Document:

Unassociated Document

    RYLAND
OIL CORPORATION

    302
– 1620 West 8th Avenue

    Vancouver,
B.C. Canada  V6J 1V4

     

    November
24,  2009

    

    Eternal
Energy Corp.

    2549 West
Main Street, Suite 202

    Littleton,
Colorado 80120

    

    Attention:  Bradley
M. Colby, President and Chief Executive Officer

    

    Dear
Sirs,

    

    
      
        	
                Re:

              	
                Acquisition
      of Eternal Energy Corp. ("Eternal") by Ryland Oil Corporation.
      ("Ryland")

              

      

    

    

    We write
further to our recent discussions regarding a transaction (the "Proposed Transaction") whereby Ryland
desires to acquire all of the issued and outstanding shares of common stock of
Eternal (the "Eternal
Shares"), making Eternal a wholly-owned subsidiary of Ryland, in exchange
for shares of common stock of Ryland (the "Ryland Shares").

    

    In
consideration of the respective covenants contained herein and intending to be
legally bound, the parties hereto agree as follows.

    

    Background

    

    The
purpose of this letter agreement is set out the material terms and conditions of
the Proposed Transaction.  Upon the execution of this letter
agreement, the parties will instruct their respective legal counsel to prepare a
more definitive agreement (the "Definitive Agreement") for
approval by the shareholders of each of the parties, which upon execution will
replace and supersede this letter agreement.  The parties acknowledge
that the Definitive Agreement will contain the representations, warranties,
covenants and conditions set out herein and additional terms that are normally
included in transactions similar to those contemplated hereby.  Unless
and until such execution, this letter agreement will exist and continue in full
force and effect, unless otherwise terminated on the terms set out
herein.

    

    Transaction

    

    Subject
to the terms and conditions hereof, Ryland will purchase all of the issued and
outstanding Eternal Shares from the stockholders of Eternal (the "Eternal Stockholders") in
exchange for Ryland Shares (the "Consideration Shares") to be
issued to the Eternal Stockholders at the closing of the Proposed
Transaction.  Each Eternal Stockholder will receive on the Closing
Date (as defined below) 0.352 of one Consideration Share for each one Eternal
Share (an “Exchange
Transaction”).  This share
exchange ratio is based on Eternal having 50,550,000 shares of common stock
issued and outstanding on a fully diluted basis and would result in the Eternal
Stockholders being issued a total of approximately 17,776,000 Consideration
Shares. Upon the execution and delivery of this letter agreement, each of Ryland
and Eternal will issue a press release setting out the material terms of the
Proposed Transaction as contemplated by this letter agreement.  The
press releases will, among other things, set out the number of issued and
outstanding common shares of each of Ryland and Eternal (on both an issued and
outstanding and a fully diluted basis).  Ryland and Eternal will also
make such regulatory filings as each determines to be
appropriate.  Ryland and Eternal will provide each other with an
opportunity to review and comment on the other’s press releases regarding the
Proposed Transaction issued by either party prior to the closing of the Proposed
Transaction.

    

    The
Proposed Transaction will be in the form of an “arrangement” as that term is
defined under the Ontario
Business Corporations Act.  The parties agree
to use their best efforts to structure the Proposed Transaction so as to
minimize the tax, corporate and accounting effects of the Proposed Transaction
on the parties and their respective equity holders.  The Proposed
Transaction will be structured such that the U.S. and Canadian Eternal
Stockholders will not be subject to payment of tax as a result of exchanging
their Eternal Shares for the Consideration Shares, but rather that the Exchange
Transaction will be completed on a tax-free basis.  The parties
currently contemplate that a court of suitable authority located in the Province
of British Columbia or Ontario will provide the requisite approval of the
Proposed Transaction upon a fairness hearing after receipt of shareholder
approval of both companies, which order will allow the Consideration Shares to
be issued to the Eternal Stockholders as freely tradable under the laws of the
United States and Canada.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      - 2 -

       

    

    The
parties agree to use their reasonable best efforts to enter into the Definitive
Agreement on or before January 15, 2010 and to apply for and
obtain all necessary acceptances, consents, approvals and orders, including
without limitation, shareholder approvals, acceptance by the TSX Venture
Exchange (the "TSX-V")
and the United States Securities and Exchange Commission (the "SEC”), and orders of the
British Columbia Supreme Court or Ontario Supreme Court , as counsel may advise
are necessary or desirable for the implementation of the Transaction on or
before June 30, 2010 (the “Closing Date”).

    

    As
referenced above, the Consideration Shares issuable by Ryland to Eternal
Stockholders hereunder will be issued pursuant to an exemption from the
registration and prospectus delivery requirements of the applicable United
States securities laws and state regulations, including without limitation, the
Securities Act of 1933
(United States) provided by Section 3(a)(10) thereof and pursuant to exemptions
under the Securities
Act (British Columbia) (collectively, the "Securities Laws"), and that
completion of the Proposed Transaction will be conditional upon the
Consideration Shares being issued as freely tradable shares for all Eternal
Stockholders, regardless of their respective status or state of domicile, under
both U.S. and Canadian securities laws.

    

    Warranties
and Representations

    

    Each of
Ryland and Eternal represents and warrants to the other party as follows: (i) it
is duly incorporated and organized under the laws of its jurisdiction of
incorporation, has the power to enter into this letter agreement (subject to the
approval of the Eternal Stockholders) and agrees to provide customary
representations and warranties in the Definitive Agreement, including without
limitation, warranties and representations with regards to corporate status and
authority to enter into the Definitive Agreement and to complete the Proposed
Transaction; (ii) the execution and delivery of this letter agreement has been
duly authorized by all necessary corporate action and constitutes a legal and
binding obligation of such party; (iii) the authorized share capital and issued
and outstanding share capital of the party is as disclosed in the party's public
record, as filed on SEDAR or EDGAR as the case may be; (iv) except as disclosed
in its public record, the party has no outstanding options or rights and is not
bound by any agreement that would obligate the party to issue equity securities;
(v) the party has not entered into and is not bound by any agreement to sell or
encumber any of its assets other than in the ordinary course of business; (vi)
the execution and delivery of this letter agreement and the Definitive Agreement
and the completion of the Proposed Transaction will not conflict with any of the
charter documents or articles of the party.  Ryland represents and
warrants to Eternal that it is not now negotiating to (i) sell all or
substantially all of its assets, (ii) enter into any merger, amalgamation, or
arrangement with any third party (other than Eternal in respect of the Proposed
Transaction), or (iii) dissolve.

    

    Conditions
of Closing

    

    Ryland’s
Conditions.  Ryland’s
obligation to complete the Proposed Transaction is subject to the following
conditions precedent which may be waived in whole or part by Ryland in its
discretion by notice in writing to Eternal:

    

    
      	
              1.

            	
              Ryland
      receiving, from its counsel and advisors, U.S. and Canadian tax opinions
      that the Eternal Stockholders are able to exchange their Eternal Shares
      for the Consideration Shares on a tax-free
  basis;

            

    

     

    
      	
              2.

            	
              Ryland
      and Eternal obtaining all necessary orders, consents and approvals from
      any relevant court, government authority, securities regulatory body,
      including without limitation, acceptances by the TSX-V and the
      SEC;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    - 3 -

     

    
      	
              3.

            	
              The
      Transaction having received the requisite statutory approvals of the
      shareholders of each of Ryland and
Eternal;

            

    

     

    
      	
              4.

            	
              Eternal
      having on closing not more than 50,550,000 shares of common stock issued
      and outstanding on a fully diluted basis (with all Eternal stock options
      having been exercised or cancelled prior to completion of the Proposed
      Transaction);

            

    

     

    
      	
              5.

            	
              From
      the date of execution of this letter agreement until completion of the
      Proposed Transaction, Eternal shall carry on its business in the ordinary
      course and maintain payables and other liabilities at levels consistent
      with normal industry practices and procedures of payment of obligations on
      a “net 30 day” basis, unless otherwise agreed by the relevant creditor,
      and shall not dispose of or encumber any of its assets without the prior
      written consent of Ryland, which shall not be unreasonably withheld,
      delayed, or denied;

            

    

     

    
      	
              6.

            	
              Not
      later than January 31, 2010, Ryland shall have received a fairness opinion
      from a qualified investment banking firm, of Ryland’s choosing, to the
      effect that the Transaction is fair to the Ryland shareholders from a
      financial viewpoint and shall have received a copy of an equivalent
      fairness opinion received by
Eternal;

            

    

     

    
      	
              7.

            	
              Eternal
      having on closing (i) cash on hand in an amount of not less than the
      aggregate of US$2.4 million, plus the amount of any royalties paid to
      Eternal from the date hereof until the date of completion of the Proposed
      Transaction, less (a) general and administrative expenses not to exceed
      $60,000 per month from the date hereof until the date of completion of the
      Proposed Transaction and (b) fees, costs, and expenses directly and
      indirectly related to the Proposed Transaction and (ii) liabilities of not
      more than US$0.8 million (including amounts payable to buy out management
      and employment agreements and Eternal’s premises lease
      obligations);

            

    

     

    
      	
              8.

            	
              Eternal
      shall have executed a mutually acceptable Definitive Agreement, the terms
      and conditions of which Eternal shall have negotiated reasonably,
      diligently, and in good faith and which shall provide for a Closing Date
      as soon as is reasonably practicable;
and

            

    

     

    
      	
              9.

            	
              The
      holders of not more than 20% of the issued and outstanding shares of
      common stock of Eternal shall have duly exercised their Dissenter’s rights
      with respect to the Proposed Transaction pursuant to the Nevada Revised
      Statutes.

            

    

     

    Eternal’s
Conditions.  Eternal’s
obligation to complete the proposed Transaction is subject to the satisfaction
of each of the following conditions precedent,  which may be waived in
whole or part by Eternal in its discretion by notice in writing to
Ryland:

    

    
      	
              1.

            	
              Eternal
      receiving, from its counsel and advisors, a U.S. tax opinion that the
      Eternal Stockholders are able to exchange their Eternal Shares for the
      Consideration Shares on a tax-free
basis;

            

    

     

    
      	
              2.

            	
              Ryland
      and Eternal obtaining all necessary orders, consents and approvals from
      any relevant court, government authority, securities regulatory body,
      including without limitation, acceptances by the TSX-V and the
      SEC;

            

    

     

    
      	
              3.

            	
              The
      Transaction having received the requisite statutory approvals of the
      shareholders of each of Ryland and
Eternal;

            

    

     

    
      	
              4.

            	
              Ryland
      having on closing not more than 300,000,000 shares of common stock issued
      and outstanding on a fully diluted
basis;

            

    

     

    
      	
              5.

            	
              From
      the date of execution of this letter agreement until completion of the
      Proposed Transaction, Ryland shall carry on its business in the ordinary
      course and maintain payables and other liabilities at levels consistent
      with normal industry practices and procedures of payment of obligations on
      a “net 30 day” basis, unless otherwise agreed by the relevant
      creditor;

            

    

     

    
      	
              6.

            	
              Not
      later than January 31, 2020, Eternal shall have received a fairness
      opinion from a qualified investment banking firm, of Eternal’s choosing,
      to the effect that the Proposed Transaction is fair to the Eternal
      Stockholders from a financial viewpoint and shall have received a copy of
      an equivalent fairness opinion received by
  Ryland;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       

      - 4 -

       

    

    
      	
              7.

            	
              Ryland
      shall have completed one or more financings and/or sales of assets and
      used the proceeds thereof together with cash currently on hand to pay out
      its outstanding debt obligations to all creditors (which currently stand
      at approximately CDN$8.5 million) and discharged all liens registered
      against its properties by such creditors, and, on completion of the
      Proposed Transaction, (i) Ryland shall be not be in material default of
      any debt obligations, (ii) Ryland’s shareholders’ equity shall be not less
      than CDN$20 million , and (iii) Ryland’s working capital deficiency shall
      be not more than CDN$10,000,000

            

    

     

    
      	
              8.

            	
              Ryland
      shall apply for a listing in the relevant Standard and Poors’ or Mergent
      Manuals in respect of the standard “Manuals Exemption” for unsolicited
      secondary trades of the Ryland Shares and shall remain so listed for the
      five-year period following the completion of the Proposed Transaction,
      provided that the cost of such listing does not exceed US$5,000 per year;
      and

            

    

     

    
      	
              9.

            	
              Ryland
      shall have executed a mutually acceptable Definitive Agreement, the terms
      and conditions of which Ryland shall have negotiated reasonably,
      diligently, and in good faith and which shall provide for a Closing Date
      as soon as is reasonably
practicable.

            

    

     

    Board
Representation

     

    On
completion of the Proposed Transaction, one nominee of Eternal shall be
appointed to the board of directors of Ryland until the next annual general
meeting of shareholders of Ryland.

     

    Lock-up
Agreements

    

    Concurrently
with the execution of this letter agreement, the directors and senior officers
of each of Ryland and Eternal will enter into support and lock-up agreements
substantially in the form delivered herewith.

    

    Standstill

    

    Until the
closing of the Proposed Transaction, or until this letter agreement is
terminated in accordance with the provisions hereof and subject to standard
fiduciary outs, Eternal will not:  (i) enter into any contract in
respect of its business or assets, other than in the ordinary course of business
or as otherwise contemplated by this letter agreement without the prior written
consent of Ryland, which shall not be unreasonably withheld, delayed, or denied;
(ii) engage or commit to engage in any extraordinary material transactions,
(iii) make or commit to make distributions, dividends or special bonuses; (iv)
repay or commit to repay any stockholders’ loans, or enter into or renegotiate
or commit to enter into or renegotiate any employment, management or consulting
agreement with any senior officer; or (v) issue any securities (debt, equity,
convertible securities, options, warrants or rights to acquire securities or
otherwise) other than pursuant to the exercise of stock options granted prior to
the date hereof.  In addition, on or before the completion of the
Proposed Transaction, Eternal will redeem, cause to be exercised or otherwise
terminate all outstanding options, warrants and rights entitling the holders
thereof to acquire equity securities of Eternal unless such options or other
rights are exercised in accordance with their terms prior to completion of the
Proposed Transaction.

    

    Furthermore,
Eternal agrees that it will not, and will not permit any of its respective
subsidiaries or affiliates, and, subject to standard fiduciary-out provisions,
will cause its officers, directors, employees, agents and representatives not
to, at any time during the term of this letter agreement, directly or
indirectly:

    

    
      	
               
      

            	
              (a)

            	
              solicit,
      initiate or encourage submission of proposals or offers from any person,
      other than Ryland, relating to any acquisition or purchase of all or a
      significant portion of Eternal, its assets, or any equity interest in
      Eternal, any of its subsidiaries or affiliates controlled by it or any
      business combination involving Eternal or any of its subsidiaries or
      affiliates controlled by it; and

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       

      - 5 -

       

    

    
      	
               
      

            	
              (b)

            	
              further
      participate in any negotiations regarding, or furnish to any other person
      any additional non-public information with respect to, or otherwise
      further cooperate in any way with, or assist or participate in, facilitate
      or encourage, any effort or attempt by any other person other than Ryland
      to do or seek any of the foregoing.

            

    

    

    Furthermore,
Eternal acknowledges and agrees that the ability of Ryland to successfully
complete the Proposed Transaction will be dependent on Ryland's success in
entering into lock-up agreements with the officers and directors of Eternal, and
to this regard, agrees to assist Ryland in its efforts to enter into such
lock-up agreements.

    

    Public
Disclosure

    

    No
disclosure or announcement, public or otherwise, in respect of this letter
agreement or the transactions contemplated herein will be made by any party
without the prior written agreement of the other party as to the content and
method; provided, that the obligations herein will not prevent either party from
making, after consultation with the other party, such disclosure as its counsel
advises is required by the applicable securities laws and regulations or,
in  the case of Ryland, the rules and policies of the
TSX-V.

    

    Unless
and until the transactions contemplated in this letter agreement will have been
completed, except with the prior written consent of the other party, each of the
parties and its respective employees, officers, directors, shareholders, agents,
advisors and other representatives will hold all information received from the
other party in strict confidence, except for such information and documents as
are already available to the public or as are required to be filed or disclosed
by the applicable Securities Laws.

    

    In the
event that the transactions provided for in this letter agreement are not
completed, all such information and documents in any form or medium whatsoever,
including copies and derivative materials made will be returned to the party
originally delivering them, or at the direction of such party,
destroyed.

    

    Termination

    

    This
letter agreement may be terminated by mutual written agreement of the
parties.  Unless otherwise agreed to in writing by the parties, this
letter agreement shall terminate without further notice or agreement in the
event that:

    

    
      	
              1.

            	
              the
      Transaction is not accepted by either the TSX-V or the SEC or any relevant
      state agency;

            

    

     

    
      	
              2.

            	
              the
      Transaction is not approved by the requisite majority of votes cast by the
      holders of voting stock  of either party at a duly constituted
      meeting of shareholders called for that purpose, as prescribed under the
      applicable corporate statute governing such
  party;

            

    

     

    
      	
              3.

            	
              any
      conditions precedent set out herein are not satisfied, released or waived
      on or before the Closing Date or such earlier date indicted thereby;
      or

            

    

     

    
      	
              4.

            	
              the
      closing of the Proposed Transaction has not occurred on or before June 30,
      2010, or such later date as may be agreed in writing by the
      parties.

            

    

     

    General

    

    Each of
the parties hereby covenants and agrees that at any time upon the request of the
other party, do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably required for
the better carrying out and performance of all the terms of this letter
agreement.  Each party will pay its own costs incurred in respect of
the Proposed Transaction, including without limitation, legal feel, audit costs
and court application costs.  This letter agreement will be governed
by and be construed in accordance with the laws of British
Columbia.  This letter agreement will be binding upon and enure to the
benefit of the parties hereto and their respective heirs and executors and
successors and assigns as the case may be.  This letter agreement| may
not be assigned without the prior written consent of the other
party.  This letter agreement constitutes the entire agreement between
the parties and supersedes all prior letters of intent, agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied.  The
recitals and any schedules form a part of and are incorporated by reference into
this letter agreement.  No modification or amendment to this letter
agreement may be made unless agreed to by the parties thereto in
writing.  In the event any provision of this letter agreement will be
deemed invalid or void, in whole or in part, by any court of competent
jurisdiction, the remaining terms and provisions will remain in full force and
effect.  Time is of the essence.  This letter agreement may
be executed in any number of counterparts with the same effect as if all parties
to this letter agreement had signed the same document and all counterparts will
be construed together and will constitute one and the same instrument and any
facsimile signature shall be taken as an original.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       

      - 6 -

       

    

    If you
agree to the above terms, kindly sign and date this letter (where indicated
below) signifying your approval and acceptance and return the fully executed
letter to the writer at your earliest convenience.  Upon acceptance,
this offer becomes a binding agreement subject to its terms.

    

    Yours
truly,

     

    
      
        	RYLAND
      OIL CORPORATION	 	 	 	 
	 	 	 	 	 	 
	Per:	
                /s/
      Gerald J. Shields

              	 	 	
                 

              	 
	 	
                Gerald
      J.  Shields

              	 	 	
                 

              	 
	 	
                President

              	 	 	
                 

              	 

      

    

     

    The
above terms and conditions are hereby accepted this 25th day of
November, 2009.

    

    
      	ETERNAL
      ENERGY CORP.	 	 	 	 
	 	 	 	 	 	 
	Per:	
              /s/
      Bradley M. Colby

            	 	 	
               

            	 
	 	
              Bradley
      M. Colby

            	 	 	
               

            	 
	 	
              Chief
      Executive OfficerExhibit
4.1

    

    THE
ISSUANCE OF THIS WARRANT AND THE WARRANT SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (REGISTRATION NO. 333-161026)

    

    SUTOR
TECHNOLOGY GROUP LIMITED

    

    WARRANT

     

    
      	
              Warrant
      No. [  ]

            	
              Original
      Issue Date: March 10, 2010

            

    

     

    Sutor
Technology Group Limited, a Nevada corporation (the "Company"), hereby certifies
that, for value received, [      ] or its
registered assigns (the "Holder"), is entitled to
purchase from the Company up to a total of
[            ]
shares of Common Stock (each such share, a "Warrant Share" and all such
shares, the "Warrant
Shares"), at any time and from time to time from and after the Original
Issue Date and through and including March 9, 2015 (the "Expiration Date"), and
subject to the following terms and conditions:

     

    1.           Definitions.  As
used in this Warrant, the following terms shall have the respective definitions
set forth in this Section 1.  Capitalized terms that are used and not
defined in this Warrant that are defined in the Subscription Agreement (as
defined below) shall have the respective definitions set forth in the
Subscription Agreement.

     

    "Business Day" means any day
except Saturday, Sunday and any day that is a federal legal holiday in the
United States or a day on which banking institutions in the State of New York or
State of Nevada are authorized or required by law or other government action to
close.

     

    "Common Stock" means the
common stock of the Company, $0.001 par value per share, and any securities into
which such common stock may hereafter be reclassified.

     

    “Common Stock Equivalents”
means any securities of the Company or any subsidiary which entitle the holder
thereof to acquire Common Stock at any time, including, without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.

     

    "Exercise Price" means $3.76,
subject to adjustment in accordance with Section 9.

     

    "Fundamental Transaction"
means any of the following: (1) the Company effects any merger or consolidation
of the Company into another person where the Company is not the surviving
entity, (2) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (3) any tender offer or
exchange offer (whether by the Company or another person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (4) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Original Issue Date” means
the Original Issue Date first set forth on the first page of this
Warrant.

     

    “New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.

     

    "Subscription Agreement" means
the Subscription Agreement, dated March 4, 2010, to which the Company and the
original Holder are parties.

     

    "Trading Day" means (i) a day
on which the Common Stock is traded on a Trading Market (other than the OTC
Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market
(other than the OTC Bulletin Board), a day on which the Common Stock is traded
in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii)
if the Common Stock is not quoted on any Trading Market, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the Pink
Sheets LLC (or any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.

     

    “Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.

     

    2.           Registration of
Warrant.  The Company shall register this Warrant upon records
to be maintained by the Company for that purpose (the "Warrant Register"), in the
name of the record Holder hereof from time to time.  The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.

     

    3.           Registration of
Transfers.  The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein.  Upon any such registration
or transfer, a new Warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new Warrant, a "New Warrant"), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

     

    4.           Exercise and Duration of
Warrants.

     

    (a)           This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the Original Issue Date through and including the Expiration
Date.  At 5:30 p.m., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value.  Except as provided in Section 4(b) below, the Company
may not call or redeem any portion of this Warrant without the prior written
consent of the affected Holder.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (b)           If
the closing price of the Common Stock for any 20 Trading Day period within a 30
Trading Day period following the one year anniversary of the Original Issue Date
is equal to or greater than $5.40 (subject to adjustment pursuant to Section 9)
then, subject to the conditions set forth in this Section, the Company may, in
its sole discretion, elect to require the exercise of up to all of the then
unexercised portion of this Warrant, on the date that is the fifth Trading Day
after written notice thereof (a “Call Notice”) is deemed
delivered to the Holder in accordance with Section 13 hereof (such fifth Trading
Day shall be known as the “Call
Date”) at the address last shown on the records of the Company for the
Holder or given by the Holder to the Company for the purpose of notice. The
Company and the Holder agree that, if and to the extent Section 11 of
this Warrant would restrict the ability of the Holder to exercise this Warrant
in the event of a delivery of a Call Notice, then notwithstanding anything
to the contrary set forth in the Call Notice, the Call Notice shall be deemed
automatically amended to apply only to such portion of this Warrant as may
be exercised by the Holder by the Call Date in accordance with such
Section.  The Holder will promptly (and, in any event, prior to the Call
Date) notify the Company in writing following receipt of a Call Notice
if Section 11 would restrict its exercise of the Warrant, specifying
therein the number of Warrant Shares so restricted.  The Company
covenants and agrees that it will honor all Exercise Notices tendered through
5:30 p.m. (New York City time) on the Call Date.  Under no
circumstances (even if Section 11 would require the amendment of a Call Notice)
may the Company deliver more than one Call Notice in any 90 calendar day
period.

     

    5.           Delivery of Warrant
Shares.

     

    (a)           To
effect exercises hereunder, the Holder shall not be required to physically
surrender this Warrant unless the aggregate Warrant Shares represented by this
Warrant is being exercised.  Upon delivery of the Exercise Notice (in
the form attached hereto) to the Company (with the attached Warrant Shares
Exercise Log) at its address for notice set forth herein and upon payment of the
Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, the Company shall promptly (but in no event later
than three Trading Days after the Date of Exercise (as defined herein)) issue
and deliver to the Holder, a certificate for the Warrant Shares issuable upon
such exercise.  The Company shall, upon request of the Holder, use
commercially reasonable efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available, provided, that, the
Company may, but will not be required to change its transfer agent if its
current transfer agent cannot deliver Warrant Shares electronically through the
Depository Trust Corporation.  A "Date of Exercise" means the
date on which the Holder shall have delivered to the Company: (i) the Exercise
Notice (with the Warrant Exercise Log attached to it), appropriately completed
and duly signed and (ii) if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, payment of the Exercise Price for the
number of Warrant Shares so indicated by the Holder to be
purchased.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (b)           If
by the third Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to Section
5(a), then the Holder will have the right to rescind such exercise.

     

    (c)           If
by the third Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to Section
5(a), and if after such third Trading Day and prior to the receipt of such
Warrant Shares, 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 the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"),
then the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue by (B) the
closing bid price of the Common Stock on the Date of Exercise and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In.

     

    (d)           The
Company's obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.

     

    6.           Charges, Taxes and
Expenses.  Issuance and delivery of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder.  The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    7.           Replacement of
Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if
requested.  Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may
prescribe.  If a New Warrant is requested as a result of a mutilation
of this Warrant, then the Holder shall deliver such mutilated Warrant to the
Company as a condition precedent to the Company’s obligation to issue the New
Warrant.

     

    8.           Reservation of Warrant
Shares.  The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable.

     

    9.           Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

     

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

     

    (b)           Fundamental
Transactions.  If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the "Alternate
Consideration").  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction.  The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this paragraph (b) and insuring that the Warrant will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (c)           Number of Warrant
Shares.  Simultaneously with any adjustment to the Exercise
Price pursuant to Section 9(a), the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such
adjustment.

     

    (d)           Calculations.  All
calculations under this Section 9 shall be made to the nearest cent or the
nearest 1/100th of a
share, as applicable.  The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

     

    (e)           Notice of
Adjustments.  Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based.  Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the Company's Transfer Agent.

     

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

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    10.         Payment
of Exercise Price. The Holder may
pay the Exercise Price in one of the following manners:

     

    (a)         Cash
Exercise.  The Holder may deliver immediately available funds;
or

     

    (b)         Cashless
Exercise.  If an Exercise Notice is delivered at a time when a
registration statement permitting the Holder to resell the Warrant Shares is not
then effective or the prospectus forming a part thereof is not then available to
the Holder for the sale of the Warrant Shares, then the Holder may notify the
Company in an Exercise Notice of its election to utilize cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

     

    X = Y
[(A-B)/A]

     

    where:

     

    X = the
number of Warrant Shares to be issued to the Holder.

     

    Y = the
number of Warrant Shares with respect to which this Warrant is being
exercised.

     

    A = the
average of the closing prices for the five Trading Days immediately prior to
(but not including) the Exercise Date.

     

    B = the
Exercise Price.

     

    For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

     

    11.         Limitations on
Exercise.  Notwithstanding anything to the contrary contained
herein, the number of Warrant Shares that may be acquired by the Holder upon any
exercise of this Warrant (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its affiliates and any other persons whose beneficial ownership
of Common Stock would be aggregated with the Holder's for purposes of Section
13(d) of the Exchange Act, does not exceed 9.99% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise).  For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder.  This provision shall not restrict the number of shares of
Common Stock which a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as contemplated in Section 9
of this Warrant.  This restriction may not be waived, and
notwithstanding anything to the contrary in any Transaction Document, may not be
amended by agreement of the parties.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    12.         No Fractional
Shares.  No fractional shares of Warrant Shares will be issued
in connection with any exercise of this Warrant.  In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the closing price of one
Warrant Share as reported by the applicable Trading Market on the date of
exercise.

     

    13.         Notices.  Any
and all notices or other communications or deliveries hereunder (including,
without limitation, any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:30 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be
given.  The addresses for such communications shall be:  (i)
if to the Company, to Sutor Technology Group Limited, No. 8, Huaye Road,
Dongbang Industrial Park, Changshu, China 215534, Attn: Chief Executive Officer,
or to Telephone: (86) 512-52680988 (or such other address as the Company shall
indicate in writing in accordance with this Section), or (ii) if to the Holder,
to the address or facsimile number appearing on the Warrant Register or such
other address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

     

    14.         Warrant
Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 10 days' notice to the Holder, the Company may appoint
a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.

     

    15.         Miscellaneous.

     

    (a)           This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns.  Subject to the preceding
sentence, nothing in this Warrant shall be construed to give to any person other
than the Company and the Holder any legal or equitable right, remedy or cause of
action under this Warrant.  This Warrant may be amended only in
writing signed by the Company and the Holder and their successors and
assigns.

     

    (b)           All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York (except for matters governed by
corporate law in the State of Nevada), without regard to the principles of
conflicts of law thereof.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (c)           The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

     

    (d)           In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

     

    (e)           Prior
to exercise of this Warrant, the Holder hereof shall not, by reason of being a
Holder, be entitled to any rights of a stockholder with respect to the Warrant
Shares.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,

    SIGNATURE
PAGE FOLLOWS]

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

     

    
      
        
          	 
      	
                  SUTOR
      TECHNOLOGY GROUP LIMITED

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                

        

      

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    EXERCISE
NOTICE

    SUTOR
TECHNOLOGY GROUP LIMITED

    WARRANT
DATED MARCH 10, 2010

     

    The
undersigned Holder hereby irrevocably elects to purchase _____________ shares of
Common Stock pursuant to the above referenced Warrant.  Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.

     

    (1)           The
undersigned Holder hereby exercises its right to purchase _________________
Warrant Shares pursuant to the Warrant.

     

    (2)           The
Holder intends that payment of the Exercise Price shall be made as (check
one):

    

    
      
        
          
            	 
      	
                    ____

                  	
                    “Cash
      Exercise” under Section 10

                  
	 
      	
                    ____

                  	
                    “Cashless
      Exercise” under Section
10

                  

          

        

      

    

     

    (3)           If
the holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the
Warrant.

     

    (4)           Pursuant
to this Exercise Notice, the Company shall deliver to the holder _______________
Warrant Shares in accordance with the terms of the Warrant.

     

    (5)           By
its delivery of this Exercise Notice, the undersigned represents and warrants to
the Company that in giving effect to the exercise evidenced hereby the Holder
will not beneficially own in excess of the number of shares of Common Stock
(determined in accordance with Section 13(d) of the Securities Exchange Act of
1934) permitted to be owned under Section 11 of this Warrant to which this
notice relates.

    

    
      
        
          
            
              
                
                  
                    	
                            Dated: _____________,
      ____

                          	 
      	
                            Name
      of Holder:

                          
	 
      	 
      	 
      
	 
      	 
      	
                            (Print)

                          	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                            By:

                          	 
      
	 
      	 
      	
                            Name:

                          	 
      
	 
      	 
      	
                            Title:

                          	 
      
	 
      	 
      	 
      
	 
      	 
      	
                            (Signature
      must conform in all respects to name of holder as specified on the face of
      the
Warrant)

                          

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    Warrant Shares Exercise
Log

     

    
      
        
          
            	
                    Date

                  	 
      	
                    Number of Warrant

                    Shares Available to be

                    Exercised

                  	 
      	
                    Number of Warrant Shares

                    Exercised

                  	 
      	
                    Number of

                    Warrant Shares

                    Remaining to

                    be Exercised

                  	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 	 	 	 	 	 	 	 
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      

          

        

      

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    SUTOR
TECHNOLOGY GROUP LIMITED

    WARRANT
ORIGINALLY ISSUED MARCH 10, 2010

    WARRANT
NO. [ ]

     

    FORM OF
ASSIGNMENT

     

    [To be
completed and signed only upon transfer of Warrant]

     

    FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the above-captioned
Warrant to purchase  ____________ shares of Common Stock to which such
Warrant relates and appoints ________________ attorney to transfer said right on
the books of the Company with full power of substitution in the
premises.

     

    Dated:                      _______________,
____

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	 	 
      
	 
      	 	
                                    (Signature
      must conform in all respects to name of holder as specified on the face of
      the Warrant)

                                  
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	
                                    Address
      of Transferee

                                  
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 	 	 
	 	 	 
	
                                    In
      the presence of:

                                  	 	 
      
	 	 	 
	 
      	 	 
      

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        13

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