Document:

Unassociated Document

     

    

      EXHIBIT
        10.1

      EQUITY
        LINE AGREEMENT

      

      THIS
        AGREEMENT
        dated as
        of the 20th
        day of
        March 2008 (the “Agreement”)
        between MAGELLAN
        GLOBAL FUND, L.P.,
        a
        Delaware limited partnership (the “Investor”),
        and
CHINA
        SHOE HOLDINGS,
        a
        corporation organized and existing under the laws of the State of Nevada
        (the
“Company”).

       

      WHEREAS,
        the
        parties desire that, upon the terms and subject to the conditions contained
        herein, the Company shall issue and sell to the Investor, from time to time
        as
        provided herein, and the Investor shall purchase from the Company up to Two
        Million Dollars ($2,000,000) of the Company’s common stock, par value $
        .001 per share (the “Common
        Stock”);
        and

       

      WHEREAS,
        such
        investments will be made in reliance upon the provisions of Regulation D
        (“Regulation
        D”)
        of the
        Securities Act of 1933, as amended, and the regulations promulgated thereunder
        (the “Securities
        Act”),
        and
        or upon such other exemption from the registration requirements of the
        Securities Act as may be available with respect to any or all of the investments
        to be made hereunder.

       

      NOW,
        THEREFORE,
        the
        parties hereto agree as follows:

       

      ARTICLE
        I.

      Certain
        Definitions

       

      Section
        1.1

      “Advance”
shall
        mean the portion of the Commitment Amount requested by the Company in the
        Advance Notice.

       

      Section
        1.2

      “Advance
        Date”
shall
        mean the first (1st)
        Trading
        Day after expiration of the applicable Pricing Period for each
        Advance.

       

      Section
        1.3

      “Advance
        Notice”
shall
        mean a written notice in the form of Exhibit
        A
        attached
        hereto to the Investor executed by an officer of the Company and setting
        forth
        the Advance amount that the Company requests from the Investor.

       

      Section
        1.4

      “Advance
        Notice Date”
shall
        mean each date the Company delivers (in accordance with Section 2.2(b) of
        this
        Agreement) to the Investor an Advance Notice requiring the Investor to advance
        funds to the Company, subject to the terms of this Agreement.  No Advance
        Notice Date shall be less than Ten (10) Trading Days after the prior Advance
        Notice Date.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Section
        1.5

      “Bid
        Price”
shall
        mean, on any date, the closing bid price (as reported by Bloomberg L.P.)
        of the
        Common Stock on the Principal Market or if the Common Stock is not traded
        on a
        Principal Market, the highest reported bid price for the Common Stock, as
        furnished by the National Association of Securities Dealers, Inc.

       

      Section
        1.6

      “Closing”
shall
        mean one of the closings of a purchase and sale of Common Stock pursuant
        to
        Section 2.3.

       

      Section
        1.7

      “Commitment
        Amount”
shall
        mean the aggregate amount of up to Two Million Dollars ($2,000,000) which
        the
        Investor has agreed to provide to the Company in order to purchase the Company’s
        Common Stock pursuant to the terms and conditions of this
        Agreement.

       

      Section
        1.8

      “Commitment
        Period”
shall
        mean the period commencing on the earlier to occur of (i) the Effective Date,
        or
        (ii) such earlier date as the Company and the Investor may mutually agree
        in
        writing, and expiring on the earliest to occur of (x) the date on which the
        Investor shall have made payment of Advances pursuant to this Agreement in
        the
        aggregate amount of the Commitment Amount, (y) the date this Agreement is
        terminated pursuant to Section 10.2 or (z) the date occurring twenty-four
        (24)
        months after the Effective Date.

       

      Section
        1.9

      “Common
        Stock”
shall
        mean the Company’s common stock, par value $.001 per share.

       

      Section
        1.10

      “Condition
        Satisfaction Date”
shall
        have the meaning set forth in Section 7.2.

       

      Section
        1.11

      “Damages”
shall
        mean any loss, claim, damage, liability, costs and expenses (including, without
        limitation, reasonable attorney’s fees and disbursements and costs and expenses
        of expert witnesses and investigation).

       

      Section
        1.12

      “Effective
        Date”
shall
        mean the date on which the SEC first declares effective a Registration Statement
        registering the resale of the Registrable Securities as set forth in Section
        7.2(a). 

      

      Section
        1.13

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

       

      
        
          
          

        

        
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      Section
        1.14

      “Material
        Adverse Effect”
shall
        mean any condition, circumstance, or situation that may result in, or reasonably
        be expected to result in (i) a material adverse effect on the legality, validity
        or enforceability of the Agreement, (ii) a material adverse effect on the
        results of operations, assets, business or condition (financial or otherwise)
        of
        the Company, taken as a whole, or (iii) a material adverse effect on the
        Company’s ability to perform in any material respect on a timely basis its
        obligations under the Agreement.

       

      Section
        1.15

      “Market
        Price”
shall
        mean the average of the three (3) lowest closing bid prices of the Common
        Stock
        during the Pricing Period

       

      Section
        1.16

      “Maximum
        Advance Amount”
with
        respect to each Advance Notice shall mean an amount at the discretion of
        the
        Company up to Sixty Thousand Dollars ($60,000) Put restriction amounts can
        be waived at the option of the Investor.

       

      Section
        1.17

      “Minimum
        Acceptable Price”
with
        respect to any Put shall mean the price at which the Company has the right,
        but
        not the obligation, to withdraw that portion of the Put. 

       

      Section
        1.18

      “NASD”
shall
        mean the National Association of Securities Dealers, Inc.

       

      Section
        1.19

      “Person”
shall
        mean an individual, a corporation, a partnership, an association, a trust
        or
        other entity or organization, including a government or political subdivision
        or
        an agency or instrumentality thereof.

       

      Section
        1.20

      “Pricing
        Period”
shall
        mean the Five (5) consecutive Trading Days after the Advance Notice
        Date.

       

      Section
        1.21

      “Principal
        Market”
shall
        mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq
        Capital Market, the American Stock Exchange, the OTC Bulletin Board or the
        New
        York Stock Exchange, whichever is at the time the principal trading exchange
        or
        market for the Common Stock. 

       

      Section
        1.22

      “Purchase
        Price”
shall
        be set at ninety two percent (92%) of the Market Price during the Pricing
        Period.

       

      Section
        1.23

      “Registrable
        Securities”
shall
        mean the shares of Common Stock to be issued hereunder (i)
        in
        respect of which the Registration Statement has not been declared effective
        by
        the SEC, (ii) which have not been sold under circumstances meeting all of
        the
        applicable conditions of Rule 144 (or any similar provision then in force)
        under
        the Securities Act (“Rule
        144”)
        or
        (iii) which have not been otherwise transferred to a holder who may trade
        such
        shares without restriction under the Securities Act, and the Company has
        delivered a new certificate or other evidence of ownership for such securities
        not bearing a restrictive legend.

       

      
        
          
          

        

        
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      Section
        1.24

      “Registration
        Rights Agreement”
shall
        mean the Registration Rights Agreement dated the date hereof, regarding the
        filing of the Registration Statement for the resale of the Registrable
        Securities, entered into between the Company and the Investor.

       

      Section
        1.25

      “Registration
        Statement”
shall
        mean a registration statement on Form S-1, Form S-3 or SB-2 (if use of such
        form
        is then available to the Company pursuant to the rules of the SEC and, if
        not,
        on such other form promulgated by the SEC for which the Company then qualifies
        and which counsel for the Company shall deem appropriate, and which form
        shall
        be available for the resale of the Registrable Securities to be registered
        thereunder in accordance with the provisions of this Agreement and the
        Registration Rights Agreement, and in accordance with the intended method
        of
        distribution of such securities), for the registration of the resale by the
        Investor of the Registrable Securities under the Securities Act.

      

      Section
        1.26

      “Regulation
        D”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      Section
        1.27

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

       

      Section
        1.28

      “Securities
        Act”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      Section
        1.29

      “SEC
        Documents”
shall
        mean Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
        Reports on Form 8-K and Proxy Statements of the Company as supplemented to
        the
        date hereof, filed by the Company for a period of at least twelve (12) months
        immediately preceding the date hereof or the Advance Date, as the case may
        be,
        until such time as the Company no longer has an obligation to maintain the
        effectiveness of a Registration Statement as set forth in the Registration
        Rights Agreement.

      

      Section
        1.30

      “Trading
        Day”
shall
        mean any day during which the New York Stock Exchange shall be open for
        business.

       

      
        
          
          

        

        
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      ARTICLE
        II.

      Advances

       

      Section
        2.1

      Advances.

       

      Subject
        to the terms and conditions of this Agreement (including, without limitation,
        the provisions of Article VII hereof), the Company, at its sole and exclusive
        option, may issue and sell to the Investor, and the Investor shall purchase
        from
        the Company, shares of the Company’s Common Stock by the delivery, in the
        Company’s sole discretion, of Advance Notices.  The number of shares of
        Common Stock that the Investor shall purchase pursuant to each Advance shall
        be
        determined by dividing the amount of the Advance by the Purchase Price.  No
        fractional shares shall be issued. Fractional shares shall be rounded to
        the
        next higher whole number of shares.  The aggregate maximum amount of all
        Advances that the Investor shall be obligated to make under this Agreement
        shall
        not exceed the Commitment Amount.

      

      Section
        2.2

      Mechanics.

       

      (a)

      Advance
        Notice.
         At any time during the Commitment Period, the Company may require the
        Investor to purchase shares of Common Stock by delivering an Advance Notice
        to
        the Investor, subject to the conditions set forth in Section 7.2; provided,
        however, the amount for each Advance as designated by the Company in the
        applicable Advance Notice shall not be more than the Maximum Advance Amount
        and
        the aggregate amount of the Advances pursuant to this Agreement shall not
        exceed
        the Commitment Amount.  The Company acknowledges that the Investor may sell
        shares of the Company’s Common Stock corresponding with a particular Advance
        Notice after the Advance Notice is received by the Investor.  There shall
        be a minimum of Ten (10) Trading Days between each Advance Notice
        Date.

       

      (b)

      Date
        of Delivery of Advance Notice.
         An Advance Notice shall be deemed delivered on (i) the Trading Day it is
        received by facsimile or otherwise by the Investor if such notice is received
        prior to 5:00 pm Eastern Time, or (ii) the immediately succeeding Trading
        Day if
        it is received by facsimile or otherwise after 5:00 pm Eastern Time on a
        Trading
        Day or at any time on a day which is not a Trading Day.  No Advance Notice
        may be deemed delivered on a day that is not a Trading Day. 

      

      Section
        2.3

      Closings.
         On each Advance Date (i) the Company shall deliver to the Investor such
        number of shares of the Common Stock registered in the name of the Investor
        as
        shall equal (x) the amount of the Advance specified in such Advance Notice
        pursuant to Section 2.1 herein, divided by (y) the Purchase Price and (ii)
        upon
        receipt of such shares, the Investor shall deliver to the Company the amount
        of
        the Advance specified in the Advance Notice by wire transfer of immediately
        available funds.  In addition, on or prior to the Advance Date, each of the
        Company and the Investor shall deliver to the other all documents, instruments
        and writings required to be delivered by either of them pursuant to this
        Agreement in order to implement and effect the transactions contemplated
        herein.
 To the extent the Company has not paid the fees, expenses, and
        disbursements of the Investor in accordance with Section 12.4, the amount
        of
        such fees, expenses, and disbursements may be deducted by the Investor (and
        shall be paid to the relevant party) directly out of the proceeds of the
        Advance
        with no reduction in the amount of shares of the Company’s Common Stock to be
        delivered on such Advance Date.  

       

      
        
          
          

        

        
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      (a)

      Company’s
        Obligations Upon Closing.

       

      (i)

      The
        Company shall deliver to the Investor the shares of Common Stock applicable
        to
        the Advance in accordance with Section 2.3.  The certificates evidencing
        such shares shall be free of restrictive legends.

       

      (ii)

      the
        Company shall maintain the effectiveness of the Registration Statement with
        respect to the resale of the shares of Common Stock delivered in connection
        with
        the Advance;

       

      (iii)

      the
        Company shall obtain all material permits and qualifications required by
        any
        applicable state for the offer and sale of the Registrable Securities, or
        have
        the availability of exemptions there from.  The sale and issuance of the
        Registrable Securities shall be legally permitted by all laws and regulations
        to
        which the Company is subject; 

       

      (iv)

       

      the
        Company shall file with the SEC in a timely manner all reports, notices and
        other documents required of a “reporting company” under the Exchange Act and
        applicable Commission regulations;

       

      (v)

      the
        Company shall pay all any unpaid fees set forth in Section 12.4 below or
        withhold such amounts as provided in Section 2.3; and

       

      
        
          
          

        

        
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      (b)

      Investor’s
        Obligations Upon Closing.

      Upon
        receipt of the shares referenced in Section 2.3(a)(i) above and provided
        the
        Company is in compliance with its obligations in Section 2.3, the Investor
        shall
        deliver to the Company the amount of the Advance specified in the Advance
        Notice
        by wire transfer of immediately available funds.  

       

      ARTICLE
        III.

      Representations
        and Warranties of Investor

       

      Investor
        hereby represents and warrants to, and agrees with, the Company that the
        following are true and correct as of the date hereof and as of each Advance
        Date:

       

      Section
        3.1

      Organization
        and Authorization.
         The Investor is duly incorporated or organized and validly existing in the
        jurisdiction of its incorporation or organization and has all requisite power
        and authority to purchase and hold the securities issuable hereunder.  The
        decision to invest and the execution and delivery of this Agreement by such
        Investor, the performance by such Investor of its obligations hereunder and
        the
        consummation by such Investor of the transactions contemplated hereby have
        been
        duly authorized and requires no other proceedings on the part of the Investor.
         The undersigned has the right, power and authority to execute and deliver
        this Agreement and all other instruments (including, without limitations,
        the
        Registration Rights Agreement), on behalf of the Investor.  This Agreement
        has been duly executed and delivered by the Investor and, assuming the execution
        and delivery hereof and acceptance thereof by the Company, will constitute
        the
        legal, valid and binding obligations of the Investor, enforceable against
        the
        Investor in accordance with its terms.

       

      Section
        3.2

      Evaluation
        of Risks.
         The Investor has such knowledge and experience in financial, tax and
        business matters as to be capable of evaluating the merits and risks of,
        and
        bearing the economic risks entailed by, an investment in the Company and
        of
        protecting its interests in connection with this transaction.  It
        recognizes that its investment in the Company involves a high degree of
        risk.

       

      Section
        3.3

       

      No
        Legal Advice From the Company.
         The Investor acknowledges that it had the opportunity to review this
        Agreement and the transactions contemplated by this Agreement with his or
        its
        own legal counsel and investment and tax advisors.  The Investor is relying
        solely on such counsel and advisors and not on any statements or representations
        of the Company or any of its representatives or agents for legal, tax or
        investment advice with respect to this investment, the transactions contemplated
        by this Agreement or the securities laws of any jurisdiction.

       

      
        
          
          

        

        
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      Section
        3.4

      Investment
        Purpose.
        The
        securities are being purchased by the Investor for its own account, and for
        investment purposes.  The Investor agrees not to assign or in any way
        transfer the Investor’s rights to the securities or any interest therein and
        acknowledges that the Company will not recognize any purported assignment
        or
        transfer except in accordance with applicable Federal and state securities
        laws.
 No other person has or will have a direct or indirect beneficial interest
        in the securities.  The Investor agrees not to sell, hypothecate or
        otherwise transfer the Investor’s securities unless the securities are
        registered under Federal and applicable state securities laws or unless,
        in the
        opinion of counsel satisfactory to the Company, an exemption from such laws
        is
        available.

       

      Section
        3.5

      Accredited
        Investor.
         The Investor is an “Accredited
        Investor”
as
        that
        term is defined in Rule 501(a)(3) of Regulation D of the Securities
        Act.

       

      Section
        3.6

      Information.
         The Investor and its advisors (and its counsel), if any, have been
        furnished with all materials relating to the business, finances and operations
        of the Company and information it deemed material to making an informed
        investment decision.  The Investor and its advisors, if any, have been
        afforded the opportunity to ask questions of the Company and its management.
         Neither such inquiries nor any other due diligence investigations
        conducted by such Investor or its advisors, if any, or its representatives
        shall
        modify, amend or affect the Investor’s right to rely on the Company’s
        representations and warranties contained in this Agreement.  The Investor
        understands that its investment involves a high degree of risk.  The
        Investor is in a position regarding the Company, which, based upon employment,
        family relationship or economic bargaining power, enabled and enables such
        Investor to obtain information from the Company in order to evaluate the
        merits
        and risks of this investment.  The Investor has sought such accounting,
        legal and tax advice, as it has considered necessary to make an informed
        investment decision with respect to this transaction.

       

      Section
        3.7

      Receipt
        of Documents.
        The
        Investor and its counsel have received and read in their entirety:  (i)
        this Agreement and the Exhibits annexed hereto; (ii) all due diligence and
        other
        information necessary to verify the accuracy and completeness of such
        representations, warranties and covenants which would not, taken as a whole
        have
        a materially adverse effect on the Company and its properties, earnings or
        operations; (iii) the Company’s Form 10-KSB for the year ended December 31, 2006
        and Form 10-QSB for the period ended September 30, 2007; and (iv) answers
        to all questions the Investor submitted to the Company regarding an investment
        in the Company; and the Investor has relied on the information contained
        therein
        and has not been furnished any other documents, literature, memorandum or
        prospectus.  

       

      Section
        3.8

      Registration
        Rights Agreement.
         The parties have entered into the Registration Rights Agreement dated the
        date hereof.

       

      
        
          
          

        

        
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      Section
        3.9

      No
        General Solicitation.
         Neither the Company, nor any of its affiliates, nor any person acting on
        its or their behalf, has officially engaged in any form of general solicitation
        or general advertising (within the meaning of Regulation D under the Securities
        Act) in connection with the offer or sale of the shares of Common Stock offered
        hereby.

       

      Section
        3.10

      Not
        an
        Affiliate.
         The Investor is not an officer, director or a person that directly, or
        indirectly through one or more intermediaries, controls or is controlled
        by, or
        is under common control with the Company or any “Affiliate”
of
        the
        Company (as that term is defined in Rule 405 of the Securities Act).

       

      Section
        3.11

      Trading
        Activities.
         The Investor’s trading activities with respect to the Company’s Common
        Stock shall be in compliance with all applicable federal and state securities
        laws, rules and regulations and the rules and regulations of the Principal
        Market on which the Company’s Common Stock is listed or traded. Neither the
        Investor nor its affiliates has an open short position in the Common Stock
        of
        the Company, the Investor agrees that it shall not, and that it will cause
        its
        affiliates not to, engage in any short sales of or hedging transactions with
        respect to the Common Stock during the term of this Agreement and for a period
        of ninety (90) days following the termination of this Agreement, provided
        that the
        Company acknowledges and agrees that upon receipt of an Advance Notice the
        Investor has the right to sell the shares to be issued to the Investor pursuant
        to the Advance Notice during the applicable Pricing Period. 

       

      ARTICLE
        IV.

      Representations
        and Warranties of the Company

       

      Except
        as
        stated below, on the disclosure schedules attached hereto or in the SEC
        Documents (as defined herein), the Company hereby represents and warrants
        to,
        and covenants with, the Investor that the following are true and correct
        as of
        the date hereof:

       

      Section
        4.1

      Organization
        and Qualification.
         The Company is duly incorporated or organized and validly existing in the
        jurisdiction of its incorporation or organization and has all requisite
        corporate power to own its properties and to carry on its business as now
        being
        conducted.  Each of the Company and its subsidiaries is duly qualified as a
        foreign corporation to do business and is in good standing in every jurisdiction
        in which 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 on the Company and
        its
        subsidiaries taken as a whole.

       

      Section
        4.2

      Authorization,
        Enforcement, Compliance with Other Instruments.
         (i) The Company has the requisite corporate power and authority to enter
        into and perform this Agreement and the Registration Rights Agreement and
        any
        related agreements, in accordance with the terms hereof and thereof, (ii)
        the
        execution and delivery of this Agreement and the Registration Rights Agreement
        and any related agreements by the Company and the consummation by it of the
        transactions contemplated hereby and thereby, have been duly authorized by
        the
        Company’s Board of Directors and no further consent or authorization is required
        by the Company, its Board of Directors or its stockholders, (iii) this
        Agreement and the Registration Rights Agreement and any related agreements
        have
        been duly executed and delivered by the Company, (iv) this Agreement and
        the
        Registration Rights Agreement and assuming the execution and delivery thereof
        and acceptance by the Investor and any related agreements constitute the
        valid
        and binding obligations of the Company enforceable against the Company in
        accordance with their 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 creditors’ rights and
        remedies.

       

      
        
          
          

        

        
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      Section
        4.3

      Capitalization.
         The capitalization of the Company as of January 1, 2008 is as set forth on
        Schedule
        4.3.
         Except for shares included in Schedule
        4.3,
        the
        Company has not issued any capital stock since its most recently filed periodic
        report under the Exchange Act, other than pursuant to the exercise of stock
        options under the Company’s stock option plans, the issuance of shares of Common
        Stock to employees, advisors or consultants as compensation for the provision
        of
        services or pursuant to the Company’s employee stock purchase/option plans and
        pursuant to the conversion or exercise of Common Stock Equivalents outstanding
        as of the date of the most recently filed periodic report under the Exchange
        Act.  No Person has any right of first refusal, preemptive right, right of
        participation, or any similar right to participate in the transactions
        contemplated by the this Agreement.  Except as a result of the purchase and
        sale of the Common Stock hereunder and except as disclosed in Schedule
        4.3,
        there
        are no outstanding options, warrants, script rights to subscribe to, calls
        or
        commitments of any character whatsoever relating to, or securities, rights
        or
        obligations convertible into or exercisable or exchangeable for, or giving
        any
        Person any right to subscribe for or acquire, any shares of Common Stock,
        or
        contracts, commitments, understandings or arrangements by which the Company
        or
        any subsidiary is or may become bound to issue additional shares of Common
        Stock.  The issuance and sale of the Common Stock hereunder will not
        obligate the Company to issue shares of Common Stock or other securities
        to any
        Person and will not result in a right of any holder of Company securities
        to
        adjust the exercise, conversion, exchange or reset price under any of such
        securities. All of the outstanding shares of capital stock of the Company
        are
        validly issued, fully paid and nonassessable, have been issued in compliance
        with all federal and state securities laws, and none of such outstanding
        shares
        was issued in violation of any preemptive rights or similar rights to subscribe
        for or purchase securities.  No further approval or authorization of any
        stockholder, the Board of Directors of the Company or others is required
        for the
        issuance and sale of the shares of Common Stock hereunder.  There are no
        stockholders agreements, voting agreements or other similar agreements with
        respect to the Company’s capital stock to which the Company is a party or, to
        the knowledge of the Company, between or among any of the Company’s
        stockholders.  The Company has furnished to the Investor true and correct
        copies of the Company’s Certificate of Incorporation, as amended and as in
        effect on the date hereof (the “Certificate
        of Incorporation”),
        and
        the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
        and
        the terms of all securities convertible into or exercisable for Common Stock
        and
        the material rights of the holders thereof in respect thereto.

       

      
        
          
          

        

        
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      Section
        4.4

      No
        Conflict.
         The execution, delivery and performance of this Agreement by the Company
        and the consummation by the Company of the transactions contemplated hereby
        will
        not (i) result in a violation of the Certificate of Incorporation, any
        certificate of designations of any outstanding series of preferred stock
        of the
        Company or By-laws or (ii) conflict with or constitute a default (or an event
        which with notice or lapse of time or both would become a default) under,
        or
        give to others any rights of termination, amendment, acceleration or
        cancellation of, any agreement, indenture or instrument to which the Company
        or
        any of its subsidiaries is a party, or result in a violation of any law,
        rule,
        regulation, order, judgment or decree (including federal and state securities
        laws and regulations and the rules and regulations of the Principal Market
        on
        which the Common Stock is quoted) applicable to the Company or any of its
        subsidiaries or by which any material property or asset of the Company or
        any of
        its subsidiaries is bound or affected and which would cause a Material Adverse
        Effect.  Except as disclosed in the SEC Documents, neither the Company nor
        its subsidiaries is in violation of any term of or in default under its Articles
        of Incorporation or By-laws or their organizational charter or by-laws,
        respectively, or any material contract, agreement, mortgage, indebtedness,
        indenture, instrument, judgment, decree or order or any statute, rule or
        regulation applicable to the Company or its subsidiaries.  The business of
        the Company and its subsidiaries is not being conducted in violation of any
        material law, ordinance, regulation of any governmental entity.  Except as
        specifically contemplated by this Agreement and as required under the Securities
        Act and any applicable state securities laws, the Company is not required
        to
        obtain any consent, authorization or order of, or make any filing or
        registration with, any court or governmental agency in order for it to execute,
        deliver or perform any of its obligations under or contemplated by this
        Agreement or the Registration Rights Agreement in accordance with the terms
        hereof or thereof.  All consents, authorizations, orders, filings and
        registrations which the Company is required to obtain pursuant to the preceding
        sentence have been obtained or effected on or prior to the date hereof.
 The Company and its subsidiaries are unaware of any fact or circumstance
        which might give rise to any of the foregoing.

       

      Section
        4.5

      SEC
        Documents; Financial Statements.
         The Company has filed all reports, schedules, forms, statements and other
        documents required to be filed by it with the SEC under the Exchange Act
        since
        June 6, 2007.  The Company has delivered to the Investor or its
        representatives, or made available through the SEC’s website at
        http://www.sec.gov, true and complete copies of the SEC Documents.  As of
        their respective dates, the financial statements of the Company disclosed
        in the
        SEC Documents (the “Financial
        Statements”)
        complied as to form in all material respects with applicable accounting
        requirements and the published rules and regulations of the SEC with respect
        thereto.  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).  No other
        information provided by or on behalf of the Company to the Investor 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, in the light of the circumstances under which they were made, not
        misleading. 

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      Section
        4.6

      10b-5.
         The SEC Documents do not include any untrue statements of material fact,
        nor do they omit to state any material fact required to be stated therein
        necessary to make the statements made, in light of the circumstances under
        which
        they were made, not misleading.

       

      Section
        4.7

      No
        Default.
         Except as disclosed in the SEC Documents, the Company is not in default in
        the performance or observance of any material obligation, agreement, covenant
        or
        condition contained in any indenture, mortgage, deed of trust or other material
        instrument or agreement to which it is a party or by which it is or its property
        is bound and neither the execution, nor the delivery by the Company, nor
        the
        performance by the Company of its obligations under this Agreement or any
        of the
        exhibits or attachments hereto will conflict with or result in the breach
        or
        violation of any of the terms or provisions of, or constitute a default or
        result in the creation or imposition of any lien or charge on any assets
        or
        properties of the Company under its Certificate of Incorporation, By-Laws,
        any
        material indenture, mortgage, deed of trust or other material agreement
        applicable to the Company or instrument to which the Company is a party or
        by
        which it is bound, or any statute, or any decree, judgment, order, rules
        or
        regulation of any court or governmental agency or body having jurisdiction
        over
        the Company or its properties, in each case which default, lien or charge
        is
        likely to cause a Material Adverse Effect on the Company’s business or financial
        condition.

       

      Section
        4.8

      Absence
        of Events of Default.
         Except for matters described in the SEC Documents and/or this Agreement,
        no Event of Default, as defined in the respective agreement to which the
        Company
        is a party, and no event which, with the giving of notice or the passage
        of time
        or both, would become an Event of Default (as so defined), has occurred and
        is
        continuing, which would have a Material Adverse Effect on the Company’s
        business, properties, prospects, financial condition or results of
        operations.

       

      Section
        4.9

      Intellectual
        Property Rights.
         The Company and its subsidiaries own or possess adequate rights or
        licenses to use all material trademarks, trade names, service marks, service
        mark registrations, service names, patents, patent rights, copyrights,
        inventions, licenses, approvals, governmental authorizations, trade secrets
        and
        rights necessary to conduct their respective businesses as now conducted.
          The Company and its subsidiaries do not have any knowledge of any
        infringement by the Company or its subsidiaries of trademark, trade name
        rights,
        patents, patent rights, copyrights, inventions, licenses, service names,
        service
        marks, service mark registrations, trade secret or other similar rights of
        others, and, to the knowledge of the Company, there is no claim, action or
        proceeding being made or brought against, or to the Company’s knowledge, being
        threatened against, the Company or its subsidiaries regarding trademark,
        trade
        name, patents, patent rights, invention, copyright, license, service names,
        service marks, service mark registrations, trade secret or other infringement;
        and the Company and its subsidiaries are unaware of any facts or circumstances
        which might give rise to any of the foregoing.  

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Section
        4.10

      Employee
        Relations.
         Neither the Company nor any of its subsidiaries is involved in any labor
        dispute nor, to the knowledge of the Company or any of its subsidiaries,
        is any
        such dispute threatened.  None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
        that their relations with their employees are good. 

       

      Section
        4.11

      Environmental
        Laws.
         The Company and its subsidiaries are (i) in compliance with any and all
        applicable material foreign, federal, state and local laws and regulations
        relating to the protection of human health and safety, the environment or
        hazardous or toxic substances or wastes, pollutants or contaminants
        (“Environmental
        Laws”),
        (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.

       

      Section
        4.12

      Title.
         Except as set forth in the SEC Documents, the Company has good and
        marketable title to its properties and material assets owned by it, free
        and
        clear of any pledge, lien, security interest, encumbrance, claim or equitable
        interest other than such as are not material to the business of the Company.
         Any real property and facilities held under lease by the Company and its
        subsidiaries are held by them under valid, subsisting and enforceable leases
        with such exceptions as are not material and do not interfere with the use
        made
        and proposed to be made of such property and buildings by the Company and
        its
        subsidiaries.

       

      Section
        4.13

      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 not be able to renew its existing insurance
        coverage as and when such coverage expires or to obtain similar coverage
        from
        similar insurers as may be necessary to continue its business at a cost that
        would not materially and adversely affect the condition, financial or otherwise,
        or the earnings, business or operations of the Company and its subsidiaries,
        taken as a whole.

       

      Section
        4.14

      Regulatory
        Permits.
         The Company and its subsidiaries possess all material certificates,
        authorizations and permits issued by the appropriate federal, state or foreign
        regulatory authorities necessary to conduct their respective businesses,
        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.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      Section
        4.15

      Internal
        Accounting Controls.
         The Company and each of its subsidiaries maintain a system of internal
        accounting controls sufficient to provide reasonable assurance that (i)
        transactions are executed in accordance with management’s general or specific
        authorizations, (ii) transactions are recorded as necessary to permit
        preparation of financial statements in conformity with generally accepted
        accounting principles and to maintain asset accountability, (iii) access
        to
        assets is permitted only in accordance with management’s general or specific
        authorization and (iv) the recorded accountability for assets is compared
        with
        the existing assets at reasonable intervals and appropriate action is taken
        with
        respect to any differences.

       

      Section
        4.16

      No
        Material Adverse Breaches, etc.
         Except as set forth in the SEC Documents, neither the Company nor any of
        its subsidiaries is subject to any charter, corporate or other legal
        restriction, or any judgment, decree, order, rule or regulation which in
        the
        judgment of the Company’s officers has or is expected in the future to have a
        Material Adverse Effect on the business, properties, operations, financial
        condition, results of operations or prospects of the Company or its
        subsidiaries.  Except as set forth in the SEC Documents, neither the
        Company nor any of its subsidiaries is in breach of any contract or agreement
        which breach, in the judgment of the Company’s officers, has or is expected to
        have a Material Adverse Effect on the business, properties, operations,
        financial condition, results of operations or prospects of the Company or
        its
        subsidiaries.

       

      Section
        4.17

      Absence
        of Litigation.
         Except as set forth in the SEC Documents, there is no action, suit,
        proceeding, inquiry or investigation before or by any court, public board,
        government agency, self-regulatory organization or body pending against or
        affecting the Company, the Common Stock or any of the Company’s subsidiaries,
        wherein an unfavorable decision, ruling or finding would (i) have a Material
        Adverse Effect on the transactions contemplated hereby (ii) adversely affect
        the
        validity or enforceability of, or the authority or ability of the Company
        to
        perform its obligations under, this Agreement or any of the documents
        contemplated herein, or (iii) except as expressly disclosed in the SEC
        Documents, have a Material Adverse Effect on the business, operations,
        properties, financial condition or results of operation of the Company and
        its
        subsidiaries taken as a whole.

       

      Section
        4.18

      Tax
        Status.
         Except as disclosed in the SEC Documents, the Company and each of its
        subsidiaries has made or filed all federal and state income and all other
        tax
        returns, reports and declarations required by any jurisdiction to which it
        is
        subject and (unless and only to the extent that the Company and each of its
        subsidiaries has set aside on its books provisions reasonably adequate for
        the
        payment of all unpaid and unreported taxes) has paid all taxes and other
        governmental assessments and charges that are material in amount, shown or
        determined to be due on such returns, reports and declarations, except those
        being contested in good faith and has set aside on its books provision
        reasonably adequate for the payment of all taxes for periods subsequent to
        the
        periods to which such returns, reports or declarations apply.  There are no
        unpaid taxes in any material amount claimed to be due by the taxing authority
        of
        any jurisdiction, and the officers of the Company know of no basis for any
        such
        claim.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      Section
        4.19

      Certain
        Transactions.
         Except as set forth in the SEC Documents none of the officers, directors,
        or employees of the Company is presently a party to any transaction with
        the
        Company (other than for services as employees, officers and 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 officer,
        director or such employee or, to the knowledge of the Company, any corporation,
        partnership, trust or other entity in which any officer, director, or any
        such
        employee has a substantial interest or is an officer, director, trustee or
        partner.

       

      Section
        4.20

      Fees
        and Rights of First Refusal.
         The Company is not obligated to offer the securities offered hereunder on
        a right of first refusal basis or otherwise to any third parties including,
        but
        not limited to, current or former shareholders of the Company, underwriters,
        brokers, agents or other third parties. 

       

      Section
        4.21

      Use
        of
        Proceeds.
         The Company shall use the net proceeds from this offering for general
        corporate purposes.

       

      Section
        4.22

      Further
        Representation and Warranties of the Company.
         For so long as any securities issuable hereunder held by the Investor
        remain outstanding, the Company acknowledges, represents, warrants and agrees
        that it will maintain the listing of its Common Stock on the Principal
        Market.

      

      Section
        4.23

      Opinion
        of Counsel.
         The Company will obtain for the Investor, at the Company’s expense, any
        and all opinions of counsel which may be reasonably required in order to
        sell
        the securities issuable hereunder without restriction.

       

      Section
        4.24

      Dilution.
         The Company is aware and acknowledges that issuance of shares of the
        Company’s Common Stock could cause dilution to existing shareholders and could
        significantly increase the outstanding number of shares of Common Stock.
         

       

      Section
        4.25

      The
        Company is aware and acknowledges that it may not be able to request Advances
        under this Agreement if it can not obtain an effective Registration Statement
        or
        if any issuances of Common Stock pursuant to any Advances would violate any
        rules of the Principal Market.  The Company further is aware and
        acknowledges that any fees paid pursuant to Section 12.4(a)(i) and 12.4(b)
        hereunder or shares issued pursuant to Section 12.4(c)(ii) hereunder shall
        be
        earned on the date hereof and not refundable or returnable under any
        circumstances.  

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        V.

      Indemnification

       

      The
        Investor and the Company represent to the other the following with respect
        to
        itself:

       

      Section
        5.1

      Indemnification.

       

      (a)

      In
        consideration of the Investor’s execution and delivery of this Agreement, and in
        addition to all of the Company’s other obligations under this Agreement, the
        Company shall defend, protect, indemnify and hold harmless the Investor,
        and all
        of its officers, directors, partners, employees and agents (including, without
        limitation, those retained in connection with the transactions contemplated
        by
        this Agreement) (collectively, the “Investor
        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 Investor 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 the Investor Indemnitees or any of them 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 this Agreement or the Registration Rights
        Agreement or any other certificate, instrument or document contemplated hereby
        or thereby, (b) any breach of any covenant, agreement or obligation of the
        Company contained in this Agreement or the Registration Rights Agreement
        or any
        other certificate, instrument or document contemplated hereby or thereby,
        or (c)
        any cause of action, suit or claim brought or made against such Investor
        Indemnitee not arising out of any action or inaction of an Investor Indemnitee,
        and arising out of or resulting from the execution, delivery, performance
        or
        enforcement of this Agreement or any other instrument, document or agreement
        executed pursuant hereto by any of the Investor Indemnitees.  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.

       

      (b)

      In
        consideration of the Company’s execution and delivery of this Agreement, and in
        addition to all of the Investor’s other obligations under this Agreement, the
        Investor shall defend, protect, indemnify and hold harmless the Company and
        all
        of its officers, directors, shareholders, employees and agents (including,
        without limitation, those retained in connection with the transactions
        contemplated by this Agreement) (collectively, the “Company
        Indemnitees”)
        from
        and against any and all Indemnified Liabilities incurred by the Company
        Indemnitees or any of them as a result of, or arising out of, or relating
        to (a)
        any misrepresentation or breach of any representation or warranty made by
        the
        Investor in this Agreement, the Registration Rights Agreement, or any instrument
        or document contemplated hereby or thereby executed by the Investor, (b)
        any
        breach of any covenant, agreement or obligation of the Investor(s) contained
        in
        this Agreement,  the Registration Rights Agreement or any other
        certificate, instrument or document contemplated hereby or thereby executed
        by
        the Investor, or (c) any cause of action, suit or claim brought or made against
        such Company Indemnitee based on  misrepresentations or due to a
 breach by the Investor and arising out of or resulting from the execution,
        delivery, performance or enforcement of this Agreement or any other instrument,
        document or agreement executed pursuant hereto by any of the Company
        Indemnitees.  To the extent that the foregoing undertaking by the Investor
        may be unenforceable for any reason, the Investor shall make the maximum
        contribution to the payment and satisfaction of each of the Indemnified
        Liabilities, which is permissible under applicable law.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (c)

      The
        obligations of the parties to indemnify or make contribution under this Section
        5.1 shall survive termination.

       

      ARTICLE
        VI.

      Covenants
        of the Company

       

      Section
        6.1

      Registration
        Rights.
         The Company shall cause the Registration Rights Agreement to remain in
        full force and effect and the Company shall comply in all material respects
        with
        the terms thereof.

       

      Section
        6.2

      Listing
        of Common Stock.
         The Company shall maintain the Common Stock’s authorization for quotation
        on the Principal Market.  

       

      Section
        6.3

      Exchange
        Act Registration.
         The Company will cause its Common Stock to continue to be registered under
        Section 12(g) of the Exchange Act, will file in a timely manner all reports
        and
        other documents required of it as a reporting company under the Exchange
        Act and
        will not take any action or file any document (whether or not permitted by
        Exchange Act or the rules thereunder) to terminate or suspend such registration
        or to terminate or suspend its reporting and filing obligations under said
        Exchange Act.

       

      Section
        6.4

      Transfer
        Agent Instructions.
         Upon effectiveness of the Registration Statement the Company shall deliver
        instructions to its transfer agent to issue shares of Common Stock to the
        Investor free of restrictive legends on or before each Advance Date pursuant
        to
        the blanket legal opinion to be delivered in accordance with the terms of
        Section 3(k) of the Registration Rights Agreement.

       

      Section
        6.5

      Corporate
        Existence.
         The Company will take all steps necessary to preserve and continue the
        corporate existence of the Company.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      

      Section
        6.6

      Notice
        of Certain Events Affecting Registration; Suspension of Right to Make an
        Advance.
         The Company will immediately notify the Investor upon its becoming aware
        of the occurrence of any of the following events in respect of a registration
        statement or related prospectus relating to an offering of Registrable
        Securities: (i) receipt of any request for additional information by the
        SEC or
        any other Federal or state governmental authority during the period of
        effectiveness of the Registration Statement for amendments or supplements
        to the
        registration statement or related prospectus; (ii) the issuance by the SEC
        or
        any other Federal or state governmental authority of any stop order suspending
        the effectiveness of the Registration Statement or the initiation of any
        proceedings for that purpose; (iii) receipt of any notification with respect
        to
        the suspension of the qualification or exemption from qualification of any
        of
        the Registrable Securities for sale in any jurisdiction or the initiation
        or
        threatening of any proceeding for such purpose; (iv) the happening of any
        event
        that makes any statement made in the Registration Statement or related
        prospectus of any document incorporated or deemed to be incorporated therein
        by
        reference untrue in any material respect or that requires the making of any
        changes in the Registration Statement, related prospectus or documents so
        that,
        in the case of the Registration Statement, it 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,
        and
        that in the case of the related prospectus, it 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, in the light
        of the
        circumstances under which they were made, not misleading; and (v) the Company’s
        reasonable determination that a post-effective amendment to the Registration
        Statement would be appropriate; and the Company will promptly make available
        to
        the Investor any such supplement or amendment to the related prospectus.
         The Company shall not deliver to the Investor any Advance Notice during
        the continuation of any of the foregoing events.

       

      Section
        6.7.

      Consolidation;
        Merger.
         The Company shall not, at any time after the date hereof, effect any
        merger or consolidation of the Company with or into, or a transfer of all
        or
        substantially all the assets of the Company to another entity (a “Consolidation
        Event”)
        unless
        the resulting successor or acquiring entity (if not the Company) assumes
        by
        written instrument the obligation to deliver to the Investor such shares
        of
        stock and/or securities as the Investor is entitled to receive pursuant to
        this
        Agreement. 

       

      Section
        6.8.

      Issuance
        of the Company’s Common Stock. The
        sale of the shares of Common Stock shall be made in accordance with the
        provisions and requirements of Regulation D and any applicable state
        securities law.

       

      Section
        6.9.

      Review
        of Public Disclosures.
         All SEC filings (including, without limitation, all filings required under
        the Exchange Act, which include Forms 10-Q and, 10-K and 8-K, etc) and other
        public disclosures made by the Company, including, without limitation, all
        press
        releases, investor relations materials, and scripts of analysts meetings
        and
        calls, shall be reviewed and approved for release by the Company’s attorneys
        and, if containing financial information, the Company’s independent certified
        public accountants.  

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      Section
        6.10.

      Market
        Activities.The
        Company will not, directly or indirectly, (i) take any action designed to
        cause
        or result in, or that constitutes or might reasonably be expected to constitute,
        the stabilization or manipulation of the price of any security of the Company
        to
        facilitate the sale or resale of the Common Stock or (ii) sell, bid for or
        purchase the Common Stock, or pay anyone any compensation for soliciting
        purchases of the Common Stock.

       

      ARTICLE
        VII.

      Conditions
        for Advance and Conditions to Closing

       

      Section
        7.1

      Conditions
        Precedent to the Obligations of the Company. The
        obligation hereunder of the Company to issue and sell the shares of Common
        Stock
        to the Investor incident to each Closing is subject to the satisfaction,
        or
        waiver by the Company, at or before each such Closing, of each of the conditions
        set forth below.

       

      (a)

      Accuracy
        of the Investor’s Representations and Warranties.
         The representations and warranties of the Investor shall be true and
        correct in all material respects.

       

      (b)

      Performance
        by the Investor.
         The Investor shall have performed, satisfied and complied in all respects
        with all covenants, agreements and conditions required by this Agreement
        and the
        Registration Rights Agreement to be performed, satisfied or complied with
        by the
        Investor at or prior to such Closing.

       

      Section
        7.2

      Conditions
        Precedent to the Right of the Company to Deliver an Advance
        Notice.
         The right of the Company to deliver an Advance Notice is subject to the
        fulfillment by the Company, on such Advance Notice (a “Condition
        Satisfaction Date”),
        of
        each of the following conditions:

       

      (a)

      Registration
        of the Common Stock with the SEC.
         The Company shall have filed with the SEC a Registration Statement with
        respect to the resale of the Registrable Securities in accordance with the
        terms
        of the Registration Rights Agreement.  As set forth in the Registration
        Rights Agreement, the Registration Statement shall have previously become
        effective and shall remain effective on each Condition Satisfaction Date
        and (i)
        neither the Company nor the Investor shall have received 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 to do so (unless the SEC’s concerns have been addressed and the
        Investor is reasonably satisfied that the SEC no longer is considering or
        intends to take such action), and (ii) no other suspension of the use or
        withdrawal of the effectiveness of the Registration Statement or related
        prospectus shall exist.  The Registration Statement must have been declared
        effective by the SEC prior to the first Advance Notice Date.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (b)

      Authority.
         The Company shall have obtained all permits and qualifications required by
        any applicable state in accordance with the Registration Rights Agreement
        for
        the offer and sale of the shares of Common Stock, or shall have the availability
        of exemptions therefrom.  The sale and issuance of the shares of Common
        Stock shall be legally permitted by all laws and regulations to which the
        Company is subject.

       

      (c)

      Fundamental
        Changes.
        There
        shall not exist any fundamental changes to the information set forth in the
        Registration Statement which would require the Company to file a post-effective
        amendment to the Registration Statement.  

       

      (d)

      Performance
        by the Company.
         The Company shall have performed, satisfied and complied in all material
        respects with all covenants, agreements and conditions required by this
        Agreement and the Registration Rights Agreement to be performed, satisfied
        or
        complied with by the Company at or prior to each Condition Satisfaction
        Date.

       

      (e)

      No
        Injunction.
         No statute, rule, regulation, executive order, decree, ruling or
        injunction shall have been enacted, entered, promulgated or endorsed by any
        court or governmental authority of competent jurisdiction that prohibits
        or
        directly and adversely affects any of the transactions contemplated by this
        Agreement, and no proceeding shall have been commenced that may have the
        effect
        of prohibiting or adversely affecting any of the transactions contemplated
        by
        this Agreement.

       

      (f)

      No
        Suspension of Trading in or Delisting of Common Stock.
         The Common Stock is listed or traded on a Principal Market.  The
        issuance of shares of Common Stock with respect to the applicable Closing,
        if
        any, shall not violate the shareholder approval requirements of the Principal
        Market.  The Company shall not have received any notice threatening the
        continued listing of the Common Stock on the Principal Market (unless the
        concerns of the Principal Market have been addressed and the Investor is
        reasonably satisfied that the Principal Market is no longer is considering
        or
        intends to take immediate action).  

       

      (g)

      Maximum
        Advance Amount.
         The amount of an Advance requested by the Company shall not exceed the
        Maximum Advance Amount.  In addition, in no event shall the number of
        shares issuable to the Investor pursuant to an Advance cause the aggregate
        number of shares of Common Stock beneficially owned by the Investor and its
        affiliates to exceed 9.99% of the then outstanding Common Stock of the Company.
         For the purposes of this section beneficial ownership shall be calculated
        in accordance with Section 13(d) of the Exchange Act.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (h)

       Minimum
        Acceptable Price.
        COMPANY’S RIGHT TO WITHDRAW. The Company shall reserve the right, but not the
        obligation, to withdrawn that portion of the Put that is below the Minimum
        Acceptable Price of $0.07, by submitting to the Investor, in writing, a notice
        to cancel that portion of the Put. Any shares above the Minimum Acceptable
        Price
        due to the investor shall be carried out by the Company under the terms of
        this
        Agreement.

       

      (i)

      No
        Knowledge.
         The Company has no knowledge of any event which would be more likely than
        not to have the effect of causing such Registration Statement to be suspended
        or
        otherwise ineffective.

       

      (j)

      Executed
        Advance Notice.
         The Investor shall have received the Advance Notice executed by an officer
        of the Company and the representations contained in such Advance Notice shall
        be
        true and correct as of each Condition Satisfaction Date.

       

      ARTICLE
        VIII.

      Due
        Diligence Review; Non-Disclosure of Non-Public Information

       

      Section
        8.1.

      Non-Disclosure
        of Non-Public Information.

       

      (a)

      The
        Company covenants and agrees that neither it nor any other Person acting
        on its
        behalf will provide the Investor or its agents or counsel with any information
        that the Company believes constitutes material non-public information, unless
        prior thereto the Company identifies such information as being material
        non-public information and provides member of the legal and compliance
        department of the Investor with the opportunity to accept or refuse to accept
        such material non-public information for review.  The Company acknowledges
        that only members of the legal and compliance department of the Investor
        have
        the authority to accept the receipt of material non-public information from
        the
        Company.  The Company acknowledges that any information provided to the
        Investor without first being accepted by a member of the legal and compliance
        department of the Investor will be deemed not to be material non-public
        information and the Investor shall be under no duty to maintain the
        confidentiality of such information.  The Company understands and confirms
        that the Investor shall be relying on the foregoing representations in effecting
        transactions in securities of the Company.  The Company shall be entitled
        to rely on the representations of any member of the Investor as to whether
        such
        person is a member of the legal and compliance department of the Investor.
         

       

      (b)

      Nothing
        herein shall require the Company to disclose non-public information to the
        Investor or its advisors or representatives, and the Company represents that
        it
        does not disseminate non-public information to any investors who purchase
        stock
        in the Company in a public offering, to money managers or to securities
        analysts, provided, however, that notwithstanding anything herein to the
        contrary, the Company will, as hereinabove provided, immediately notify the
        advisors and representatives of the Investor and, if any, underwriters, of
        any
        event or the existence of any circumstance (without any obligation to disclose
        the specific event or circumstance) of which it becomes aware, constituting
        non-public information (whether or not requested of the Company specifically
        or
        generally during the course of due diligence by such persons or entities),
        which, if not disclosed in the prospectus included in the Registration Statement
        would cause such prospectus to include a material misstatement or to omit
        a
        material fact required to be stated therein in order to make the statements,
        therein, in light of the circumstances in which they were made, not misleading.
         Nothing contained in this Section 8.2 shall be construed to mean that such
        persons or entities other than the Investor (without the written consent
        of the
        Investor prior to disclosure of such information) may not obtain non-public
        information in the course of conducting due diligence in accordance with
        the
        terms of this Agreement and nothing herein shall prevent any such persons
        or
        entities from notifying the Company of their opinion that based on such due
        diligence by such persons or entities, that the Registration Statement contains
        an untrue statement of material fact or omits a material fact required to
        be
        stated in the Registration Statement or necessary to make the statements
        contained therein, in light of the circumstances in which they were made,
        not
        misleading.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        IX.

      Choice
        of Law/Jurisdiction

       

      Section
        9.1

      Governing
        Law.
         This Agreement shall be governed by and interpreted in accordance with the
        laws of the State of California without regard to the principles of conflict
        of
        laws.  The parties further agree that any action between them shall be
        heard in San Diego County, California, and expressly consent to the jurisdiction
        and venue of the Superior Court of California, sitting in San Diego County,
        California and the United States District Court of California, sitting in
        Santa
        Ana, California for the adjudication of any civil action asserted pursuant
        to
        this paragraph.

       

      ARTICLE
        X.

      Assignment;
        Termination

       

      Section
        10.1

      Assignment.
         Neither this Agreement nor any rights of the Company hereunder may be
        assigned to any other Person.  

       

      Section
        10.2

      Termination.
         

       

      (a)

      The
        obligations of the Investor to make Advances under Article II hereof shall
        terminate twenty-four (24) months after the Effective Date.

       

      (b)

      The
        obligation of the Investor to make an Advance to the Company pursuant to
        this
        Agreement shall terminate permanently (including with respect to an Advance
        Date
        that has not yet occurred) in the event that (i) there shall occur any stop
        order or suspension of the effectiveness of the Registration Statement for
        an
        aggregate of fifty (50) Trading Days, other than due to the acts of the
        Investor, during the Commitment Period, or (ii) the Company shall at any
        time
        fail materially to comply with the requirements of Article VI and such failure
        is not cured within thirty (30) days after receipt of written notice from
        the
        Investor, provided,
        however,
        that
        this termination provision shall not apply to any period commencing upon
        the
        filing of a post-effective amendment to such Registration Statement and ending
        upon the date on which such post effective amendment is declared effective
        by
        the SEC.

       

      [REMAINDER
        OF PAGE LEFT BLANK]

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        XI.

      Notices

       

      Section
        11.1

      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 a copy is
        mailed
        by U.S. certified mail, return receipt requested; (iii) three (3) days after
        being sent by U.S. certified mail, return receipt requested, or (iv) one
        (1) day
        after deposit with a nationally recognized overnight delivery service, in
        each
        case properly addressed to the party to receive the same.  The addresses
        and facsimile numbers for such communications shall be:

       

      
        	
                 

              	
                 

              
	
                If
                  to the Company, to:

              	
                China
                  Shoe Holdings, Inc.

              
	
                 

              	
                488
                  Wai Qingsong Road 

                Waigang,
                  Jiading District, Shanghai

                People's
                  Republic of China 201800

              
	
                 

              	
                Attention:
                  Gu Xianzhong 

                President
                  and Chief Executive Officer

              
	
                 

              	
                Telephone:
                  011-86-21-59587756 

              
	 	 
	
                 

              	
                Facsimile:

              
	
                 

              	
                 

              
	
                With
                  a copy to:

              	
                Gary
                  Joiner, Esq.

              
	
                 

              	 
	
                 

              	 
	
                 

              	 
	
                 

              	
                Telephone:
                      

                Facsimile:
                       

              
	
                 

              	
                 

              
	
                 

              	
                 

              
	
                If
                  to the Investor:

              	
                MAGELLAN
                  GLOBAL FUND , L.P.

              
	
                 

              	
                4666
                  Mission Ave., Suite 1

              
	
                 

              	
                San
                  Diego, CA 

              
	
                 

              	
                Attention:
                  Harry Orfanos

              
	
                 

              	
                Portfolio
                  Manager

              
	
                 

              	
                Telephone:
                  (619) 819-7595

              
	
                 

              	
                Facsimile:
                  (619) 839-3177 

              
	
                 

              	
                 

              
	
                With
                  a Copy to:

              	
                Nicholas
                  Lahanas

              
	
                 

              	
                3709
                  Bamboo Ct.

              
	
                 

              	
                Concord,
                  CA 94519

              
	
                 

              	
                Telephone:
                  (925) 948-3649

              
	
                 

              	
                Facsimile:
                  (619) 839-3177

              

      

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      Each
        party shall provide five (5) days’ prior written notice to the other party of
        any change in address or facsimile number.

       

      ARTICLE
        XII.

      Miscellaneous

       

      Section
        12.1

      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 any signature page is delivered by facsimile
        transmission, the party using such means of delivery shall cause four (4)
        additional original executed signature pages to be physically delivered to
        the
        other party within five (5) days of the execution and delivery hereof, though
        failure to deliver such copies shall not affect the validity of this
        Agreement.

       

      Section
        12.2

      Entire
        Agreement; Amendments.
         This Agreement supersedes all other prior oral or written agreements
        between the Investor, the Company, their affiliates and persons acting on
        their
        behalf with respect to the matters discussed herein, and this Agreement and
        the
        instruments referenced herein contain the entire understanding of the parties
        with respect to the matters covered herein and therein and, except as
        specifically set forth herein or therein, neither the Company nor the Investor
        makes any representation, warranty, covenant or undertaking with respect
        to such
        matters.  No provision of this Agreement may be waived or amended other
        than by an instrument in writing signed by the party to be charged with
        enforcement.

       

      Section
        12.3

      Reporting
        Entity for the Common Stock.
         The reporting entity relied upon for the determination of the trading
        price or trading volume of the Common Stock on any given Trading Day for
        the
        purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto.
         The written mutual consent of the Investor and the Company shall be
        required to employ any other reporting entity.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      Section
        12.4

      Fees
        and Expenses.
         The Company hereby agrees to pay the following fees:

       

      (a)

      Commitment
        Fees.

       

      (i)

      Upon
        the
        execution of this Agreement the Company shall issue to the Investor a restricted
        stock certificate of the Company’s Common Stock in an amount equal to Forty
        Thousand Dollars ($40,000) divided by the Closing Bid Price on the Closing
        Date.

       

      (ii)
        

      In
        addition, upon effectiveness of a registration statement pursuant to this
        agreement, the Company will issue an additional Forty Thousand Dollars ($40,000)
        of Common Stock to the Investor priced at the closing bid price of the day
        the
        registration statement is declared Effective by the SEC.

      (iii)

      Fully
        Earned.
         The Investor’s Shares shall be deemed fully earned as of the date hereof.

       

      (iv)

      Registration
        Rights.
         The Investor’s Shares shall have “piggy back” registration rights.
 

       

      Section
        12.5

      Brokerage.
         Each of the parties hereto represents that it has had no dealings in
        connection with this transaction with any finder or broker who will demand
        payment of any fee or commission from the other party.  The Company on the
        one hand, and the Investor, on the other hand, agree to indemnify the other
        against and hold the other harmless from any and all liabilities to any person
        claiming brokerage commissions or finder’s fees on account of services purported
        to have been rendered on behalf of the indemnifying party in connection with
        this Agreement or the transactions contemplated hereby.

       

      Section
        12.6

      Confidentiality.
         If for any reason the transactions contemplated by this Agreement are not
        consummated, each of the parties hereto shall keep confidential any information
        obtained from any other party (except information publicly available or in
        such
        party’s domain prior to the date hereof, and except as required by court order)
        and shall promptly return to the other parties all schedules, documents,
        instruments, work papers or other written information without retaining copies
        thereof, previously furnished by it as a result of this Agreement or in
        connection herein.

      

      IN
        WITNESS WHEREOF,
        the
        parties hereto have caused this Equity Line Agreement to be executed by the
        undersigned, thereunto duly authorized, as of the date first set forth above.
        

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                COMPANY:
                  

              
	
                 

              	
                China
                  Shoe Holdings, Inc.

              
	 	 
	
                 

              	
                By:

              
	
                 

              	
                Name:
                  Gu Xianzhong

              
	
                 

              	
                Title:
                  President and Chief Executive Officer

              
	
                 

              	
                 

              
	
                 

              	
                 

              
	
                 

              	
                INVESTOR:

              
	
                 

              	
                MAGELLAN
                  GLOBAL FUND , L.P.

              
	
                 

              	
                 

              
	
                 

              	
                By:
                  Orinda Advisors, LLC

              
	
                 

              	
                Its:
                  Investment Manager

              
	
                 

              	
                 

              
	
                 

              	
                By:

              
	
                 

              	
                Name:
                  Harry Orfanos

              
	
                 

              	
                Title:
                  Managing Partner

              
	
                 

              	
                 

              

      

      

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        A

      ADVANCE
        NOTICE

       

      China
        Shoe Holdings, Inc.

       

      The
        undersigned, _______________________ hereby certifies, with respect to the
        sale
        of shares of Common Stock of China Shoe Holdings, Inc.
        (the
“Company”)
        issuable in connection with this Advance Notice, delivered pursuant to the
        Equity Line Agreement (the “Agreement”),
        as
        follows: 

       

      1. The
        undersigned is the duly elected ______________ of the Company.

       

      2. There
        are
        no fundamental changes to the information set forth in the Registration
        Statement which would require the Company to file a post effective amendment
        to
        the Registration Statement. 

       

      3.
         The
        Company has performed in all material respects all covenants and agreements
        to
        be performed by the Company and has complied in all material respects with
        all
        obligations and conditions contained in the Agreement on or prior to the
        Advance
        Notice Date, and shall continue to perform in all material respects all
        covenants and agreements to be performed by the Company through the applicable
        Advance Date.  All conditions to the delivery of this Advance Notice are
        satisfied as of the date hereof.

       

      4. The
        undersigned hereby represents, warrants and covenants that it has made all
        filings (“SEC
        Filings”)
        required to be made by it pursuant to applicable securities laws (including,
        without limitation, all filings required under the Securities Exchange Act
        of
        1934, which include Forms 10-Q, 10-K or 8-K, etc.).  All SEC Filings and
        other public disclosures made by the Company, including, without limitation,
        all
        press releases, analysts meetings and calls, etc. (collectively, the
“Public
        Disclosures”),
        have
        been reviewed and approved for release by the Company’s attorneys and, if
        containing financial information, the Company’s independent certified public
        accountants.  None of the Company’s Public Disclosures 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, in the light
        of the
        circumstances under which they were made, not misleading.

       

      5. The
        Advance requested is _____________________.

       

      The
        undersigned has executed this Certificate this ____ day of
        _________________.

       

      China
        Shoe Holdings, Inc.

      

      

      By:

      

      Name:

      

      Title:

       

      
        
          
          

        

        
          27Unassociated Document

     

    

      EXHIBIT
        10.2 

       

      REGISTRATION
        RIGHTS AGREEMENT

       

      REGISTRATION
        RIGHTS AGREEMENT
        (this
“Agreement”),
        dated
        as of March 20, 2008, by and between CHINA
        SHOE HOLDINGS, INC.,
        a Nevada
        corporation (the “Company”),
        and
MAGELLAN
        GLOBAL FUND, L.P.,
        a
        Delaware limited partnership (the “Investor”).

       

      WHEREAS:

       

      A.

      In
        connection with the Equity Line Agreement by and between the parties hereto
        of
        even date herewith (the “Equity
        Line Agreement”),
        the
        Company has agreed, upon the terms and subject to the conditions of the Equity
        Line Agreement, to issue and sell to the Investor that number of shares of
        the
        Company’s common stock, par value $0.001 per share (the “Common
        Stock”),
        which
        can be purchased pursuant to the terms of the Equity Line Agreement for an
        aggregate purchase price of up to Two Million Dollars ($2,000,000).
 Capitalized terms not defined herein shall have the meaning ascribed to
        them in the Equity Line Agreement.

       

      B.

      To
        induce
        the Investor to execute and deliver the Equity Line Agreement, the Company
        has
        agreed to provide certain registration rights under the Securities Act of
        1933,
        as amended, and the rules and regulations thereunder, or any similar successor
        statute (collectively, the “Securities
        Act”),
        and
        applicable state securities laws.

       

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

       

      1.

      DEFINITIONS.

       

      As
        used
        in this Agreement, the following terms shall have the following
        meanings:

       

      a.

      “Person”
means
        a
        corporation, a limited liability company, an association, a partnership,
        an
        organization, a business, an individual, a governmental or political subdivision
        thereof or a governmental agency.

       

      b.

      “Register,”
        “registered,”
and
        “registration”
refer
        to a registration effected by preparing and filing one or more Registration
        Statements (as defined below) in compliance with the Securities Act and pursuant
        to Rule 415 under the Securities Act or any successor rule providing for
        offering securities on a continuous or delayed basis (“Rule
        415”),
        and
        the declaration or ordering of effectiveness of such Registration Statement(s)
        by the United States Securities and Exchange Commission (the “SEC”).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      c.

      “Registrable
        Shares”
means
        the Investor’s Shares, as defined in the Equity Line Agreement, and all shares
        of Common Stock issuable or issued to Investors pursuant to the Equity Line
        Agreement.

       

      d.

       

      “Registration
        Statement”
means
        a
        registration statement under the Securities Act which covers the Registrable
        Shares.

       

      2.

      REGISTRATION.

       

      a.

      Registration.
         Prior to the first sale to the Investor of the Company’s Common Stock
        pursuant to the Equity Line Agreement the Company shall prepare and file
        with
        the SEC a Registration Statement on Form S-1, or on such other form as is
        available cause such Registration Statement to be declared effective by the
        SEC.
 The Company shall insure that the Registration Statement and any
        subsequent Registration Statements remain in effect until all of the Registrable
        Shares which have been issued have been sold, or may be sold without restriction
        pursuant to Rule 144 of the Securities Act.  

       

      b.

      Sufficient
        Number of Shares Registered.
         In the event the number of shares available under a Registration Statement
        filed pursuant to Section 2(a) is insufficient to cover all of the Registrable
        Shares issued pursuant to the Equity Line Agreement, the Company shall amend
        the
        Registration Statement, or file a new Registration Statement (on the short
        form
        available therefore, if applicable), or both, so as to cover all of such
        Registrable Shares pursuant to the Equity Line Agreement as soon as practicable,
        but in any event not later than fifteen (15) days after the necessity therefore
        arises.  The Company shall use its best efforts to cause such amendment
        and/or new Registration Statement to become effective as soon as practicable
        following the filing thereof.  For purposes of the foregoing provision, the
        number of shares available under a Registration Statement shall be deemed
        “insufficient to cover all of the Registrable Shares” if at any time the number
        of Registrable Shares issuable on an Advance Notice Date is greater than
        the
        number of shares available for resale under such Registration
        Statement.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      3.

      RELATED
        OBLIGATIONS.

       

      a.

      The
        Company shall keep the Registration Statement effective pursuant to Rule
        415 at
        all times until the earlier of (i) the Investor has disposed of all the
        Registrable Shares or (b) all Registrable Shares are may be freely resold
        by the
        Investor without any limitations under Rule 144 (the “Registration
        Period”),
        which
        Registration Statement (including any amendments or supplements thereto and
        prospectuses contained therein) shall not contain any untrue statement of
        a
        material fact or omit to state a material fact required to be stated therein,
        or
        necessary to make the statements therein, in light of the circumstances in
        which
        they were made, not misleading.

       

      b.

      The
        Company shall prepare and file with the SEC such amendments (including
        post-effective amendments) and supplements to a Registration Statement and
        the
        prospectus used in connection with such Registration Statement, which prospectus
        is to be filed pursuant to Rule 424 promulgated under the Securities Act,
        as may
        be necessary to keep such Registration Statement effective at all times during
        the Registration Period, and, during such period, comply with the provisions
        of
        the Securities Act with respect to the disposition of all Registrable Shares
        of
        the Company covered by such Registration Statement until such time as all
        of
        such Registrable Shares shall have been disposed of in accordance with the
        intended methods of disposition by the seller or sellers thereof as set forth
        in
        such Registration Statement.  In the case of amendments and supplements to
        a Registration Statement which are required to be filed pursuant to this
        Agreement (including pursuant to this Section 3(b)) by reason of the Company’s
        filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report
        under the Securities Exchange Act of 1934, as amended (the “Exchange
        Act”),
        the
        Company shall have incorporated such report by reference into the Registration
        Statement, if applicable, or shall file such amendments or supplements with
        the
        SEC on the same day on which the Exchange Act report is filed which created
        the
        requirement for the Company to amend or supplement the Registration
        Statement.

       

      c.

      The
        Company shall furnish to the Investor without charge, (i) at least one copy
        of
        such Registration Statement as declared effective by the SEC and any
        amendment(s) thereto, including financial statements and schedules, all
        documents incorporated therein by reference, all exhibits and each preliminary
        prospectus, (ii) ten (10) copies of the final prospectus included in such
        Registration Statement and all amendments and supplements thereto (or such
        other
        number of copies as such Investor may reasonably request) and (iii) such
        other
        documents as such Investor may reasonably request from time to time in order
        to
        facilitate the disposition of the Registrable Shares owned by such
        Investor.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      d.

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

       

      e.

      As
        promptly as practicable after becoming aware of such event or development,
        the
        Company shall notify the Investor in writing of the happening of any event
        as a
        result of which the prospectus included in a Registration Statement, as then
        in
        effect, includes an untrue statement of a material fact or omission to state
        a
        material fact required to be stated therein or necessary to make the statements
        therein, in light of the circumstances under which they were made, not
        misleading (provided that in no event shall such notice contain any material,
        nonpublic information), and promptly prepare a supplement or amendment to
        such
        Registration Statement to correct such untrue statement or omission, and
        deliver
        ten (10) copies of such supplement or amendment to each Investor.  The
        Company shall also promptly notify the Investor in writing (i) when a prospectus
        or any prospectus supplement or post-effective amendment has been filed,
        and
        when a Registration Statement or any post-effective amendment has become
        effective (notification of such effectiveness shall be delivered to the Investor
        by facsimile on the same day of such effectiveness), (ii) of any request
        by the
        SEC for amendments or supplements to a Registration Statement or related
        prospectus or related information, and (iii) of the Company’s reasonable
        determination that a post-effective amendment to a Registration Statement
        would
        be appropriate. 

       

      f.

      The
        Company shall use its best efforts to prevent the issuance of any stop order
        or
        other suspension of effectiveness of a Registration Statement, or the suspension
        of the qualification of any of the Registrable Shares for sale in any
        jurisdiction within the United States of America and, if such an order or
        suspension is issued, to obtain the withdrawal of such order or suspension
        at
        the earliest possible moment and to notify the Investor of the issuance of
        such
        order and the resolution thereof or its receipt of actual notice of the
        initiation or threat of any proceeding for such purpose.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      g.

      At
        the
        reasonable request of the Investor, the Company shall furnish to each Investor,
        on the date of the effectiveness of the Registration Statement and thereafter
        from time to time on such dates as the Investor may reasonably request (i)
        a
        letter, dated such date, from the Company’s independent certified public
        accountants in form and substance as is customarily given by independent
        certified public accountants to underwriters in an underwritten public offering,
        and (ii) an advance blanket legal opinion, dated as of such date, of counsel
        representing the Company for purposes of such Registration Statement, relating
        to (1) the issuance of the Registrable Shares without legend, and (2) the
        subsequent sale of the Registrable Shares under the Registration Statement
        (so
        long as it is then effective) for cash at current market prices on the Principal
        Market through a registered broker-dealer.  Each Investor acknowledges that
        until sold in the manner described above, the Registrable Shares shall continue
        to represent “Restricted Stock” within the meaning of the federal securities
        laws, and that any other transaction pursuant to which the Investor desires
        to
        remove such classification, including private sales of the Registrable Shares,
        will require a separate legal opinion as of each such transaction establishing
        conformity with the terms of the form of registration statement to be relied
        upon (which is anticipated to be form S-1), notwithstanding that the Registrable
        Shares do not bear a restrictive legend.  Each Investor further
        acknowledges that should it place the Registrable Shares in street name in
        the
        account of a broker-dealer, that such broker-dealer will be required to abide
        by
        the terms of the blanket advance legal opinion.

       

      h.

      The
        Company shall make available for inspection by (i) the Investor and (ii)
        one
        firm of accountants or other agents retained by the Investor (collectively,
        the
“Inspectors”) all pertinent financial and other records, and pertinent corporate
        documents and properties of the Company (collectively, the “Records”), as shall
        be reasonably necessary to enable them to exercise their due diligence
        responsibility, and cause the Company’s officers, directors and employees to
        supply all information which any Inspector may reasonably request in connection
        with the Registration Statement.  The Investor agrees that Records obtained
        by it as a result of such inspections which is conspicuously marked by the
        Company as "Confidential" (subject to the Company’s obligations with respect to
        material non-public information set forth in Section 8.1(a) herein) shall
        be
        deemed confidential and held in strict confidence by the Investor, unless
        (a)
        the disclosure of such Records is necessary to avoid or correct a misstatement
        or omission in any Registration Statement or is otherwise required under
        the
        Securities Act, (b) the release of such Records is ordered pursuant to a
        final,
        non-appealable subpoena or order from a court or government body of competent
        jurisdiction, or (c) the information in such Records has been made generally
        available to the public other than by disclosure in violation of this or
        any
        other agreement of which the Inspector and the Investor has knowledge.  The
        Investor agrees that it shall, upon learning that disclosure of such Records
        is
        sought in or by a court or governmental body of competent jurisdiction or
        through other means, give prompt notice to the Company and allow the Company,
        at
        its expense, to undertake appropriate action to prevent disclosure of, or
        to
        obtain a protective order for, the Records deemed confidential.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      i.

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

       

      j.

      The
        Company shall use its best efforts either to cause all the Registrable Shares
        covered by a Registration Statement (i) to be listed on each securities exchange
        on which securities of the same class or series issued by the Company are
        then
        listed, if any, if the listing of such Registrable Shares is then permitted
        under the rules of such exchange or to secure the inclusion for quotation
        on the
        Primary Market.  The Company shall pay all fees and expenses in connection
        with satisfying its obligation under this Section 3(j).

       

      k.

      The
        Company shall cooperate with the Investor to the extent applicable, to
        facilitate the timely preparation and delivery of certificates (not bearing
        any
        restrictive legend subject to the terms of the blanket advance opinion letter
        referenced in Section 3(g)) representing the Registrable Shares to be offered
        pursuant to a Registration Statement and enable such certificates to be in
        such
        denominations or amounts, as the case may be, as the Investor may reasonably
        request and registered in such names as the Investor may request.

       

      l.

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

       

      m.

      The
        Company shall make generally available to its security holders as soon as
        practical, but not later than one hundred(100) days after the close of the
        period covered thereby, an earnings statement (in form complying with the
        provisions of Rule 158 under the Securities Act) covering a twelve-month
        period
        beginning not later than the first day of the Company’s fiscal quarter next
        following the effective date of the Registration Statement. 

       

      n.

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

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      o.

      Within
        five (5) business days after a Registration Statement which covers Registrable
        Shares is ordered effective by the SEC, the Company shall deliver, and shall
        cause legal counsel for the Company to deliver, to the transfer agent for
        such
        Registrable Shares (with copies to the Investor) confirmation that such
        Registration Statement has been declared effective by the SEC in the form
        attached hereto as Exhibit
        A.

       

      p.

      The
        Company shall take all other reasonable actions necessary to expedite and
        facilitate disposition by the Investor of Registrable Shares pursuant to
        a
        Registration Statement.

       

      4.

      OBLIGATIONS
        OF THE INVESTOR.

       

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

       

      a.

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

       

      b.

      Each
        Investor acknowledges that the Registration Statement relates solely to the
        registration of the Registrable Shares in connection with their sale by such
        Investor pursuant to the Plan of Distribution contained in the Prospectus
        contained in the Registration Statement, and not to the issuance of the
        Registrable Shares to the Investor, and that the Company may be required
        to
        periodically update the Registration Statement from time to time with respect
        to
        the holdings of all selling shareholders.  Accordingly, anything herein to
        the contrary notwithstanding, until such time as all Registrable Shares are
        sold
        pursuant to such Plan of Distribution or are otherwise eligible for sale
        under
        Rule 144, the Investor (or his, her or its successors to such Shares) shall
        upon
        reasonable request of the Company (which request may only be provided in
        connection with a bona fide obligation to report such information in a
        registration statements, proxy information, or annual reports or other report),
        to promptly advise the Company of its current holdings of outstanding
        Registrable Shares.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      5.

      EXPENSES
        OF REGISTRATION.

       

      All
        expenses incurred in connection with registrations, filings or qualifications
        pursuant to Sections 2 and 3, including, without limitation, all registration,
        listing and qualifications fees, printers, legal and accounting fees shall
        be
        paid by the Company. 

       

      6.

      INDEMNIFICATION.

       

      With
        respect to Registrable Shares which are included in a Registration Statement
        under this Agreement:

       

      a.

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

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      b.

      In
        connection with a Registration Statement, the Investor agrees to indemnify,
        hold
        harmless and defend, to the same extent and in the same manner as is set
        forth
        in Section 6(a), the Company, each of its directors, each of its officers
        who
        signs the Registration Statement and each Person, if any, who controls the
        Company within the meaning of the Securities Act or the Exchange Act (each
        an
“Indemnified
        Party”),
        against any Claim or Indemnified Damages to which any of them may become
        subject, under the Securities Act, the Exchange Act or otherwise, insofar
        as
        such Claim or Indemnified Damages arise out of or is based upon any Violation,
        in each case to the extent, and only to the extent, that such Violation occurs
        in reliance upon and in conformity with written information furnished to
        the
        Company by the Investor expressly for use in connection with such Registration
        Statement; and, subject to Section 6(d), the Investor will reimburse any
        legal
        or other expenses reasonably incurred by them in connection with investigating
        or defending any such Claim; provided, however, that the indemnity agreement
        contained in this Section 6(b) and the agreement with respect to contribution
        contained in Section 7 shall not apply to amounts paid in settlement of any
        Claim if such settlement is effected without the prior written consent of
        the
        Investor, which consent shall not be unreasonably withheld; provided, further,
        however, that the Investor shall be liable under this Section 6(b) for only
        that
        amount of a Claim or Indemnified Damages as does not exceed the net proceeds
        to
        the Investor as a result of the sale of Registrable Shares pursuant to such
        Registration Statement.  Such indemnity shall remain in full force and
        effect regardless of any investigation made by or on behalf of such Indemnified
        Party.  Notwithstanding anything to the contrary contained herein, the
        indemnification agreement contained in this Section 6(b) with respect to
        any
        prospectus shall not inure to the benefit of any Indemnified Party if the
        untrue
        statement or omission of material fact contained in the prospectus was corrected
        and such new prospectus was delivered to the Investor prior to the Investor’s
        use of the prospectus to which the Claim relates.

       

      c.

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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      d.

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

       

      e.

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

       

      7.

      CONTRIBUTION.

       

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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      8.

      REPORTS
        UNDER THE EXCHANGE ACT.

       

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

       

      a.

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

       

      b.

      file
        with
        the SEC in a timely manner all reports and other documents required of the
        Company under the Securities Act and the Exchange Act so long as the Company
        remains subject to such requirements (it being understood that nothing herein
        shall limit the Company’s obligations under Section 6.3 of the Equity Line
        Agreement) and the filing of such reports and other documents is required
        for
        the applicable provisions of Rule 144; and

       

      c.

      furnish
        to the Investor so long as the Investor owns Registrable Shares, promptly
        upon
        request (except to the extent available on the SEC EDGAR system), (i) a written
        statement by the Company that it has complied with the reporting requirements
        of
        Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
        recent annual or quarterly report of the Company and such other reports and
        documents so filed by the Company, and (iii) such other information as may
        be
        reasonably requested to permit the Investor to sell such securities pursuant
        to
        Rule 144 without registration.

       

      9.

      AMENDMENT
        OF REGISTRATION RIGHTS.

       

      Provisions
        of this Agreement may be amended and the observance thereof may be waived
        (either generally or in a particular instance and either retroactively or
        prospectively), only by a written agreement between the Company and the
        Investor.  Any amendment or waiver effected in accordance with this Section
        9 shall be binding upon the Investor and the Company.  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 this Agreement unless the same
        consideration also is offered to all of the parties to this
        Agreement.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      10.

      MISCELLANEOUS.

       

      a.

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

       

      b.

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

       

      
        	
                If
                  to the Company, to:

              	
                China
                  Shoe Holdings, Inc.

              
	
                 

              	
                488
                  Wai Qingsong Road 

                Waigang,
                  Jiading District, 

              
	
                 

              	
                Shanghai
                  People's Republic of China 201800

              
	
                 

              	
                Attention:
                  

                Gu
                  Xianzhong 

                President
                  and Chief Executive Officer

              
	
                 

              	
                Telephone:
                  011-86-21-59587756 

              
	
                 

              	
                 

              
	
                With
                  a copy to:

              	
                Gary
                  Joyner

              
	
                 

              	 
	
                 

              	 
	
                 

              	 
	
                 

              	 
	
                 

              	
                 

              
	
                 

              	
                 

              
	
                If
                  to the Investor, to:

              	
                Magellan
                  Global Fund, L.P.

              
	
                 

              	
                4666
                  Mission Ave Suite 1

              
	
                 

              	
                San
                  Diego, CA 

              
	
                 

              	
                Attention:
                  Harry Orfanos

              
	
                 

              	
                Portfolio
                  Manager

              
	
                 

              	
                Telephone:
                  (619) 819-7595

              
	
                 

              	
                Facsimile:
                  (619) 839-3177

              
	
                 

              	
                 

              
	
                With
                  a copy to:

              	
                Magellan
                  Global Fund, L.P.

              
	
                 

              	
                3709
                  Bamboo Ct.

              
	
                 

              	
                Concord,
                  CA 94519

              
	
                 

              	
                Attention:
                  Niko Lahanas

              
	
                 

              	
                Telephone:
                  (925) 948-3649

              
	
                 

              	
                Facsimile:
                  (619) 839-3177

              
	
                 

              	
                 

              
	
                 

              	
                 

              

      

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Any
        party
        may change its address by providing written notice to the other parties hereto
        at least five days prior to the effectiveness of such change.  Written
        confirmation of receipt (A) given by the recipient of such notice, consent,
        waiver or other communication, (B) mechanically or electronically generated
        by
        the sender’s facsimile machine containing the time, date, recipient facsimile
        number and an image of the first page of such transmission or (C) provided
        by a
        courier or overnight courier service shall be rebuttable evidence of personal
        service, receipt by facsimile or receipt from a nationally recognized overnight
        delivery service in accordance with clause (i), (ii) or (iii) above,
        respectively.

       

      c.

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

       

      d.

      The
        corporate laws of the State of California shall govern all issues concerning
        the
        relative rights of the Company and the Investor.  All other questions
        concerning the construction, validity, enforcement and interpretation of
        this
        Agreement shall be governed by the internal laws of the State of California,
        without giving effect to any choice of law or conflict of law provision or
        rule
        (whether of the State of California or any other jurisdiction) that would
        cause
        the application of the laws of any jurisdiction other than the State of
        California.  Each party hereby irrevocably submits to the non-exclusive
        jurisdiction of the Superior Courts of the State of California, sitting in
        San
        Diego County, California and the Federal District Court for the District
        of
        Southern California sitting in San Diego, California, for the adjudication
        of
        any dispute hereunder or in connection herewith or with any transaction
        contemplated hereby or discussed herein, and hereby irrevocably waives, and
        agrees not to assert in any suit, action or proceeding, any claim that it
        is not
        personally subject to the jurisdiction of any such court, that such suit,
        action
        or proceeding is brought in an inconvenient forum or that the venue of such
        suit, action or proceeding is improper.  Each party hereby irrevocably
        waives personal service of process and consents to process being served in
        any
        such suit, action or proceeding by mailing a copy thereof to such party at
        the
        address for such notices to it under this Agreement and agrees that such
        service
        shall constitute good and sufficient service of process and notice thereof.
         Nothing contained herein shall be deemed to limit in any way any right to
        serve process in any manner permitted by law.  If any provision of this
        Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
        or unenforceability shall not affect the validity or enforceability of the
        remainder of this Agreement in that jurisdiction or the validity or
        enforceability of any provision of this Agreement in any other jurisdiction.
         EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
        TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
        IN
        CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
        CONTEMPLATED HEREBY.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      e.

      This
        Agreement and the Equity Line Agreement constitute the entire agreement among
        the parties hereto with respect to the subject matter hereof and thereof.
         There are no restrictions, promises, warranties or undertakings, other
        than those set forth or referred to herein and therein.  This Agreement and
        the Equity Line Agreement supersede all prior agreements and understandings
        among the parties hereto with respect to the subject matter hereof and
        thereof.

       

      f.

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

       

      g.

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

       

      h.

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

       

      i.

      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 the 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.

       

      j.

      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.

       

      k.

      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.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF,
        the
        parties have caused this Registration Rights Agreement to be duly executed
        as of
        day and year first above written.

       

      
        	
                 

              	
                China
                  Shoe Holdings, Inc.

              
	
                 

              	
                 

              
	
                 

              	
                By:

              
	
                 

              	
                Name:
                  Gu Xianzhong 

              
	
                 

              	
                Title:
                  President and Chief Executive Officer

              
	
                 

              	
                 

              
	
                 

              	
                Magellan
                  Global Fund, L.P.

              
	
                 

              	
                 

              
	
                 

              	
                By:

                Orinda
                  Advisors, LLC

              
	
                 

              	
                Its:
                  Investment Manager

              
	
                 

              	
                 

              
	
                 

              	
                By:

              
	
                 

              	
                Name:
                  Harry Orfanos

              
	
                 

              	
                Title:
                  Managing Partner

              
	
                 

              	
                 

              

      

      

      

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

      FORM
        OF NOTICE OF EFFECTIVENESS

      OF
        REGISTRATION STATEMENT

       

      Attention:

      

      Re:
        CHINA
        SHOE HOLDINGS, INC.

      

      Ladies
        and Gentlemen:

      

      We
        are
        counsel to China Shoe Holdings, Inc. (the “Company”),
        and
        have represented the Company in connection with that certain Equity Line
        Agreement (the “Equity
        Line Agreement”)
        entered into by and between the Company and Magellan Global Fund, L.P. (the
        “Investor”)
        pursuant to which the Company issued to the Investor shares of its Common
        Stock,
        par value $0.001 per share (the “Common
        Stock”).
         Pursuant to the Equity Line Agreement, the Company also has entered into
        a
        Registration Rights Agreement with the Investor (the “Registration
        Rights Agreement”)
        pursuant to which the Company agreed, among other things, to register the
        Registrable Shares (as defined in the Registration Rights Agreement) under
        the
        Securities Act of 1933, as amended (the “Securities
        Act”).
         In connection with the Company’s obligations under the Registration Rights
        Agreement, on ____________ ____, the Company filed a Registration Statement
        on
        Form ________ (File No. 333-_____________) (the “Registration
        Statement”)
        with
        the Securities and Exchange Commission (the “SEC”)
        relating to the Registrable Shares which names the Investor as a selling
        stockholder thereunder.

       

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

       

      Very
        truly yours,

      

      

      

      By:

      cc:
        Magellan
        Global Fund, L.P.

       

      
        
          
          

        

        
          16

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