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.

     

    WHEREAS,
      the
      Company has engaged GLB Trading Inc. (the “Placement
      Agent”),
      to
      act as the Company’s exclusive placement agent in connection with the sale of
      the Company’s Common Stock to the Investor hereunder pursuant to the Placement
      Agent Agreement dated the date hereof by and among the Company, the Placement
      Agent and the Investor (the “Placement
      Agent Agreement”).

     

    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.

     

    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

     

                     
      “Placement
      Agent”
shall
      mean GLB Trading Inc. a
      registered broker-dealer.

     

    Section
      1.21

     

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

     

    Section
      1.22

     

                     
      “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
      1.23

     

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

     

    Section
      1.24

     

                     
      “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.

     

    Section
      1.25

     

                     
      “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
      1.26

     

                     
      “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
      1.27

     

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

     

    Section
      1.28

     

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

     

    Section
      1.29

     

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

     

    Section
      1.30

     

                     
      “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
      1.31

     

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

     

    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.  

     

                     
      (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

    

    
       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

                     
      (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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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, the Registration Rights Agreement, the
      Placement Agent Agreement and any related agreements, in accordance with the
      terms hereof and thereof, (ii) the execution and delivery of this Agreement,
      the
      Registration Rights Agreement, the Placement Agent 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,
      the Registration Rights Agreement, the Placement Agent Agreement and any related
      agreements have been duly executed and delivered by the Company, (iv) this
      Agreement, the Registration Rights Agreement, the Placement Agent 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.  

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.  

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                     
      (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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    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.  

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                     
      (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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                     
      (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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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

            

    

    

    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.

    

    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.
      

     

     

    
      	 	 	 
	 	
              COMPANY:
                

              
                China
                  Shoe Holdings, Inc.

              

            
	 
 	 
 	 
 
	 	By:  	/s/
              Gu
              Xianzhong
	 	
              

              Name:
                Gu Xianzhong

            
	 	
              Title:
                President and Chief Executive
                Officer

            

    

     

    
      	 	 	 
	 	
              INVESTOR:

              
                MAGELLAN
                  GLOBAL FUND , L.P.

              

            
	 
 	 
 	 
 
	 	By:  	Orinda
              Advisors, LLC
	
               

            	
              

              Its:
                Investment Manager

            

    

    
      	 	 	
               

            
	 	By:  	/s/
              Harry Orfanos
	 	
              

              Name:
                Harry Orfanos

            
	 	
              Title:
                Managing Partner

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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:Unassociated 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

           
      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.

     

                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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                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.

     

                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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                o. 
Within
      five (1) 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

           
      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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

           
      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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

           
      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

            
	
               

            	
               

            
	
               

            	
               

            

    

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

                e. 
This
      Agreement, the Equity Line Agreement, and the Placement Agent 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, the Equity Line Agreement, and the Placement
      Agent 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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:  	/s/
              Gu
              Xianzhong
	 	
              

              Name:
                Gu Xianzhong 

            
	 	
              Title:
                President and Chief Executive
                Officer

            

    

     

    
      	 	 	 
	 	
              Magellan
                Global Fund, L.P.

            
	 
 	 
 	 
 
	 	By:  	
              Orinda
                Advisors, LLC

            
	 	
              

              Its:
                Investment Manager

            

    

     

    
      	 	 	 
	 	By:  	/s/
              Harry Orfanos
	 	
              

              Name:
                Harry Orfanos

            
	 	
              Title:
                Managing Partner

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

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