Document:

EXHIBIT
      10.2

     

    CONTRACT
      OF RUILI GROUP RUIAN AUTO PARTS CO., LTD

    RUILI
      GROUP RUIAN AUTO PARTS CO., LTD.

     

    Contract
      of the Joint Venture (Revision)

     

    CONTRACT
      OF RUILI GROUP RUIAN AUTO PARTS CO., LTD

     

    Article
      1

     

    General
      Provisions

     

    1.1    This
      contract is made and entered into on the basis of equality and mutual benefit,
      through friendly consultations, by and between RUILI GROUP CO., LTD. and
FAIRFORD
      HOLDINGS LIMITED,
      who
      agree to jointly set up and run a JOINT VENTURE in Wenzhou city, Zhejiang
      province in China under the Act of Sino-foreign Joint Ventures of the People’s
      Republic of China, its implementation statutes, the other related laws and
      regulations made by the People’s Republic of China as well as the stipulations
      in this contract. Alteration so made in the articles, which originally contained
      in this contract, is subject to additional capital contributed from each
      party.

     

    Article
      2

     

    The
      Two Parties of the Contract

     

    2.1    The
      parties of this contract are as follows:

     

    (1)    RUILI
      GROUP CO., LTD. (hereinafter referred as party A), a corporation registered
      in
      Wenzhou city, China, with its legal address as: 1169Yumeng Road, the Economy
      Development Zone, Ruian city

     

    Legal
      representative: ZHANG Xiaoping

    Post:
      Board Chairman

    Nationality:
      Chinese

    

    (2)    FAIRFORD
      HOLDINGS LIMITED (hereinafter
      referred as party B ), a company registered in Hong Kong. The legal address
      is:
      12 Zhong huan xia que road, Hong Kong Special Administration
      District

     

    Legal
      representative: Zhang Ronggang

    Post:
      General Manager

    Nationality:
      Taiwan China

    

    Article
      3

     

    Definition

     

    Otherwise
      stipulated, the words and phrases used in the contract have the meanings as
      follows:

     

    “Related
      company” refers to any company controlled by any party directly or indirectly,
      controlled together with any other party by or control any party; the word
      “control” means possession of stock or registered capital allowing the right to
      vote by over 50%.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Article
      of Associations” refers to the constitution of joint ventures subscribed by both
      parties in this contract and authorized by the examining and approving
      institution.

     

    “The
      Board of Directors” shall mean the directorate of the joint
      ventures.

     

    “Business
      License” shall mean the business license of joint ventures issued by the State
      Administrative department for Industry and Commerce or authorized local
      Administration department Industry and Commerce.

     

    “Contract
      Duration” refers to the contract term stated in Article 20.

     

    “Effective
      Date” shall mean the date on which the contract and the article of associations
      becomes effective, viz. the date of approval by the examining and approving
      authorities.

     

    “Examining
      and approving Authorities” shall mean the government authorities that are
      entitled with the right to examine and approve the contract according to the
      stipulations on the examination of overseas invested projects.

     

    “Force
      Majeure” refers to all the contingencies which happened after the subscription
      of the contract and can not be anticipated at the moment, the occurrence and
      aftermath of which can not be avoided or conquered, and which hinder the full
      or
      partial performance of the contract. The above mentioned contingencies include
      earthquake, typhoon, flood, wars, international or domestic conveyance
      breakdown, act of government or public institutions, epidemic, civil commotions,
      strike as well as other contingencies generally considered force majeure by
      the
      international business conventions.

     

    “Joint
      Ventures Company” shall mean the Sino-foreign joint ventures established
      according to the stipulations in the contract.

     

    “Joint
      Ventures Product” shall mean the products made in the ranges stated in the
      Article5.2

     

    “Joint
      Ventures Regulations” refers to The Implementation Regulations of Sino-foreign
      Joint Ventures Law of People’s Republic of China.

     

    “Labor
      Law” refers to The Labor Law of People’s Republic of China as well as relevant
      laws and regulations of China.

     

    “Administrative
      Staff (executives)” refers to the general manager of the joint ventures, as well
      as other administrative staff who report directly to the general
      manager.

     

    “A
      Party”
refers to any party stated in Article2.1 in this contract.

     

    “The
      Third Party” refers to any natural man, legal person, other organization or
      entity other than the two parties of this contract.

     

    “The
      Three Funds” refers to the reserve funds, development funds, employee bonus and
      welfare funds of the joint ventures stipulated in the joint venture
      regulations.

     

    Article
      4

     

    The
      Foundation of the Joint Ventures Company

     

    4.1    Both
      parties agree to establish a joint venture in Wenzhou city, Zhejiang province,
      China according to the laws and regulations of China as well as the stipulations
      in this contract. Upon the

     

    
      
        
        

      

      
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    subscription
      of this contract by both parties, party A shall transact promptly Feasibility
      Study of the joint venture, the examination procedures of the contract and
      its
      constitutions as well as the registration procedures of the joint venture.
      Party
      B shall cooperate with party A and provide the documents and information that
      are requested.

     

    4.2    The
      Chinese name of the joint venture is [Missing Graphic Reference],
      the
      English name is “RUILI GROUP RUIAN AUTO PARTS CO., LTD.”

     

    4.3    The
      legal
      address of the joint venture is: Ruili Industry Garden, 1169Yumeng Road, Ruian
      Economy Development, Zhejiang Province, PRC.

     

    4.4    With
      the
      agreement of the board of directors as well as the approval by the relevant
      Chinese government department, the joint venture is entitled to establish
      branches setup both in and out of the China territory.

     

    4.5    The
      joint
      venture is an enterprise legal person stipulated by China laws. All the
      activities of the joint venture shall conform to the laws, provisions and rules
      & regulations of PRC.

     

    4.6    The
      joint
      venture is a company with limited liability. The responsibility one party
      carries is confined with the registered capital turned over to the joint venture
      according to the stipulations in Article6. The creditors of the joint venture
      have recourses only for the assets of the joint venture, and they have no right
      for indemnification, damage compensation or other remediation from any party.
      On
      the premise that the above stipulations are observed, both parties share in
      the
      profits and losses as well as the risks of the joint venture according to the
      respective investment proportions in the registered capital of the joint
      venture.

     

    Article
      5

     

    Scope
      and Scale of Management

     

    5.1    The
      purposes of joint ventures are: to manufacture and sell products by joint
      venture through adaptation of advanced technology and scientific administration;
      to exploit and introduce new products and new services, so as to obtain
      satisfactory economic benefits for both parties.

     

    5.2    The
      management scope of the joint venture is: to produce and sell automobile
      parts.

     

    5.3    The
      management scale of the currently planned joint venture by each party is: annual
      production of 3 million automobile gas brake valve, with total annual output
      value of 40 million US dollars (USD40,000,000).

     

    Article
      6

     

    The
      Total Amount of Investment and the Registered Capital

     

    6.1    The
      total
      amount of investment of the joint venture is 58 million US dollars (USD58,
      000,000), say fifty eight million only and the registered capital is 43.4
      million US dollars (USD 43,400,000).say forty three million and four hundred
      thousand only

     

    6.2    The
      subscribed investment amount by each party for the registered capital
      is:

     

    (1)    Party
      A:
      4.34 million US dollars (USD 4,340,000), say four million, three hundred and
      forty thousand only which accounts for 10% of the registered capital of the
      joint venture.

     

    
      
        
        

      

      
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    (2)    Party
      B:
      39.06 million US dollars (USD39,060,000), say thirty nine million and sixty
      thousand only which accounts for 90% of the registered capital of the joint
      venture.

     

    6.3    The
      contribution modes for the registered capital by each party are as
      follows:

     

    (1)    Party
      A
      shall invest by assets, which is evaluated by qualified Asset Assessment
      Institution and converted into money as 710 thousand US dollars (USD
      710,000).

     

    (2)    Party
      B
      shall invest by assets, which are evaluated by qualified Asset Assessment
      Institute and converted into money as USD 6,390,000, say six million, three
      hundred and ninety thousand US dollars only.

     

    (3)    Party
      B
      shall fund their additional capital by U.S. dollars and Party A shall do it
      by
      RMB .with equal value of U.S. dollars which are translated at the exchange
      rate
      of the date.

     

    6.4    As
      original registered capital has been received, each party shall pay 20% of
      their
      additional capital before the date on which the business license is altered
      and
      shall pay the remaining within three months as from the date

     

    6.5    If
      one
      party hasn’t contributed the contracted investment upon the due date, she shall
      pay to the joint venture interests calculated from the due date to the actual
      contributions date of the investment with respect to the unpaid amount (or
      the
      value of tangible materials investment), the interest rate shall be calculated
      on the basis of benchmark rate of RMB loan for six months issued daily during
      the default time. Moreover, the observant party may inform in written notice
      to
      the defaulting party demanding her to contribute the investment in one (1)
      month
      as from the receipt date. If the default party fails to contribute within the
      time limit, the observant party shall have the right to contribute the
      investment according to the proportion and acquires the corresponding equity
      of
      registered capital accordingly. Or, the observant party may choose a third
      party
      to contribute the investment and acquires the corresponding equity of registered
      capital accordingly. The observant party may also terminate the contract
      according to the Article21.1 in the contract. Under each circumstance in this
      article, the observation party may claim damages from the defaulting party.
      The
      provisions in the Article 6.5 herein shall not affect any other rights enjoyed
      by observant party as for the failure of investment by the defaulting party
      under this contract or other applicable laws and regulations.

     

    6.6    After
      the
      contribution of investment to the registered capital of the joint venture by
      each of the two parties, it shall be verified immediately by a Chinese Certified
      Public Accountant (CPA) engaged by the Board of Directors, and shall submit
      the
      Capital Verification Report to the joint venture company within sixty (60)
      days
      after the investment date. Within thirty (30) days as from the receipt of the
      Capital Verification Report, according to style and content prescribed in the
      joint venture codes, the joint venture shall submit to the party an investment
      certificate signed by the Board Chair with the stamp of the joint venture on
      it,
      as well as a copy as a record in the Examining and approving authorities, the
      General Manager shall put on file all the copies of Capital Verification Report
      and investment certificates which have been granted to the parties.

     

    6.7    In
      despite of any other provisions in this contract, if any of the following
      conditions fail to be implemented, and both parties have not given up the
      condition in writing, then both parties shall have no obligations to contribute
      any investment to the registered capital of the joint venture:

     

    (1)    After
      the
      capital contribution of the contract and article of association by both parties,
      they have been approved by the examining and approving authorities, and neither
      of the terms and conditions has been altered, nor has any extra obligation
      been
      added to one party or the joint venture company; but if the alterations herein
      or the extra obligations have been informed to each party in writing, and each
      party agrees with them in writing, then it shall be excluded.

    
      
        
        

      

      
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    (2)    The
      business license has been issued with no alteration to the scope of business
      of
      the joint venture stipulated in Article5.2; but if each party has been informed
      of the alterations herein in writing, and each party agrees with them in
      writing, then it shall be excluded.

     

    Both
      parties agree, (i) within three (3) months after the issue of the business
      license, or (ii) within five (5) months after the signing of this contract
      by
      both parties (the earlier shall prevail), or within any extended term decided
      in
      writing by both parties through consultation, any of the above-mentioned
      prerequisites has not been realized, nor has any party given them up, then
      either party shall be entitled to inform the other party in writing so as to
      terminate the contract, while any party shall have no obligation to contribute
      any investment to the registered capital of the joint venture.

     

    6.8    The
      increase of or adjustment to the registered capital of the joint venture company
      shall be approved by both parties in writing with the unanimous agreement
      through the board of directors as well as the approval by the examining and
      approving authorities. After approval from the above authorities, the joint
      venture company shall proceed registration procedures for the registered capital
      alteration in relevant administrative department for Industry and
      Commerce.

     

    6.9    The
      provisions in Article 6.9 herein are suitable for the transferring of the
      registered capital of the joint venture company:

     

    (1)    According
      to the following stipulations, each party enjoys priority right to purchase
      full
      or partial assignment or transfer of equity the other party’s in the registered
      capital of the joint venture company.

     

    (a)    The
      party
      that wishes to transfer the full or partial interests in the registered capital
      of the joint venture company (“assigning party”) should inform the other party
      in writing (“transfer notice”), stating clearly the identity of the intended
      assignee (“the intended assignee”), equity intended to transfer (“transferred
      rights and interests”), the transferring price and other terms and conditions.
      The transfer notice constitutes as an irrevocable offer, that is to say, to
      transfer all the rights and interests to the other party according to the price
      as well as other terms and conditions.

     

    (b)    The
      other
      party shall be entitled to inform the assigning party in writing (“purchase
      notice”) within sixty (60) days as from the receipt date of the transfer notice,
      so as to purchase the full or partial shares in the assigner’s transferred
      rights and interests at priority. Within the sixty days herein, the assigner
      shall provide promptly the information on the conditions of business and finance
      of the intended assignee to the party according to its reasonable requirements,
      so as to make the party decide whether to exercise the purchase right at
      priority.

     

    (c)    If
      the
      other party fails to purchase within sixty (60) days stipulated in item (b),
      then the assigning party may transfer all the equity to the intended assignee,
      with price no lower than the price stipulated in the transfer notice, while
      the
      other terms and conditions offered to the intended assignee shall not be more
      preferential than what are stated in the transfer notice.

     

    (d)    The
      assigner should inform the other party in writing of the final terms and
      conditions of transferring within two (2) days as from the date of signing
      of
      the transfer contract by the assignee. If the transfer made to the assignee
      fails to be reported to the examining and approving authorities within thirty
      (30) days after the signing of the transfer contract for approval, then the
      assigner shall follow once again the provisions prescribed in article
      (1).

     

    (2)    Within
      the term of this contract, each party may transfer the full or partial right
      or
      interest (equity) in the registered capital of the joint venture to a related
      (interested) company. After the approval of the original examining and approving
      authorities, the registration procedures of company alteration

     

    
      
        
        

      

      
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    should
      be
      proceeded. One party shall hereby give up the preferential purchase right for
      such transfer to the other party.

     

    (3)    The
      party
      that transfers the rights and interests of the registered capital of the joint
      venture shall confirm that the assignee has signed a document with legal binding
      which makes him a party of this contract, and shall be restricted by the terms
      and conditions under this contract as the assigner himself.

     

    (4)    Pursuant
      to Article 6.9, each party shall consent any transfer of registered capital
      and
      the Board of Directors shall be deemed as consent the transfer. Each party
      shall
      agree to take immediate action required under the law, execute all documents
      under the law and urge its appointed directors to immediately take the action
      and execute all the documents hereinbefore. The transfer of the registered
      capital shall be subject to application with and approval by the examining
      and
      approval authority. Upon receipt of the said approval, the Joint Venture shall
      check in the transfer to the related administrative department for industry
      and
      commerce.

     

    6.10    The
      Joint
      Venture may get banking loan from finance institutes in or out of China and
      the
      shareholder loan from the two parties, financing for the balance between the
      total investment of the Company and her registered capital. If the shareholders
      of the two parties shall provide the loan, it is based on its proportional
      percentage of investment of each party in the registered capital. The two
      parties shall determine their willingness and in what way they shall provide
      guarantee if required by the loaner.

     

    6.11    Save
      as
      lien of general nature (the lien of general nature herein refers to the lien
      established on the entity held by share by any party hereto, such as lien out
      of
      tax, duty and exercise, or the lien made under security documents secured with
      all assets where the assets are not particularly identified), each party shall
      not be allowed to mortgage or pledge part or all of its share in the registered
      capital of the Joint venture, or to set any credit in other whatsoever
      forms.

     

    Article
      7

     

    The
      Responsibilities of Both Parties

     

    7.1    In
      addition to the other responsibilities stipulated in this contract, the parties
      shall fulfill their respective responsibilities as follows:

     

    (1)    Responsibilities
      of party A:

     

    (a)    Assist
      the joint venture in applying for all the licenses and permission required
      for
      the running of business of the joint venture company.

     

    (b)    Assist
      the joint venture in coordinating with the local government, so as to make
      water, electricity and road. Available near the joint venture
      company

     

    (c)    Assist
      the joint venture in all the procedures to assign the ownership of asset of
      both
      parties to the joint venture company.

     

    (d)    Assist
      the joint venture in applying for the preferential tax treatments and other
      investment encouragement available under the relevant China laws, administrative
      statutes and local regulations.

     

    (e)    Assist
      the joint venture in obtaining all the machinery equipment, instrument, raw
      materials, office appliance and facility, vehicles as well as other materials
      needed in the manufacture or management of the joint venture company through
      buying, leasing or other ways in the China territory.

     

    
      
        
        

      

      
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    (f)    Assist
      the joint venture in applying for import license for the machinery equipment,
      instrument, raw materials, office appliances and facility, vehicles as well
      as
      other materials needed in the manufacturing or administration of the joint
      venture company, and to assist in transacting all the relevant procedures and
      formalities to declare customs.

     

    (g)    Assist
      the joint venture in recruiting local Chinese personnel, and to assist the
      joint
      venture in obtaining visas, residence permits, work permit and housings for
      its
      foreign personnel.

     

    (h)    Assist
      the joint venture in obtaining and recommending the Foreign Exchange
      Registration Certificate as well as other approval needed to adopt the various
      methods of foreign exchange balance permitted by Chinese laws and
      statutes.

     

    (i)    Assist
      the joint venture in arranging reliable supply of water, electricity, heating,
      gas, steam, telecommunication and transport needed in the
      production.

     

    (j)    Assist
      the joint venture company in other matters consigned by the Board of
      Directors.

     

    (2)    Responsibilities
      of party B:

     

    (a)    Assist
      the joint venture company in obtaining machinery equipment, raw material etc.
      by
      purchase or lease or other ways from abroad.

     

    (b)    Assist
      the joint venture company in distributing its products in the international
      market.

     

    (c)    Training
      the administrative staff and technical personnel of the joint venture
      company.

     

    (d)    Assist
      the joint venture in other matters consigned by the Board of
      Directors.

     

    Both
      parties agree to perform their respective responsibilities stipulated in
      Article7 herein without any condition.

     

    Article
      8

     

    Mutual
      Declarations and Warranties

     

    8.1    Each
      party hereto claims and warrants to the other party that as of the execution
      date and the validity date of the contract:

     

    (1)    This
      party is formed under laws of establishment or that of registered place, legally
      existing in accordance with all rules and regulations;

     

    (2)    This
      party has gone through all the necessary procedures and obtained all the
      necessary approvals under relevant laws and regulations with which it shall
      comply, and it has all necessary rights, power and capacity under such laws
      to
      execute this Contract and to perform all the obligations under this
      Contract;

     

    (3)    This
      party has taken all the necessary internal measures and actions to obtain
      authorization to execute this Contract, her representative(s) who have signed
      this Contract has been fully authorized to make this Contract binding on
      its/their party;

    
      
        
        

      

      
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    (4)    This
      Contract shall be binding on each party as of the date of validity;

     

    (5)    Execution
      hereof or the performance of obligation hereunder by this party shall not
      conflict with each/all provision(s) herein below or result in breach of such
      provision(s) or non-performance of either such provision(s) or this party’s
      article of association or internal by-laws, or any laws, regulations, or
      authorization, or approvals by any government authorities or organs, or any
      contract or agreement to which this party is one party or is binding to any
      party;

     

    (6)    There
      has
      not any jurisdiction or arbitration or any other legal or administrative
      proceedings or government investigations against or threat to against this
      party, which shall affect her capacity to execute or perform this
      Contract;

     

    (7)    This
      party has disclosed all the materials held by it, in respect of establishment
      of
      the Joint Venture or the future operations of the Joint Venture, which may
      have
      virtually unfavorable effect on this party’s capacity to fully perform all the
      obligations hereunder, or, which may virtually affect the intention of the
      party
      hereto to execute the Contract. In case it is disclosed to other party hereto,
      there exists no furthermore virtually untrue or misguiding statements by this
      party to the other party hereto; Provided that each party hereto is in breach
      of
      any statements and warrants as provided in 8.1, it shall indemnify the other
      party from all losses, damages and claims suffered from (including but not
      limited to any interests accrued thereof and reasonable lawyer
      fee).

     

    Article
      9

     

    Technology

     

    Both
      parties agree that the Joint Venture company shall use the advanced technology
      and equipment for manufacturing of spare parts of car to realize the production
      scale under article 5.

     

    Article
      10

     

    Sales
      of the Joint Venture Products

     

    10.1    The
      products of the Joint Venture may be sold in China and abroad. Under the
      condition of meeting internationally recognized quality standard, the joint
      venture company shall try to export part of the product overseas, taking into
      consideration of the market demands in accordance the economic interests of
      the
      joint venture company.

     

    10.2    The
      joint
      venture company shall be responsible for the selling of the products, and the
      two parties shall assist the joint venture company in sales. Any party has
      the
      priority to purchase the products at the usual market price. The two parties
      shall buy, according to the percentage of their equity in the joint venture
      company in case of lacking in enough products.

     

    10.3    The
      joint
      venture company may set up branches in China and overseas appointing sales
      agents and distributors for sales and after-sales service after relevant
      government authorization. The Board of Directors also can appoint any party
      thereby as the sales agent or the distributor.

     

    Article
      11

     

    Board
      of Directors

     

    11.1    The
      Board
      of Directors of the Joint Venture shall be established upon the date that
      business license is issued. The Board of Directors is the supreme power
      authority of the joint venture company.

    
      
        
        

      

      
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    11.2    The
      Board
      of Directors shall consist of three (3) directors, of whom, one (1) shall be
      appointed by Party A and two (2) by Party B. Respective parties appoint
      directors in written form with a term of office for three (3) years. The
      appointing party may dismiss the appointed director any time, in case that
      an
      immediate written notice is sent to other shareholders. The related party that
      nominates them may renew the appointment of the directors. If there is any
      vacancy on the Board of Directors arising from the retirement, resignation,
      dismissal, lack of civil ability or the death of a director, the originally
      nominated party shall appoint a successor to continue the term of the director
      with a written form to other shareholders.

     

    11.3    The
      Board
      of Directors shall be one Chairman whom shall be appointed by Party B. The
      Chairman shall be the legal representative of the joint venture company. If,
      for
      any reason, the Chairman is unable to perform his duty, any other director
      shall
      be authorized by the Chairman to perform his duties by proxy.

     

    11.4    Any
      delegation, dismissal, appointment or the replacement of a Chairman or a
      director shall be effected pursuant to written notice to other shareholders
      on
      receiving the written notice by the shareholders. The above delegation,
      dismissal, appointment or the replacement therefore shall be reported to and
      filed with examining and approving authority and registered with related
      Administrative Department for Commerce and Industry.

     

    11.5    The
      Joint
      Venture company shall compensate all the indemnity claim and responsibility
      for
      any director, in case that the indemnity is occurred when the director performs
      his duty of the Joint Venture company on the condition that the claim and
      responsibility is not incurred by the deliberate misdemeanor, major negligence
      and intentional breach of the criminal law by that director.

     

    11.6    The
      first
      meeting of the Board of Directors shall be held within one (1) month since
      the
      date that business license is issued. Thereafter, the Board of Directors shall
      conduct at least a meeting once a year. Upon the written request of more than
      one director specifying the matters to be discussed, the Chairman shall within
      thirty (30) days, after receiving the request therefore summon an ad hoc meeting
      of the Board of Directors.

     

    11.7    Written
      notice of the time, place, and agenda of each meeting of the Board of Directors
      shall be sent by the Chairman to all the directors, at least fifteen (15) days
      before such meeting. The Chairman shall put all the written request of any
      director in the agenda to be discussed. The summoned meeting of the Board of
      Directors shall be deemed as invalid unless all the directors have been properly
      notified except the director hand in the written notice of voluntary forfeiture
      before or after the meeting. The Boarding meeting shall be conducted in the
      registration place the Joint Venture or other places in or out of China, which
      is determined by the Chairman. The Chairman shall determine the agenda of the
      meeting, convene and preside over the meeting of the Board of
      Directors.

     

    11.8    A
      quorum
      for the meeting of the Board of Directors shall exist if at least two (2)
      directors are present in person or by proxy. The Chairman shall notice all
      the
      Board members for another meeting thirty (30) days prior to the date of that
      meeting if the quorum for the meeting of the Board of Directors is less than
      two
      (2) of the directors present in person or by proxy. Each party shall make sure
      the appointed directors present all the properly summoned meetings of the Board
      of Directors in person or by proxy.

     

    11.9    In
      the
      event a director is unable to attend a Board meeting, he may appoint by notice
      in writing a proxy to attend on his behalf. The appointed proxy may act as
      a
      director to represent more than one director if authorized and the appointed
      proxy shall be entitled the same rights as whom he represents.

     

    11.10    Detailed
      written minutes shall be recorded in all the Board meetings. The resolution
      of
      the Boarding meeting shall be written in Chinese for the signing of directors
      who are in approval of the resolution. The minutes shall be sent to all the
      directors within fifteen (15) days of the meeting and the directors who hope
      to
      amend or supplement the minutes shall hand in the amendment and supplementary
      proposal to the Chairman

     

    
      
        
        

      

      
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          9 -

        
          

        

      

      
        
        

      

       

    

    in
      writing within seven (7) days after receiving the minutes (The signed written
      resolution of the meeting shall not be amended or supplemented). The Chairman
      shall complete and sign the minutes (These minutes shall be deemed as ultimate)
      and send one copy of the minutes to all the directors and parties within thirty
      (30) days after the meeting. The Joint Venture shall file all the minutes for
      the free reference of the two parties and their authorized
      representatives.

     

    11.11    The
      resolution and the ratification of the Board meetings shall determine (but
      not
      limited to) the following major matters:

     

    (1)    Any
      amendment to the Article;

     

    (2)    Formulating
      plans for merger with another economic organization;

     

    (3)    Disbanding
      the Joint Venture or terminating any business operation of the Joint
      Venture;

     

    (4)    Increasing,
      transferring or decreasing the registered capital of the Joint
      Venture;

     

    (5)    The
      investment of the Joint Venture to any other companies or
      corporations;

     

    (6)    Setting
      up any branches or other operating places;

     

    (7)    Signing
      any contract, the contract value of which exceeds four million U.S. dollars
      (USD4,000,000) between the Joint Venture and any shareholder or the related
      company as well as the amendment and termination of the contract;

     

    (8)    Subject
      to Article 17.12 thereafter, formulating after-tax profit distribution plans
      of
      any fiscal year;

     

    (9)    The
      collected total amount of the three funds and the spending of the
      money;

     

    (10)    The
      sale
      or purchase of any fixed asset or real estate which exceeds one hundred thousand
      U.S. dollars (USD100, 000) as well as in other currencies of the same
      value;

     

    (11)    The
      annual or the long-term production plan, sales and promotion plan, basic
      construction plan, research and development plan, financing plan, financial
      budget, tax report as well as the audited financial statement of the Joint
      Venture;

     

    (12)    Signing
      any other commercial contract without the normal business line of the Joint
      Venture, the contract value of which exceeds two million U.S. dollars (USD2,
      000,000) as well as in other currencies of the same value;

     

    (13)    Receiving
      any loan which exceed five hundred thousand U.S. dollars (USD500, 000) as well
      as in other currencies of the same value;

     

    (14)    Providing
      any guarantee or loan for others by the Joint Venture;

     

    (15)    Deciding
      the basic departmental structure of the Joint Venture, including setting
      positions for management personnel which is not stipulated in this
      Contract;

     

    (16)    The
      internal policy and the major regulations and Articles of
      Association;

     

    
      
        
        

      

      
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          10 -

        
          

        

      

      
        
        

      

       

    

    (17)    The
      appointment, dismissal, remuneration and the welfare of the management
      personnel;

     

    (18)    The
      employment of external accountant, auditor and the legal advisor;

     

    (19)    Opening
      bank account and appointing the signer;

     

    (20)    Any
      litigation or arbitration claim of the Joint Venture and the settlement of
      any
      legal claim related to the Joint Venture.

     

    11.12    The
      following issues shall require approval from all the directors of the Board
      with
      the presentation of the directors in person or by proxy in the Board meeting
      summoned according to the stipulations herein.

     

    (1)    Any
      amendment to the Article;

     

    (2)    Formulating
      plans for merger with another economic organization;

     

    (3)    Disbanding
      the Joint Venture or terminating any business operation of the Joint Venture
      company;

     

    (4)    Increasing,
      transferring or decreasing the registered capital of the Joint Venture
      company;

     

    (5)    Approval
      and termination of any service management contract.

     

    11.13    The
      resolution of other issues shall require the approval of a/half directors who
      present in person or by proxy in the Board meeting summoned according to the
      stipulations herein.

     

    11.14    The
      Board
      of Directors may ratify a resolution through teleconference or with no meeting,
      if all the incumbent directors may sign the resolution in written form. The
      resolution herein shall be filed with minutes, bearing the same validity as
      those resolutions ratified in the Board meeting.

     

    11.15    Directors
      shall not be paid a salary except the reasonable expenses (including but not
      limited to transportation and accommodations) incurred by the directors as
      per
      the performance of their duties.

     

    Article
      12

     

    Supervisor

     

    12.1    The
      board
      of supervisors shall not be established, one (1) shall be appointed by Party
      A
      with a term of three (3) years. The supervisor can be reappointed by the
      assignor after the term.

     

    12.2    The
      supervisor shall exercise the following major matters:

     

    (1)    Checking
      the finance of the Joint Venture company;.

     

    (2)    Supervising
      the behaviors of directors and senior managers who carrying out the duties
      of
      the Joint Venture company; recommending the dismissal of the directors and
      senior managers who violate the laws, administrative regulations, bylaw and
      resolution of the board of directors;

     

    (3)    Correcting
      the behaviors of the directors and senior managers who harm the interest of
      the
      Joint Venture company;

     

    
      
        
        

      

      
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          11 -

        
          

        

      

      
        
        

      

       

    

    (4)    Taking
      judicial proceedings against the directors and senior managers in according
      with
      the 125th rule of the “Law of Corporation”;

     

    (5)    Other
      official powers identified in the by-law.

     

    12.3    The
      supervisor can attend the meeting of the board of directors and bring forward
      inquiries or suggestions to the resolutions of the board of
      directors.

     

    The
      supervisor can hire law firms and accounting firms to help carry out duties,
      the
      fees are borne to the Joint Venture company.

     

    12.4    The
      directors and senior managers shall not serve as the supervisor
      meanwhile.

     

    Article
      13

     

    Management
      Structure

     

    13.1    The
      Joint
      Venture company shall set up operation management structure and stipulate
      clauses and conditions of offering management service thereof as well as the
      regulations employed by the management.

     

    13.2    The
      Joint
      Venture shall one General Manager as leader, who shall be appointed by and
      responsible to the Board of Directors. The Joint Venture shall have one Deputy
      Manager, one accountant and departmental managers, all of whom are appointed
      by
      the Board of Directors and responsible to the General Manager.

     

    13.3    The
      duty
      of the General Manager shall be to organize and supervise the day-to-day
      management of the Joint Venture company and to carry out the resolutions of
      the
      Board of Directors.

     

    13.4    Unless
      approved by the Board of Directors of the Joint Venture company, the General
      Manager and all the other management personnel shall not work as the managers
      in
      other companies or corporations, nor shall they be allowed to work as directors,
      consultant or be involved in any economic interests in other companies and
      corporations which are in commercial competition with the Joint
      Venture.

     

    13.5    The
      basic
      organization structure, including the positions for management personnel who
      are
      not stipulated in the Contract shall be set up by the Joint Venture. The details
      of the organizational structure and the establishment of other positions except
      those of management personnel shall be determined by the Board of
      Directors.

     

    Article
      14

     

    The
      Purchase of Material and Equipment

     

    14.1    The
      Joint
      Venture may purchase the necessary machinery, instruments, vehicles, spare
      parts, and goods and materials for the operation the company in or out of China
      and obtain the necessary service for the production and operation of the
      company. The necessary raw material, fuel, spare parts, equipment, etc, shall
      be
      bought within China if the condition, price, quality, and other aspects of
      terms
      are the same as those from aboard.

     

    
      
        
        

      

      
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          12 -

        
          

        

      

      
        
        

      

    

     

    Article
      15

     

    Preparation
      of the Joint Venture Company

     

    15.1    During
      preparation of the joint venture company, a preparation office shall be set
      up
      for preparation of Company establishment. The office consists of one
      representative from each party.

     

    15.2    Work
      Scope of Preparation Office

     

    (1)    Purchase
      and check before acceptance goods such as equipment and materials

     

    (2)    Formulate
      relevant administrative methods

     

    (3)    Well
      organize protection and classification of relevant files, drawings, archives
      and
      data.

     

    15.3    Salary
      of
      Preparation Office staff and expenses concerning the preparation shall be
      included in the Set-up Cost (Organization cost) after approval of Board of
      Directors.

     

    15.4    After
      completion of the preparation, the preparation office shall be cancelled by
      the
      board.

     

    Article
      16

     

    Labor
      Management

     

    16.1    Labor
      matters concerning the staff and workers of the joint venture company such
      as
      the recruitment, dismissal, resignation, salaries, welfare shall be in
      accordance with Labor Law. Its labor policy and implementation rules shall
      be
      approved by the board and put into force by General Manager or under supervision
      of General Manager.

     

    16.2    Except
      executives, the joint venture company shall recruit staff in accordance with
      rules of individual labor contracts. For administrative personnel (executives),
      the joint venture company abides by individual appointment contracts approved
      by
      the board.

     

    16.3    Employees
      shall be selected based on their major qualifications, characteristics and
      working experience. For specific staff number and their qualifications, General
      Manager shall decide by as per the joint venture’s actual requirements. Common
      staff (non-executives) shall be interviewed and selected by General Manager
      or
      his appointed proxy. Before becoming formal employees of the joint venture,
      all
      the staff shall satisfactorily pass three months’ probation.

     

    16.4    Social
      insurance (such as pension, unemployment, medical, work injury, maternity leave)
      of every employee during his employment term in the joint venture company shall
      be borne by Company in accordance with relevant law and provisions, but not
      include that before the date of recruitment. (As per effective date of Labour
      Contract entered into by the joint venture company and Employee.)

     

    16.5    The
      joint
      venture company shall abide by Country provisions and rules & regulations
      concerning labor protection to ensure safety and civilized production. Social
      insurance of the joint venture company employees shall confirm to “Labour
      Law”.

     

    
      
        
        

      

      
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    Article
      17

     

    Accounting,
      Auditing and other financial affairs

     

    17.1    Chief
      accountant of the joint venture company, under the leadership of General
      Manager, shall be responsible for the its financial administration.

     

    17.2    General
      Manager and Chief accountant shall draw up accounting system and procedures
      in
      accordance with “Accounting
      System of Foreign-invested Enterprises of People’s Republic China”
and
      other
      law provisions and regulations for approval of the board. These accounting
      systems and procedures shall be put into record in Supervision authorities
      of
      the joint venture company, relevant local finance bureaus and taxation
      bureaus.

     

    17.3    The
      joint
      venture company shall adopt Renminbi as recording currency used in book-keeping.
      Meanwhile, it can adopt U.S Dollar or other foreign currency as an auxiliary
      accounting currency.

     

    17.4    All
      vouchers, receipts, accounts books, financial statements and reports shall
      be
      written in Chinese.

     

    17.5    Foreign
      currency will be converted to Renminbi at the middle rate of buying and selling
      rate issued on current day by the People’s Bank of China based on actual
      receipts and expenditure transactions.

     

    17.6    The
      fiscal year of the joint venture company shall coincide with the calendar year.
      The first fiscal year of the joint venture company shall be up to December
      31 on
      the Gregorian calendar as from the date of getting Business
      License.

     

    17.7    Both
      parties shall have ample and equal opportunity to review accounts of the joint
      venture company, which shall be properly kept in legal address of the joint
      venture company. The joint venture company shall monthly and quarterly provide
      the two parties with unaudited finance statements for them to continuously
      get
      acquaintance about the financial results of the joint venture
      company.

     

    In
      addition, under the premise of charging her own expenses and pre-notice to
      the
      joint venture company in advance, either party may invite an accountant
      registered in China or abroad to audit the joint venture company on behalf
      of
      herself. The joint venture company shall allow the auditor to be responsible
      for
      checking of all financial and accounting records under the condition that the
      auditor shall keep all the above documents strictly confidential.

     

    17.8    The
      joint
      venture company shall invite a China Public Certified Accountant (CPA), which
      is
      independent from either party to audit accounts, make fiscal financial
      statements and reports. The draft work sheet of audited finance statements
      and
      reports shall be submitted to the two parties and board of directors for
      examining and verifying within (two) months as from the date of the end of
      every
      fiscal year. The final work sheet shall be completed within (four) months as
      from the date of the end of every fiscal year.

     

    17.9    The
      joint
      venture company shall open foreign exchange deposit accounts and Renminbi
      account respectively in China, which are allowed for foreign exchange
      transactions. After approval of the State Administration of Foreign Exchange,
      the joint venture company can also open foreign exchange account
      abroad.

     

    17.10    Through
      sales and other methods approved by China’s Law and provisions (including
      foreign exchange in banks and foreign exchange swap centers according to foreign
      exchange administration rules), the joint venture company shall, on her own,
      maintain a balance between its foreign exchange receipts and
      expenditures.

     

    
      
        
        

      

      
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          14 -

        
          

        

      

      
        
        

      

       

    

    17.11    After
      prior year’s loss making-up, the board of directors shall decide the percentage
      of allocations for three reserve funds from profits after tax. Except for
      additional resolution of the board of directors, the total proportion of three
      funds withdrawn in any fiscal year shall not exceed 15% of profits after
      tax

     

    17.12    Joint
      Venture Company shall abide by the following provisions to distribute profits
      to
      both parties:

     

    (1)    The
      board
      of directors shall, within (four) months as from the date of the end of every
      fiscal year, decide the remaining profits (after withdrawn of three reserves)
      for production and operation and the profit to be distributed proportionately
      to
      each party’s investment in the joint venture company.

     

    (2)    Profits
      may not be distributed before the losses of the previous year have been made
      up.
      Remaining profits from previous year (or years) may be distributed together
      with
      those of the current year.

     

    (3)    Profits
      for distribution shall be calculated in Renminbi. But Party B enjoys first
      priority to be paid by foreign exchange of Joint Company for her part in shared
      profits. (Renminbi shall be converted to U.S. Dollar at the middle rate of
      buying and selling rate issued by the People’s Bank of China on the date of
      resolution on profit distribution by the board of directors.) If foreign
      currency fails to pay off Party B’s entire profit share by sufficient foreign
      exchange.

     

    The
      joint
      venture company shall, after receipt of Party A’s notice, for the party B,
      immediately convert the remaining Renminbi to foreign currency in banks or
      foreign exchange swap center to Party B. Upon failure of exchange, the joint
      venture company shall, after receipt of Party A’s notice, deposit the remaining
      Renminbi profit into an interest saving account individually bank account in
      name of the joint venture company and moreover, keep the Renminbi deposit and
      accrued interests for Party B for further notification from Party B. As long
      as
      Party B requires to dispose the above-said account in a way which doesn’t
      conflict with China’s Law and provisions, the joint venture company shall
      immediately follow Party B’s instructions.

     

    17.13    As
      for
      profits and other payment from the joint venture company to Part B abroad,
      the
      joint venture company shall, under premise of abiding by China’s foreign
      exchange administration provisions, remit the payment into banks’ account abroad
      designated by Party B.

     

    Article
      18

     

    Taxes

     

    18.1    The
      joint
      venture company shall pay all taxes and tariff prescribed by China local laws
      and relevant provisions. Chinese and foreign Staff employed by the joint venture
      shall pay individual income tax according to “the
      Individual Income Tax Law of the People’s Republic of China.”

     

    Article
      19

     

    Confidentiality

     

    19.1    Before
      or
      within contract period, one party has disclosed or probably may disclose his
      business, financial position, know how, research and development and other
      confidential information or documents to other parties. In addition, the two
      parties may get confidential and private documents of the two parties and vice
      versa, With the exception of other Confidentiality or non-disclosure agreements
      or provisions, either Party and the joint venture company who accept all above
      documents (with inclusion of written documents or

     

    
      
        
        

      

      
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          15 -

        
          

        

      

      
        
        

      

    

     

    non-written
      documents, hereinafter referred as “secret documents” shall, within the validity
      period of the contract and following two years”

     

    (1)    Keep
      them
      under secret conditions

     

    (2)    Except
      for her own employees who need to get acquaintance of the above secret documents
      to fulfill duties and will not disclose to any other person or
      Entity.

     

    19.2    The
      above
      regulation Article 19.1 shall not apply to the following secret
      documents:

     

    (1)    Any
      written record can verify that these documents from the disclosure party has
      been known to the other party before

     

    (2)    Not
      due
      to the receiver’s breach of this contract but those documents are or have been
      published

     

    (3)    Secret
      data received from another third party without any non-disclosure
      liability

     

    (4)    Data
      required to be disclosed as per order of court of jurisdiction or government
      departments

     

    19.3    As
      per
      required by one party, the joint venture company should sign another
      Non-disclosure agreement on the secret documents obtained from the party or
      its
      related companies, provisions of which shall be similar with those under Article
      19.

     

    19.4    Rule
      & regulations shall be formulated by every party and the joint venture
      company to ensure every party herself, related companies, Board members,
      high-ranking executives and other employees can equally abide by the above
      non-disclosure liability stipulated in Article 19. All directors, manager and
      other employees of the joint venture company shall sign a non-disclosure letter
      of guarantee with an acceptable style and contents.

     

    19.5    Rules
      and
      regulations under this Article 19 are stipulated without prejudice to any
      possible occurred rights or obligations of either Party or the joint venture
      company under relevant Law or relevant provisions.

     

    19.6    For
      any
      natural person or legal person of either party under this contract, after his
      transferred registered capital and correspondent rights and obligations no
      more
      belongs to his possession alone, article 19 keeps binding upon either party.
      In
      addition, even upon the contract expiration of the Duration or termination
      before the date of expiration or dissolutions of the joint venture, rights
      and
      obligations under article 19 shall be kept valid within prescribed
      period.

     

    Article
      20

     

    The
      duration of a Joint Venture Company

     

    20.1    The
      duration of a joint venture company shall be 15 years. The duration begins
      from
      the date when the joint venture is issued a business license.

     

    20.2    When
      both
      parties agree to extend the duration, the joint venture shall file an
      application for extending the duration by the parties with the examining and
      approving authorities not less than (6) months before the date of expiration
      of
      the duration. Duration of contract can only be extended after approval of the
      examining and approving authorities.

     

    
      
        
        

      

      
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    Article
      21

     

    Termination,
      Business Acquisition, Liquidation

     

    21.1    Except
      extension under Article 20.2, the contract shall be terminated upon expiration
      of the joint venture. This contract can also be terminated through consultation
      in written. Either party shall have the right to terminate the joint venture
      in
      case one of the following situations occurs by issuing a (30) day’s written
      pre-notice to other parties to terminate the contract before the date of
      expiration.

     

    (1)    The
      Joint
      Venture company stops operation or can’t pay off debts due;

     

    (2)    Any
      jurisdiction authorities for either party require to make amendments to this
      contract or any article of the article of associations, which will cause major
      unfavorable results to the joint venture company.

     

    (3)    Have
      the
      right to terminate this contract in accordance with the articles of 6.7, 24.1,
      25.3, 26.2.

     

    (4)    All
      or
      part of the joint venture company is confiscated, thus affecting major favorable
      results for the joint venture company.

     

    (5)    Either
      party violates the provisions prescribed under this contract, assign or transfer
      all or part of shares in registered capital of the joint venture company, under
      which only non-ceder party has the right to terminate this
      contract.

     

    (6)    Either
      party virtually violates this contract or rules and regulations of article
      of
      association and his such violating activities are not adjusted within (60)
      days
      as from the date of written notification of violation.

     

    (7)    Either
      party is declared bankruptcy or enters into bankruptcy, dissolution or
      liquidation procedures or is unable to pay off debts due, only other unaffected
      party can terminate this contract.

     

    21.2    If
      either
      party issues notice expression willingness to terminate this contract under
      article 21.1, both parties shall go through consultation to try to cancel the
      causes of termination within (two) months as from the date of the notice. If
      the
      problems keep unsolved after expiration of the above (two) months, either party
      shall have rights to buy out the other party’s equity under the article 21.3 in
      the joint venture company. But the condition shall be if it belongs to the
      termination of (5), (6), (7) of article 21.1, the observant party (parties)
      or
      non-affected party shall have the right to purchase equity of defaulting party
      or affected party.

     

    21.3    (1)    Upon
      determination before the date of expirations under article 21.1 under this
      contract or before expirations of cooperative duration stipulated under article
      20, with the exception of stipulations prescribed under 21.2 any party
      (“takeover party”), after consent from the other party (“withdrawn party”) can
      buy out the withdrawn party’s equity in the joint venture company (as an
      enterprise under operations). If the takeover party issues notice to buy out
      the
      other party’s equity, both parties shall decide the joint venture company’s
      value through consultations. If no agreements are reached within (30) days
      of
      discussion, then within the following (30) days they shall appoint an
      international investment bank corporation, using public international standards
      to decide the value (evaluated) of the joint venture as an enterprise under
      business operations. Relevant charges occurred should be borne the joint venture
      company.

     

    (2)    Business
      acquisition (takeover) prices shall be multiplied product of the following
      two
      items (a) value of the joint venture company specified under the item of article
      (1) multiply (b) Proportion of registered capital in the joint venture of the
      withdrawn party. The takeover party can inform the withdrawn

     

    
      
        
        

      

      
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          17 -

        
          

        

      

      
        
        

      

    

    party
      thirty- (30) -days in written notice after final evaluation of the joint venture
      company and buy out equity of withdrawn party in the joint venture company
      via
      acquisition.

     

    (3)    If
      the
      takeover party chooses to buy out the equity of withdrawn party in the joint
      venture, both parties shall timely sign a transfer or assignment contract on
      the
      above equity for necessary approval from authorities for application and
      completion of the assignment. If the above assignment is not completed within
      (90) days after the receipt of notice mentioned in article (2), then the
      acquisition party has the right (but no obligation), at any time, to terminate
      business acquisition. Under this situation, assignment application shall be
      withdrawn and the joint venture company and both parties shall apply for
      dissolution of the joint venture company from examining and approving
      authorities.

     

    21.4    After
      the
      termination of article 21 under this contract, if either party has not started
      the takeover procedures prescribed under the article 21.3, it shall be deemed
      that the board of directors has unanimously agree to pass the resolution to
      dissolve the joint venture company. Then the joint venture company shall
      immediately apply for dissolution from examining and approving authorities.
      To
      terminate this contract or dissolve the joint venture company, either party
      agrees to take any action prescribed in Law, signs up any document prescribed
      by
      law and agrees to promote Board members to take the above actions and sign
      up
      the above documents accordantly.

     

    Article
      22

     

    The
      Disposal of Assets after the Expiration of the Duration

     

    22.1    Upon
      the
      expiration of contract duration, or approval of dissolution in accordance with
      Article 20 or terminations of contract or dissolutions of the joint venture
      under other conditions, liquidation shall be carried out in accordance with
      China’s law, relevant provisions and rules and regulations below for liquidation
      (except for those conflicting with Law)

     

    (1)    The
      liquidation committee shall be made up of three members. Party A has right
      to
      appoint one member and Party B two members. Any resolutions made by liquidation
      committee shall be unanimously approved.

     

    (2)    In
      the
      process of drafting and carrying out liquidation plan, the liquidation committee
      shall make all efforts to get as high price as possible for assets of the joint
      venture. Moreover, in accordance with the State Regulations on Foreign Exchange
      Control, assets shall be sold in U.S dollar, other convertible foreign
      currencies or Renminbi.

     

    (3)    Assets
      evaluation process shall be operated for any asset to be liquidated. The
      liquidation committee shall invite an accounting firm to perform, which is
      registered in China, with correspondent qualifications, moreover independent
      from either party.

     

    (4)    Upon
      distribution of residual assets after liability and equity disposal and tax
      composition, Party B enjoys the first priority for foreign exchange of the
      joint
      venture. If foreign exchange in he joint venture fails to pay off Party B’s all
      proportional shares in the residual assets, the liquidation committee shall,
      for
      the party B, convert Renminbi to foreign exchange in Foreign exchange swap
      centers or banks.

     

    (5)    After
      the
      liquidation, either party shall be entitled to obtain copies of accounting
      vouches, books, financial statements, meeting minutes of the board of directors,
      resolutions and other relevant documents at their own expenses.

     

    
      
        
        

      

      
        -
          18 -

        
          

        

      

      
        
        

      

       

    

    22.2    Articles
      21.3, 21.4 and 22.1 shall be kept valid after the contract Expiration of the
      Duration or termination before the date of expiration of the joint venture
      until
      all takeover procedures under article 21.3 and the liquidation work under the
      article 22.1 has been completed.

     

    Article
      23

     

    Insurance

     

    23.1    Throughout
      contract period, the joint venture company on shall, in all the time, cover
      insurance. Types and value of insurance shall be decided by General Manager
      and
      approved by the board of directors. In accordance with law and provisions of
      the
      People’s Republic of China, he joint venture can cover insurance from Insurance
      companies or institutes in China and abroad.

     

    Article
      24

     

    Liability
      for breach of contract

     

    24.1    Should
      either Party fail to provide on schedule the contributions in accordance with
      the provisions defined in Article 6 of this contract, the defaulting party
      shall
      pay to the other party (3)% per month of the prescribed contributions to
      observant party starting from the first month after exceeding the time limit.
      Should the defaulting party fail for accumulatively three months, he shall
      pay
      (9%) of the other party’s prescribed contribution shall to the other party.
      Meanwhile, the observant party shall have the right to terminate the contract
      accordance with the provisions of Article 21.1 of the contract.

     

    24.2    Should
      all or part of the contract be unable to be fulfilled owing to the fault of
      one
      party, the party in breach shall bear the liability therefore. Under all
      circumstances, the liabilities of the above defaulting party shall be limited
      to
      the amount of their respective subscribed capital contributions

     

    Article
      25

     

    Force
      Majeure

     

    25.1    Any
      failure or delay in the performance by either Party hereto of its obligations
      under this contract shall not constitute a breach hereof if it is caused by
      the
      occurrences beyond the control, that is, force majeure.

     

    25.2    The
      declaring prevented party shall notify the other party in written without any
      delay, and within (15) days thereafter provide sufficient documents of Force
      Majeure and its affecting period for evidence

     

    25.3    Under
      the
      situation of Force Majeure, the two Parties hereto shall settle the problem
      through mutual consultation for a fair solution, moreover, shall dedicate all
      reasonable endeavors to cut down its influence. If the results or aftermath
      of
      Force Majeure event has set up heavy obstacles for the operation of the joint
      venture and lasts over 6 months, moreover, no fair solutions was found, both
      parties shall have the right to terminate the contract under the premise that
      the Party who terminates the contract has fulfilled his obligations prescribed
      under the article 25.3.

     

    
      
        
        

      

      
        -
          19 -

        
          

        

      

      
        
        

      

    

     

    Article
      26

     

    Governing
      Law and Jurisdiction

     

    26.1    The
      formation, validity, interpretation, execution and settlement of disputes in
      respect of, this contract shall be governed by the relevant laws of the People’s
      Republic of China. For unsettled problem under our contract having no law
      stipulation, it shall be settled abiding by international trade
      practice.

     

    26.2    With
      regard to newly issued law or rules and provision after the effective date
      of
      this contract or amendments or new explanation for current law provisions,
      which
      may have virtual and unfavorable effect on interests of one party under this
      contract, two parties shall, try their best, effectuate most necessary
      amendments to keep the either party economic interests no less than those before
      newly issued law or rules and provision after the effective date of this
      contract or amendments or new explanation for current law provisions. In case
      of
      such adjustments failure, any party whose interests were virtually or
      unfavorably affected has the right to terminate this contract.

     

    26.3    As
      from
      the date of this contract, the join venture and the two parties has the right
      to
      enjoy more favorable taxation, investment or other treatments than those in
      this
      contract as Foreign-invested Enterprise or foreign investors in accordance
      by
      law. As agreed, the two parties or the joint venture shall, under requirements
      of law, timely apply to enjoy favorable treatments the above.

     

    Article
      27

     

    Settlement
      of Disputes

     

    27.1    Any
      disputes arising from the execution of, or in connection with this contract
      shall be settled through friendly consultations between both parties. In case
      no
      understanding settlement can be reached through consultations within (60) days
      as from the date the written request from a Party to the other party for
      consultation, the disputes shall be submitted to the China International
      Economic and Trade Arbitration Commission (“Trade Arbitration Commission”) for
      arbitration in accordance with its current effective rules in
      Beijing.

     

    27.2    (3)
      arbitrators shall be appointed, including (1) appointed by Claimant and the
      other (1) by defendant, (1) Both parties may jointly appoint one arbitrator.
      Under the failure of joint appointment, Arbitration Commission shall appoint
      the
      latter arbitrator as the presiding arbitrator in arbitration
      tribunal.

     

    27.3    Arbitration
      procedures shall be written in Chinese.

     

    27.4    The
      arbitral award is final and binding upon both parties.

     

    27.5    In
      the
      course of disputes, rights and obligations under this contract shall be
      continuously executed by both parties except the part of the contract that
      is
      under arbitration.

     

    27.6    In
      any
      arbitration, any jurisdiction procedures of enforcement of arbitration award
      and
      any other lawsuit procedures, either party declared explicitly waiver of
      sovereign defenses, and other defenses based on such claims or facts as an
      institute or department from an independent and sovereign state.

     

    Article
      28

     

    Other
      clauses

     

    28.1    The
      failure, delay, relaxation or indulgence on the part of either party in
      exercising any power or right conferred under this contract does not operate
      as
      a waiver of that power or right, nor does any single

     

    
      
        
        

      

      
        -
          20 -

        
          

        

      

      
        
        

      

    

     

    exercise
      of a power or part exercise of right preclude any other or further exercise
      of
      this power or right under this agreement.

     

    28.2    Except
      other provisions, neither party may assign or transfer all or any part of its
      rights or obligations under this agreement subscribed to a third party without
      the prior written consent of the other party or approval from the examination
      and approval authority as per required legally.

     

    28.3    This
      contract is hereto made and entered into by two parties two parties based on
      mutual interests of their lawful successors and assignees of and is legally
      binding This contract shall not be subject to any oral amendments. Any
      amendments to the contract or other appendices shall come into force only after
      a written agreement has been signed both parties and after approved by the
      examining and approving authority as per requirement legally.

     

    28.4    Any
      provision in this agreement, which is invalid or unenforceable, shall not affect
      the validity or enforceability of other provision under this
      contract.

     

    28.5    The
      contract undersigned shall be written in Chinese and in (six) original
      copies.

     

    28.6    Any
      notice or written correspondence from one party to the other or the joint
      venture prescribed d under our contract shall be in Chinese. Any notice shall
      be
      sent by express courier or by fax. The express service company shall confirm
      the
      receipt of delivery. For any notice or written correspondence under this
      contract, (7) days as from the date from handing over to an express courier
      service company shall be deemed as Receipt Date, or, in case of fax, (1) days
      from the date as Receipt Date which, however, shall be verified by fax
      confirmation report.

     

    Any
      notice and correspondence shall be sent to the following address till written
      notice to the other Party for change of address.

     

    
      	
              Party
                A

              RUILI
                GROUP CO.,LTD.

              Address:
                No.1169, Yu Meng Road, Economic Development Zone, Rui An City

              Fax
                No.:0577-65608962

              Mail
                Acceptor: ZHANG Xiaoping

            
	 
	
              Party
                B

              FAIRFORD
                HOLDINGS LIMITED

              Address:
                No.12, Zhong Huan Xia Que Road, Hong Kong Special Administrative
                Region

              00852-25220172

              Mail
                Acceptor: ZHANG Ronggang

            
	 
	
              Joint
                Venture:

              RUILI
                GROUP RUIAN AUTO PARTS CO., LTD.

              Address:
                No.1169, Yu Meng Road, Economic Development Zone, Rui An City

              Tel:
                0577-65608962

              Mail
                Acceptor: General Manager

            

    

     

    28.7    This
      contract iterates full agreements on contract object and thus replaces all
      former discussions, negotiations and agreements on contract object. If the
      former resolutions conflict with provisions prescribed under this contract
      clause and the article of association, hereabove, if any, this contract clause
      and regulations prevail.

    
      
        
        

      

      
        -
          21 -

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Parties hereto have signed up this contracted by their
      duly
      authorized representatives in Wenzhou, Zhejiang province as of the date on
      December 12, 2006 first above written.

     

    
      	 	
              RUILI
                GROUP CO., LTD.

               

               

              Signature
                ______________________________

              Name:      
                ZHANG
                Xiaoping

               
                Board Chairman

              Nationality: China

               

            
	 	
              FAIRFORD
                HOLDINGS LIMITED

               

               

              Signature
                ______________________________

              Name:     
                 ZHANG
                Ronggang

               
                General Manager

              Nationality: China

               

            

    

     

     

    -
      22
      -EXHIBIT
        4.22

       

      WARRANT

    

    TO
      PURCHASE SHARES OF COMMON STOCK

    of

    NEURALSTEM,
      INC

    A
      Delaware Corporation

     

    THIS
      WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED PURSUANT
      TO THE EXERCISE OF THIS WARRANT (THE “WARRANT SHARES”) WILL BE, ACQUIRED SOLELY
      FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
      DISTRIBUTION THEREOF. NEITHER THIS WARRANT OR THE WARRANT SHARES (TOGETHER,
      THE
“SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
      SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
      REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
      COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
      DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE
      SECURITIES LAWS. THIS WARRANT MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER
      AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY
      INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS WARRANT.

     

    
      	
              Warrant
                No.: [_______]

            	
              June
                6, 2007

            

    

     

    THIS
      CERTIFIES THAT, for value received, Karl Johe (the “Holder”) is entitled to
      subscribe for and purchase from NEURALSTEM, INC, INC., a Delaware corporation
      (the “Company”), [______] ([_______]) shares of the Company's Common Stock (as
      adjusted pursuant to Section 2 hereof) (the “Warrant Shares”) at the purchase
      price of $3.01 per share (as adjusted pursuant to Section 2 hereof) (the
“Exercise Price”), upon the terms and subject to the conditions hereinafter set
      forth:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exercise
      Rights.

     

    (a) Cash
      Exercise. The
      purchase rights represented by this Warrant may be exercised by the Holder
      at
      any time during the term hereof, as defined in sections 1(f), in whole or in
      part, by surrender of this Warrant and delivery of a completed and duly executed
      Notice of Cash Exercise, in the form attached as Exhibit
      A
      hereto,
      accompanied by payment to the Company of an amount equal top the Exercise Price
      then in effect multiplied by the number of Warrant Shares to be purchased by
      the
      Holder in connection with such cash exercise of this Warrant, which amount
      may
      be paid, at the election of the Holder, by wire transfer, delivery of a check
      payable to the order of the Company or delivery of a promissory note made by
      the
      Company for whole or partial cancellation, or any combination of the foregoing,
      to the principal offices of the Company. The exercise of this Warrant shall
      be
      deemed to have been effected on the day on which the Holder surrenders this
      Warrant to the Company and satisfies all of the requirements of this Section
      1.
      Upon such exercise, the Holder will be deemed a shareholder of record of those
      Warrant Shares for which the Warrant has been exercised with all rights of
      a
      shareholder (including, without limitation, all voting rights with respect
      to
      such Warrant Shares and all rights to receive any dividends with respect to
      such
      Warrant Shares). If this Warrant is to be exercised in respect of less than
      all
      of the Warrant Shares covered hereby, the Holder shall be entitled to receive
      a
      new warrant covering the number of Warrant Shares in respect of which this
      Warrant shall not have been exercised and for which it remains subject to
      exercise. Such new warrant shall be in all other respects identical to this
      Warrant.

     

    (b) Net
      Issue Exercise.

     

    (i) In
      lieu
      of exercising the purchase rights represented by this Warrant on a cash basis
      pursuant to Section 1(a) hereof, the Holder may elect to exercise such rights
      represented by this Warrant at any time during the term hereof, in whole or
      in
      part, on a net-issue basis by electing to receive the number of Warrant Shares
      which are equal in value to the value of this Warrant (or any portion thereof
      to
      be canceled in connection with such net-issue exercise) at the time of any
      such
      net-issue exercise, by delivery to the principal offices of the Company this
      Warrant and a completed and duly executed Notice of Net-Issue Exercise, in
      the
      form attached as Exhibit
      B
      hereto,
      properly marked to indicate (A) the number of Warrant Shares to be delivered
      to
      the Holder in connection with such net-issue exercise, (B) the number of Warrant
      Shares with respect to which the Warrant is being surrendered in payment of
      the
      aggregate Exercise Price for the Warrant Shares to be delivered to the Holder
      in
      connection with such net-issue exercise, and (C) the number of Warrant
      Shares which remain subject to the Warrant after such net-issue exercise, if
      any
      (each as determined in accordance with Section 1(b)(ii) hereof). 

     

    (ii) In
      the
      event that the Holder shall elect to exercise the rights represented by this
      Warrant in whole or in part on a net-issue basis pursuant to this Section 1(b),
      the Company shall issue to the Holder the number of Warrant Shares determined
      in
      accordance with the following formula:

     

    X
      =
Y
      (A-B)

          
      A

    

      
        	
                X

              	
                =

              	
                the
                  number of Warrant Shares to be issued to the Holder in connection
                  with
                  such net-issue exercise.

              
	 	 	 
	
                Y

              	
                =

              	
                the
                  number of Warrant Shares subject to this Warrant.

              
	 	 	 
	
                A

              	
                =

              	
                the
                  Fair Market Value (as defined below) of one share Common Stock
                  on the date
                  of exercise.

              
	 	 	 
	
                B

              	
                =

              	
                the
                  Exercise Price in effect as of the date of such net-issue exercise
                  (as
                  adjusted pursuant to Section 2
                  hereof).

              

      

    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (c) Fair
      Market Value.
      For
      purposes of this warrant, the “Fair Market Value” of the Common Stock shall have
      the following meanings:

     

    (i) If
      the
      Common Stock is not listed for trading on a national securities exchange or
      admitted for trading on a national market system, the then Fair Market Value
      of
      a share of Common Stock shall be as determined in good faith by the Board of
      Directors (the “Board of Directors”).

     

    (ii) If
      the
      Common Stock is listed for trading on a national securities exchange or admitted
      for trading on a national market system, then the Fair Market Value of Common
      Stock shall be deemed to be the closing price quoted on the principal securities
      exchange on which the Common Stock is listed for trading, or if not so listed,
      the average of the closing bid and asked prices for Common Stock quoted on
      the
      national market system on which Common Stock is admitted for trading, each
      as
      published in the Western Edition of The
      Wall Street Journal,
      in each
      case for the ten trading days prior to the date of exercise pursuant to
      clause (b) of Fair Market Value for Common Stock in accordance
      herewith.

     

    (d) Additional
      Conditions to Exercise of Warrant.
      Unless
      there is a registration statement declared or ordered effective by the
      Securities and Exchange Commission (the “Commission”) under the Securities Act
      which includes the Warrant Shares to be issued upon the exercise of the rights
      represented by this Warrant, such rights may not be exercised unless and
      until:

     

    (i) 
      the
      Company shall have received an Investment Representation Statement, in the
      form
      attached as Exhibit C
      hereto,
      certifying that, among other things, the Warrant Shares to be issued upon the
      exercise of the rights represented by this Warrant are being acquired for
      investment and not with a view to any sale or distribution thereof;
      and

     

    (ii) each
      certificate evidencing the Warrant Shares to be issued upon the exercise of
      the
      rights represented by this Warrant shall be stamped or imprinted with a legend
      substantially in the following form:

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
      NOT
      FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
      1933,
      AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY
      NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, OR OTHERWISE TRANSFERRED
      IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
      THE
      COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
      SECURITIES ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES
      AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
      MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY
      AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. THIS CERTIFICATE MUST BE
      SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO
      THE
      SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN ANY OF THE SHARES REPRESENTED
      BY THIS CERTIFICATE.

     

    THE
      SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER
      CONTAINED IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
      WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

     

    (e) Fractional
      Shares. Upon
      the
      exercise of the rights represented by this Warrant, the Company shall not be
      obligated to issue fractional shares of Common Stock, and in lieu thereof,
      the
      Company shall pay to the Holder an amount in cash equal to the Fair Market
      Value
      per share of Common Stock immediately prior to such exercise multiplied by
      such
      fraction (rounded to the nearest cent).

     

    (f) Term
      of Warrant.
      This
      Warrant shall be exercisable at any time on or after October 31, [______].
      Notwithstanding the fogoing, upon the occurance of an event which would result
      in an acceleratin of vesting under the Holders current employment agreement
      with
      the Company, this Warrant shall become immediately exercisable. This warrant
      shall expire on the earlier of: (i) five (5) years from the date it become
      exercisable; and (ii) the day Holders is no longer employed by the Company.
      

     

    (g) Record
      Ownership of Warrant Shares. The
      Warrant Shares shall be deemed to have been issued, and the person in whose
      name
      any certificate representing Warrant Shares shall be issuable upon the exercise
      of the rights represented by this Warrant (as indicated in the appropriate
      Notice of Exercise) shall be deemed to have become the holder of record of
      (and
      shall be treated for all purposes as the record holder of) the Warrant Shares
      represented thereby, immediately prior to the close of business on the date
      or
      dates upon which the rights represented by this Warrant are exercised in
      accordance with the terms hereof.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    (h) Stock
      Certificates.
      In
      the
      event of any exercise of the rights represented by this Warrant, certificates
      for the Warrant Shares so purchased pursuant hereto shall be delivered to the
      Holder promptly and, unless this Warrant has been fully exercised or has
      expired, a new Warrant representing the Warrant Shares with respect to which
      this Warrant shall not have been exercised shall also be issued to the Holder
      within such time.

     

    (i) Issue
      Taxes.
      The
      issuance of certificates for shares of stock upon the exercise of the rights
      represented by this Warrant shall be made without charge to the Holder for
      any
      issuance tax in respect thereof; provided,
      however,
      that
      the Company shall not be required to pay any tax which may be payable in respect
      of any transfer involved in the issuance and delivery of any certificate in
      a
      name other than that of the Holder of the Warrant.

     

    (j) Conditional
      Exercise.
      The
      Holder of this Warrant shall have the right to submit a notice of exercise
      of
      this Warrant conditional upon the an acquisition of the Company. If such
      transaction upon which such exercise is conditioned is not consummated, such
      notice of exercise shall be deemed of no further force or effect. For the
      purposes hereof, the Fair Market Value for the purposes of Section 1(b)
      hereto shall be the value of the consideration payable or issuable to the
      holders of the Company's Common Stock.

     

    (k) Stock
      Fully Paid; Reservation of Shares.
      All
      Warrant Shares that may be issued upon the exercise of the rights represented
      by
      this Warrant, upon issuance, will be duly and validly issued, will be fully
      paid
      and nonassessable, will not violate any preemptive rights or rights of first
      refusal, will be free from restrictions on transfer other than restrictions
      on
      transfer imposed by applicable federal and state securities laws, will be issued
      in compliance with all applicable federal and state securities laws, and will
      have the rights, preferences and privileges described in the Company's
      Certificate of Incorporation, as amended; and the Warrant Shares will be free
      of
      any liens or encumbrances, other than any liens or encumbrances created by
      or
      imposed upon the Holder through no action of the Company. During the period
      within which the rights represented by the Warrant may be exercised, the Company
      will at all times have authorized and reserved for the purpose of issuance
      upon
      exercise of the purchase rights evidenced by this Warrant, a sufficient number
      of shares of Common Stock to provide for the exercise of the right represented
      by this Warrant. 

     

    2. Adjustment
      Rights.

     

    (a) Right
      to Adjustment.
      The
      number of Warrant Shares purchasable upon the exercise of the rights represented
      by this Warrant, and the Exercise Price therefor, shall be subject to adjustment
      from time to time upon the occurrence of certain events, as follows:

     

    (i) Merger.
      If
      at any
      time there shall be a merger or consolidation of the Company with or into
      another corporation when the Company is not the surviving corporation, then,
      as
      a part of such merger or consolidation, lawful provision shall be made so that
      the holder of this Warrant shall thereafter be entitled to receive upon exercise
      of this Warrant, during the period specified herein and upon payment of the
      aggregate Exercise Price then in effect, the number of shares of stock or other
      securities or property of the successor corporation resulting from such merger
      or consolidation, to which a holder of the stock deliverable upon exercise
      of
      this Warrant would have been entitled in such merger or consolidation if this
      Warrant had been exercised immediately before such merger or consolidation.
      In
      any such case, appropriate adjustment shall be made in the application of the
      provisions of this Warrant with respect to the rights and interests of the
      Holder after the merger or consolidation.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (ii) Stock
      Splits, Dividends, Combinations and Consolidations.
      In
      the
      event of a stock split, stock dividend or subdivision of or in respect of the
      outstanding shares of Common Stock, the number of Warrant Shares issuable upon
      the exercise of the rights represented by this Warrant immediately prior to
      such
      stock split, stock dividend or subdivision shall be proportionately increased
      and the Exercise Price then in effect shall be proportionately decreased,
      effective at the close of business on the date of such stock split, stock
      dividend or subdivision, as the case may be. In the event of a reverse stock
      split, consolidation, combination or other similar event of or in respect of
      the
      outstanding shares of Common Stock, the number of Warrant Shares issuable upon
      the exercise of the rights represented by this Warrant immediately prior to
      such
      reverse stock split, consolidation, combination or other similar event shall
      be
      proportionately decreased and the Exercise Price shall be proportionately
      increased, effective at the close of business on the date of such reverse stock
      split, consolidation, combination or other similar event, as the case may
      be.

     

    (b) Adjustment
      Notices.
      Upon any
      adjustment of the Exercise Price, and any increase or decrease in the number
      of
      Warrant Shares subject to this Warrant, in accordance with this Section 2,
      the Company, within 30 days thereafter, shall give written notice thereof to
      the
      Holder at the address of such Holder as shown on the books of the Company,
      which
      notice shall state the Exercise Price as adjusted and, if applicable, the
      increased or decreased number of Warrant Shares subject to this Warrant, setting
      forth in reasonable detail the method of calculation of each such adjustment.
      

     

    3. Transfer
      of Warrant.

     

    (a) Conditions. This
      Warrant and the rights represented hereby are not transferable, except in
      accordance with the conditions set forth in this Section 3. In order to
      effect any transfer of all or a portion of this Warrant, the Holder hereof
      shall
      deliver to the Company a completed and duly executed Notice of Transfer, in
      the
      form attached as Exhibit D
      hereto.
      Once the Warrant is exercised, the Warrant Shares shall be transferable in
      accordance with the Investor Rights Agreement.

     

    (b) Additional
      Conditions to Transfer of Warrant.
      Unless
      there is a registration statement declared or ordered effective by the
      Commission under the Securities Act which includes this Warrant, this Warrant
      may not be transferred unless and until:

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    (i) the
      Company receives an Investment Representation Statement, in the form attached
      as
Exhibit E
      hereto,
      certifying that, among other things, this Warrant is being acquired for
      investment and not with a view to any sale or distribution thereof;
      and

     

    (ii) the
      Company receives a written notice from the Holder which describes the manner
      and
      circumstances of the proposed transfer accompanied by a written opinion of
      Holder’s legal counsel, in form and substance reasonably satisfactory to the
      Company, stating that such transfer is exempt from the registration and
      prospectus delivery requirements of the Securities Act and all applicable state
      securities laws or with a Commission “no-action” letter stating that future
      transfers of such securities by the transferor or the contemplated transferee
      would be exempt from registration under the Securities Act or such securities
      may be transferred in accordance with Rule 144(k). Upon receipt of the
      foregoing, the Company shall, or shall instruct its transfer agent to, promptly,
      and without expense to the Holder issue new securities in the name of the Holder
      not bearing the legends required under Section 1(c)(ii). In addition, new
      securities shall be issued without such legend if such legends may be properly
      removed under the terms of Rule 144(k).

     

    4. No
      Shareholder Rights.
      The
      Holder of this Warrant (and any transferee hereof) shall not be entitled to
      vote
      on matters submitted for the approval or consent of the shareholders of the
      Company or to receive dividends declared on or in respect of shares of Common
      Stock, or otherwise be deemed to be the holder of Common Stock or any other
      capital stock or other securities of the Company which may at any time be
      issuable upon the exercise of the rights represented hereby for any purpose,
      nor
      shall anything contained herein be construed to confer upon the Holder (or
      any
      transferee hereof) any of the rights of a shareholder of the Company or any
      right to vote for the election of directors or upon any matter submitted for
      the
      approval or consent of the shareholders, or to give or withhold consent to
      any
      corporate action (whether upon any recapitalization, issuance of stock,
      reclassification of stock, merger or consolidation, conveyance, or otherwise)
      or
      to receive notice of meetings, or to receive dividends or subscription rights
      or
      otherwise until this Warrant shall have been exercised as provided herein.
      No
      provision of this Warrant, in the absence of the actual exercise of such Warrant
      or any part thereof into Common Stock issuable upon such exercise, shall give
      rise to any liability on the part of such Holder as a shareholder of the
      Company, whether such liability shall be asserted by the Company or by creditors
      of the Company.

     

    5. Company Registration.

     

    (a) Notice
      of Registration.
      If at
      any time after the date of this Warrant the Company shall determine to register
      any of its equity securities, either for its own account or the account of
      a
      security holder or holders, other than a registration relating solely to
      employee benefit plans, (ii) a registration relating solely to a Rule 145
      transaction, the Company will:

     

    (a) promptly
      give the Holder written notice thereof; and

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (b) include
      in such registration (and any related qualification under blue sky laws or
      other
      compliance), and in any underwriting involved therein, all the Warrant Shares
      specified in a written request or requests, made within ten (10) business days
      after receipt of such written notice from the Company, by the
      Holder.

     

    (b) Underwriting.
      If the
      registration of which the Company gives notice is for a registered public
      offering involving an underwriting, the Company shall so advise the Holder
      as a
      part of the written notice given pursuant to Section 5. In such event the
      right of any Holder to registration pursuant to this Section 5 shall be
      conditioned upon such the Holder's participation in such underwriting, including
      the exercise by Holder of any market stand off agreements, cut back in the
      amount of securities to be registered or any other condition reasonably
      requested by the underwriter. 

     

    6. Miscellaneous.

     

    (a) Governing
      Law.
      This
      Warrant will be construed in accordance with, and governed in all respects
      by,
      the laws of the State of Delaware, as applied to agreements entered into, and
      to
      be performed entirely in such state, between residents of such
      state.

     

    (b) Dispute
      Resolution. 

     

    (i) Negotiation.
      In
      the
      event of any dispute, controversy or claim arising out of or relating to this
      Warrant, representatives of the parties will meet in a location chosen by the
      party initiating the negotiation not later than ten business days after written
      notice from one party to the other of such dispute and will enter into good
      faith negotiations aimed at resolving the dispute. If they are unable to resolve
      the dispute in a mutually satisfactory manner within 30 business days from
      the
      date of such notice, the matter may be submitted by either party to arbitration
      as provided for in Section 5(b)(ii), below.

     

    (ii) Arbitration.

     

    (a) Any
      dispute, controversy or claim between or among any of the parties hereto arising
      out of or relating to this Warrant or the breach, termination or invalidity
      thereof, including any dispute as to whether any dispute is subject to
      arbitration, which has not been resolved after good faith negotiations pursuant
      to subsection 5(b)(i) hereof will be settled by binding arbitration
      administered by the American Arbitration Association in accordance with its
      then
      current Commercial Arbitration Rules except as provided herein.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (b) Any
      arbitration will be conducted in a location in the metropolitan area of the
      party responding to the action by a three person arbitration panel. The three
      person arbitration panel will consist of one party arbitrator selected by the
      Company, one party arbitrator selected by the Holder, each of whom will be
      named
      within ten business days of the demand for arbitration, and one neutral
      arbitrator selected by the first two arbitrators. If the two party appointed
      arbitrators cannot agree on the neutral arbitrator within ten business days
      of
      the selection of the last party appointed arbitrator, the American Arbitration
      Association will appoint the neutral arbitrator, who will act as chairperson.
      In
      the event of a vacancy with respect to an arbitrator, the vacancy will be filled
      within ten business days of notice of the vacancy in the same manner and subject
      to the same requirements as are provided for in the original appointment to
      that
      position. If the vacancy is not filled within ten business days, the American
      Arbitration Association will make the appointment.

     

    It
      is the
      intent of the parties to avoid the appearance of impropriety due to bias or
      partiality on the part of the neutral arbitrator. Accordingly, prior to his
      or
      her appointment, such neutral arbitrator will disclose to the parties and the
      other members of the tribunal, any financial, fiduciary, kinship or other
      relationship between the neutral arbitrator and any party or its counsel. Any
      party will have the right to challenge in writing the appointment of the neutral
      arbitrator on the basis of and within five days of such disclosure. In the
      event
      of a challenge, the American Arbitration Association will uphold or dismiss
      the
      challenge and its decision will be conclusive.

     

    (c) The
      law
      applicable to the validity of the arbitration clause, the conduct of the
      arbitration, including the resort to a court for interim relief, enforcement
      of
      the award or any other question of arbitration law or procedure will be the
      United States' Federal Arbitration Act, 9 U.S.C. § 1 et seq.
      The
      parties shall be entitled to engage in reasonable discovery including requests
      for the production of all relevant documents and a reasonable number of
      depositions. The arbitration panel shall have the sole discretion to determine
      the reasonableness of any requested document production or deposition. It is
      the
      intent of the parties that a substantive hearing be held as soon as practicable
      after the appointment of the neutral arbitrator or the rejection of a challenge
      thereto, whichever occurs later. The presentation of evidence will be governed
      by the federal Rules of Evidence. A stenographic record of all witness testimony
      will be made.

     

    (d) Any
      award, including any interim award, made will be made by a majority of the
      arbitrators applying the substantive law of Delaware and will (i) be in
      writing and state the arbitration panel's findings of fact and conclusions
      of
      law, (ii) be made promptly, and in any event within 60 days after the
      conclusion of the arbitration hearing; and (iii) be binding against the
      parties involved and may be entered for enforcement in any court of competent
      jurisdiction.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    (e) Fifty
      percent of the costs of any arbitration proceeding (e.g., arbitrators, court
      reporter and room rental fees) will be borne by the Company with the remaining
      50% to paid by the other party to the dispute. However, each party will pay
      its
      own expense, including attorneys' and other professionals' fees and
      disbursements.

     

    (f) The
      arbitration provision set forth in this Section 5(b)(ii) will be a complete
      defense to any suit, action or proceeding instituted in any court with respect
      to any matter arbitrable under this Warrant, except that judicial intervention
      may be sought in accordance with Section 5(b)(iii) hereof.

     

    (iii) No
      Waivers; Interim Relief.
      The
      parties mutually acknowledge that an award of damages may be inadequate to
      remedy any breach hereof and that injunctive relief may be required. Therefore,
      (i) a party may request a court of competent jurisdiction to provide interim
      injunctive relief in aid of arbitration or to prevent a violation of this
      Warrant pending arbitration, and any such request will not be deemed a waiver
      or
      breach of the obligations to arbitrate set forth herein and (ii) the arbitrators
      may order equitable relief where they deem it appropriate and the parties agree
      that any interim relief ordered by the arbitrators may be immediately and
      specifically enforced by a court otherwise having jurisdiction over the
      parties.

     

    (c) Successors
      and Assigns.
      Subject
      to the restrictions on transfer described in Section 3, the rights and
      obligations of the Company and Holder of this Warrant shall be binding upon
      and
      benefit the successors, assigns, heirs, administrators and transferees of the
      parties.

     

    (d) Waiver
      and Amendment.
      Any
      provision of this Warrant may be amended, waived or modified upon the written
      consent of the Company and the Holder.

     

    (e) Notices. All
      notices and other communications required or permitted hereunder will be in
      writing and will be sent by telecopier or mailed by first-class mail, postage
      prepaid, or delivered either by hand or by messenger, addressed (a) if to
      the Holder, at the address indicated on the Company's books, or at such other
      address and telecopier number as Holder will have furnished to the Company
      in
      writing, or (b) if to the Company, at 9700 Great Seneca Highway, Rockville,
      Maryland 20850 Attn: Chief Financial Officer, or at such other address and
      telecopier number as the Company will have furnished to the Holder and each
      such
      other holder in writing.

     

    Each
      such
      notice or other communication will for all purposes of this Agreement be treated
      as effective or having been given when delivered if delivered personally or
      by
      messenger, or, if sent by mail, at the earlier of its receipt or 72 hours after
      the same has been deposited in a regularly maintained receptacle for the deposit
      of the United States mail addressed and mailed as aforesaid.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (f) Severability.
      In case
      any provision of this Warrant will be invalid, illegal or unenforceable, the
      validity, legality and enforceability of the remaining provisions will not
      in
      any way be affected or impaired thereby.

     

    (g) Lost
      Warrant.
      Upon
      receipt from the Holder of written notice or other evidence reasonably
      satisfactory to the Company of the loss, theft, destruction or mutilation of
      the
      Warrant and, in the case of any such loss, theft or destruction, upon receipt
      of
      an unsecured indemnity agreement and an affidavit of lost warrant, or in the
      case of any such mutilation upon surrender and cancellation of the Warrant,
      the
      Company, at the Company's expense, will make and deliver a new Warrant in lieu
      of the lost, stolen, destroyed or mutilated Warrant carrying the same rights
      and
      obligations as the original Warrant. The Company will also pay the cost of
      all
      deliveries of the Warrant upon any exchange thereof. 

     

    [Remainder
      of Page Intentionally Left Blank]

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

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

     

    
      	 	
              NEURALSTEM,
                INC, INC.

            
	 	
              a
                Delaware corporation

            
	 	 
	 	
              By:

            	 
	 	 	
              I.
                Richard Garr

            
	 	 	
              President
                and Chief Executive Officer

            

    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    NOTICE
      OF CASH EXERCISE

     

    TO: [_________]

     

    1. The
      undersigned hereby elects to purchase ____________ shares of Common Stock of
      Neuralstem, Inc, Inc., a Delaware corporation (the “Company”), pursuant to the
      terms of Warrant No. [______], issued June 6, 2007 to and in the name of Karl
      Johe, a copy of which is attached hereto (the “Warrant”), and tenders herewith
      full payment of the aggregate Exercise Price for such shares in accordance
      with
      the terms of the Warrant.

     

    2. Please
      issue a certificate or certificates representing said shares of ____________
      Stock in such name or names as specified below:

     

    
      	 	 	 
	
              (Name)

            	 	
              (Name)

            
	 	 	 
	 	 	 
	
              (Address)

            	 	
              (Address)

            

    

     

    3. The
      undersigned hereby represents and warrants that the aforesaid shares of stock
      are being acquired for the account of the undersigned for investment and not
      with a view to, or for resale in connection with, the distribution thereof,
      and
      that the undersigned has no present intention of distributing or reselling
      such
      shares. The undersigned has executed an Investment Representation Statement
      with
      certain representations and warranties, in the form attached as Exhibit
      C
      to the
      Warrant, concurrently herewith.

     

    
      	
              Date:
                ___________

            	
              Karl
                Johe

            
	 	 
	 	
              By:

            	 
	 	 	
              (Signature
                must conform in all respects to name of the Holder as set forth on
                the
                face of the Warrant)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    NOTICE
      OF NET-ISSUE EXERCISE

     

    TO: [_________]

     

    1. The
      undersigned hereby elects to purchase ____________ shares of Common Stock of
      Neuralstem, Inc, Inc., a Delaware corporation (the “Company”), on a net-issue
      basis pursuant to the terms of Warrant No. [______], issued June 6, 2007 to
      and
      in the name of Karl Johe, a copy of which is attached hereto (the
“Warrant”).

     

    2. Net-Issue
      Information:

     

    (a) Number
      of
      Shares of ____________
      Stock to
      be Delivered:__________________

     

    (b) Number
      of
      Shares Subject to the Warrant Surrendered:______________________

     

    (c) Number
      of
      Shares Remaining Subject to Warrant:__________________________

     

    3. Please
      issue a certificate or certificates representing said shares of ____________
      Stock in
      such name or names as specified below:

     

    
      	 	 	 
	
              (Name)

            	 	
              (Name)

            
	 	 	 
	 	 	 
	
              (Address)

            	 	
              (Address)

            

    

     

    4. The
      undersigned hereby represents and warrants that the aforesaid shares of stock
      are being acquired for the account of the undersigned for investment and not
      with a view to, or for resale in connection with, the distribution thereof,
      and
      that the undersigned has no present intention of distributing or reselling
      such
      shares. In support thereof, the undersigned has executed an Investment
      Representation Statement, in the form attached as Exhibit
      C
      to the
      Warrant, concurrently herewith.

    

    
      	
              Date:
                ___________

            	
              Karl
                Johe

            
	 	 
	 	
              By:

            	 
	 	 	
              (Signature
                must conform in all respects to name of the Holder as set forth on
                the
                face of the Warrant)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      C

     

    INVESTMENT
      REPRESENTATION STATEMENT

    

      
        	
                PURCHASER

              	
                :

              	
                Karl
                  Johe

              
	 	 	 
	
                SELLER
                  

              	
                :

              	
                [_________]

              
	 	 	 
	
                COMPANY 

              	
                :

              	
                Neuralstem,
                  Inc, Inc.

              
	 	 	 
	
                SECURITY 

              	
                :

              	
                COMMON
                  STOCK ISSUED UPON THE EXERCISE OF WARRANT NO. [______], ISSUED
                  ON June 6,
                  2007

              
	 	 	 
	
                AMOUNT 

              	
                :

              	
                ____________
                  SHARES

              
	 	 	 
	
                DATE 

              	
                :

              	
                ________________________

              

      

    

     

    The
      undersigned hereby represents and warrants to Neuralstem, Inc, Inc., a Delaware
      corporation (the “Company”), as follows:

     

    1. I
      am
      aware of the business affairs, financial condition and results of operations
      of
      the Company and have acquired sufficient information about the Company to reach
      an informed and knowledgeable investment decision to acquire the Securities.
      I
      am purchasing the Securities for my own account for investment purposes only
      and
      not with a view to, or for the resale in connection with, any “distribution”
thereof for purposes of the Securities Act of 1933, as amended (the “Securities
      Act”).

     

    2. I
      understand that the Securities have not been registered under the Securities
      Act
      in reliance upon a specific exemption therefrom, which exemption depends upon,
      among other things, the bona fide nature of my investment intent as expressed
      herein. I understand that, in the view of the Securities and Exchange Commission
      (the “Commission”), the statutory basis for such exemption may be unavailable if
      my representation was predicated solely upon a present intention to hold the
      Securities for the minimum capital gains period specified under tax statutes,
      for a deferred sale, for or until an increase or decrease in the market price
      of
      the Securities, or for a period of one year or any other fixed period in the
      future.

     

    3. I
      further
      understand that the Securities must be held indefinitely unless subsequently
      registered under the Securities Act or unless an exemption from registration
      is
      otherwise available. Moreover, I understand that the Company is under no
      obligation to register the Securities. In addition, I understand that the
      certificate evidencing the Securities will be imprinted with a legend which
      prohibits the transfer of the Securities unless they are registered or such
      registration is not required in the opinion of counsel for the
      Company.

     

    4. I
      am
      familiar with the provisions of Rule 144, promulgated under the Securities
      Act, which, in substance, permits limited public resale of “restricted
      securities” acquired, directly or indirectly, from the issuer thereof, in a
      non-public offering subject to the satisfaction of certain
      conditions.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. I
      agree
      that, if so requested by the Company or any representative of the underwriters
      (the "Managing Underwriter") in connection with any registration of the offering
      of any securities of the Company under the Securities Act, I shall not sell
      or
      otherwise transfer any of the above listed Securities or other securities of
      the
      Company during the 180-day period (or such other period as may be requested
      in
      writing by the Managing Underwriter and agreed to in writing by the Company)
      (the "Market Standoff Period") following the effective date of a registration
      statement of the Company filed under the Securities Act. Such restriction shall
      apply only to the first registration statement of the Company to become
      effective under the Securities Act that includes securities to be sold on behalf
      of the Company to the public in an underwritten public offering under the
      Securities Act. The Company may impose stop-transfer instructions with respect
      to securities subject to the foregoing restrictions until the end of such Market
      Standoff Period.

     

    6. I
      further
      understand that in the event all of the applicable requirements of Rule 144
      are
      not satisfied, registration under the Securities Act, compliance with
      Regulation A, or some other registration exemption will be required; and
      that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of
      the Commission has expressed its opinion that persons proposing to sell private
      placement securities other than in a registered offering and otherwise than
      pursuant to Rule 144 will have a substantial burden of proof in
      establishing that an exemption from registration is available for such offers
      or
      sales, and that such persons and their respective brokers who participate in
      such transactions do so at their own risk.

     

    
      	
              Date:
                ___________

            	
              Karl
                Johe

            
	 	 
	 	
              By:

            	 
	 	 	
              (Signature
                must conform in all respects to name of the Holder as set forth on
                the
                face of the Warrant)

            

    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      D

     

    NOTICE
      OF TRANSFER

     

    FOR
      VALUE
      RECEIVED, the undersigned hereby sells, assigns and transfers unto
      ______________________________ the right represented by Warrant No. [______],
      issued on June 6, 2007 to and in the name of Karl Johe to purchase 1,000,000
      shares of Common Stock
      of
      Neuralstem, Inc, Inc., a Delaware corporation (the “Company”), a copy of which
      is attached hereto (the “Warrant”), and appoints ______________________________
      as attorney-in-fact to transfer such right on the books of the Company with
      full
      power of substitution in the premises.

     

    
      	
              Date:
                ___________

            	
              Karl
                Johe

            
	 	 
	 	
              By:

            	 
	 	 	
              (Signature
                must conform in all respects to name of the Holder as set forth on
                the
                face of the Warrant)

            
	 	 	 
	 	 
	 	 
	 	
              (Address)

            

    

    

    
      	
              Signed
                in the presence of:

            	 
	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      E 

     

    INVESTMENT
      REPRESENTATION STATEMENT

     

    
      	
              PURCHASER

            	
              :

            	
              __________________________

            
	 	 	 
	
              TRANSFEROR

            	
              :

            	
              Karl
                Johe

            
	 	 	 
	
              COMPANY 

            	
              :

            	
              Neuralstem,
                Inc, Inc.

            
	 	 	 
	
              SECURITY 

            	
              :

            	
              Warrant
                no. [______] issued on June 6, 2007

            
	 	 	 
	
              AMOUNT 

            	
              :

            	
              __________
                SHARES

            
	 	 	 
	
              DATE 

            	
              :

            	
              ________________________

            

    

     

    The
      undersigned hereby represents and warrants to Neuralstem, Inc, Inc., a Delaware
      corporation (the “Company”), as follows:

     

    1. I
      am
      aware of the business affairs, financial condition and results of operations
      of
      the Company, and have acquired sufficient information about the Company to
      reach
      an informed and knowledgeable investment decision to acquire the Securities.
      I
      am purchasing the Securities for my own account for investment purposes only
      and
      not with a view to, or for the resale in connection with, any “distribution”
thereof for purposes of the Securities Act of 1933, as amended (the “Securities
      Act”).

     

    2. I
      understand that the Securities have not been registered under the Securities
      Act
      in reliance upon a specific exemption therefrom, which exemption depends upon,
      among other things, the bona fide nature of my investment intent as expressed
      herein. I understand that, in the view of the Securities and Exchange Commission
      (the “Commission”), the statutory basis for such exemption may be unavailable if
      my representation was predicated solely upon a present intention to hold the
      Securities for the minimum capital gains period specified under tax statutes,
      for a deferred sale, for or until an increase or decrease in the market price
      of
      the Securities, or for a period of one year or any other fixed period in the
      future.

     

    3. I
      further
      understand that the Securities must be held indefinitely unless subsequently
      registered under the Securities Act or unless an exemption from registration
      is
      otherwise available. Moreover, I understand that the Company is under no
      obligation to register the Securities. In addition, I understand that the
      certificate evidencing the Securities will be imprinted with a legend which
      prohibits the transfer of the Securities unless they are registered or such
      registration is not required in the opinion of counsel for the
      Company.

     

    4. I
      am
      familiar with the provisions of Rule 144, promulgated under the Securities
      Act, which, in substance, permits limited public resale of “restricted
      securities” acquired, directly or indirectly, from the issuer thereof, in a
      non-public offering subject to the satisfaction of certain
      conditions.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. I
      agree
      that, if so requested by the Company or any representative of the underwriters
      (the "Managing Underwriter") in connection with any registration of the offering
      of any securities of the Company under the Securities Act, I shall not sell
      or
      otherwise transfer any of the above listed Securities or other securities of
      the
      Company during the 180-day period (or such other period as may be requested
      in
      writing by the Managing Underwriter and agreed to in writing by the Company)
      (the "Market Standoff Period") following the effective date of a registration
      statement of the Company filed under the Securities Act. Such restriction shall
      apply only to the first registration statement of the Company to become
      effective under the Securities Act that includes securities to be sold on behalf
      of the Company to the public in an underwritten public offering under the
      Securities Act. The Company may impose stop-transfer instructions with respect
      to securities subject to the foregoing restrictions until the end of such Market
      Standoff Period.

     

    6. I
      further
      understand that in the event all of the applicable requirements of Rule 144
      are
      not satisfied, registration under the Securities Act, compliance with
      Regulation A, or some other registration exemption will be required; and
      that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of
      the Commission has expressed its opinion that persons proposing to sell private
      placement securities other than in a registered offering and otherwise than
      pursuant to Rule 144 will have a substantial burden of proof in
      establishing that an exemption from registration is available for such offers
      or
      sales, and that such persons and their respective brokers who participate in
      such transactions do so at their own risk.

     

    
      	
              Date:
                ___________

            	
              By:

            	 
	 	 	 
	 	
              Name:  

            	 

    

     

    
      
        
        

      

      
        -2-

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