Murray Holladay Road, Suite 100

              Salt
      Lake City, UT  84117

              Telephone:   801-272-9294

              Facsimile:   801-277-3147

              Attention: 
      Melinda Orth

            

    

    

    If to a
Buyer, to its address, facsimile number and email address set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers,

     

    with a
copy (for informational purposes only) to:

     

    
      	 	
              Schulte
      Roth & Zabel LLP

              919
      Third Avenue

              New
      York, New York  10022
Telephone:   (212)
      756-2000

              Facsimile:   (212)
      593-5955

              Attention:    Eleazer
      N. Klein, Esq.

              Email:   eleazer.klein@srz.com

            

    

     

     

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    or to
such other address and/or facsimile number and/or email address and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change.  Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

     

    (g) Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Preferred Shares or the Warrants.  The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of at least two-thirds of the aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the
Certificate of Designations and the Warrants).  A Buyer may assign
some or all of its rights hereunder in connection with transfer of any of its
Securities without the consent of the Company, in which event such assignee
shall be deemed to be a Buyer hereunder with respect to such assigned
rights.

     

    (h) No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.

     

    (i) Survival.  Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3 and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the
delivery and exercise of Securities, as applicable.  Each Buyer shall
be responsible only for its own representations, warranties, agreements and
covenants hereunder.

     

    (j) Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

     

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    (k) Indemnification.  In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees"), as incurred,
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents.  To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.  Except as otherwise set forth herein, the mechanics
and procedures with respect to the rights and obligations under this Section
9(k) shall be the same as those set forth in Section 6 of the Registration
Rights Agreement.

     

    (l) No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    (m) Remedies.  Each
Buyer and each holder of the Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law.  Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.  Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge any
or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the Buyers.  The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.

     

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

     

     

    36

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    (p) Independent Nature of
Buyers' Obligations and Rights.  The obligations of each Buyer
under any Transaction Document are several and not joint with the obligations of
any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document.  Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group, and the
Company will not assert any such claim, with respect to such obligations or the
transactions contemplated by the Transaction Documents.  The Company
acknowledges and each Buyer confirms that it has independently participated in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors.  Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.

     

    (q) Currency.  Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States Dollars.  All amounts owing under this Agreement or any
Transaction Document shall be paid in US dollars.  All amounts
denominated in other currencies shall be converted in the US dollar equivalent
amount in accordance with the Exchange Rate on the date of
calculation.  "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Agreement, the US dollar exchange rate as published in The Wall Street
Journal on the relevant date of calculation.

     

    (r) Judgment
Currency.

     

    (i) If for
the purpose of obtaining or enforcing judgment against the Company in any court
in any jurisdiction it becomes necessary to convert into any other currency
(such other currency being hereinafter in this Section 9(r) referred to as the
"Judgment Currency") an
amount due in US Dollars under this Agreement, the conversion shall be made at
the Exchange Rate prevailing on the Business Day immediately
preceding:

     

     

    37

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

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

     

    (ii) If in the
case of any proceeding in the court of any jurisdiction referred to in Section
9(r)(i)(2) above, there is a change in the Exchange Rate prevailing between the
Judgment Conversion Date and the date of actual payment of the amount due, the
applicable party shall pay such adjusted amount as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the Exchange
Rate prevailing on the date of payment, will produce the amount of US Dollars
which could have been purchased with the amount of Judgment Currency stipulated
in the judgment or judicial order at the Exchange Rate prevailing on the
Judgment Conversion Date.

     

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

     

    

     

    [Signature
Page Follows]

     

     

     

     

     

     

    38

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN WITNESS WHEREOF, each Buyer
and the Company have caused its respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.

     

     

     

     

     

     

    
      
        	 	
                COMPANY:

                 

                CHINA XD PLASTICS COMPANY
      LIMITED

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Jie
      Han	 
	 	 	Name: 
      Jie Han	 
	 	 	Title: 
      Chief Executive Officer	 
	 	 	 	 

      

    
 

     

     

     

    39

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN WITNESS WHEREOF, each Buyer
and the Company have caused its respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.

     

     

     

     

     

     

     

    
      
        	 	BUYERS	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

      

    

     

     

     

     

     

     

     

    40

     

     

     

     

     

     

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      SCHEDULE
OF BUYERS

       

      

      
        	
                (1)

              	
                (2)

              	
                (3)

              	
                (4)

              	
                (5)

              	
                (6)

              	
                (7)

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                
                   

                  Buyer

                

              	
                
                   

                  Address
      and Facsimile Number

                

              	
                
                   

                  Aggregate
      Number of Preferred Shares

                

              	
                
                   

                  Aggregate
      Number of Series A Warrant Shares

                

              	
                
                   

                  Aggregate
      Number of Series B Warrant Shares

                

              	
                
                  Purchase
      Price

                

              	
                
                  Legal
      Representative's

                  Address
      and Facsimile Number

                

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Empery
      Asset  Master Ltd.

              	
                c/o
      Empery Asset Management, LP

                120
      Broadway, Suite 1019

                New
      York, NY 10271

                Attention:
      Ryan M. Lane

                Facsimile:  212-608-3307

                Telephone:
      212-608-3300

                Residence:
      Cayman Islands

                Email:  ryan.lane@emperyam.com

              	
                600

              	
                52,174

              	
                46,565

              	
                $600,000

              	
                Schulte
      Roth & Zabel LLP

                919
      Third Avenue

                New
      York, New York  10022

                Attention:  Eleazer
      Klein, Esq.

                Facsimile:
      (212) 593-5955

                Telephone:  (212)
      756-2376

                Email:
      Eleazer.Klein@srz.com

              
	
                Hartz
      Capital Investments, LLC c/o Empery Asset Management LP

              	
                c/o
      Empery Asset Management, LP

                120
      Broadway, Suite 1019

                New
      York, NY 10271

                Attention:
      Ryan M. Lane

                Facsimile:  212-608-3307

                Telephone:
      212-608-3300

                Residence:
      New Jersey

                Email:  ryan.lane@emperyam.com

              	
                1,500

              	
                130,435

              	
                116,413

              	
                $1,500,000

              	
                Schulte
      Roth & Zabel LLP

                919
      Third Avenue

                New
      York, New York  10022

                Attention:  Eleazer
      Klein, Esq.

                Facsimile:
      (212) 593-5955

                Telephone:  (212)
      756-2376

                Email:
      Eleazer.Klein@srz.com

              
	
                Jiulong
      Sun

              	
                6
      Xiwai Street, Zhongyi Building, Xicheng District, Suite 1010

                Beijing
      China 100044

                Facsimile:

                Telephone:

              	
                4,400

              	
                382,609

              	
                341,478

              	
                $4,400,000

              	
                ----

              
	
                Daybreak
      Special Situations Master Fund Ltd.

              	
                Daybreak
      Special Situations

                100
      East Cook Avenue, Suite 100

                Libertyville,
      FL 60048

                Attention:
      Rich Corbin

                Facsimile:

                Telephone:

                Email:
      rich@dssfund

                           larry@dssfund.com

                Residence:

              	
                200

              	
                17,391

              	
                15,522

              	
                $200,000

              	
                ----

              

         

         

         

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        	
                Hua-Mei
      21st Century Partners, LP

              	
                237
      Park Avenue, 9th Floor

                New
      York, NY 10017

                Attention:
      Peter Siris

                Facsimile:

                Telephone:

                Email:
      psiris@ix.netcom.com

                           rpang@guerillacapital.com

                Residence:

              	
                325

              	
                28,261

              	
                25,223

              	
                $325,000

              	
                ----

              
	
                Guerilla
      Partners, LP

              	
                237
      Park Avenue, 9th Floor

                New
      York, NY 10017

                Attention:
      Peter Siris

                Facsimile:

                Telephone:

                Email:
      psiris@ix.netcom.com

                           rpang@guerillacapital.com

                Residence:

              	
                175

              	
                15,217

              	
                13,582

              	
                $175,000

              	
                ----

              
	
                Jayhawk
      Private Equity Fund II, L.P.

              	
                930
      Tahoe Boulevard, 802-281

                Incline
      Village, NV 89457

                Attention:
      Alberto Bassetto

                Facsimile:

                Telephone:

                Email:
      alberto.bassetto@jayhawkcapital.com

                           chris.wu@jayhawkcapital.com

                Residence:

              	
                1,000

              	
                86,957

              	
                77,609

              	
                $1,000,000

              	
                ----

              
	
                Capital
      Ventures International

              	
                c/o
      Heights Management

                401
      City Line Avenue, Suite 220

                Bala
      Cynwyd, PA 19004

                Attention:
      Brad Alles

                               
         Sam Winer

                Facsimile:

                Telephone:

                Email:
      winer@sig.com

                           andrew,singer@sig.com

                           martin.kobinger@sig.com

                Residence:
      Cayman Islands

              	
                1,500

              	
                130,435

              	
                116,413

              	
                $1,500,000

              	
                ----

              
	
                Alder
      Capital Partners I, LP

              	
                Alder
      Capital LLC

                1223
      Camino Del Mar

                Del
      Mar, CA 92014

                Attention:
      Mike Licosati

                Facsimile:

                Telephone:

                Email:
      mlicosati@aldercap.com

                Residence:

              	
                828

              	
                72,000

              	
                64,260

              	
                $828,000

              	
                ----

              

         

         

         

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        	
                Hudson
      Bay Fund, LP

              	
                120
      Broadway, 40th Floor

                New
      York, New York 10271

                Attention:
      Yoav Roth

                           
              George
      Antonopolous

                Facsimile:  646-214-7946

                Telephone:
      212-571-1244

                Residence:
      United States

                E-mail:
      investments@hudsonbaycapital.com

                            operations@hudsonbaycapital.com

              	
                360

              	
                31,304

              	
                27,939

              	
                $360,000

              	
                ----

              
	
                Hudson
      Bay Overseas Fund, Ltd.

              	
                120
      Broadway, 40th Floor

                New
      York, New York 10271

                Attention:
      Yoav Roth

                                  George
      Antonopolous

                Facsimile:  646-214-7946

                Telephone:
      212-571-1244

                Residence:
      Cayman Islands

                E-mail:
      investments@hudsonbaycapital.com

                      
            operations@hudsonbaycapital.com

              	
                640

              	
                55,652

              	
                49,670

              	
                $640,000

              	
                ----

              
	
                Trillion
      Growth China Limited Partnership

              	
                1000,
      888-3rd Street S.W.

                Calgary,
      AB T2P 5C% Canada

                Attention:
      Corey Mitchell

                Facsimile:

                Telephone:

                Email:
      cmitchell@trilliongrowthchina.com

                Residence:

              	
                250

              	
                21,739

              	
                19,402

              	
                $250,000

              	
                ----

              
	
                Genesis
      Opportunity Fund LP

              	
                c/o
      Genesis Capital Advisors

                61
      Paine Avenue

                New
      Rochelle, NY 10804

                Attention:
      Ethan Benovitz

                Facsimile:

                Telephone:

                Email:
      ebenovitz@genesiscm.com

                Residence:

              	
                1,000

              	
                86,957

              	
                77,609

              	
                $1,000,000

              	
                ----

              

         

         

         

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        	
                Genesis
      Asset Opportunity Fund LP

              	
                c/o
      Genesis Capital Advisors

                61
      Paine Avenue

                New
      Rochelle, NY 10804

                Attention:
      Ethan Benovitz

                Facsimile:

                Telephone:

                Email:
      ebenovitz@genesiscm.com

                Residence:

              	
                750

              	
                65,217

              	
                58,207

              	
                $750,000

              	
                ----

              
	
                Oberweiss
      Asset Management

              	
                Oberweiss
      Asset Management

                3333
      Warrenville Road, Suite 500

                Lisle,
      IL 60532

                Attention:
      Jeff Papp

                Facsimile:

                Telephone:

                Email:
      jeff.pap@oberweis.net

                           chartrand@oberweis.net

                       
         nick.curry@oberweis.net

                Residence:

              	
                1,500

              	
                130,435

              	
                116,413

              	
                $1,500,000

              	
                ----

              
	
                Hermes
      Partners LP

              	
                Hermes
      Partners

                1223
      Camino del Mar

                Del
      Mar, CA 92014

                Attention:
      Paul Flather

                Facsimile:

                Telephone:

                Email:
      paulf@hermesadvisors.com

                Residence:

              	
                160

              	
                13,913

              	
                12,417

              	
                $160,000

              	
                ----

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      

      

      

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBITS

     

     

    
    

     

    
      	
              Exhibit
      A

              Exhibit
      B-1

              Exhibit
      B-2

              Exhibit
      C

              Exhibit
      D

              Exhibit
      E-1

              Exhibit
      E-2

              Exhibit
      F

              Exhibit
      G

              Exhibit
      H

            	
              Form
      of Certificate of Designations

              Form
      of Series A Warrant

              Form
      of Series B Warrant

              Form
      of Registration Rights Agreement

              Form
      of Irrevocable Transfer Agent Instructions

              Form
      of Nevada Counsel Opinion

              Form
      of Securities Counsel Opinion

              Form
      of Secretary's Certificate

              Form
      of Officer's Certificate

              Form
      of Lock-Up Agreement

            	 

    

     

    

 

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    SCHEDULES

     

    Schedule
3(a) - List of Subsidiaries

    Schedule
3(d) - No Conflicts

    Schedule
3(l) - Absence of Certain Changes

    Schedule
3(q) - Transactions with Affiliates

    Schedule
3(r) - Equity Capitalization

    Schedule
3(s) - Indebtedness and Other Contracts

    Schedule
3(jj) - China Subsidiaries

    Schedule
3(oo) - Accountants

    Schedule
4(o) - List of Entities

    Schedule
7(j) - Lock-Up Personschxd_8k-ex10x2.htm

    Exhibit 10.2

    
 

    

     

    REGISTRATION
RIGHTS AGREEMENT

     

     

    REGISTRATION RIGHTS AGREEMENT
(this "Agreement"),
dated as of November 27, 2009, by and among China XD Plastics Company Limited, a
Nevada corporation, with headquarters located at No. 9 Qinling Road, Yingbin
Road Centralized Industrial Park, Harbin Development Zone, Heilongjiang 150078,
China (the "Company"),
and the investors listed on the Schedule of Buyers attached hereto (each, a
"Buyer" and
collectively, the "Buyers").

     

    WHEREAS:

     

    A.           In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the "Securities Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) shares of the Company's Series C Convertible Preferred Stock, par value
$0.0001 per share (the "Preferred Shares"), which
will, among other things, be convertible into a certain number of shares of the
Company's common stock, $0.0001 par value per share (the "Common Stock", as converted,
the "Conversion Shares")
in accordance with the terms of the Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock (the "Certificate of Designations")
and (ii) two (2) series of warrants (the "Warrants") which will be
exercisable to purchase shares of Common Stock (as exercised, the "Warrant Shares") in accordance
with the terms of the Warrants.

     

    B.           In
accordance with the terms of the Securities Purchase Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "1933 Act"), and applicable
state securities laws.

     

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

     

    1.           Definitions.

     

    Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

     

    (a)           "Additional Effective Date"
means the date the Additional Registration Statement is declared effective by
the SEC.

     

    (b)           "Additional Effectiveness
Deadline" means the date which is thirty (30) calendar days after the
earlier of the Additional Filing Date and the Additional Filing Deadline or in
the event that the Registration Statement is subject to a full review by the
SEC, sixty (60) calendar days after the earlier of the Additional Filing Date
and the Additional Filing Deadline.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)           "Additional Filing Date" means
the date on which the Additional Registration Statement is filed with the
SEC.

     

    (d)           "Additional Filing Deadline"
means if Cutback Shares are required to be included in the Additional
Registration Statement, the later of (i) the date sixty (60) days after the date
substantially all of the Registrable Securities registered under the immediately
preceding Registration Statement are sold and (ii) the date six (6) months from
the Initial Effective Date or the last Additional Effective Date, as
applicable.

     

    (e)           "Additional Registrable
Securities" means, (i) any Cutback Shares not previously included on a
Registration Statement and (ii) any capital stock of the Company issued or
issuable with respect to the Preferred Shares, the Conversion Shares, the
Warrants, the Warrant Shares or the Cutback Shares, as applicable, as a result
of any stock split, stock dividend, recapitalization, exchange or similar event
or otherwise, without regard to any limitations conversions and/or redemptions
of the Preferred Shares or exercise of the Warrants.

     

    (f)           "Additional Registration
Statement" means a registration statement or registration statements of
the Company filed under the 1933 Act covering any Additional Registrable
Securities.

     

    (g)           "Additional Required Registration
Amount" means any Cutback Shares not previously included on a
Registration Statement, all subject to adjustment as provided in Section 2(f),
without regard to any limitations on conversion and/or redemption of the
Preferred Shares or exercise of the Warrants.

     

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

     

    (i)           "Closing Date" shall have the
meaning set forth in the Securities Purchase Agreement.

     

     

    (j)           "Cutback Shares" means any of
the Initial Required Registration Amount or the Additional Required Registration
Amount of Registrable Securities not included in all Registration Statements
previously declared effective hereunder as a result of a limitation on the
maximum number of shares of Common Stock of the Company permitted to be
registered by the staff of the SEC pursuant to Rule 415.  The number
of Cutback Shares shall be allocated pro rata among the Investors with each
Investor entitled to elect the portion of its Conversion Shares and/or Warrant
Shares that are to be considered Cutback Shares.

     

     

    (k)           "Effective Date" means the
Initial Effective Date and the Additional Effective Date, as
applicable.

     

     

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (l)           "Effectiveness Deadline" means
the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as
applicable.

     

    (m)           "Filing Deadline" means the
Initial Filing Deadline and the Additional Filing Deadline, as
applicable.

     

    (n)           "Initial Effective Date" means
the date that the Initial Registration Statement has been declared effective by
the SEC.

     

    (o)           "Initial Effectiveness
Deadline" means the date which is (i) in the event that the Initial
Registration Statement is not subject to a full review by the SEC, sixty (60)
calendar days after the Closing Date or (ii) in the event that the Initial
Registration Statement is subject to a full review by the SEC, ninety (90)
calendar days after the Closing Date.

     

    (p)           "Initial Filing Deadline" means
the date which is thirty (30) calendar days after the Closing Date.

     

    (q)           "Initial Registrable
Securities" means (i) the Conversion Shares issued or issuable upon
conversion of the Preferred Shares, (ii) the Warrant Shares issued or issuable
upon exercise of the Warrants and (iii) any capital stock of the Company issued
or issuable, with respect to the Conversion Shares, the Preferred Shares, the
Warrant Shares or the Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversion and/or redemption of the Preferred Shares or exercise
of the Warrants.

     

    (r)           "Initial Registration
Statement" means a registration statement or registration statements of
the Company filed under the 1933 Act covering the Initial Registrable
Securities.

     

    (s)           "Initial Required Registration
Amount" means (I) 130% of the sum of (i) the number of Conversion Shares
issued and issuable pursuant to the Preferred Shares as of the Trading Day (as
defined in the Certificate of Designations) immediately preceding the applicable
date of determination and (ii) the number of Warrant Shares issued and issuable
pursuant to the Warrants as of the Trading Day immediately preceding the
applicable date of determination, each subject to adjustment as provided in
Section 2(f), without regard to any limitations on conversions and/or
redemptions of the Preferred Shares or exercises of the Warrants or (II) such
other amount as may be required by the staff of the SEC pursuant to Rule
415.

     

     

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    (t)           "Investor" means a Buyer, any
transferee or assignee thereof to whom a Buyer assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section
9.

     

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

     

    (v)           "register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415, and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

     

    (w)           "Registrable Securities" means
the Initial Registrable Securities and the Additional Registrable
Securities.

     

    (x)           "Registration Statement" means
the Initial Registration Statement and the Additional Registration Statement, as
applicable.

     

     

    (y)           "Required Holders" means the
initial holders of at least two-thirds of the Registrable
Securities.

     

     

    (z)           "Required Registration Amount"
means either the Initial Required Registration Amount or the Additional Required
Registration Amount, as applicable.

     

     

    (aa)           "Rule 415" means Rule 415
promulgated under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.

     

     

    (bb)           "SEC" means the United States
Securities and Exchange Commission.

     

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

     

     

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    2.           Registration.

     

    (a)           Initial Mandatory
Registration.  The Company shall prepare, and, as soon as
practicable but in no event later than the Initial Filing Deadline, file with
the SEC the Initial Registration Statement on Form S-3 covering the resale of
all of the Initial Registrable Securities.  In the event that Form S-3
is unavailable for such a registration, the Company shall use such other
appropriate form as is available for such a registration and is reasonably
acceptable to the Required Holders, subject to the provisions of Section
2(e).  The Initial Registration Statement prepared pursuant hereto
shall register for resale at least the number of shares of Common Stock equal to
the Initial Required Registration Amount determined as of the date the Initial
Registration Statement is initially filed with the SEC, subject to adjustment as
provided in Section 2(f).  The Initial Registration Statement shall
contain (except if otherwise directed by the Required Holders) the "Selling Shareholders"
and "Plan of
Distribution" sections in substantially the form attached hereto as Exhibit B. The
Company shall use its best efforts to have the Initial Registration Statement
declared effective by the SEC as soon as practicable, but in no event later than
the Initial Effectiveness Deadline.  By 9:30 a.m. New York time on the
Business Day following the Initial Effective Date, the Company shall file with
the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to
be used in connection with sales pursuant to such Initial Registration
Statement.

     

    (b)           Additional Mandatory
Registrations.  The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing Deadline, file with
the SEC an Additional Registration Statement on Form S-3 covering the resale of
all of the Additional Registrable Securities not previously registered on an
Additional Registration Statement hereunder.  To the extent the staff
of the SEC does not permit the Additional Required Registration Amount to be
registered on an Additional Registration Statement, the Company shall file
Additional Registration Statements successively trying to register on each such
Additional Registration Statement the maximum number of remaining Additional
Registrable Securities until the Additional Required Registration Amount has
been registered with the SEC.  In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other
appropriate form as is available for such a registration and is reasonably
acceptable to the Required Holders, subject to the provisions of Section
2(e).  Each Additional Registration Statement prepared pursuant hereto
shall register for resale at least that number of shares of Common Stock equal
to the Additional Required Registration Amount determined as of the date such
Additional Registration Statement is initially filed with the
SEC.  Each Additional Registration Statement shall contain (except if
otherwise directed by the Required Holders) the "Selling Shareholders" and "Plan
of Distribution" sections in substantially the form attached hereto as Exhibit
B.  The Company shall use its best efforts to have each
Additional Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Additional Effectiveness
Deadline.  By 9:30 a.m. New York time on the Business Day following
the Additional Effective Date, the Company shall file with the SEC in accordance
with Rule 424 under the 1933 Act the final prospectus to be used in connection
with sales pursuant to such Additional Registration Statement.

     

    (c)           Allocation of Registrable
Securities.  The initial number of Registrable Securities
included in any Registration Statement and any increase or decrease in the
number of Registrable Securities included therein shall be allocated pro rata
among the Investors based on the number of Registrable Securities held by each
Investor at the time the Registration Statement covering such initial number of
Registrable Securities or increase or decrease thereof is filed with the
SEC.  In the event that an Investor sells or otherwise transfers any
of such Investor's Registrable Securities, each transferee shall be allocated a
pro rata portion of the then remaining number of Registrable Securities included
in such Registration Statement for such transferor.  Any shares of
Common Stock included in a Registration Statement and which remain allocated to
any Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata
based on the number of Registrable Securities then held by such Investors which
are covered by such Registration Statement.  In no event shall the
Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders.

     

     

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    (d)           Legal
Counsel.  Subject to Section 5 hereof, the Required Holders
shall have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 ("Legal Counsel"), which shall
be Schulte Roth & Zabel LLP or such other counsel as thereafter designated
by the Required Holders.  The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company's obligations
under this Agreement.

     

    (e)           Ineligibility for Form
S-3.  In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably acceptable to the Required Holders and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available, provided that the Company shall maintain the effectiveness of
the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

     

    (f)           Sufficient Number of Shares
Registered.  In the event the number of shares available under
a Registration Statement filed pursuant to Section 2(a) or Section 2(b) is
insufficient to cover all of the Registrable Securities required to be covered
by such Registration Statement or an Investor's allocated portion of the
Registrable Securities pursuant to Section 2(c), the Company shall amend the
applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than fifteen (15) days
after the necessity therefor arises.  The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.  For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of shares of Common Stock
available for resale under the Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such time
by (ii) 0.80.  The calculation set forth in the foregoing sentence
shall be made without regard to any limitations and/or redemption on the
conversion of the Preferred Shares or exercise of the Warrants and such
calculation shall assume that the Preferred Shares are then convertible into
shares of Common Stock at the then prevailing Conversion Rate (as defined in the
Certificate of Designations and the Warrants are then exercisable for shares of
Common Stock at the then prevailing Exercise Price (as defined in the
Warrants).

     

     

     

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    (g)           Effect of Failure to File
and Obtain and Maintain Effectiveness of Registration
Statement.  If (i) a Registration Statement covering all of the
Registrable Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the respective Filing Deadline (a "Filing Failure") or (B) not
declared effective by the SEC on or before the respective Effectiveness
Deadline, (an "Effectiveness
Failure") or
(ii) on any day after the respective Effective Date sales of all of the
Registrable Securities required to be included on such Registration Statement
cannot be made (other than during an Allowable Grace Period (as defined in
Section 3(r)) pursuant to such Registration Statement or otherwise (including,
without limitation, because of the suspension of trading or any other limitation
imposed by an Eligible Market, a failure to keep such Registration Statement
effective, a failure to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or a failure to register a
sufficient number of shares of Common Stock or to maintain the listing of the
Common Stock) (a "Maintenance
Failure") then, as partial relief for the damages to any holder by reason
of any such delay in or reduction of its ability to sell the underlying shares
of Common Stock (which remedy shall not be exclusive of any other remedies
available at law or in equity, including, without limitation, specific
performance), the Company shall pay to each holder of Registrable Securities
relating to such Registration Statement an amount in cash equal to two percent
(2.0%) of the aggregate Purchase Price (as such term is defined in the
Securities Purchase Agreement) of such Investor's Registrable Securities
included in such Registration Statement on each of the following dates: (i) the
day of a Filing Failure; (ii) the day of an Effectiveness Failure; and (iii) the
initial day of a Maintenance Failure; (iv) on the thirtieth day after the date
of a Filing Failure and every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until such Filing Failure is cured; (v) on the
thirtieth day after the date of an Effectiveness Failure and every thirtieth day
thereafter (pro rated for periods totaling less than thirty days) until such
Effectiveness Failure is cured; and (vi) on the thirtieth day after the date of
a Maintenance Failure and every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until such Maintenance Failure is
cured.  The payments to which a holder shall be entitled pursuant to
this Section 2(g) are referred to herein as "Registration Delay
Payments."  Registration Delay Payments shall be paid on the
earlier of (I) the dates set forth above and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is
cured.  In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for
partial months) until paid in full.  Notwithstanding the foregoing, no
Registration Delay Payments shall be due pursuant to this Section 2(g) as a
result of and solely to the extent of an Effectiveness Failure (i) caused solely
by the application of a limitation on the maximum number of shares of Common
Stock of the Company permitted to be registered by the staff of the SEC pursuant
to Rule 415 or (ii) with respect to any Investor, caused solely by such
Investor's exercise of its rights pursuant to Section 3(h).

     

    3.           Related
Obligations.

     

    At such
time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:

     

     

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    (a)           The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its reasonable best efforts
to cause such Registration Statement relating to the Registrable Securities to
become effective as soon as practicable after such filing (but in no event later
than the Effectiveness Deadline).  The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction or limitation pursuant to Rule 144 and without the requirement to be
in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under
the 1933 Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the "Registration
Period").  The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading.  The term "best
efforts" shall mean, among other things, that the Company shall submit to the
SEC, within two (2) Business Days after the later of the date that (i) the
Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on a
particular Registration Statement, as the case may be, and (ii) the approval of
Legal Counsel pursuant to Section 3(c) (which approval is immediately sought), a
request for acceleration of effectiveness of such Registration Statement to a
time and date, subject to acceptance by the SEC, not later than two (2) Business
Days after the submission of such request.  The Company shall respond
in writing to comments made by the SEC in respect of a Registration Statement as
soon as practicable, but in no event later than fifteen (15) days after the
receipt of comments by or notice from the SEC that an amendment is required in
order for a Registration Statement to be declared effective.

     

    (b)           The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement.  In the case of amendments and
supplements to a Registration Statement which are required to be filed pursuant
to this Agreement (including pursuant to this Section 3(b)) by reason of the
Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC no later
than three (3) Trading Days after the date on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement such
Registration Statement.

     

     

     

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    (c)           The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any
Registration Statement or amendment or supplement thereto in a form to which
Legal Counsel reasonably objects.  The Company shall not submit a
request for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto without the prior approval of Legal Counsel,
which consent shall not be unreasonably withheld.  The Company shall
furnish to Legal Counsel, without charge, (i) copies of any correspondence from
the SEC or the staff of the SEC to the Company or its representatives relating
to any Registration Statement, (ii) promptly after the same is prepared and
filed with the SEC, one copy of any Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, if requested by an Investor, and all exhibits
and (iii) upon the effectiveness of any Registration Statement, one copy of the
prospectus included in such Registration Statement and all amendments and
supplements thereto.  The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to this Section
3.

     

    (d)           The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge,  (i) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.

     

    (e)           The
Company shall use its best efforts, unless an exemption from registration and
qualification applies, to (i) register and qualify the resale by Investors of
the Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of all applicable jurisdictions in the United
States, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such
jurisdiction.  The Company shall promptly notify Legal Counsel and
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.

     

     

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    (f)           The
Company shall notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of such event, as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or 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 (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(r), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request).  The Company
shall also promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile on the same day of such effectiveness and
by overnight mail), (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information, and
(iii) of the Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate.  By 9:30 a.m. New
York City time on the date following the date any post-effective amendment has
become effective, the Company shall file with the SEC in accordance with Rule
424 under the 1933 Act the final prospectus to be used in connection with sales
pursuant to such Registration Statement.

     

    (g)           The
Company shall use its best efforts to 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 and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such
purpose.

     

    (h)           If
any Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter or an Investor believes that it could
reasonably be deemed to be an underwriter of Registrable Securities, at the
reasonable request of such Investor, the Company shall furnish to such Investor,
at such Investor's expense, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the Investors, and (ii) an opinion, dated as of
such date, of counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the Investors.

     

     

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    (i)           If
any Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter or an Investor believes that it could
reasonably be deemed to be an underwriter of Registrable Securities, the Company
shall make available for inspection by (i) such Investor, (ii) Legal Counsel and
(iii) one firm of accountants or other agents retained by the Investors
(collectively, the "Inspectors"), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree to hold
in strict confidence and shall not make any disclosure (except to an Investor)
or use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement.  Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.  Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit the
Investors' ability to sell Registrable Securities in a manner which is otherwise
consistent with applicable laws and regulations.

     

    (j)           The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement.  The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at the
Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

     

    (k)           The
Company shall use its best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on each Eligible
Market on which securities of the same class or series issued by the Company are
then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange or (ii) if, despite the Company's
best efforts, the Company is unsuccessful in satisfying the preceding clause
(i), to secure the inclusion for quotation on an Eligible Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
use its best efforts to arrange for at least two market makers to register with
the Financial Industry Regulatory Authority, Inc. ("FINRA") as such with respect
to such Registrable Securities.  The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section
3(k).

     

     

     

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    (l)           The
Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Investors may reasonably request and registered in such names as the
Investors may request.

     

    (m)           If
requested by an Investor, the Company shall as soon as practicable (i)
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

     

    (n)           The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.

     

    (o)           The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the applicable Effective Date of a Registration
Statement.

     

    (p)           The
Company shall otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC in connection with any registration
hereunder.

     

    (q)           Within
two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.

     

     

    12

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (r)           Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a "Grace
Period"); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information giving
rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Investors)
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing of the date on which the Grace Period ends; and, provided further,
that no Grace Period shall exceed five (5) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of twenty (20) days and the first day of any Grace Period must be at
least five (5) Trading Days after the last day of any prior Grace Period (each,
an "Allowable Grace
Period") and that no Allowable Grace Period shall occur during the thirty
(30) calendar days immediately following the Effective Date.  For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred to
in clause (i) and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred to in such
notice.  The provisions of Section 3(g) hereof shall not be applicable
during the period of any Allowable Grace Period.  Upon expiration of
the Grace Period, the Company shall again be bound by the first sentence of
Section 3(f) with respect to the information giving rise thereto unless such
material, non-public information is no longer
applicable.  Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale, prior to the
Investor's receipt of the notice of a Grace Period and for which the Investor
has not yet settled.

     

    (s)           Neither
the Company nor any Subsidiary or affiliate thereof shall identify any Investor
as an underwriter in any public disclosure or filing with the SEC or any
Eligible Market (as defined in the Warrants) and any Investor being deemed an
underwriter by the SEC shall not relieve the Company of any obligations it has
under this Agreement or any other Transaction Document (as defined in the
Securities Purchase Agreement); provided, however, that the
foregoing shall not prohibit the Company from including the disclosure found in
the "Plan of Distribution" section attached hereto as Exhibit B in the
Registration Statement.

     

    4.           Obligations of the
Investors.

     

    (a)           At
least five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in such
Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete any registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

     

     

    13

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)           Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor's election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.

     

    (c)           Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of copies of the
supplemented or amended prospectus as contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is
required.  Notwithstanding anything to the contrary, the Company shall
cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of any event of
the kind described in Section 3(g) or the first sentence of 3(f) and for which
the Investor has not yet settled.

     

    (d)           Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in
connection with sales of Registrable Securities pursuant to the Registration
Statement.

     

    5.           Expenses of
Registration.

     

    All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.  The Company
shall also reimburse the Investors for the fees and disbursements of Legal
Counsel in connection with registration, filing or qualification pursuant to
Sections 2 and 3 of this Agreement which amount shall be limited to $10,000 for
each such registration, filing or qualification.

     

    6.           Indemnification.

     

    In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:

     

     

    14

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)           To
the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,
partners, members, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, reasonable attorneys' fees, amounts paid in
settlement or expenses, joint or several (collectively, "Claims"), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("Indemnified Damages"), to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon:  (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations").  Subject
to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly
as such expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim.  Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(a):  (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(d); and (ii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed.  Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.

     

     

    15

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)           In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Party"), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such Investor shall reimburse the Indemnified Party any legal
or other expenses reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld or
delayed; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement.  Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

     

    (c)           Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of not
more than one counsel for all such Indemnified Person or Indemnified Party to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the Indemnified Person or Indemnified Party, as the case may be, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding.  In the
case of an Indemnified Person, legal counsel referred to in the immediately
preceding sentence shall be selected by the Investors holding at least
two-thirds in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates.  The Indemnified
Party or Indemnified Person shall reasonably cooperate with the indemnifying
party in connection with any negotiation or defense of any such action or Claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or Claim.  The indemnifying party shall
keep the Indemnified Party or Indemnified Person fully apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto.  No indemnifying party shall be liable for any settlement of
any action, claim or proceeding effected without its prior written consent;
provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent.  No indemnifying party shall, without the prior written
consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation and such settlement shall not include any
admission as to fault on the part of the Indemnified Party.  Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.

     

     

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    (d)           The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.

     

    (e)           The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

     

    7.           Contribution.

     

    To the
extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that:  (i) no
Person involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the amount of net proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

     

    8.           Reports Under the 1934
Act.

     

    With a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that may
at any time permit the Investors to sell securities of the Company to the public
without registration ("Rule
144"), the Company agrees to:

     

    (a)           make
and keep public information available, as those terms are understood and defined
in Rule 144;

     

    (b)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and

     

     

    17

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)           furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.

     

    9.           Assignment of Registration
Rights.

     

    The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor's Registrable
Securities if:  (i) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.

     

    10.           Amendment of Registration
Rights.

     

    Provisions
of this Agreement may be amended and the observance thereof 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 Required
Holders.  Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.

     

    11.           Miscellaneous.

     

    (a)           A
Person is deemed to be a holder of Registrable Securities whenever such Person
owns or is deemed to own of record such Registrable Securities.  If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.

     

    (b)           Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such
communications shall be:

     

     

     

    18

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      If to the
Company:

       

      
        	 	
                China
      XD Plastics Company Limited

                11
      Broadway STE 1004

                New
      York, NY 10004

                Telephone:   212-747-1118

                Facsimile:    212-747-1088

                Attention:   Taylor
      Zhang, Chief Financial Officer

                Email:   cxdc@chinaxd.net

              

      

       

       

      With a
copy (for informational purposes only) to:

       

      
        	 	
                Loeb
      & Loeb LLP

                345
      Park Avenue

                New
      York, New York 10154

                Telephone:  212-407-4159

                Facsimile:   212-407-4990

                Attention:    Mitchell
      S. Nussbaum, Esq.

              

      

      

       

      If to the
Transfer Agent:

      
      

       

      
        	 	
                Interwest
      Transfer Company, Inc

                1981
      Murray Holladay Road, Suite 100

                Salt
      Lake City, UT  84117

                Telephone:   801-272-9294

                Facsimile:   801-277-3147

                Attention: 
      Melinda Orth

              

      

      

      If to a
Buyer, to its address, facsimile number and email address set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers,

       

      with a
copy (for informational purposes only) to:

       

      
        	 	
                Schulte
      Roth & Zabel LLP

                919
      Third Avenue

                New
      York, New York  10022
Telephone:   (212)
      756-2000

                Facsimile:   (212)
      593-5955

                Attention:    Eleazer
      N. Klein, Esq.

                Email:   eleazer.klein@srz.com

              

      

       

       

      If to a
Buyer, to its address, facsimile number or email address set forth on the
Schedule of Buyers attached hereto, with copies to such Buyer's representatives
as set forth on the Schedule of Buyers, or to such other address, facsimile
number and/or email address to the attention of such other Person as the
recipient party has specified by written notice given to each other party five
(5) days prior to the effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

    

     

     

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

     

    (d)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  The
Company hereby appoints Loeb & Loeb LLP with offices at 345 Park Avenue, New
York, New York 10154 as its agent for service of process in the United States.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

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

     

     

    20

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    
      
      
(f)           This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof.  There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and
therein.  This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.

     

    (g)           Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of
and be binding upon the permitted successors and assigns of each of the parties
hereto.

     

    (h)           The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

     

    (i)           This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement.  This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

     

    (j)           Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (k)           All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders, determined as if all of the Preferred Shares and
Warrants held by Investors then outstanding have been exercised for Registrable
Securities without regard to any limitations on conversions and/or redemptions
of the Preferred Shares or exercises of the Warrants.

     

    (l)           The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.

     

    (m)           This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

     

    (n)           The
obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis-à-vis any other
Investor.  Nothing contained herein, and no action taken by any
Investor pursuant hereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated
herein.

     

     

    21

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (o)           Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States Dollars.  All amounts owing under this Agreement shall
be paid in US dollars.  All amounts denominated in other currencies
shall be converted in the US dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation.  "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Agreement, the US dollar exchange rate as published in The Wall Street
Journal on the relevant date of calculation.

     

    (p)           Judgment
Currency.

     

    i. If for
the purpose of obtaining or enforcing judgment against the Company in any court
in any jurisdiction it becomes necessary to convert into any other currency
(such other currency being hereinafter in this Section 11(p) referred to as the
"Judgment Currency") an amount due in US Dollars under this Agreement, the
conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:

     

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

     

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

     

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

     

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

     

     

    * * * * *
*

     

    

     

    [Signature
Page Follows]

     

     

    22

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    IN WITNESS WHEREOF, each Buyer
and the Company have caused its respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.

     

    
      
        	 	
                COMPANY:

                 

                CHINA XD PLASTICS COMPANY
      LIMITED

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Jie
      Han	 
	 	 	Name:
      Jie Han	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 

      

    

     

     

     

     

     

     

     

     

     

    21

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, each Buyer
and the Company have caused its respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.

     

     

     

    
       

      
        
          	 	
                  BUYERS:

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	 	Name:
      	 
	 	 	Title:	 
	 	 	 	 

        

      

       

       

       

       

       

       

      22

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

     

    
 

    

     

    SCHEDULE
OF BUYERS

    

    
      	
               

              Buyer

            	
              Buyer
      Address

              and Facsimile Number

            	
              Buyer's
      Representative's Address

              and Facsimile Number

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

    

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
A

     

    FORM
OF NOTICE OF EFFECTIVENESS

    OF
REGISTRATION STATEMENT

     

    

    Interwest
Transfer Company, Inc.

    1981
Murray Holladay Road, Suite 100

    Salt Lake
City, UT  84117

     

    Re:           China XD Plastics Company
Limited

     

    Ladies
and Gentlemen:

     

    [We
are][I am] counsel to China XD Plastics Company Limited, a Nevada corporation
(the "Company"), and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of November 27, 2009 (the "Securities Purchase Agreement"), entered
into by and among the Company and the buyers named therein (collectively, the
"Holders") pursuant to
which the Company issued to the Holders Series C Convertible Preferred Shares
(the "Preferred Shares")
convertible into the Company's common stock, $0.0001 par value per share
(the "Common
Stock") and two (2) series of warrants exercisable for shares of Common
Stock (the "Warrants").  Pursuant
to the Securities Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the resale of the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Preferred Shares and the shares of Common Stock issuable
upon exercise of the Warrants under the Securities Act of 1933, as amended (the
"1933
Act").  In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 2009, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") relating to the
Registrable Securities which names each of the Holders as a selling shareholder
thereunder.

     

    In connection with the foregoing,
[we][I] advise you that a member of the SEC's staff has advised [us][me] by
telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we]
[I] have no knowledge, after telephonic inquiry of a member of the SEC's staff,
that any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

     

    This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement.  You need not require further letters from us to effect any
future legend-free issuance or reissuance of shares of Common Stock to the
Holders as contemplated by the Company's Irrevocable Transfer Agent Instructions
dated November [__], 2009.

     

    Very
truly yours,

     

    [ISSUER'S COUNSEL]

     

    By:_____________________

     

    CC:           [LIST NAMES OF HOLDERS]

    
 

     

     

    
Annex A-1

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      

       

      
        	
                Name of Selling shareholder

              	
                Number of Shares of Common Stock Owned Prior to
      Offering

              	
                Maximum Number of Shares of Common Stock to be
      Sold Pursuant to this Prospectus

              	
                Number of Shares of Common Stock Owned After
      Offering

              

      

       

       

       

       

       

       

       

       

       

       

       

       

      
Annex A-2

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    EXHIBIT
B

    SELLING
SHAREHOLDERS

     

    The
shares of common stock being offered by the selling shareholders are those
issuable upon conversion of the convertible preferred shares and upon exercise
of the warrants.  For additional information regarding the issuances
of the convertible preferred shares and the warrants, see "Private Placement of
the Convertible Preferred Shares and Warrants" above.  We are
registering the shares of common stock in order to permit the selling
shareholders to offer the shares for resale from time to time.  Except
for the ownership of the convertible preferred shares and the warrants, the
selling shareholders have not had any material relationship with us within the
past three years.

     

    The table
below lists the selling shareholders and other information regarding the
beneficial ownership of the shares of common stock by each of the selling
shareholders.  The second column lists the number of shares of common
stock beneficially owned by each selling shareholder, based on its ownership of
the shares of the convertible preferred shares and the warrants, as of ________,
2009, assuming conversion of all convertible preferred shares and exercise of
the warrants held by the selling shareholders on that date, without regard to
any limitations on conversions and/or redemptions of the convertible preferred
shares or exercises of the warrants.

     

    The third
column lists the shares of common stock being offered by this prospectus by the
selling shareholders.

     

    In
accordance with the terms of a registration rights agreement with the holders of
the convertible preferred shares and the warrants, this prospectus generally
covers the resale of at least 130% of the sum of (i) the number of shares of
common stock issued and issuable upon conversion of the convertible preferred
shares as of the trading day immediately preceding the date the registration
statement is initially filed with the SEC and (ii) the number of shares of
common stock issued and issuable upon exercise of the related warrants,
determined as if the outstanding warrants were exercised, as applicable, in
full, as of the Trading Day immediately preceding the date this registration
statement is initially filed with the SEC, without regard to any limitations on
conversions and/or redemptions of the Preferred Shares or exercises of the
Warrants.  The fourth column assumes the sale of all of the shares
offered by the selling shareholders pursuant to this prospectus.

     

    Under the
terms of the convertible preferred shares and the warrants, a selling
shareholder may not convert the convertible preferred shares or exercise the
warrants, to the extent such conversion or exercise would cause such selling
shareholder, together with its affiliates, to beneficially own a number of
shares of common stock which would exceed 4.99% of our then outstanding shares
of common stock following such conversion or exercise, excluding for purposes of
such determination shares of common stock issuable upon conversion of the
convertible preferred shares which have not been converted and upon exercise of
the warrants which have not been exercised.  The number of shares in
the second column does not reflect this limitation.  The selling
shareholders may sell all, some or none of their shares in this
offering.  See "Plan of Distribution."

     

    
 

     

     

    Annex B-1

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    PLAN
OF DISTRIBUTION

     

    We are
registering the shares of common stock issuable upon conversion of the
convertible preferred shares and the shares of common stock issuable upon
exercise of the warrants to permit the resale of these shares of common stock by
the holders of the convertible preferred shares and warrants from time to time
after the date of this prospectus.  We will not receive any of the
proceeds from the sale by the selling shareholders of the shares of common
stock.  We will bear all fees and expenses incident to our obligation
to register the shares of common stock.

     

    The
selling shareholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents.  If the
shares of common stock are sold through underwriters or broker-dealers, the
selling shareholders will be responsible for underwriting discounts or
commissions or agent's commissions.  The shares of common stock may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at
negotiated prices.  These sales may be effected in transactions, which
may involve crosses or block transactions,

     

    
      	
              ·  

            	
              on
      any national securities exchange or quotation service on which the
      securities may be listed or quoted at the time of
  sale;

            

    

     

    
      	
              ·  

            	
              in
      the over-the-counter market;

            

    

     

    
      	
              ·  

            	
              in
      transactions otherwise than on these exchanges or systems or in the
      over-the-counter market;

            

    

     

    
      	
              ·  

            	
              through
      the writing of options, whether such options are listed on an options
      exchange or otherwise;

            

    

     

    
      	
              ·  

            	
              ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

            

    

     

    
      	
              ·  

            	
              block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;

            

    

     

    
      	
              ·  

            	
              purchases
      by a broker-dealer as principal and resale by the broker-dealer for its
      account;

            

    

     

    
      	
              ·  

            	
              an
      exchange distribution in accordance with the rules of the applicable
      exchange;

            

    

     

    
      	
              ·  

            	
              privately
      negotiated transactions;

            

    

     

    
      	
              ·  

            	
              short
      sales;

            

    

     

    
      	
              ·  

            	
              sales
      pursuant to Rule 144;

            

    

     

     

     

    Annex
B-1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              ·  

            	
              broker-dealers
      may agree with the selling securityholders to sell a specified number of
      such shares at a stipulated price per
share;

            

    

     

    
      	
              ·  

            	
              a
      combination of any such methods of sale;
and

            

    

     

    
      	
              ·  

            	
              any
      other method permitted pursuant to applicable
  law.

            

    

     

    If the
selling shareholders effect such transactions by selling shares of common stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  In connection with
sales of the shares of common stock or otherwise, the selling shareholders may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the shares of common stock in the course of hedging in positions
they assume.  The selling shareholders may also sell shares of common
stock short and deliver shares of common stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales.  The selling shareholders may also loan or pledge shares
of common stock to broker-dealers that in turn may sell such
shares.

     

    The
selling shareholders may pledge or grant a security interest in some or all of
the convertible preferred shares or warrants or shares of common stock owned by
them and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933, as amended, amending, if necessary, the list of selling shareholders to
include the pledgee, transferee or other successors in interest as selling
shareholders under this prospectus.  The selling shareholders also may
transfer and donate the shares of common stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.

     

    The
selling shareholders and any broker-dealer participating in the distribution of
the shares of common stock may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act.  At the time a particular
offering of the shares of common stock is made, a prospectus supplement, if
required, will be distributed which will set forth the aggregate amount of
shares of common stock being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions
and other terms constituting compensation from the selling shareholders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker-dealers.

     

    Under the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers.  In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied
with.

     

     

    Annex
B-2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    There can
be no assurance that any selling shareholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.

     

    The
selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
shareholders and any other participating person.  Regulation M may
also restrict the ability of any person engaged in the distribution of the
shares of common stock to engage in market-making activities with respect to the
shares of common stock.  All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.

     

    We will
pay all expenses of the registration of the shares of common stock pursuant to
the registration rights agreement, estimated to be
$[     ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that a selling
shareholder will pay all underwriting discounts and selling commissions, if
any.  We will indemnify the selling shareholders against liabilities,
including some liabilities under the Securities Act, in accordance with the
registration rights agreements, or the selling shareholders will be entitled to
contribution.  We may be indemnified by the selling shareholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
shareholder specifically for use in this prospectus, in accordance with the
related registration rights agreement, or we may be entitled to
contribution.

     

     

    Once sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of common stock will be freely tradable in the hands of persons other
than our affiliates.

    

     

     

     

     

    Annex B-3

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