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Kandi Technologies Group, Inc.: Exhibit 4.1 - Filed by newsfilecorp.com

Exhibit 4.1

[FORM OF SERIES [A][B][C] WARRANT]

KANDI TECHNOLOGIES GROUP, INC.

SERIES [A][B][C] WARRANT
TO PURCHASE COMMON
STOCK

Warrant No.: [A][B][C]
-                               
Date
of Issuance: June __, 2013 (“Issuance Date”)

     Kandi Technologies Group, Inc., a
Delaware corporation (the “Company”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,  [BUYERS], the registered
holder hereof or its permitted assigns (the “Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon exercise of this Warrant
to Purchase Common Stock (including any Warrants to Purchase Common Stock issued
in exchange, transfer or replacement hereof, the “Warrant”), at any time
or times on or after [INSERT IN SERIES A WARRANT: the Issuance Date][INSERT IN
SERIES B WARRANT: [ ] (the “Initial Exercisability Date”), but not after
11:59 p.m., New York time, on the Expiration Date (as defined below),
[______________] (subject to adjustment as provided herein) fully paid and
non-assessable shares of Common Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 17. This Warrant is one of
the Warrants to Purchase Common Stock (the “SPA Warrants”) issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of
June 26, 2013 (the “Subscription Date”), by and among the Company and the
investors (the “Buyers”) referred to therein (the “Securities Purchase
Agreement”).

1. EXERCISE OF WARRANT.

     (a) Mechanics of Exercise.
Subject to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the [INSERT IN SERIES A WARRANTS: Issuance Date]
[INSERT IN SERIES B AND C WARRANTS: Initial Exercisability Date], in whole or in
part, by delivery (whether via facsimile or otherwise) of a written notice, in
the form attached hereto as Exhibit A (the “Exercise Notice”), of
the Holder’s election to exercise this Warrant. Within one (1) Trading Day
following an exercise of this Warrant as aforesaid, the Holder shall deliver
payment to the Company of an amount equal to the Exercise Price in effect on the
date of such exercise multiplied by the number of Warrant Shares as to which
this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or
via wire transfer of immediately available funds if, subject to the provisions
of Section 1(d), the Holder did not notify the Company in such Exercise Notice
that such exercise was made pursuant to a Cashless Exercise (as defined in
Section 1(d)) at a time and under circumstances which permit a Cashless
Exercise. The Holder shall not be required to deliver the original of this
Warrant in order to effect an exercise hereunder. Execution and delivery of an
Exercise Notice with respect to less than all of the Warrant Shares shall have
the same effect as cancellation of the original of this Warrant and issuance of
a new Warrant evidencing the right to purchase the remaining number of Warrant
Shares. Execution and delivery of an Exercise Notice for all of the
then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after
delivery of the Warrant Shares in accordance with the terms hereof. On or before
the first (1st) Trading Day following the date on which the Company
has received an Exercise Notice, the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of such Exercise Notice, in the form
attached hereto as Exhibit B, to the Holder and the Company’s
transfer agent (the “Transfer Agent”). On or before the third
(3rd) Trading Day following the date on which the Company has
received such Exercise Notice, the Company shall (X) provided that the Transfer
Agent is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit/ Withdrawal at Custodian system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the Holder or, at the Holder’s instruction
pursuant to the Exercise Notice, the Holder’s agent or designee, in each case,
sent by reputable overnight courier to the address as specified in the
applicable Exercise Notice, a certificate, registered in the Company’s share
register in the name of the Holder or its designee (as indicated in the
applicable Exercise Notice), for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise
Notice, the Holder shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be). If this Warrant is submitted in connection
with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then, at the request of the
Holder, the Company shall as soon as practicable and in no event later than
three (3) Business Days after any exercise and at its own expense, issue and
deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
and fees which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant. [INSERT FOR SERIES C WARRANTS:
Notwithstanding any provision of this Warrant to the contrary, no more than the
Maximum Eligibility Number of Warrant Shares shall be exercisable
hereunder.]

     (b) Exercise Price. For
purposes of this Warrant, “Exercise Price” means $[______], subject to
adjustment as provided herein.

     (c) Company’s Failure to
Timely Deliver Securities. If the Company shall fail, for any reason or for
no reason, to issue to the Holder within three (3) Trading Days after receipt of
the applicable Exercise Notice, a certificate for the number of shares of Common
Stock to which the Holder is entitled and register such shares of Common Stock
on the Company’s share register or to credit the Holder’s balance account with
DTC for such number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise of this Warrant (as the case may be) and if on or
after such third (3rd) Trading Day the Holder (or any other Person in
respect, or on behalf, of the Holder) purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all
or any portion of the number of shares of Common Stock, or a sale of a number of
shares of Common Stock equal to all or any portion of the number of shares of
Common Stock, issuable upon such exercise that the Holder so anticipated
receiving from the Company, then, in addition to all other remedies available to
the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including reasonable
brokerage commissions and other reasonable out-of-pocket expenses, if any) for
the shares of Common Stock so purchased (including, without limitation, by any
other Person in respect, or on behalf, of the Holder) (the “Buy-In
Price”), at which point the Company’s obligation to so issue and deliver
such certificate or credit the Holder’s balance account with DTC for the number
of shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder (as the case may be) (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to so issue and
deliver to the Holder a certificate or certificates representing such shares of
Common Stock or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder (as the case may be) and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price
of the Common Stock on any Trading Day during the period commencing on the date
of the applicable Exercise Notice and ending on the date of such issuance and
payment under this clause (ii).

2

     (d) [INSERT IN SERIES A
AND C WARRANTS ONLY: Cashless Exercise. Notwithstanding anything
contained herein to the contrary (other than Section 1(f) below), if, at the
time of exercise hereof, the Registration Statement (as defined in the
Securities Purchase Agreement) is not effective (or the prospectus contained
therein is not available for use) for the issuance by the Company to the Holder
of all of the Warrant Shares, then the Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (a “Cashless Exercise”):

Net Number = (A x B) - (A x C)

                                      B

For purposes of the foregoing
formula:

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

B= as applicable: (i) the Closing Sale
Price of the Common Stock on the Trading Day immediately preceding the date of
the applicable Exercise Notice if such Exercise Notice is (1) both executed and
delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or
(2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day
prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64)
of Regulation NMS promulgated under the federal securities laws) on such
Trading Day, (ii) the Bid Price of the Common Stock as of the time of the
Holder’s execution of the applicable Exercise Notice if such Exercise Notice is
executed during “regular trading hours” on a Trading Day and is delivered within
two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the Closing
Sale Price of the Common Stock on the date of the applicable Exercise Notice if
the date of such Exercise Notice is a Trading Day and such Exercise Notice is
both executed and delivered pursuant to Section 1(a) hereof after the close of
“regular trading hours” on such Trading Day.

3

C= the Exercise Price then in effect
for the applicable Warrant Shares at the time of such exercise.][INSERT IN
SERIES B WARRANTS: [INTENTIONALLY OMITTED]

     (e) Disputes. In the case
of a dispute as to the determination of the Exercise Price or the arithmetic
calculation of the number of Warrant Shares to be issued pursuant to the terms
hereof, the Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and resolve such dispute in accordance with Section
14.

     (f) Limitations on
Exercises.

     (i)
Beneficial Ownership. Notwithstanding anything to the contrary contained
in this Warrant, this Warrant shall not be exercisable by the Holder hereof to
the extent (but only to the extent) that the Holder together with any of its
affiliates would beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the Common Stock after giving effect to such exercise. To
the extent the above limitation applies, the determination of whether this
Warrant shall be exercisable (vis-à-vis other convertible, exercisable or
exchangeable securities owned by the Holder or any of its affiliates) and of
which such securities shall be exercisable (as among all such securities owned
by the Holder) shall, subject to such Maximum Percentage limitation, be
determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to exercise this
Warrant pursuant to this paragraph shall have any effect on the applicability of
the provisions of this paragraph with respect to any subsequent determination of
exercisability. For the purposes of this paragraph, beneficial ownership and all
determinations and calculations (including, without limitation, with respect to
calculations of percentage ownership) shall be determined in accordance with
Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement)
and the rules and regulations promulgated thereunder. The provisions of this
paragraph shall be implemented in a manner otherwise than in strict conformity
with the terms of this paragraph to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such Maximum
Percentage limitation. The limitations contained in this paragraph shall apply
to a successor Holder of this Warrant. The holders of Common Stock shall be
third party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding, including by virtue of any prior
conversion or exercise of convertible or exercisable securities into Common
Stock, including, without limitation, pursuant to this Warrant or securities
issued pursuant to the Securities Purchase Agreement. By written notice to the
Company, any Holder may increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% specified in such notice; provided that (x)
any such increase will not be effective until the 61st day after such notice is
delivered to the Company, and (y) any such increase or decrease will apply only
to the Holder sending such notice and not to any other holder of SPA
Warrants.

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     (ii)
[INSERT IN SERIES A AND C WARRANTS: Principal Market Regulation.
The Company shall not issue any shares of Common Stock upon exercise of this
Warrant if the issuance of such shares of Common Stock (together with any Common
Shares issued pursuant to the Securities Purchase Agreement and any shares of
Common Stock previously issued pursuant to any Series A Warrant or Series C
Warrant (in each case, as defined in the Securities Purchase Agreement) would
exceed the aggregate number of shares of Common Stock which the Company may
issue upon exercise of the Series A Warrants and/or Series C Warrants without
breaching the Company’s obligations under the rules or regulations of the
Principal Market (the number of shares which may be issued without violating
such rules and regulations, the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (A) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company that
such approval is not required, which opinion shall be reasonably satisfactory to
the Holder. Until such approval or such written opinion is obtained, no Buyer
shall be issued in the aggregate, upon exercise of any Series A Warrant and/or
Series C Warrant, shares of Common Stock in an amount greater than the product
of (I) the Exchange Cap multiplied by (II) the quotient of (1) the Purchase
Price paid by such Buyer pursuant to the Securities Purchase Agreement divided
by (2) the Purchase Price paid by all Buyers pursuant to the Securities Purchase
Agreement (with respect to each Buyer, the “Exchange Cap Allocation”). In
the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
Series A Warrants or Series C Warrants, the transferee shall be allocated a pro
rata portion of such Buyer’s Exchange Cap Allocation with respect to such
portion of such Series A Warrants or Series C Warrants, as applicable, so
transferred, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation so
allocated to such transferee. Upon exercise in full of a holder’s Series A
Warrants or Series C Warrants, as applicable, the excess of such holder’s
Exchange Cap Allocation over the number of shares of Common Stock actually
issued to such holder upon such holder's exercise in full of such Series A
Warrants or Series C Warrants, as applicable, shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of Series A
Warrants and Series C Warrants on a pro rata basis in proportion to the shares
of Common Stock underlying the Series A Warrants and Series C Warrants then held
by each such holder. In the event that the Company is prohibited from issuing
any shares of Common Stock pursuant to this Section 1(f)(ii) (the “Exchange
Cap Shares”), in lieu of issuing and delivering such Exchange Cap Shares to
the Holder, the Company shall pay cash to the Holder in exchange for the
cancellation of such portion of this Warrant exercisable into such Exchange Cap
Shares at a price equal to the sum of (x) the product of (A) such number of
Exchange Cap Shares and (B) the greatest Closing Sale Price of the Common Stock
on any Trading Day during the period commencing on the date the Holder delivers
the applicable Exercise Notice with respect to such Exchange Cap Shares to the
Company and ending on the date immediately preceding the date of such payment
under this Section 1(f)(ii) and (y) to the extent the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of Exchange Cap Shares, any brokerage
commissions and other out-of-pocket expenses, if any, of the Holder incurred in
connection therewith.][INSERT IN SERIES B WARRANT: [INTENTIONALLY OMITTED]]

5

     (g) Insufficient Authorized
Shares. The Company shall at all times keep reserved for issuance under this
Warrant a number of shares of Common Stock as shall be necessary to satisfy the
Company’s obligation to issue shares of Common Stock hereunder (without regard
to any limitation otherwise contained herein with respect to the number of
shares of Common Stock that may be acquirable upon exercise of this Warrant).
If, notwithstanding the foregoing, and not in limitation thereof, at any time
while any of the SPA Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the SPA Warrants at
least a number of shares of Common Stock equal to the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the SPA Warrants then outstanding (the “Required Reserve Amount”) (an
“Authorized Share Failure”), then the Company shall immediately take all
action necessary to increase the Company’s authorized shares of Common Stock to
an amount sufficient to allow the Company to reserve the Required Reserve Amount
for all the SPA Warrants then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES. The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to time as set
forth in this Section 2.

     (a) Stock Dividends and
Splits. Without limiting any provision of Section 2(b) or Section 4, if the
Company, at any time on or after the date of the Securities Purchase Agreement,
(i) pays a stock dividend on one or more classes of its then outstanding shares
of Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its then
outstanding shares of Common Stock into a larger number of shares or (iii)
combines (by combination, reverse stock split or otherwise) one or more classes
of its then outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event.

6

     (b) [INSERT IN SERIES A
AND C WARRANTS ONLY: Adjustment Upon Issuance of Shares of Common
Stock. If and whenever on or after the date of the Securities Purchase
Agreement, the Company issues or sells, or in accordance with this Section 2 is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company, but excluding any Excluded Securities (as defined in the
Securities Purchase Agreement) issued or sold or deemed to have been issued or
sold) for a consideration per share (the “New Issuance Price”) less than
a price equal to the Exercise Price in effect immediately prior to such issue or
sale or deemed issuance or sale (such Exercise Price then in effect is referred
to as the “Applicable Price”) (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance
Price. For all purposes of the foregoing (including, without limitation,
determining the adjusted Exercise Price and consideration per share under this
Section 2(b)), the following shall be applicable:

     (i)
Issuance of Options. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(b)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to (1) the lower of (x) the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option and
(y) the lowest exercise price set forth in such Option for which one share of
Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option minus (2) the sum of all amounts paid or payable to
the holder of such Option (or any other Person) upon the granting or sale of
such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option plus
the value of any other consideration received or receivable by, or benefit
conferred on, the holder of such Option (or any other Person). Except as
contemplated below, no further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of
such shares of Common Stock upon conversion, exercise or exchange of such
Convertible Securities.

7

     (ii)
Issuance of Convertible Securities. If the Company in any manner issues
or sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 2(b)(ii), the “lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to (1) the lower of (x) the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale of
the Convertible Security and upon conversion, exercise or exchange of such
Convertible Security and (y) the lowest conversion price set forth in such
Convertible Security for which one share of Common Stock is issuable upon
conversion, exercise or exchange thereof minus (2) the sum of all amounts paid
or payable to the holder of such Convertible Security (or any other Person) upon
the issuance or sale of such Convertible Security plus the value of any other
consideration received or receivable by, or benefit conferred on, the holder of
such Convertible Security (or any other Person). Except as contemplated below,
no further adjustment of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(b), except as contemplated below, no further adjustment of the Exercise Price
shall be made by reason of such issue or sale.

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

8

     (iv) Calculation of Consideration Received. If any Option and/or Convertible
Security and/or Adjustment Right is issued in connection with the issuance or
sale or deemed issuance or sale of any other securities of the Company (as
determined by the Holder, the “Primary Security”,
and such Option and/or Convertible Security and/or Adjustment Right, the
“Secondary Securities”), together comprising one integrated transaction,
the aggregate consideration per share of Common Stock with respect to such
Primary Security shall be deemed to be equal to the difference of (x) the lowest
price per share for which one share of Common Stock was issued in such
integrated transaction (or was deemed to be issued pursuant to Section 2(b)(i)
or 2(b)(ii) above, as applicable) solely with respect to such Primary Security,
minus (y) with respect to such Secondary Securities, the sum of (I) the Black
Scholes Consideration Value of each such Option, if any, (II) the fair market
value (as determined by the Holder) or the Black Scholes Consideration Value, as
applicable, of such Adjustment Right, if any, and (III) the fair market value
(as determined by the Holder) of such Convertible Security, if any, in each
case, as determined on a per share basis in accordance with this Section
2(b)(iv). If any shares of Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor (for the purpose of determining the consideration paid for
such Common Stock, Option or Convertible Security, but not for the purpose of
the calculation of the Black Scholes Consideration Value) will be deemed to be
the net amount of consideration received by the Company therefor. If any shares
of Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration received by the
Company (for the purpose of determining the consideration paid for such Common
Stock, Option or Convertible Security, but not for the purpose of the
calculation of the Black Scholes Consideration Value) will be the fair value of
such consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the Company
for such securities will be the arithmetic average of the VWAPs of such security
for each of the five (5) Trading Days immediately preceding the date of receipt.
If any shares of Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor (for
the purpose of determining the consideration paid for such Common Stock, Option
or Convertible Security, but not for the purpose of the calculation of the Black
Scholes Consideration Value) will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is attributable to
such shares of Common Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or publicly traded
securities will be determined jointly by the Company and the Holder. If such
parties are unable to reach agreement within ten (10) days after the occurrence
of an event requiring valuation (the “Valuation Event”), the fair value
of such consideration will be determined within five (5) Trading Days after the
tenth (10th) day following such Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Holder. The
determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.

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

9

     (c) Number of Warrant
Shares. Simultaneously with any adjustment to the Exercise Price pursuant to
only paragraph (a) of this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein).

     (d) Other Events. In the
event that the Company (or any Subsidiary (as defined in the Securities Purchase
Agreement)) shall take any action to which the provisions hereof are not
strictly applicable, or, if applicable, would not operate to protect the Holder
from dilution or if any event occurs of the type contemplated by the provisions
of this Section 2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company’s board of
directors shall in good faith determine and implement an appropriate adjustment
in the Exercise Price and the number of Warrant Shares (if applicable) so as to
protect the rights of the Holder, provided that no such adjustment pursuant to
this Section 2(d) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section 2, provided
further that if the Holder does not accept such adjustments as appropriately
protecting its interests hereunder against such dilution, then the Company’s
board of directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company.

     (e) Calculations. All
calculations under this Section 2 shall be made by rounding to the nearest cent
or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to
any adjustments pursuant to Section 2 above, if the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled to
participate in such Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of Common Stock
acquirable upon a complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distributions would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such Distribution to such extent (or the beneficial ownership
of any such shares of Common Stock as a result of such Distribution to such
extent) and such Distribution to such extent shall be held in abeyance for the
benefit of the Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Maximum Percentage).]

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4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

     (a) Purchase Rights. In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon a complete exercise of this Warrant (without regard to any limitations on
exercise hereof, including without limitation, the Maximum Percentage)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights (provided, however, to the extent
that the Holder’s right to participate in any such Purchase Right would result
in the Holder exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to
such extent) and such Purchase Right to such extent shall be held in abeyance
for the Holder until such time, if ever, as its right thereto would not result
in the Holder exceeding the Maximum Percentage).

     (b) Fundamental
Transactions. The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity assumes in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents (as defined in the Securities Purchase Agreement) in accordance with
the provisions of this Section 4(b) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the Holder prior
to such Fundamental Transaction, such approval not to be unreasonably withheld,
conditioned or delayed, including agreements to deliver to the Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, which is exercisable for a corresponding number
of shares of capital stock equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and with
an exercise price which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction) and (ii) the Successor Entity (including its Parent Entity) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the consummation of each Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the
applicable Fundamental Transaction, the provisions of this Warrant and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of each Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the applicable Fundamental Transaction, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property (except such
items still issuable under Sections 3 and 4(a) above, which shall continue to be
receivable thereafter)) issuable upon the exercise of this Warrant prior to the
applicable Fundamental Transaction, such shares of publicly traded common stock
(or its equivalent) of the Successor Entity (including its Parent Entity) which
the Holder would have been entitled to receive upon the happening of the
applicable Fundamental Transaction had this Warrant been exercised immediately
prior to the applicable Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant), as adjusted in accordance with the
provisions of this Warrant. Notwithstanding the foregoing, the Holder may elect,
at its sole option, by delivery of written notice to the Company to waive this
Section 4(b) to permit the Fundamental Transaction without the assumption of
this Warrant. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of each Fundamental Transaction pursuant to
which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a
“Corporate Event”), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon an
exercise of this Warrant at any time after the consummation of the applicable
Fundamental Transaction but prior to the Expiration Date, in lieu of the shares
of the Common Stock (or other securities, cash, assets or other property (except
such items still issuable under Sections 3 and 4(a) above, which shall continue
to be receivable thereafter)) issuable upon the exercise of the Warrant prior to
such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of the applicable Fundamental Transaction had this Warrant been
exercised immediately prior to the applicable Fundamental Transaction (without
regard to any limitations on the exercise of this Warrant). Provision made
pursuant to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Holder.

11

     (c) Black Scholes Value.
Notwithstanding the foregoing and the provisions of Section 4(b) above, at the
request of the Holder delivered at any time commencing on the earliest to occur
of (x) the public disclosure of any Fundamental Transaction, (y) the
consummation of any Fundamental Transaction and (z) the Holder first becoming
aware of any Fundamental Transaction through the date that is ninety (90) days
after the public disclosure of the consummation of such Fundamental Transaction
by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the
Company or the Successor Entity (as the case may be) shall purchase this Warrant
from the Holder on the date of such request by paying to the Holder cash in an
amount equal to the Black Scholes Value.

     (d) Application. The
provisions of this Section 4 shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied as if this
Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this
Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital
stock registered under the 1934 Act and thereafter receivable upon exercise of
this Warrant (or any such other warrant)).

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

6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as
otherwise specifically provided herein, the Holder, solely in its capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in its capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which it is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in
this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 6, the Company
shall provide the Holder with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.

7. REISSUANCE OF WARRANTS.

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

13

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

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

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

8. NOTICES; CURRENCY; PAYMENTS.

     (a) Whenever notice is required
to be given under this Warrant, unless otherwise provided herein, such notice
shall be given in accordance with Section 8(f) of the Securities Purchase
Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Warrant, including in reasonable detail a
description of such action and the reason therefor. Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon each adjustment of the Exercise Price and the number of
Warrant Shares, setting forth in reasonable detail, and certifying, the
calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to
the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B)
with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in conjunction with such notice
being provided to the Holder and (iii) at least ten (10) Trading Days prior to
the consummation of any Fundamental Transaction. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any of its Subsidiaries, the Company shall
simultaneously file such notice with the SEC (as defined in the Securities
Purchase Agreement) pursuant to a Current Report on Form 8-K. It is expressly
understood and agreed that the time of execution specified by the Holder in each
Exercise Notice shall be definitive and may not be disputed or challenged by the
Company.

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     (b) Currency. All amounts
owing under this Warrant that, in accordance with their terms, are paid in cash
shall be paid in United States dollars (“U.S. Dollars”). All amounts
denominated in other currencies (if any) shall be converted into the U.S. 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 U.S. Dollars pursuant to this Warrant, the U.S. Dollar
exchange rate as published in the Wall Street Journal on the relevant date of
calculation (it being understood and agreed that where an amount is calculated
with reference to, or over, a period of time, the date of calculation shall be
the final date of such period of time).

     (c) Payments. Whenever any
payment is to be made by the Company to any Person pursuant to this Warrant,
such payment shall be made in lawful money of the United States of America via
wire transfer of U.S. Dollars in immediately available funds in accordance with
the Holder’s wire transfer instructions delivered to the Company on or prior to
such payment date or, in the absence of such instructions, by a certified check
drawn on the account of the Company and sent via overnight courier service to
such Person at such address as previously provided to the Company in writing
(which address, in the case of each of the Buyers, shall initially be as set
forth on the Schedule of Buyers attached to the Securities Purchase
Agreement).

9. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of this Warrant (other than Section 1(f)) may be amended
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company has obtained the
written consent of the Holder. The Holder shall be entitled, at its option, to
the benefit of any amendment of (a) any other similar warrant issued under the
Securities Purchase Agreement or (b) any other similar warrant. No consideration
shall be offered or paid to the Holder to amend or consent to a waiver or
modification of any provision of this Warrant unless the same consideration is
also offered to all of the holders of the other SPA Warrants. No waiver shall be
effective unless it is in writing and signed by an authorized representative of
the waiving party.

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

15

11. GOVERNING LAW. This Warrant shall be governed by and
construed and enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Warrant shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdiction other than the State of New York. The Company 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. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company’s obligations to the
Holder or to enforce a judgment or other court ruling in favor of the Holder.
The Company hereby appoints CT Corporation System, with offices at 111 Eighth
Avenue, New York, New York 10011 as its agent for service of process in the
United States. If service of process is effected pursuant to the above sentence,
such service will be deemed sufficient under New York law and the Company shall
not assert otherwise. 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 IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

12. JUDGMENT CURRENCY.

     (a) If for the purpose of
obtaining or enforcing judgment against the Company in any court in any
jurisdiction it becomes necessary to convert into any other currency (such other
currency being hereinafter in this Section 12 referred to as the “Judgment
Currency”) an amount due in U.S. Dollars under this Warrant, the conversion
shall be made at the Exchange Rate prevailing on the Trading Day immediately
preceding:

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

     (ii) the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 12(a)(ii)
being hereinafter referred to as the “Judgment Conversion Date”).

16

     (b) If in the case of any
proceeding in the court of any jurisdiction referred to in Section 12(a)(ii)
above, there is a change in the Exchange Rate prevailing between the Judgment
Conversion Date and the date of actual payment of the amount due, the applicable
party shall pay such adjusted amount as may be necessary to ensure that the
amount paid in the Judgment Currency, when converted at the Exchange Rate
prevailing on the date of payment, will produce the amount of U.S. Dollars which
could have been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial order at the Exchange Rate prevailing on the Judgment
Conversion Date. 

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

13. CONSTRUCTION; HEADINGS. This Warrant shall be deemed
to be jointly drafted by the Company and the Holder and shall not be construed
against any Person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant. Terms used in this Warrant but defined in the
other Transaction Documents shall have the meanings ascribed to such terms on
the Closing Date in such other Transaction Documents unless otherwise consented
to in writing by the Holder.

14. DISPUTE RESOLUTION. In the case of a dispute as to
the determination of the Exercise Price, the Closing Sale Price, the Bid Price
or fair market value or the arithmetic calculation of the Warrant Shares (as the
case may be), the Company or the Holder (as the case may be) shall submit the
disputed determinations or arithmetic calculations (as the case may be) via
facsimile (a) within two (2) Business Days after receipt of the applicable
notice giving rise to such dispute to the Company or the Holder (as the case may
be) or (b) if no notice gave rise to such dispute, at any time after the Holder
learned of the circumstances giving rise to such dispute (including, without
limitation, as to whether any issuance or sale or deemed issuance or sale was an
issuance or sale or deemed issuance or sale of Excluded Securities). If the
Holder and the Company are unable to agree upon such determination or
calculation (as the case may be) of the Exercise Price, the Closing Sale Price,
the Bid Price or fair market value or the number of Warrant Shares (as the case
may be) within three (3) Business Days of such disputed determination or
arithmetic calculation being submitted to the Company or the Holder (as the case
may be), then the Company shall, within two (2) Business Days submit via
facsimile (i) the disputed determination of the Exercise Price, the Closing Sale
Price, the Bid Price or fair market value (as the case may be) to an
independent, reputable investment bank selected by the Holder or (ii) the
disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and
the Holder of the results no later than ten (10) Business Days from the time it
receives such disputed determinations or calculations (as the case may be). Such
investment bank’s or accountant’s determination or calculation (as the case may
be) shall be binding upon all parties absent demonstrable error.

17

15. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be
cumulative and in addition to all other remedies available under this Warrant
and the other Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall
limit the right of the Holder to pursue actual damages for any failure by the
Company to comply with the terms of this Warrant. The Company covenants to the
Holder that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein with
respect to payments, exercises and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by the
Holder to enable the Holder to confirm the Company’s compliance with the terms
and conditions of this Warrant (including, without limitation, compliance with
Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

16. TRANSFER. This Warrant may be offered for sale,
sold, transferred or assigned without the consent of the Company.

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

     (a) “Adjustment Right”
means any right granted with respect to any securities issued in connection
with, or with respect to, any issuance or sale (or deemed issuance or sale in
accordance with Section 2(b)) of shares of Common Stock (other than rights of
the type described in Section 3 and 4 hereof) that could result in a decrease in
the net consideration received by the Company in connection with, or with
respect to, such securities (including, without limitation, any cash settlement
rights, cash adjustment or other similar rights).

     (b) “Bid Price” means, for
any security as of the particular time of determination, the bid price for such
security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg as of such time of determination, or
if the foregoing does not apply, the bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg as of such time of determination, or, if no bid price is
reported for such security by Bloomberg as of such time of determination, the
average of the bid prices of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.) as of such time of determination. If the
Bid Price cannot be calculated for a security as of the particular time of
determination on any of the foregoing bases, the Bid Price of such security as
of such time of determination shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the Holder are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved in accordance with the procedures in Section 14. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such period.

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     (c) “Black Scholes
Consideration Value” means the value of the applicable Option, Convertible
Security or Adjustment Right (as the case may be) as of the date of issuance
thereof calculated using the Black Scholes Option Pricing Model obtained from
the “OV” function on Bloomberg utilizing (i) an underlying price per share equal
to the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the public announcement of the execution of definitive documents with
respect to the issuance of such Option or Convertible Security (as the case may
be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for
a period equal to the remaining term of such Option, Convertible Security or
Adjustment Right (as the case may be) as of the date of issuance of such Option,
Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost
of borrow and (iv) an expected volatility equal to the greater of 90% and the
100 day volatility obtained from the HVT function on Bloomberg (determined
utilizing a 365 day annualization factor) as of the Trading Day immediately
following the date of issuance of such Option, Convertible Security or
Adjustment Right (as the case may be).

     (d) “Black Scholes Value”
means the value of the unexercised portion of this Warrant remaining on the date
of the Holder’s request pursuant to Section 4(c), which value is calculated
using the Black Scholes Option Pricing Model obtained from the “OV” function on
Bloomberg utilizing (i) an underlying price per share equal to the greater of
(1) the highest Closing Sale Price of the Common Stock during the period
beginning on the Trading Day immediately preceding the announcement of the
applicable Fundamental Transaction (or the consummation of the applicable
Fundamental Transaction, if earlier) and ending on the Trading Day of the
Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share
being offered in cash in the applicable Fundamental Transaction (if any) plus
the value of the non-cash consideration being offered in the applicable
Fundamental Transaction (if any), (ii) a strike price equal to the Exercise
Price in effect on the date of the Holder’s request pursuant to Section 4(c),
(iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a
period equal to the greater of (1) the remaining term of this Warrant as of the
date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term
of this Warrant as of the date of consummation of the applicable Fundamental
Transaction or as of the date of the Holder’s request pursuant to Section 4(c)
if such request is prior to the date of the consummation of the applicable
Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected
volatility equal to the greater of 90% and the 100 day volatility obtained from
the HVT function on Bloomberg (determined utilizing a 365 day annualization
factor) as of the Trading Day immediately following the earliest to occur of (x)
the public disclosure of the applicable Fundamental Transaction, (y) the
consummation of the applicable Fundamental Transaction and (z) the date on which
the Holder first became aware of the applicable Fundamental Transaction.

19

     (e) “Bloomberg” means
Bloomberg, L.P.

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

     (g) “Closing Sale Price”
means, for any security as of any date, the last closing trade price for such
security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the
closing trade price, then the last trade price of such security prior to 4:00
p.m., New York time, as reported by Bloomberg, or, if the Principal Market is
not the principal securities exchange or trading market for such security, the
last trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in Section 14. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

     (h) “Common Stock” means
(i) the Company’s shares of common stock, $0.001 par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common stock.

     (i) “Convertible
Securities” means any stock or other security (other than Options) that is
at any time and under any circumstances, directly or indirectly, convertible
into, exercisable or exchangeable for, or which otherwise entitles the holder
thereof to acquire, any shares of Common Stock.

     (j) “Eligible Market”
means The New York Stock Exchange, the NYSE Amex, the NASDAQ Global Select
Market or the Principal Market.

     (k) [INSERT IN SERIES A AND C
WARRANTS ONLY: “Equity Conditions” means: (i) on each day during the
period beginning one month prior to the applicable date of determination and
ending on and including the applicable date of determination the Registration
Statement is effective and the prospectus contained therein shall be available
for the issuance by the Company to the Holder of all of the Warrant Shares
(disregarding any limitation on exercise of this Warrant); (ii) on each day
during the period beginning three months prior to the applicable date of
determination and ending on and including the applicable date of determination
(the “Equity Conditions Measuring Period”), the Common Stock (including
all of the Warrant Shares) is listed or designated for quotation (as applicable)
on an Eligible Market and shall not have been suspended from trading on an
Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by the Company)
nor shall delisting or suspension by an Eligible Market have been threatened
(with a reasonable prospect of delisting occurring) or pending either (A) in
writing by such Eligible Market or (B) by falling below the minimum listing
maintenance requirements of the Eligible Market on which the Common Stock is
then listed or designated for quotation (as applicable); (iii) on each day
during the Equity Conditions Measuring Period, the Company shall have delivered
all shares of Common Stock issuable upon exercise of this Warrant on a timely
basis as set forth in Section 1(a) hereof and all other shares of capital stock
required to be delivered by the Company on a timely basis as set forth in the
other Transaction Documents; (iv) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating Section 1(f) hereof; (v) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating the rules or regulations of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (vi) on each
day during the Equity Conditions Measuring Period, no public announcement of a
pending, proposed or intended Fundamental Transaction shall have occurred which
has not been abandoned, terminated or consummated; (vii) the Company shall have
no knowledge of any fact that would reasonably be expected to cause the
Registration Statement to not be effective or the prospectus contained therein
to not be available for the issuance by the Company to the Holder of all of the
Warrant Shares (disregarding any limitation on exercise of this Warrant); (viii)
the Holder shall not be in (and no other Buyer shall be in) possession of any
material, non-public information provided to any of them by the Company, any of
its Subsidiaries or any of their respective affiliates, employees, officers,
representatives, agents or the like; and (ix) on each day during the Equity
Conditions Measuring Period, the Company otherwise shall have been in compliance
with each provision, covenant, representation or warranty of any of the
Transaction Documents and shall not have breached any, provision, covenant,
representation or warranty of any of the Transaction Documents.]

20

     (l) [INSERT IN SERIES A AND C
WARRANTS ONLY: “Equity Conditions Failure” means, with respect to a
particular date of determination, that on any day during the period commencing
twenty (20) Trading Days immediately prior to such date of determination, the
Equity Conditions have not been satisfied (or waived in writing by the
Holder).]

     (m) “Expiration Date”
means the date that is [ ] or, if such date falls on a day other than a Business
Day or on which trading does not take place on the Principal Market (a
“Holiday”), the next date that is not a Holiday.

     (n) “Fundamental
Transaction” means that (i) the Company or any of its Subsidiaries shall,
directly or indirectly, in one or more related transactions, (A) consolidate or
merge with or into (whether or not the Company or any of its Subsidiaries is the
surviving corporation) any other Person, or (B) sell, lease, license, assign,
transfer, convey or otherwise dispose of all or substantially all of its
respective properties or assets to any other Person, or (C) allow any other
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Voting Stock of the
Company (not including any shares of Voting Stock of the Company held by the
Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (D)
consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with any other Person
whereby such other Person acquires more than 50% of the outstanding shares of
Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination), or (E) (1)
reorganize, recapitalize or reclassify the Common Stock, (2) effect or
consummate a stock combination, reverse stock split or other similar transaction
involving the Common Stock or (3) make any public announcement or disclosure
with respect to any stock combination, reverse stock split or other similar
transaction involving the Common Stock (including, without limitation, any
public announcement or disclosure of (a) any potential, possible or actual stock
combination, reverse stock split or other similar transaction involving the
Common Stock or (b) board or stockholder approval thereof, or the intention of
the Company to seek board or stockholder approval of any stock combination,
reverse stock split or other similar transaction involving the Common Stock), or
(ii) any “person” or “group” (as these terms are used for purposes of Sections
13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated
thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Voting Stock of the
Company.

21

     (o) [INSERT FOR SERIES C
WARRANTS: “Maximum Eligibility Number” means initially zero and shall be
increased upon each exercise of the Series B Warrant held by the Holder by such
aggregate number of shares of Common Stock equal to 40% of the number of shares
of Common Stock issued upon any such exercise of such Series B Warrant (as
adjusted for stock splits, stock distributions, recapitalizations and similar
events).]

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

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

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

     (s) “Principal Market”
means the Nasdaq Global Market. 

     (t) “Successor Entity”
means the Person (or, if so elected by the Holder, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Holder, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

     (u) “Trading Day” means
any day on which the Common Stock is traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Common Stock, then 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
p.m., New York time) unless such day is otherwise designated as a Trading Day in
writing by the Holder.

22

     (v) “Voting Stock” of a
Person means capital stock of such Person of the class or classes pursuant to
which the holders thereof have the general voting power to elect, or the general
power to appoint, at least a majority of the board of directors, managers or
trustees of such Person (irrespective of whether or not at the time capital
stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).

     (w) “VWAP” means, for any
security as of any date, the dollar volume-weighted average price for such
security on the Principal Market (or, if the Principal Market is not the
principal trading market for such security, then on the principal securities
exchange or securities market on which such security is then traded) during the
period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New
York time, as reported by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York time,
and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 14.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

[INSERT IN SERIES A AND C WARRANTS ONLY:

23

18. MANDATORY EXERCISE. If at any time after [INSERT IN
SERIES A WARRANTS ONLY: the Issuance Date][INSERT IN SERIES C WARRANTS ONLY: the
Initial Exercisability Date] (the “Mandatory Exercise Eligibility Date”),
(i) the daily VWAP of the Common Stock is equal to or greater than $[ ] (as
adjusted for any stock dividend, stock split, stock combination or other similar
transaction occurring after the date of the Securities Purchase Agreement) (the
“Trigger Price”) for a period of fifteen (15) consecutive Trading Days
following the Mandatory Exercise Eligibility Date (the fifteen (15) consecutive
Trading Days on which the condition in this clause (i) is satisfied are referred
to herein as the “Mandatory Exercise Measuring Period”), (ii) the
aggregate dollar trading volume (as reported on Bloomberg) of the Common Stock
on the applicable Eligible Market for each Trading Day during the Mandatory
Exercise Measuring Period exceeds $3,000,000 per day and (iii) no Equity
Conditions Failure shall have occurred, then the Company shall have the right to
require the Holder to exercise all, but not less than all, of this Warrant
for all of the then-remaining Warrant Shares in accordance with Section 1 hereof
(a “Mandatory Exercise”). The Company may exercise its right to require
exercise under this Section 18 on one occasion by delivering (provided that all
of the conditions set forth in clauses (i) through (iii) above are then
satisfied), on the first (1st) Trading Day immediately following the
end of the Mandatory Exercise Measuring Period, a written notice thereof by
facsimile and overnight courier to the Holder (the “Mandatory Exercise
Notice” and the date the Holder receives such notice by facsimile is
referred to as the “Mandatory Exercise Notice Date”). The Mandatory
Exercise Notice shall be irrevocable. The Mandatory Exercise Notice shall (1)
state the Trading Day selected for the Mandatory Exercise in accordance with
this Section 18, which Trading Day shall be at least five (5) Trading Days but
not more than sixty (60) Trading Days following the Mandatory Exercise Notice
Date (the “Mandatory Exercise Date”), (2) state the number of shares of
Common Stock to be issued to the Holder on the Mandatory Exercise Date (subject
to any adjustments thereto pursuant to Section 2 that may occur prior to the
Mandatory Exercise Date), (3) contain a certification from the Chief Executive
Officer of the Company that there is then no Equity Conditions Failure and (4)
contain a certification from the Chief Executive Officer of the Company that the
Company has simultaneously taken the same action with respect to all of the SPA
Warrants. Any portion of this Warrant exercised by the Holder after the
Mandatory Exercise Notice Date shall reduce the number of Warrant Shares for
which this Warrant is required to be exercised on the Mandatory Exercise Date.
If the Company has elected a Mandatory Exercise, the mechanics of exercise set
forth in Section 1 shall apply, to the extent applicable, as if the Company had
received from the Holder on the Mandatory Exercise Date an Exercise Notice with
respect to all of the then-remaining Warrant Shares. Notwithstanding anything
contained in this Section 18 to the contrary, if (I) any daily VWAP of the
Common Stock is less than the Trigger Price on any day during the period
commencing on the Mandatory Exercise Notice Date and ending on the Trading Day
immediately preceding the Mandatory Exercise Date; (II) the aggregate dollar
trading volume (as reported on Bloomberg) of the Common Stock on the applicable
Eligible Market on any Trading Day during the period commencing on the Mandatory
Exercise Notice Date and ending on the Trading Day immediately preceding the
Mandatory Exercise Date is less than $3,000,000 per day; or (III) an Equity
Conditions Failure occurs on any day during the period commencing on the
Mandatory Exercise Notice Date and ending on the Mandatory Exercise Date which
has not been waived in writing by the Holder, then, in either case, the
Mandatory Exercise Notice delivered to the Holder shall be null and void ab
initio and the Mandatory Exercise shall not occur. If the Company elects to
cause a Mandatory Exercise of this Warrant pursuant to this Section 18, then it
must simultaneously take the same action with respect to all of the other SPA
Warrants.]

[signature page follows]

24

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

	 	KANDI TECHNOLOGIES GROUP, INC. 
	 	  
	 	  
	 	By: ____________________________________ 
	 	Name: 
	 	Title: 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

KANDI TECHNOLOGIES GROUP, INC.

     The undersigned holder hereby
exercises the right to purchase _________________ of the shares of Common Stock
(“Warrant Shares”) of Kandi Technologies Group, Inc., a Delaware corporation
(the “Company”), evidenced by Series [A][B][C] Warrant to Purchase Common
Stock No. _______ (the “Warrant”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the
Warrant.

     [INSERT IN SERIES A AND C
WARRANTS: 1. Form of Exercise Price. The Holder intends that payment of
the Exercise Price shall be made as:

	          _______________	a “Cash Exercise” with respect to
      _______________
	 	Warrant Shares; and/or 
	 	  
	          _______________	a “Cashless Exercise” with respect to
      _______________
	 	Warrant Shares. 

     In the event that the Holder has
elected a Cashless Exercise with respect to some or all of the Warrant Shares to
be issued pursuant hereto, the Holder hereby represents and warrants that (i)
this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on
the date set forth below and (ii) if applicable, the Bid Price as of such time
of execution of this Exercise Notice was $________.]

     [INSERT IN SERIES B WARRANT: 1.
Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as a “Cash Exercise”.]

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

     3. Delivery of Warrant
Shares. The Company shall deliver to Holder, or its designee or agent as
specified below, __________ Warrant Shares in accordance with the terms of the
Warrant. Delivery shall be made to Holder, or for its benefit, to the following
address:

	 	_______________________________
_______________________________
_______________________________
	Date: _____________ __, ______	

	____________________________________ 	 
	Name of Registered Holder 	 
	  	 
	By: ____________________________________ 	 
	       Name: 	 
	       Title: 	 

EXHIBIT B

ACKNOWLEDGMENT

     The Company hereby acknowledges
this Exercise Notice and hereby directs ______________ to issue the above
indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated _________, 20__, from the Company and acknowledged and agreed
to by _______________.

	 	KANDI TECHNOLOGIES GROUP, INC. 
	 	  
	 	  
	 	By: ____________________________________ 
	 	Name: 
	 	Title:Kandi Technologies Group, Inc.: Exhibit 10.1 - Filed by newsfilecorp.com

Exhibit 10.1

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of June 26, 2013, is by and
among Kandi Technologies Group, Inc., a Delaware corporation with headquarters
located at Jinhua City Industrial Zone, Jinhua, Zhejiang Province, People’s
Republic of China, Post Code 321016 (the “Company”), and each of the
investors listed on the Schedule of Buyers attached hereto (individually, a
“Buyer” and collectively, the “Buyers”).

RECITALS

     A. The Company and each Buyer
desire to enter into this transaction to purchase the Common Shares (as defined
below) and Warrants (as defined below) set forth herein pursuant to a currently
effective shelf registration statement on Form S-3, which has at least
$26,387,500 of unallocated securities, including Common Stock (as defined below)
and warrants registered thereunder (Registration Number 333-188039) (the
“Registration Statement”), which Registration Statement has been declared
effective in accordance with the Securities Act of 1933, as amended (the
“1933 Act”), by the United States Securities and Exchange Commission (the
“SEC”).

     B. Each Buyer wishes to purchase,
and the Company wishes to sell, upon the terms stated in this Agreement, (i) the
aggregate number of shares of common stock, $0.001 par value per share, of the
Company (the “Common Stock”) set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (which aggregate amount for all Buyers
shall be 4,376,036 shares of Common Stock and shall collectively be referred to
herein as the “Common Shares”), (ii) a warrant to initially acquire up to
the aggregate number of shares of Common Stock set forth opposite such Buyer’s
name in column (4) on the Schedule of Buyers, as evidenced by a certificate in
the form attached hereto as Exhibit A (the “Series A
Warrants”) (as exercised, collectively, the “Series A Warrant
Shares”), (iii) a warrant to initially acquire up to the aggregate number of
shares of Common Stock set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers, as evidenced by a certificate in the form attached hereto as
Exhibit B (the “Series B Warrants”) (as exercised,
collectively, the “Series B Warrant Shares”), and (iv) a warrant to
initially acquire up to the aggregate number of shares of Common Stock set forth
opposite such Buyer’s name in column (6) on the Schedule of Buyers, as evidenced
by a certificate in the form attached hereto as Exhibit C (the
“Series C Warrants”) (as exercised, collectively, the “Series C
Warrant Shares”). The Series A Warrants, the Series B Warrants and the
Series C Warrants are collectively referred to herein as the “Warrants.”
The Series A Warrant Shares, the Series B Warrant Shares and the Series C
Warrant Shares are collectively referred to herein as the “Warrant
Shares.”

     C. The Common Shares, the
Warrants and the Warrant Shares are collectively referred to herein as the
“Securities.”

AGREEMENT

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

1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

     (a) Common Shares and
Warrants. The Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, shall purchase from the Company on the Closing Date
(as defined below), such aggregate number of Common Shares as is set forth
opposite such Buyer’s name in column (3) on the Schedule of Buyers along with
(i) Series A Warrants to initially acquire up to that aggregate number of Series
A Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers, (ii) Series B Warrants to initially acquire up to that
aggregate number of Series B Warrant Shares as is set forth opposite such
Buyer’s name in column (5) on the Schedule of Buyers, and (iii) Series C
Warrants to initially acquire up to that aggregate number of Series C Warrant
Shares as is set forth opposite such Buyer’s name in column (6) on the Schedule
of Buyers.

     (b) Closing. The closing
(the “Closing”) of the purchase of the Common Shares and the Warrants by
the Buyers shall occur at the offices of Greenberg Traurig, LLP, MetLife
Building, 200 Park Avenue, New York, NY 10166 or such other place as the parties
shall agree. The date and time of the Closing (the “Closing Date”) shall
be 10:00 a.m., New York time, on the third (3rd) Trading Day (as
defined in the Warrants) after the date hereof (or such earlier date as is
mutually agreed to by the Company and each Buyer). As used herein “Business
Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
remain closed.

     (c) Purchase Price. The
aggregate purchase price for the Common 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 (7) on the Schedule of Buyers.

     (d) Payment of Purchase Price;
Deliveries. On the Closing Date, (i) each Buyer shall pay its respective
Purchase Price to the Company for the Common 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 the lead Buyer, the amounts withheld pursuant to Section
4(g)) and (ii) the Company shall (A) cause Corporate Stock Transfer, Inc.
(together with any subsequent transfer agent, the “Transfer Agent”)
through the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer Program, to credit such aggregate number of Common Shares that such
Buyer is purchasing as is set forth opposite such Buyer’s name in column (3) of
the Schedule of Buyers to such Buyer’s or its designee’s balance account with
DTC through its Deposit/Withdrawal at Custodian system, (B) deliver to each
Buyer (x) a Series A Warrant pursuant to which such Buyer shall have the right
to initially acquire up to that aggregate number of Series A Warrant Shares as
is set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers,
(y) a Series B Warrant pursuant to which such Buyer shall have the right to
initially acquire up to that aggregate number of Series B Warrant Shares as is
set forth opposite such Buyer’s name in column (5) of the Schedule of Buyers,
and (z) a Series C Warrant pursuant to which such Buyer shall have the right to
initially acquire up to that aggregate number of Series C Warrant Shares as is
set forth opposite such Buyer’s name in column (6) of the Schedule of Buyer, in each
case, duly executed on behalf of the Company and registered in the name of such
Buyer or its designee and (C) deliver to each such Buyer the other documents,
instruments and certificates set forth in Section 6(a)(ii) duly executed on
behalf of the Company.

2

2. BUYER’S REPRESENTATIONS AND WARRANTIES.

     Each Buyer, severally and not
jointly, represents and warrants to the Company with respect to only itself
that: 

     (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.

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

     (c) No Conflicts. The
execution, delivery and performance by such Buyer of this Agreement and the
consummation by such Buyer of the transactions contemplated hereby will not (i)
result in a violation of the organizational documents of such Buyer, (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.

     (d) Certain Trading
Activities. Such Buyer has not directly or indirectly, nor has any Person
acting on behalf of or pursuant to any understanding with such Buyer, engaged in
any transactions in the securities of the Company (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing as of the time that such Buyer was
first contacted by the Placement Agent (as defined below) regarding the specific
investment in the Company contemplated by this Agreement and ending immediately
prior to the execution of this Agreement by such Buyer, excluding any
transaction in any securities of the Company that relates to the exercise or
assignment by a third party of any option sold or bought by such Buyer prior to the initial date of contact of such Buyer. “Short Sales” means all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).

3

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and
warrants to each of the Buyers that:

     (a) Organization and
Qualification. Each of the Company and each of its Subsidiaries 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 and as presently proposed to be conducted. Each of the Company
and each of 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 have a Material Adverse Effect. “Material Adverse
Effect” means any material adverse effect on (i) the business, properties,
assets, liabilities, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company or any Subsidiary, either
individually or taken as a whole, (ii) the transactions contemplated hereby or
in any of the other Transaction Documents or (iii) the authority or ability of
the Company to perform any of its obligations under any of the Transaction
Documents. Other than the Persons (as defined below) set forth in the Company’s
Quarterly Report on Form 10-Q, as filed with the SEC in the SEC Documents (as
defined below), the Company has no Subsidiaries. “Subsidiaries” means any
Person in which the Company, directly or indirectly, (A) owns any of the
outstanding capital stock or holds any equity or similar interest of such Person
or (B) controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.” 

     (b) Authorization;
Enforcement; Validity. The Company has the requisite power and authority to
enter into and perform its obligations under this Agreement and the other
Transaction Documents and to issue the Securities in accordance with the terms
hereof and thereof. The execution and delivery of this Agreement and the other
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 Common 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 the filing with the SEC of the prospectus supplement required by the
Registration Statement pursuant to Rule 424(b) under the 1933 Act (the
“Prospectus Supplement”) supplementing the base prospectus forming part
of the Registration Statement (the “Prospectus”) and 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 or other governing body. This Agreement has been, and the other
Transaction Documents will be prior to the Closing, duly executed and delivered
by the Company, and each constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its 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 and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this
Agreement, the Warrants, the Irrevocable Transfer Agent Instructions (as defined
below) and each of the other agreements and instruments entered into or
delivered by any of the parties hereto in connection with the transactions contemplated hereby
and thereby, as may be amended from time to time. 

4

     (c) Issuance of Securities;
Registration Statement. The issuance of the Common Shares and the Warrants
are duly authorized and, upon issuance in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and non-assessable and
free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. As of the Closing, the Company
shall have reserved from its duly authorized capital stock not less than 100% of
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 therein). The issuance of the Warrant Shares is duly
authorized, and upon exercise in accordance with the Warrants, the Warrant
Shares, when issued, will be validly issued, fully paid and non-assessable and
free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. The issuance by the Company
of the Securities has been registered under the 1933 Act, the Securities are
being issued pursuant to the Registration Statement and all of the Securities
are freely transferable and freely tradable by each of the Buyers without
restriction. The Registration Statement is effective and available for the
issuance of the Securities thereunder and the Company has not received any
notice that the SEC has issued or intends to issue a stop-order with respect to
the Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so. The “Plan of
Distribution” section under the Registration Statement permits the issuance and
sale of the Securities hereunder and as contemplated by the other Transaction
Documents. Upon receipt of the Securities, each of the Buyers will have good and
marketable title to the Securities. The Registration Statement and any
prospectus included therein, including the Prospectus and the Prospectus
Supplement, complied in all material respects with the requirements of the 1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder and all other applicable laws and regulations. At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at each deemed effective date thereof pursuant to Rule
430B(f)(2) of the 1933 Act, the Registration Statement and any amendments
thereto complied and will comply in all material respects with the requirements
of the 1933 Act and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus and
any amendments or supplements thereto (including, without limitation the
Prospectus Supplement), at the time the Prospectus or any amendment or
supplement thereto was issued and at the Closing Date, complied, and will
comply, in all material respects with the requirements of the 1933 Act and did
not, and will not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company meets all of the requirements for the use of Form S-3 under the 1933 Act
for the offering and sale of the Securities contemplated by this Agreement and
the other Transaction Documents, and the SEC has not notified the Company of any
objection to the use of the form of the Registration Statement pursuant to Rule
401(g)(1) under the 1933 Act. The Registration Statement meets the requirements
set forth in Rule 415(a)(1)(x) under the 1933 Act. At the earliest time after
the filing of the Registration Statement that the Company or another offering
participant made a bona fide offer (within the meaning of Rule 164(h)(2) under
the 1933 Act) relating to any of the Securities, the Company was not and is not
an “Ineligible Issuer” (as defined in Rule 405 under the 1933 Act). The Company (i) has
not distributed any offering material in connection with the offer or sale of
any of the Securities and (ii) until no Buyer holds any of the Securities, shall
not distribute any offering material in connection with the offer or sale of any
of the Securities to, or by, any of the Buyers (if required), in each case,
other than the Registration Statement, the Prospectus or the Prospectus
Supplement. In accordance with Rule 5110(b)(7)(C)(i) of the Financial Industry
Regulatory Authority Manual, the offering of the Securities has been registered
with the SEC on Form S-3 under the 1933 Act pursuant to the standards for Form
S-3 in effect prior to October 21, 1992, and the Securities are being offered
pursuant to Rule 415 promulgated under the 1933 Act.

5

     (d) No Conflicts. 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 Common Shares, the
Warrants and Warrant Shares and the reservation for issuance of the Warrant
Shares) will not (i) result in a violation of the Certificate of Incorporation
(as defined below) (including, without limitation, any certificates of
designation contained therein) or other organizational documents of the Company
or any of its Subsidiaries, any capital stock of the Company, or Bylaws (as
defined below), (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, without limitation, foreign,
federal and state securities laws and regulations and the rules and regulations
of the Nasdaq Global Market (the “Principal Market”)) 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, except, in the case of
clause (ii) or (iii) above, to the extent such violations that could not
reasonably be expected to have a Material Adverse Effect. 

     (e) Consents. The Company
is not required to obtain any consent from, authorization or order of, or make
any filing or registration with (other than the filing with the SEC of the
Prospectus Supplement and any other filings as may be required by any state
securities agencies), 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. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain at or prior to the Closing have been obtained or effected on
or prior to the Closing Date, and neither the Company nor any of its
Subsidiaries are aware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents. The Company is not in
violation of the requirements of the Principal Market and has no knowledge of
any facts or circumstances which could 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 an 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” (as defined in Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”)) of
the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial
owner” of more than 10% of the shares of Common Stock (as defined for purposes
of Rule 13d-3 of 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.

6

     (g) Placement Agent’s
Fees. 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. Other than FT Global Capital, Inc.
(the “Placement Agent”), neither the Company nor any of its Subsidiaries
has engaged any placement agent or other agent in connection with the offer or
sale of the Securities.

     (h) No Integrated
Offering. None of the Company, its Subsidiaries or any of their affiliates,
nor 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 cause this offering of the Securities to require
approval of stockholders of the Company under 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 for quotation. None of the
Company, its Subsidiaries, their affiliates nor any Person acting on their
behalf will take any action or steps that would cause the offering of any of the
Securities to be integrated with other offerings of securities of the
Company.

     (i) Dilutive Effect. The
Company understands and acknowledges that the number of Warrant Shares will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is absolute and unconditional,
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.

     (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, interested stockholder, business combination, poison pill
(including, without limitation, any distribution under a rights agreement) or
other similar anti-takeover provision under the Certificate of Incorporation,
Bylaws or other organizational documents or the laws of the jurisdiction of its
incorporation or otherwise 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 and its board of directors have taken all
necessary action, if any, in order to render inapplicable any stockholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
shares of Common Stock or a change in control of the Company or any of its
Subsidiaries.

7

     (k) SEC Documents; Financial
Statements. During the two (2) years prior to the date hereof, 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 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. As of their respective dates, the
SEC Documents 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 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 have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (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 which will not be
material, either individually or in the aggregate). No other information
provided by or on behalf of the Company to any of the Buyers which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein not misleading, in the light of the circumstance under which they are or
were made. The Company has not been informed by its independent accountants that
they recommend that the Company amend or restate any of the Financial Statements
or that there is any need for the Company to amend or restate any of the
Financial Statements.

     (l) Absence of Certain
Changes. Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, except as disclosed in the SEC Documents
filed subsequent to such Form 10-K, there has been no material adverse change
and no material adverse development in the business, assets, liabilities,
properties, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any of its Subsidiaries. Since the
date of the Company’s most recent audited financial statements contained in a
Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or
paid any dividends, (ii) sold any assets outside of the ordinary course of
business or (iii) made any material capital expenditures, individually or in the
aggregate. Neither the Company nor any of its Subsidiaries has taken any steps
to seek protection pursuant to any law or statute relating to bankruptcy,
insolvency, reorganization, receivership, liquidation or winding up, nor does
the Company or any Subsidiary have any knowledge or reason to believe that any
of their respective 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 will not be,
Insolvent (as defined below). “Insolvent” means, (A) with respect to the
Company and its Subsidiaries, on a consolidated basis, (1) the present fair
saleable value of the Company’s and its Subsidiaries’ assets is less than the
amount required to pay the Company’s and its Subsidiaries’ total Indebtedness
(as defined below), (2) the Company and its Subsidiaries are unable to pay their
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (3) the Company and its Subsidiaries
intend to incur or believe that they will incur debts that would be beyond their
ability to pay as such debts mature; and (B) with respect to the Company and
each Subsidiary, individually, (1) the present fair saleable value of the
Company’s or such Subsidiary’s (as the case may be) assets is less than the
amount required to pay its respective total Indebtedness, (2) the Company or
such Subsidiary (as the case may be) is unable to pay its respective debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (3) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature. Neither the
Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction,
for which the Company’s or such Subsidiary’s remaining assets constitute
unreasonably small capital.

8

     (m) No Undisclosed Events,
Liabilities, Developments or Circumstances. No event, liability, development
or circumstance has occurred or exists, or is reasonably expected to occur or
exist with respect to the Company, any of its Subsidiaries or any of their
respective businesses, properties, liabilities, prospects, operations (including
results thereof) or condition (financial or otherwise) that (i) 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, (ii) could have a material adverse effect on any Buyer’s investment
hereunder or (iii) could have a Material Adverse Effect.

     (n) Conduct of Business;
Regulatory Permits. Neither the Company nor any of its Subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation,
any certificate of designation, preferences or rights of any other outstanding
series of preferred stock of the Company or any of its Subsidiaries or Bylaws or
their organizational charter, certificate of formation 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 any of 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 could not, individually or in the aggregate, 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
could reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Since the date of the Company’s last
Annual Report on Form 10-K filed with the SEC, (i) the Common Stock has been
listed or 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 each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate 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.

9

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

     (q) Transactions With
Affiliates. Other than the grant of stock options disclosed in the SEC
Documents, 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 Person in which
any such officer, director or employee has a substantial interest or is an
employee, officer, director, trustee or partner.

     (r) Equity Capitalization.
As of the date hereof, the authorized capital stock of the Company consists of
(i) 100,000,000 shares of Common Stock, of which, 32,592,440 are issued and
outstanding and 1,793,310 shares are reserved for issuance pursuant to
securities (other than the Common Shares and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
10,000,000 shares of preferred stock, none of which are issued and outstanding.
67,407,560 shares of Common Stock are authorized but unissued shares. All of
such outstanding shares are duly authorized and have been, or upon issuance will
be, validly issued and are fully paid and non-assessable. 13,358,500 shares of
the Company’s issued and outstanding Common Stock on the date hereof are owned
by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and
calculated based on the assumption that only officers, directors and holders of
at least 10% of the Company’s issued and outstanding Common Stock are
“affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its Subsidiaries.
With the exception of Excelvantage Group Limited, which owns approximately 36.8%
of the Company’s issued and outstanding shares of Common Stock, to the Company’s
knowledge, no Person owns 10% or more of the Company’s issued and outstanding
shares of Common Stock (calculated based on the assumption that all Convertible
Securities (as defined below), whether or not presently exercisable or convertible, have been fully exercised or converted (as the
case may be) taking account of any limitations on exercise or conversion
(including “blockers”) contained therein without conceding that such identified
Person is a 10% stockholder for purposes of federal securities laws). Except as
disclosed in the SEC Documents: (i) none of the Company’s or any Subsidiary’s
capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company or any Subsidiary;
(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
amounts 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 this 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) neither the Company nor any Subsidiary has any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (ix) neither the Company nor any of its Subsidiaries have any
liabilities or obligations required to be disclosed in the SEC Documents which
are 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 could 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 “Articles 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.

10

     (s) Indebtedness and Other
Contracts. Neither the Company nor any of its Subsidiaries (i) except as set
forth in the SEC Documents, 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. For purposes of this Agreement: “Indebtedness” of any
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 generally accepted accounting principles) (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 generally accepted accounting principles, consistently applied
for the periods covered thereby, 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; “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
“Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization, any
other entity and a government or any department or agency thereof.

11

     (t) Absence of Litigation.
Except as disclosed in the SEC Documents, 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 in writing against or affecting the
Company or any of its Subsidiaries, the Common Stock or any of the Company’s or
its Subsidiaries’ officers or directors which is outside of the ordinary course
of business or individually or in the aggregate material to the Company or any
of its Subsidiaries. No director, officer or employee of the Company or any of
its subsidiaries has willfully violated 18 U.S.C. §1519 or engaged in spoliation
in reasonable anticipation of litigation. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current or former director or officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933
Act or the 1934 Act, including, without limitation, the Registration
Statement.

     (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. 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 be unable 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.

12

     (v) Employee Relations.
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 believes that
its and its Subsidiaries’ relations with their respective employees are good. No
executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or
other key employee of the Company or any of its Subsidiaries 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 or other key employee 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 or other key employee (as the case may
be) does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. 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 good and marketable title in fee simple to all real
property, and have 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 or 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 or any of 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, original
works, inventions, licenses, approvals, governmental authorizations, 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 and as presently proposed
to be conducted. None of the Company’s or its Subsidiaries’ Intellectual
Property Rights have expired, terminated or been abandoned, or are expected to
expire, terminate or be abandoned, within three years from the date of this
Agreement. The Company has no 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 their Intellectual Property Rights. The Company is not aware of
any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.

13

     (y) Environmental Laws.
The Company and its Subsidiaries (i) are in compliance with all Environmental
Laws (as defined below), (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.
“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 timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely 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 and its
Subsidiaries know of no basis for any such claim. The Company is not operated in
such a manner as to qualify as a passive foreign investment company, as defined
in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

     (bb) Internal Accounting and
Disclosure Controls. The Company and each of its Subsidiaries maintains
internal control over financial reporting (as such term is defined in Rule
13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles, including 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 generally accepted accounting principles 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-15(e) 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 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. Neither the Company nor any of its Subsidiaries has received any
notice or correspondence from any accountant or other Person relating to any
potential material weakness or significant deficiency in any part of the
internal controls over financial reporting of the Company or any of its
Subsidiaries.

14

     (cc) Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other relationship
between the Company or any of its Subsidiaries 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 could 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 will not be, an “investment company,” an affiliate of 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) Acknowledgement Regarding
Buyers’ Trading Activity. It is understood and acknowledged by the Company
that (i) following the public disclosure of the transactions contemplated by the
Transaction Documents, in accordance with the terms thereof, none of the Buyers
have been asked by the Company or any of its Subsidiaries to agree, nor has any
Buyer agreed with the Company or any of its Subsidiaries, to desist from
effecting any transactions in or with respect to (including, without limitation,
purchasing or selling, long and/or short) any securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold any
of the Securities for any specified term; (ii) any Buyer, and counterparties in
“derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Stock which was
established prior to such Buyer’s knowledge of the transactions contemplated by
the Transaction Documents; and (iii) 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
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) 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 and/or number of the Warrant
Shares deliverable with respect to the Securities are being determined and 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 or any other Transaction Document or
any of the documents executed in connection herewith or therewith.

15

     (ff) Manipulation of
Price. Neither the Company nor any of its Subsidiaries has, and, to the
knowledge of the Company, no Person acting on their behalf has, directly or
indirectly, (i) taken any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or any
of its Subsidiaries 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 (other than the Placement Agent), or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company or any of its Subsidiaries.

     (gg) U.S. Real Property
Holding Corporation. Neither the Company nor any of its Subsidiaries is, or
has ever been, and so long as any of the Securities are held by any of the
Buyers, shall 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 and each Subsidiary shall so certify upon any Buyer’s request.

     (hh) Registration
Eligibility. The Company is eligible to register the issuance and sale of
the Securities to the Buyers using Form S-3 promulgated under the 1933 Act.

     (ii) 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 issuance and
sale 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.

     (jj) Bank Holding Company
Act. Neither the Company nor any of its Subsidiaries 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 equity 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.

     (kk) Public Utility Holding
Act. None of the Company nor any of its Subsidiaries is a “holding company,”
or an “affiliate” of a “holding company,” as such terms are defined in the
Public Utility Holding Act of 2005.

     (ll) Federal Power Act.
None of the Company nor any of its Subsidiaries is subject to regulation as a
“public utility” under the Federal Power Act, as amended.

     (mm) No Additional
Agreements. The Company does not have any agreement or understanding with
any Buyer with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.

16

     (nn) Real Property. Each
of the Company and its Subsidiaries holds good title to all real property,
leases in real property, or other interests in real property owned or held by
the Company or any of its Subsidiaries (the “Real Property”) owned by the
Company or any of its Subsidiaries (as applicable). The Real Property is free
and clear of all mortgages, defects, claims, liens, pledges, charges, taxes,
rights of first refusal, encumbrances, security interests and other encumbrances
(collectively “Encumbrances”) and is not subject to any rights of way,
building use restrictions, exceptions, variances, reservations, or limitations
of any nature except for (a) liens for current taxes not yet due and (b) zoning
laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.

     (oo) Fixtures and
Equipment. Each of the Company and its Subsidiaries (as applicable) has good
title to, or a valid leasehold interest in, the tangible personal property,
equipment, improvements, fixtures, and other personal property and appurtenances
that are used by the Company or its Subsidiary in connection with the conduct of
its business (the “Fixtures and Equipment”). The Fixtures and Equipment
are structurally sound, are in good operating condition and repair, are adequate
for the uses to which they are being put, are not in need of maintenance or
repairs except for ordinary, routine maintenance and repairs and are sufficient
for the conduct of the Company’s and/or its Subsidiaries’ businesses (as
applicable) in the manner as conducted prior to the Closing. Each of the Company
and its Subsidiaries owns all of its Fixtures and Equipment free and clear of
all Encumbrances except for (a) liens for current taxes not yet due and (b)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.

     (pp) Illegal or Unauthorized
Payments; Political Contributions. Neither the Company nor any of its
Subsidiaries nor, to the best of the Company’s knowledge (after reasonable
inquiry of its officers and directors), any of the officers, directors,
employees, agents or other representatives of the Company or any of its
Subsidiaries or any other business entity or enterprise with which the Company
or any Subsidiary is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (a) as
a kickback or bribe to any Person or (b) to any political organization, or the
holder of or any aspirant to any elective or appointive public office except for
personal political contributions not involving the direct or indirect use of
funds of the Company or any of its Subsidiaries.

     (qq) Money Laundering. The
Company and its Subsidiaries are in compliance with, and have not previously
violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S.
anti-money laundering laws and regulations, including, without limitation, the
laws, regulations and Executive Orders and sanctions programs administered by
the U.S. Office of Foreign Assets Control, including, without limitation, (i)
Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31
CFR, Subtitle B, Chapter V.

     (rr) Management. Except as
set forth in Schedule 3(rr) hereto, during the past five year period, no
current or former officer or director or, to the knowledge of the Company,
stockholder of the Company or any of its Subsidiaries has been the subject
of:

17

     (i) a
petition under bankruptcy laws or any other insolvency or moratorium law or the
appointment by a court of a receiver, fiscal agent or similar officer for such
Person, or any partnership in which such person was a general partner at or
within two years before the filing of such petition or such appointment, or any
corporation or business association of which such person was an executive
officer at or within two years before the time of the filing of such petition or
such appointment;

     (ii) a
conviction in a criminal proceeding or a named subject of a pending criminal
proceeding (excluding traffic violations that do not relate to driving while
intoxicated or driving under the influence);

     (iii) any
order, judgment or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction, permanently or temporarily enjoining any
such person from, or otherwise limiting, the following activities:

     (1)
Acting as a futures commission merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker, leverage transaction merchant,
any other person regulated by the United States Commodity Futures Trading
Commission or an associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct or
practice in connection with such activity;

     (2)
Engaging in any particular type of business practice; or

     (3)
Engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of securities laws or
commodities laws;

     (iv) any
order, judgment or decree, not subsequently reversed, suspended or vacated, of
any authority barring, suspending or otherwise limiting for more than 60 days
the right of any such person to engage in any activity described in the
preceding sub paragraph, or to be associated with persons engaged in any such
activity;

     (v) a
finding by a court of competent jurisdiction in a civil action or by the SEC or
other authority to have violated any securities law, regulation or decree and
the judgment in such civil action or finding by the SEC or any other authority
has not been subsequently reversed, suspended or vacated; or

     (vi) a
finding by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgment in such civil action or finding has not been subsequently
reversed, suspended or vacated.

     (ss) Registration Rights.
No holder of securities of the Company has rights to the registration of any
securities of the Company because of the filing of the Registration Statement or
the issuance of the Securities hereunder that could expose the Company to
material liability or any Buyer to any liability or that could impair the
Company’s ability to consummate the issuance and sale of the Securities in the manner, and at the times,
contemplated hereby, which rights have not been waived by the holder thereof as
of the date hereof.

18

     (tt) Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents. 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 businesses and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf of
the Company or any of its Subsidiaries 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 any of 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 its or their business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial or
otherwise), which, under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the Company but which
has not been so publicly disclosed. The Company acknowledges and agrees that no
Buyer makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 2.

4. COVENANTS.

     (a) Maintenance of
Registration Statement For so long as any of the Warrants remain
outstanding, the Company shall use its best efforts to maintain the
effectiveness of the Registration Statement for the issuance thereunder of the
Warrant Shares, provided that if at any time while the Warrants are outstanding
the Company shall be ineligible to utilize Form S-3 (or any successor form) for
the purpose of issuance of the Warrant Shares, the Company shall promptly amend
the Registration Statement on such other form as may be necessary to maintain
the effectiveness of the Registration Statement for this purpose. If at any time
following the date hereof the Registration Statement is not effective or is not
otherwise available for the issuance of the Securities or any prospectus
contained therein is not available for use, the Company shall immediately notify
the holders of the Securities in writing that the Registration Statement is not
then effective or a prospectus contained therein is not available for use and
thereafter shall promptly notify such holders when the Registration Statement is
effective again and available for the issuance of the Securities or such
prospectus is again available for use.

     (b) Prospectus Supplement and
Blue Sky. Immediately prior to execution of this Agreement, the Company
shall have delivered to the Buyers, and as soon as practicable after execution
of this Agreement the Company shall file, the Prospectus Supplement with respect
to the Securities as required under, and in conformity with, the 1933 Act,
including Rule 424(b) thereunder. If required, the Company, on or before the
Closing Date, shall 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. Without limiting any other obligation of
the Company under this Agreement, the Company shall timely make all filings and
reports relating to the offer and sale of the Securities required under all
applicable securities laws (including, without limitation, all applicable
federal securities laws and all applicable “Blue Sky” laws), and the Company
shall comply with all applicable federal, state and local laws, statutes, rules,
regulations and the like relating to the offering and sale of the Securities to
the Buyers.

19

     (c) Reporting Status.
Until the date on which no Warrants are outstanding (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 such filings
or otherwise permit such termination.

     (d) Use of Proceeds. The
Company shall use the net proceeds from the sale of the Securities hereunder
solely for general working capital purposes. Without limiting the foregoing,
except as set forth on Schedule 4(d), none of such proceeds shall be
used, directly or indirectly, (i) for the satisfaction of any debt of the
Company or any of its Subsidiaries (other than payment of trade payables
incurred after the date hereof in the ordinary course of business of the Company
and its Subsidiaries and consistent with prior practices), (ii) for the
redemption of any securities of the Company or (iii) with respect to any
litigation involving the Company or any of its Subsidiaries (including, without
limitation, (A) any settlement thereof or (B) the payment of any costs or
expenses related thereto).

     (e) Financial Information.
The Company agrees to send the following to each Buyer during the Reporting
Period (i) 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, a copy of its Annual Reports on Form 10-K
and Quarterly Reports on Form 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, (ii) unless the following are filed with the SEC
through EDGAR and are available to the public through the EDGAR system, on the
same day as the release thereof, facsimile copies of all press releases issued
by the Company or any of its Subsidiaries and (iii) 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.

     (f) Listing. The Company
shall promptly secure the listing or designation for quotation (as the case may
be) of all of the Common Shares and Warrant Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed or designated for quotation (as the case may be) (subject to
official notice of issuance) (but in no event later than the Closing Date) and
shall maintain such listing or designation for quotation (as the case may be) of
all the shares of Common Stock from time to time issuable under the terms of the
Transaction Documents on such national securities exchange or automated quotation system. The Company shall maintain the
Common Stock’s listing or designation for quotation (as the case may be) on the
Principal Market, The New York Stock Exchange, the NYSE Amex, or the Nasdaq
Global Select Market (each, an “Eligible Market”).
Neither the Company nor any of its Subsidiaries shall take any action which
could be reasonably expected to result in the delisting or suspension of the
Common Stock on an Eligible Market. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(f).

20

     (g) Fees. The Company
shall reimburse Greenberg Traurig, LLP for all costs and expenses incurred by it
or its affiliates in connection with the transactions contemplated by the
Transaction Documents (including, without limitation, all legal fees and
disbursements in connection therewith, structuring, documentation and
implementation of the transactions contemplated by the Transaction Documents and
due diligence and regulatory filings in connection therewith) in a
non-accountable amount equal to $40,000, which amount shall be withheld by the
lead Buyer from its Purchase Price at the Closing or paid by the Company on
demand by Greenberg Traurig, LLP if the lead Buyer terminates its obligations
under this Agreement in accordance with Section 7 (as the case may be), in
either case, less $20,000 which was previously advanced to Greenberg Traurig,
LLP by the Company. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, transfer agent fees, DTC 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 payable to the Placement Agent, who is the Company’s sole
placement agent in connection with the transactions contemplated by this
Agreement). The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorneys’
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the
sale of the Securities to the Buyers.

     (h) Pledge of Securities.
Notwithstanding anything to the contrary contained in this Agreement, the
Company acknowledges and agrees that the Securities may be pledged by a Buyer 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 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. 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 a Buyer.

     (i) Disclosure of Transactions
and Other Material Information. The Company shall, on or before 8:30 a.m.,
New York time, on the date of this Agreement, (i) issue a press release (the
“Press Release”) reasonably acceptable to the Buyers disclosing all the
material terms of the transactions contemplated by the Transaction Documents and
(ii) file a Current Report on Form 8-K describing all the material terms of the
transactions contemplated by the Transaction Documents in the form required by
the 1934 Act and attaching all the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement) and the
form of Warrants) (including all attachments, the “8-K Filing”). From and
after the issuance of the Press Release, the Company shall have disclosed all
material, non-public information (if any) delivered to any of the Buyers by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. The Company shall not, and the Company shall cause
each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents, not to, provide any Buyer with any material,
non-public information regarding the Company or any of its Subsidiaries from and
after the issuance of the Press Release without the express prior written
consent of such Buyer. In the event of a breach of any of the foregoing
covenants or any of the covenants contained in Section 4(n) by the Company, any
of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents (as determined in the reasonable good faith judgment of
such Buyer), in addition to any other remedy provided herein or in the
Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, non-public information without the prior approval by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, any of 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, 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 (A) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (B) as is
required by applicable law and regulations (provided that in the case of clause
(A) 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 the applicable Buyer, the Company shall not (and shall
cause each of its Subsidiaries and affiliates to not) disclose the name of such
Buyer in any filing (other than the 8-K Filing), announcement, release or
otherwise. Notwithstanding anything contained in this Agreement to the contrary
and without implication that the contrary would otherwise be true, the Company
expressly acknowledges and agrees that no Buyer has had, and no Buyer shall have
(unless expressly agreed to by a particular Buyer after the date hereof in a
written definitive and binding agreement executed by the Company and such
particular Buyer (it being understood and agreed that no Buyer may bind any
other Buyer with respect thereto)), any duty of confidentiality with respect to,
or a duty not to trade on the basis of, any information regarding the Company or
any of its Subsidiaries.

21

     (j) Additional Issuance of
Securities. The Company agrees that for the period commencing on the date
hereof and ending on the date immediately following the sixty (60) Trading Day
anniversary of the Closing Date (provided that such period shall be extended by
the number of Trading Days during such period and any extension thereof
contemplated by this proviso on which the Registration Statement is not
effective or any prospectus contained therein is not available for use) (the
“Restricted Period”), neither the Company nor any of its Subsidiaries
shall directly or indirectly issue, offer, sell, grant any option or right to
purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant
of any option or right to purchase or other disposition of) any equity security
or any equity-linked or related security (including, without limitation, any
“equity security” (as that term is defined under Rule 405 promulgated under the
1933 Act), any Convertible Securities, any preferred stock or any purchase
rights) (any such issuance, offer, sale, grant, disposition or announcement
(whether occurring during the Restricted Period or at any time thereafter) is
referred to as a “Subsequent Placement”). Notwithstanding the foregoing,
this Section 4(j) shall not apply in respect of the issuance of (i) shares of Common Stock or standard options to
purchase Common Stock to directors, officers, employees or consultants of the
Company or any of its Subsidiaries in their capacity as such pursuant to an
Approved Share Plan (as defined below) (it being expressly understood and agreed
that lawyers, law firms, accountants, accounting firms and other similar
professional advisors and professional advisory firms are not consultants),
provided that (A) all such issuances (taking into account the shares of Common
Stock issuable upon exercise of such options) after the date hereof pursuant to
this clause (i) do not, in the aggregate, exceed more than 1,629,622 shares of
Common Stock (adjusted for stock splits, stock combinations and other similar
transactions) and (B) the exercise price of any such options is not lowered,
none of such options are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such options are otherwise
materially changed in any manner that adversely affects any of the Buyers; (ii)
shares of Common Stock issued upon the conversion or exercise of Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (i) above) issued prior to
the date hereof, provided that the conversion price of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (i) above) is not lowered,
none of such Convertible Securities (other than standard options to purchase
Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (i) above) are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (i) above) are otherwise
materially changed in any manner that adversely affects any of the Buyers; (iii)
shares of Common Stock issued pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter that
generates gross proceeds to the Company in excess of $25,000,000 (but expressly
excluding “at-the-market offerings” (as defined in Rule 415(a)(4) under the 1933
Act) and “equity lines of credit”); (iv) shares of Common Stock issued in
connection with strategic alliances, strategic mergers and acquisitions and
strategic partnerships, provided that (A) the primary purpose of such issuance
is not to raise capital as determined in good faith by the Buyers, (B) the
purchaser or acquirer of such shares of Common Stock in such issuance solely
consists of either (1) the actual participants in such strategic alliance or
strategic partnership, (2) the actual owners of such assets or securities
acquired in such merger or acquisition or (3) the stockholders, partners or
members of the foregoing Persons, (C) the number or amount (as the case may be)
of such shares of Common Stock issued to such Person by the Company shall not be
disproportionate to such Person’s actual participation in such strategic
alliance or strategic partnership or ownership of such assets or securities to
be acquired by the Company (as applicable) and (D) all such issuances of Common
Stock after the date hereof pursuant to this clause (iv) do not, in the
aggregate, exceed more than 3,259,244 shares of Common Stock (adjusted for stock
splits, stock combinations and other similar transactions); (v) standard
warrants to purchase Common Stock and the shares of Common Stock issuable upon
exercise of such warrants issued solely to placement agents solely as
compensation for services rendered to the Company in their capacity as such in
connection with a Subsequent Placement, provided that (A) all such issuances
(taking into account the shares of Common Stock issuable upon exercise of such
warrants) after the date hereof pursuant to this clause (i) do not, in the
aggregate, exceed more than 1,629,622 shares of Common Stock (adjusted for stock
splits, stock combinations and other similar transactions), (B) the exercise
price of any such warrants is not lower than the Exercise Price (as defined in
the Warrants) and (C) the exercise price of any such warrants is not lowered,
none of such warrants are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such warrants are otherwise materially
changed in any manner that adversely affects any of the Buyers; (vi) the Common
Shares, (vii) the Warrants and (viii) the Warrant Shares (each of the foregoing
in clauses (i) through (viii), collectively the “Excluded Securities”).
“Approved Share Plan” means any employee benefit plan which has been
approved by the board of directors of the Company prior to or subsequent to the
date hereof pursuant to which shares of Common Stock and standard options to
purchase Common Stock may be issued to any employee, officer, director or
consultant for services provided to the Company or any of its Subsidiaries in
their capacity as such. “Convertible Securities” means any capital stock
or other security of the Company or any of its Subsidiaries that is at any time
and under any circumstances directly or indirectly convertible into, exercisable
or exchangeable for, or which otherwise entitles the holder thereof to acquire,
any capital stock or other security of the Company (including, without
limitation, Common Stock) or any of its Subsidiaries.

22

     (k) Reservation of Shares.
So long as any of the Warrants remain outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than 100% of the maximum number of shares of Common Stock
issuable upon exercise of all the Warrants (without regard to any limitations on
the exercise of the Warrants set forth therein).

     (l) 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.

23

     (m) Variable Rate
Transaction. From the date hereof through the one (1) year anniversary of
the Closing Date, the Company and each Subsidiary shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Placement
involving a Variable Rate Transaction. “Variable Rate Transaction” means
a transaction in which the Company or any Subsidiary (i) issues or sells any
Convertible Securities either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of, or
quotations for, the shares of Common Stock at any time after the initial
issuance of such Convertible Securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such Convertible Securities or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock, other than pursuant to a
customary “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an “equity line of credit” or an
“at-the-market offering”) whereby the Company or any Subsidiary may sell
securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Buyer shall be entitled to obtain
injunctive relief against the Company and its Subsidiaries to preclude any such
issuance, which remedy shall be in addition to any right to collect damages.

     (n) Participation Right.
From the date hereof through the one (1) year anniversary of the Closing Date,
neither the Company nor any of its Subsidiaries shall, directly or indirectly,
effect any Subsequent Placement unless the Company shall have first complied
with this Section 4(n). The Company acknowledges and agrees that the right set
forth in this Section 4(n) is a right granted by the Company, separately, to
each Buyer.

24

     (i) At
least five (5) Trading Days prior to any proposed or intended Subsequent
Placement, the Company shall deliver to each Buyer a written notice of its
proposal or intention to effect a Subsequent Placement (each such notice, a
“Pre-Notice”), which Pre-Notice shall not contain any information
(including, without limitation, material, non-public information) other than:
(A) a statement that the Company proposes or intends to effect a Subsequent
Placement, (B) a statement that the statement in clause (A) above does not
constitute material, non-public information and (iii) a statement informing such
Buyer that it is entitled to receive an Offer Notice (as defined below) with
respect to such Subsequent Placement upon its written request. Upon the written
request of a Buyer within three (3) Trading Days after the Company’s delivery to
such Buyer of such Pre-Notice, and only upon a written request by such Buyer,
the Company shall promptly, but no later than one (1) Trading Day after such
request, deliver to such 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 (1)
identify and describe the Offered Securities, (2) 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, (3) identify
the Persons (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (4) offer to issue and sell to or
exchange with such Buyer in accordance with the terms of the Offer forty-five
percent (45%) of the Offered Securities, provided that the number of Offered
Securities which such Buyer shall have the right to subscribe for under this
Section 4(n) shall be (a) based on such Buyer’s pro rata portion of the
aggregate number of Common Shares purchased hereunder by all Buyers (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”).

     (ii) 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 fifth (5th) 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 such 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, 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”), such 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 it deems reasonably
necessary. Notwithstanding the foregoing, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to each Buyer a new Offer Notice and the Offer Period
shall expire on the fifth (5th) Business Day after such Buyer’s
receipt of such new Offer Notice.

25

     (iii) The
Company shall have five (5) days from the expiration of the Offer Period above
(A) 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 a Buyer (the
“Refused Securities”) pursuant to a definitive agreement(s) (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 (B) to publicly announce
(1) the execution of such Subsequent Placement Agreement, and (2) either (a) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (b) 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.

     (iv) 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(n)(iii) above), then such 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(n)(ii) above multiplied by a fraction, (A) 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 this Section 4(n) prior to such reduction) and (B)
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(n)(i) above.

     (v) Upon
the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, such Buyer shall acquire from the Company, and the Company
shall issue to such Buyer, the number or amount of Offered Securities specified
in its Notice of Acceptance. The purchase by such Buyer of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and such Buyer of a separate purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to such Buyer
and its counsel.

     (vi) Any
Offered Securities not acquired by a Buyer or other Persons in accordance with
this Section 4(n) may not be issued, sold or exchanged until they are again
offered to such Buyer under the procedures specified in this Agreement.

     (vii) The
Company and each Buyer agree that if any Buyer elects to participate in the
Offer, 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 provision whereby such Buyer shall be required to agree to
any restrictions on trading as to any securities of the Company or be required
to consent to any amendment to or termination of, or grant any waiver, release
or the like under or in connection with, any agreement previously entered into
with the Company or any instrument received from the Company.

26

     (viii)
Notwithstanding anything to the contrary in this Section 4(n) and unless
otherwise agreed to by such Buyer, the Company shall either confirm in writing
to such Buyer 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 such Buyer will not be in
possession of any material, non-public information, by the fifth
(5th) Business Day following delivery of the Offer Notice. If by such
fifth (5th) Business Day, 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 such Buyer,
such transaction shall be deemed to have been abandoned and such Buyer shall not
be in possession of any material, non-public information with respect to the
Company or any of its Subsidiaries. Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company shall provide
such Buyer with another Offer Notice in accordance with, and subject to, the
terms of this Section 4(n) and such Buyer will again have the right of
participation set forth in this Section 4(n). The Company shall not be permitted
to deliver more than one Offer Notice to such Buyer in any sixty (60) day
period, except as expressly contemplated by the last sentence of Section
4(n)(ii).

     (ix) The
restrictions contained in this Section 4(n) shall not apply in connection with
the issuance of any Excluded Securities. The Company shall not circumvent the
provisions of this Section 4(n) by providing terms or conditions to one Buyer
that are not provided to all.

     (o) Passive Foreign Investment
Company. The Company shall conduct its business in such a manner as will
ensure that the Company will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.

     (p) Exercise Procedures.
The form of Notice of Exercise included in each of the Warrants set forth the
totality of the procedures required of the Buyers in order to exercise the
Warrants. No additional legal opinion, other information or instructions shall
be required of the Buyers to exercise their Warrants. The Company shall honor
exercises of the Warrants and shall deliver the Warrant Shares in accordance
with the terms, conditions and time periods set forth in the Warrants.

     (q) 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 Greenberg
Traurig, LLP executed copies of the Transaction Documents, Securities and other
document required to be delivered to any party pursuant to Section 6 hereof.

27

5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

     (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 Common Shares and the Warrants in which the
  Company shall record the name and address of the Person in whose name the Common
  Shares and the Warrants have been issued (including the name and address of each
  transferee), the number of Common Shares held by such Person 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 the
Transfer Agent in the form previously provided to the Company (the
“Irrevocable Transfer Agent Instructions”) 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 Common Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon delivery of the Common Shares or the exercise of the Warrants
(as the case may be). The Company represents and warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b) will be given by the Company to the Transfer Agent with respect to
the Securities, and that the Securities shall otherwise be freely transferable
on the books and records of the Company. If a Buyer effects a sale, assignment
or transfer of the Securities, the Company shall permit the transfer and shall
promptly instruct the 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. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each 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
each 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. Any fees (with respect to the Transfer
Agent, counsel to the Company or otherwise) associated with the issuance of such
opinion shall be borne by the Company.

     (c) Legends. Certificates
and any other instruments evidencing the Securities shall not bear any
restrictive or other legend. 

6. ADDITIONAL CLOSING DELIVERIES OF THE COMPANY.

     (a) Deliveries. The
Company shall deliver to each Buyer on the Closing Date each of the
following:

     (i) The
opinion of McKenna Long & Aldridge LLP, the Company’s counsel, dated as of the
Closing Date, in the form previously provided to the Company.

     (ii) A
copy of the Irrevocable Transfer Agent Instructions, in the form previously
provided to the Company, that have been delivered to and acknowledged in writing
by the Transfer Agent.

     (iii) 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 comparable
office) of such jurisdiction of formation as of a date within ten (10) days of
the Closing Date.

28

     (iv) 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 ten (10) days of the Closing Date.

     (v) A
certified copy of the Certificate of Incorporation as certified by the
Secretary of State of the Company’s jurisdiction of formation within ten (10)
days of the Closing Date.

     (vi) A
certificate, in the form previously provided to the Company, executed by an
officer 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.

     (vii) A
letter from the Transfer Agent certifying the number of shares of Common Stock
outstanding on the Closing Date immediately prior to the Closing.

     (viii) A
letter on the letterhead of the Company, duly executed by the Chief Executive
Officer of the Company, setting forth the wire amounts of each Buyer and the
wire transfer instructions of the Company.

     (ix) Such
other documents, instruments or certificates relating to the transactions
contemplated by this Agreement as such Buyer or its counsel may reasonably
request.

7. TERMINATION.

     In the event that the Closing
shall not have occurred with respect to a Buyer within five (5) days after the
date hereof, then such Buyer shall have the right to terminate its obligations
under this Agreement with respect to itself at any time on or after the close of
business on such date without liability of such Buyer to any other party;
provided, however, (a) the right to terminate this Agreement under this Section
7 shall not be available to such Buyer if the failure of the transactions
contemplated by this Agreement to have been consummated by such date is the
result of such Buyer’s breach of this Agreement and (b) the abandonment of the
sale and purchase of the Common Shares and the Warrants shall be applicable only
to such Buyer providing such written notice, provided further that no such
termination shall affect any obligation of the Company under this Agreement to
reimburse such Buyer for the expenses described in Section 4(g) above. Nothing
contained in this Section 7 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

29

8. MISCELLANEOUS.

     (a) Governing Law;
Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents 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 jurisdiction 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 under any of the
other Transaction Documents or in connection herewith or therewith or with any
transaction contemplated hereby or thereby or discussed herein or therein, 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.
Nothing contained herein shall be deemed or operate to preclude any Buyer from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to such Buyer or to enforce
a judgment or other court ruling in favor of such Buyer. The Company hereby
appoints CT Corporation System, with offices at 111 Eighth Avenue, New York, New
York 10011, 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 TO, 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.

     (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. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original thereof.

     (c) Headings; Gender. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,” “includes,” “include” and words of like import shall be construed
broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.

30

     (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, the other Transaction Documents and the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Buyers, the Company, their affiliates and Persons acting
on their behalf solely with respect to the matters contained herein and therein,
and this Agreement, the other Transaction Documents, the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
contain the entire understanding of the parties solely with respect to the
matters covered herein and therein; provided, however, nothing contained in this
Agreement or any other Transaction Document shall (or shall be deemed to) (i)
have any effect on any agreements any Buyer has entered into with the Company or
any of its Subsidiaries prior to the date hereof with respect to any prior
investment made by such Buyer in the Company or (ii) waive, alter, modify or
amend in any respect any obligations of the Company or any of its Subsidiaries,
or any rights of or benefits to any Buyer or any other Person, in any agreement
entered into prior to the date hereof between or among the Company and/or any of
its Subsidiaries and any Buyer and all such agreements shall continue in full
force and effect. 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. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and each of
the Buyers. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, all holders
of Common Shares or all holders of the Warrants (as the case may be). 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, any Subsidiary or otherwise.
As a material inducement for each Buyer to enter into this Agreement, the
Company expressly acknowledges and agrees that (A) no due diligence or other
investigation or inquiry conducted by a Buyer, any of its advisors or any of its
representatives shall affect such Buyer’s right to rely on, or shall modify or
qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other
Transaction Document, (B) nothing contained in the Registration Statement, the Prospectus or the Prospectus Supplement shall
affect such Buyer’s right to rely on, or shall modify or qualify in any manner
or be an exception to any of, the Company’s representations and warranties
contained in this Agreement or any other Transaction Document and (C) unless a
provision of this Agreement or any other Transaction Document is expressly
preceded by the phrase “except as disclosed in the SEC Documents,” nothing
contained in any of the SEC Documents shall affect such Buyer’s right to rely
on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any
other Transaction Document.

31

     (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) one
(1) Business Day after deposit with an overnight courier service with next day
delivery specified, 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:

Kandi Technologies Group, Inc.
Jinhua
City Industrial Zone
Jinhua, Zhejiang Province
People’s Republic of
China
Post Code 321016
Telephone: (86-0579) 82239851
Facsimile:
(86-0579) 82239855
Attention: Chief Executive Officer

With a copy (for informational
purposes only) to:

McKenna Long & Aldridge LLP
303
Peachtree Street
Suite 5300
Atlanta, GA 30308
Attn. Thomas Wardell,
Esq.

If to the Transfer Agent:

Corporate Stock Transfer
3200
Cherry Creek Dr. South
Suite 430
Denver, CO 80209
Facsimile: (303)
282-5800
Attention: Carylyn Bell

32

If to a Buyer, to its address and facsimile number 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:

Greenberg Traurig, LLP 
MetLife
Building
200 Park Avenue
New York, NY 10166
Telephone: (212)
801-9200
Facsimile: (212) 805-9222
Attention: Michael A. Adelstein,
Esq.

or to such other address and/or facsimile number 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, provided that Greenberg Traurig, LLP shall only be provided copies
of notices sent to the lead Buyer. 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, as
contemplated below, any assignee of any of the Securities. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each of the Buyers, including, without limitation, by way of
a Fundamental Transaction (as defined in the Warrants) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Warrants). A Buyer may assign some or all of its rights hereunder
in connection with any 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, other
than the Indemnitees referred to in Section 8(k).

     (i) Survival. The
representations, warranties, agreements and covenants shall survive the Closing.
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.

33

     (k) Indemnification.

     (i) 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 holder of any
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”) 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 any of the Transaction
Documents, (B) any breach of any covenant, agreement or obligation of the
Company contained in any of 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 (1) the execution, delivery,
performance or enforcement of any of the Transaction Documents, (2) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (3) any
disclosure properly made by such Buyer pursuant to Section 4(i), or (4) 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. 

     (ii)
Promptly after receipt by an Indemnitee under this Section 8(k) of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against the Company under this Section
8(k), deliver to the Company a written notice of the commencement thereof, and
the Company shall have the right to participate in, and, to the extent the
Company so desires, to assume control of the defense thereof with counsel
mutually satisfactory to the Company and the Indemnitee; provided, however, that
an Indemnitee shall have the right to retain its own counsel with the fees and
expenses of such counsel to be paid by the Company if: (A) the Company has
agreed in writing to pay such fees and expenses; (B) the Company shall have
failed promptly to assume the defense of such Indemnified Liability and to
employ counsel reasonably satisfactory to such Indemnitee in any such
Indemnified Liability; or (C) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnitee and the Company (in which case, if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of
the Company), provided further, that in the case of clause (C) above the Company
shall not be responsible for the reasonable fees and expenses of more than one
(1) separate legal counsel for the Indemnitees. The Indemnitee shall reasonably
cooperate with the Company in connection with any negotiation or defense of any
such action or Indemnified Liability by the Company and shall furnish to the
Company all information reasonably available to the Indemnitee which relates to
such action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, 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
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
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 Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 8(k), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.

34

     (iii) The
indemnification required by this Section 8(k) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, within
ten (10) days after bills are received or Indemnified Liabilities are
incurred.

     (iv) The
indemnity agreement contained herein shall be in addition to (A) any cause of
action or similar right of the Indemnitee against the Company or others, and (B)
any liabilities the Company may be subject to pursuant to the law.

     (l) 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. No specific representation or warranty shall limit
the generality or applicability of a more general representation or warranty.
Each and every reference to share prices, shares of Common Stock and any other
numbers in this Agreement that relate to the Common Stock shall be automatically
adjusted for stock splits, stock dividends, stock combinations and other similar
transactions that occur with respect to the Common Stock after the date of this
Agreement.

     (m) Remedies. Each Buyer
and each holder of any 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 specific performance
and/or temporary, preliminary and permanent injunctive or other equitable relief
from any court of competent jurisdiction in any such case without the necessity
of proving actual damages and without posting a bond or other security.

35

     (n) 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.

     (o) Payment Set Aside;
Currency. To the extent that the Company makes a payment or payments to any
Buyer hereunder or pursuant to any of the other Transaction Documents or any of
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. Until
the Warrants are no longer outstanding, the Company shall not effect any stock
combination, reverse stock split or other similar transaction (or make any
public announcement or disclosure with respect to any of the foregoing) without
the prior written consent of each of the Buyers, such consent not to be
unreasonably withheld, conditioned or delayed. Unless otherwise expressly
indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“U.S. Dollars”), and
all amounts owing under this Agreement and all other Transaction Documents shall
be paid in U.S. Dollars. All amounts denominated in other currencies (if any)
shall be converted into the U.S. 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 U.S. Dollars pursuant to
this Agreement, the U.S. Dollar exchange rate as published in the Wall Street
Journal on the relevant date of calculation.

     (p) Independent Nature of
Buyers’ Obligations and Rights. The obligations of each Buyer under the
Transaction Documents 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 group or
entity, or create a presumption that the Buyers are in any way acting in concert
or as a group or entity with respect to such obligations or the transactions
contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are
not acting in concert or as a group, and the Company shall not assert any such
claim, with respect to such obligations or the transactions contemplated by the
Transaction Documents. The decision of each Buyer to purchase Securities
pursuant to the Transaction Documents has been made by such Buyer independently
of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as
agent for such Buyer in connection with such Buyer making its investment
hereunder and that no other Buyer will be acting as agent of such Buyer in
connection with monitoring such Buyer’s investment in the Securities or
enforcing its rights under the Transaction Documents. The Company and each Buyer
confirms that each Buyer has independently participated with the Company 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. The use of a single agreement to effectuate the
purchase and sale of the Securities contemplated hereby was solely in the
control of the Company, not the action or decision of any Buyer, and was done
solely for the convenience of the Company and not because it was required or
requested to do so by any Buyer. It is expressly understood and agreed that each
provision contained in this Agreement and in each other Transaction Document is
between the Company and a Buyer, solely, and not between the Company and the
Buyers collectively and not between and among the Buyers.

36

     (q) 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 8(q) referred to
as the “Judgment Currency”) an amount due in U.S. Dollars under this
Agreement or any other Transaction Document, the conversion shall be made at the
Exchange Rate prevailing on the Trading Day immediately preceding: (A) the date
actual payment of the amount due, in the case of any proceeding in the courts of
New York or in the courts of any other jurisdiction that will give effect to
such conversion being made on such date or (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 8(q)(i) 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 8(q)(i) 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 U.S.
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 or any other Transaction Document.

37

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

	 	COMPANY: 
	 	  
	 	KANDI TECHNOLOGIES GROUP, INC. 
	 	  
	 	  
	 	  
	 	By: ________________________________
	 	       Name:
    
	 	       Title:

Schedule 4 (d)

The Company may use proceeds to pay for professional service
  fees and expenses in connection with litigation matters.

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