Document:

ex10-20.htm

     

    
      

      

    

    
      Exhibit
10-20

      SECURITIES
PURCHASE AGREEMENT

       

      This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of April
20, 2010, is by and among China Armco Metals, Inc., a Nevada corporation with
headquarters located at One Waters Park Drive, Suite 98, San Mateo, California
(the “Company”),
and each of the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer”
and collectively, the “Buyers”).

      

      RECITALS

       

      A.           The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933
Act.

       

       

      B.           Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the aggregate number of shares of
common stock, $0.001 par value, of the Company (the “Common Stock”), set forth
opposite such Buyer’s name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be $10,000,000 of shares of Common Stock
and shall collectively be referred to herein as the “Common Shares”), and (ii) a
warrant to initially acquire up to that number of shares of Common Stock set
forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, in the
form attached hereto as Exhibit
A (the “Warrants”) (as exercised,
collectively, the “Warrant
Shares”).

       

      C.           At
the Closing, the parties hereto shall execute and deliver a Registration Rights
Agreement, in the form attached hereto as Exhibit
B (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement), under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities
laws.

       

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

       

      AGREEMENT

       

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

       

      
        	
                1.

              	
                PURCHASE
      AND SALE OF COMMON SHARES AND
WARRANTS.

              

      

       

      
      

      (a)           Common Shares and
Warrants. Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6 and 7 below, the Company shall issue and sell to each
Buyer, and each Buyer severally, but not jointly, shall purchase from the
Company on the Closing Date (as defined below), the number of Common Shares, as
is set forth opposite such Buyer’s name in column (3) on the Schedule of
Buyers, along with
a Warrant to initially acquire up to the number of Warrant Shares as is set
forth opposite such Buyer’s name in column
(4) on the Schedule of Buyers, which amount shall be equal to 100% of the Common Shares
purchased by such Buyer.

       

      
        
           

        

        
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      (b)           Closing.  The
closing (the “Closing”)
of the purchase of the Common Shares and the Warrants by the Buyers shall occur
at the offices of Weinstein Smith LLP, 420 Lexington Avenue, New York, New York
10170.  The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York time, on the first (1st)
Business Day on which the conditions to the Closing set forth in Sections 6 and 7 below are
satisfied or waived (or such later date as is mutually agreed to by the Company
and each Buyer).  As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.

       

      (c)           Purchase
Price. The
aggregate purchase price for the Common Shares and the Warrants to be purchased
by each Buyer (the “Purchase
Price”) shall be the amount set forth opposite such Buyer’s name in
column (5) on the Schedule of Buyers, which shall be determined by multiplying
the number of Common Shares purchased by such Buyer by the per Common Share
purchase price of $6.50.

       

      (d)           Form of
Payment. On the
Closing Date, (i) each Buyer shall pay its respective Purchase Price to the
Company for the Common Shares and the Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions (less, in the case of
Ontario (as defined below)), the amounts withheld pursuant to Section 4(g)) and (ii) the Company shall deliver to each
Buyer (A) one or more stock certificates, free and clear of all restrictive and
other legends (except as expressly provided in Section 5(c) hereof), evidencing the number of Common Shares
such Buyer is purchasing as is set forth opposite such Buyer’s name in column
(3) of the Schedule of Buyers, and (B) a Warrant pursuant to which such Buyer
shall have the right to initially acquire up to the number of Warrant Shares as
is set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers,
in all cases, duly executed on behalf of the Company and registered in the name
of such Buyer or its designee.

       

      
        	
                2.

              	
                BUYER’S
      REPRESENTATIONS AND WARRANTIES.

              

      

       

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

       

      (a)           Organization;
Authority. Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to
carry out its obligations hereunder and thereunder.

       

      (b)           No Public Sale or
Distribution. Such
Buyer (i) is acquiring its Common Shares and Warrants and (ii) upon
exercise of its Warrants, will acquire the Warrant Shares issuable upon exercise
thereof, in each case, for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof in violation
of applicable securities laws, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, by making the representations herein,
such Buyer does not agree, or make any representation or warranty, to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities in violation of
applicable securities laws.

       

      (c)           Accredited Investor
Status.  Such
Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.

       

      (d)           Reliance on
Exemptions. Such
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities

       

      
        
           

        

        
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      laws and that the Company is relying in part upon the truth and accuracy
of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.

       

      (e)           Information. Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such
Buyer.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.  Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.

       

      (f)           No Governmental
Review.  Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.

       

      (g)           Transfer or
Resale. Such
Buyer understands that except as provided in the Registration Rights Agreement
and Section 4(h) hereof: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company (if requested by the Company) an opinion of counsel to such Buyer, in a
form reasonably acceptable to the Company, to the effect that such Securities to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, or (C) such Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or
a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the Person (as
defined below) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.

       

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

       

      (i)           No
Conflicts. The
execution, delivery and performance by such Buyer of this Agreement and the
consummation by such Buyer of the transactions contemplated hereby will not (i)
result in a violation of the organizational documents of such Buyer, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which such Buyer is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment  or decree
(including federal and state securities laws) applicable to such Buyer, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Buyer to perform its obligations hereunder.

      
        
           

        

        
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      (j)           Certain Trading
Activities. Such Buyer has not directly or indirectly, nor has any Person
acting on behalf of or pursuant to any understanding with such Buyer, engaged in
any transactions in the securities of the Company (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing as of the time that such Buyer was
first contacted by the Placement Agent (as defined below) regarding the specific
investment in the Company contemplated by this Agreement and ending immediately
prior to the execution of this Agreement by such Buyer. “Short Sales” means all “short
sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934
Act (as defined below) (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock). Such Buyer does not as of the
date hereof, and will not immediately following the Closing, own 10% or more of
the Company’s issued and outstanding shares of Common Stock (calculated based on
the assumption that all Convertible Securities (as defined below) owned by such
Buyer, whether or not presently exercisable or convertible, have been fully
exercised or converted (as the case may be) but taking into account any
limitations on exercise or conversion (including “blockers”) contained
therein).

       

      
        	
                3.

              	
                REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

              

      

       

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

       

      (a)           Organization and
Qualification. Each of
the Company and each of its Subsidiaries are entities duly organized and validly
existing and in good standing under the laws of the jurisdiction in which they
are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted and as
presently proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any Subsidiary, either individually or
taken as a whole, (ii) the transactions contemplated hereby or in any of the
other Transaction Documents or (iii) the authority or ability of the Company to
perform any of its obligations under any of the Transaction Documents. Other
than the Persons set forth on Schedule 3(a), the Company has no Subsidiaries. “Subsidiaries” means any Person
in which the Company, directly or indirectly, (I) owns any of the outstanding
capital stock or holds any equity or similar interest of such Person or (II)
controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

      

      (b)           Authorization; Enforcement;
Validity. The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement and the other Transaction Documents and to
issue the Securities in accordance with the terms hereof and
thereof.  The execution and delivery of this Agreement and the other
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Common Shares, the issuance of the Warrants and the reservation
for issuance and issuance of the Warrant Shares issuable upon exercise of the
Warrants) have been duly authorized by the Company’s board of directors and
(other than the filing with the SEC of one or more Registration Statements (as
defined in the Registration Rights Agreement) in accordance with the
requirements of the Registration Rights Agreement, a Form D with the SEC and any
other filings as may be required by any state securities agencies) no further
filing, consent or authorization is required by the Company, its board of
directors or its stockholders or other governing body. This Agreement has been,
and the other Transaction Documents will be prior to the Closing, duly executed
and delivered by the Company, and each constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
its respective terms, except as such enforceability may be limited by general
principles of

       

      
        
           

        

        
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      equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this Agreement, the
Warrants, the Registration Rights Agreement and each of the other agreements and
instruments entered into or delivered by any of the parties hereto in connection
with the transactions contemplated hereby and thereby, as may be amended from
time to time.

       

      (c)           Issuance of
Securities. The
issuance of the Common Shares and the Warrants are duly authorized and, upon
issuance in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, taxes, liens, charges and other encumbrances with respect to the
issue thereof. As of the Closing, the Company shall have reserved from its duly
authorized capital stock not less than 100% of the maximum number of shares of
Common Stock issuable upon exercise of the Warrants (without taking into account
any limitations on the exercise of the Warrants set forth therein). The issuance
of the Warrant Shares is duly authorized, and upon exercise in accordance with
the Warrants, the Warrant Shares, when issued, will be validly issued, fully
paid and non-assessable and free from all preemptive or similar rights, taxes,
liens, charges and other encumbrances with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
Subject to the accuracy of the representations and warranties of the Buyers in
this Agreement, the offer and issuance by the Company of the Securities is
exempt from registration under the 1933 Act.

       

      (d)           No
Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Common Shares, the
Warrants and Warrant Shares and the reservation for issuance of the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation (as
defined below) (including, without limitation, any certificates of designation
contained therein) or other organizational documents of the Company or any of
its Subsidiaries, any capital stock of the Company, or Bylaws (as defined
below), (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, foreign,
federal and state securities laws and regulations and the rules and regulations
of the NYSE Amex (the “Principal Market”)) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected except, in the case
of clause (ii) or (iii) above, to the extent such violations that could not
reasonably be expected to have a Material Adverse Effect.

       

      (e)           Consents.  The
Company is not required to obtain any consent from, authorization or order of,
or make any filing or registration with (other than the filing with the SEC of
one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, a Form D with the SEC and any other filings as
may be required by any state securities agencies), any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under, or
contemplated, by the Transaction Documents, in each case, in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain at or prior to the Closing
have been obtained or effected on or prior to the Closing Date, and neither the
Company nor any of its Subsidiaries are aware of any facts or circumstances
which might prevent the Company from obtaining or effecting any of the
registration, application or filings contemplated by the Transaction Documents.
The Company is not in violation of the requirements of the Principal Market and
has no knowledge of any facts or circumstances which could reasonably lead to
delisting or suspension of the Common Stock in the foreseeable
future.

       

      (f)           Acknowledgment Regarding
Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director

       

      
        
           

        

        
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      of the Company or any of its Subsidiaries, (ii) an “affiliate” (as defined
in Rule 144) of the Company or any of its Subsidiaries or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the “1934 Act”)). The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities.  The
Company further represents to each Buyer that the Company’s decision to enter
into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.

       

      (g)           No General Solicitation;
Placement Agent’s Fees. Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby. Other than Jessup &
Lamont Securities Corporation (the “Placement Agent”), neither the
Company nor any of its Subsidiaries has engaged any placement agent or other
agent in connection with the offer or sale of the Securities.

       

      (h)           No Integrated
Offering. None of
the Company, its Subsidiaries or any of their affiliates, nor any Person acting
on their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of the issuance of any of the Securities under the
1933 Act, whether through integration with prior offerings or otherwise, or
cause this offering of the Securities to require approval of stockholders of the
Company under any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated for quotation.  None of the Company, its Subsidiaries,
their affiliates nor any Person acting on their behalf will take any action or
steps that would require registration of the issuance of any of the Securities
under the 1933 Act or cause the offering of any of the Securities to be
integrated with other offerings of securities of the Company.

       

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

       

      (j)           Application of Takeover
Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including, without limitation,
any distribution under a rights agreement) or other similar anti-takeover
provision under the Articles of Incorporation, Bylaws or other organizational
documents or the laws of the jurisdiction of its incorporation or otherwise
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Buyer’s ownership of the Securities. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of shares of Common Stock or a
change in control of the Company or any of its Subsidiaries.

       

      (k)           SEC Documents; Financial
Statements. During
the two (2) years prior to the date hereof, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and
documents

       

      
        
           

        

        
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      incorporated by reference therein being hereinafter referred to as the “SEC
Documents”). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of each of the SEC Documents
not available on the EDGAR system. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect as of the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). No other information
provided by or on behalf of the Company to any of the Buyers which is not
included in the SEC Documents (including, without limitation, information
referred to in Section 2(e) of this Agreement) contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein not misleading, in the light of the circumstance under
which they are or were made.

       

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

       

      
        
           

        

        
          - 7
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      (m)           No Undisclosed Events,
Liabilities, Developments or Circumstances. No
event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur or exist, with respect to the Company, any of its
Subsidiaries or any of their respective businesses, properties, liabilities,
prospects, operations (including results thereof) or condition (financial or
otherwise) that (i) would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced, (ii) could have a material adverse effect
on any Buyer’s investment hereunder or (iii) could have a Material Adverse
Effect.

       

      (n)           Conduct of Business;
Regulatory Permits. Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Articles of Incorporation, any certificate of designation,
preferences or rights of any other outstanding series of preferred stock of the
Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws,
respectively. Neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that could reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2007, (i) the Common Stock has been listed or
designated for quotation on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

       

      (o)           Foreign Corrupt
Practices.  Neither
the Company nor any of its Subsidiaries nor any director, officer, any agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

       

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

       

      (q)           Transactions With
Affiliates.  Except
as disclosed in the SEC Documents and other than the grant of stock options
disclosed on Schedule 3(q), none of the officers, directors or employees of
the Company or any of its Subsidiaries is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer, director, or
employee has a substantial interest or is an employee, officer, director,
trustee or partner.

       

      
        
           

        

        
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      (r)           Equity
Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of (i)
74,000,000 shares of Common Stock, of which 12,609,280 are issued and
outstanding and 2,218,021 shares are reserved for issuance pursuant to
securities (other than the Common Shares and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii) 1,000,000
shares of preferred stock, none of which are issued and outstanding. No shares
of Common Stock are held in treasury.  All of such outstanding shares
are duly authorized and have been, or upon issuance will be, validly issued and
are fully paid and non-assessable. 6,513,000 shares of the Company’s issued and
outstanding Common Stock on the date hereof are owned by Persons who are
“affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the
assumption that only officers, directors and holders of at least 10% of the
Company’s issued and outstanding Common Stock are “affiliates” without conceding
that any such Persons are “affiliates” for purposes of federal securities laws)
of the Company or any of its Subsidiaries. To the Company’s knowledge, no Person
owns 10% or more of the Company’s issued and outstanding shares of Common Stock
(calculated based on the assumption that all Convertible Securities, whether or
not presently exercisable or convertible, have been fully exercised or
converted (as the case may be) taking account of any limitations on
exercise or conversion (including “blockers”) contained therein without
conceding that such identified Person is a 10% stockholder for purposes of
federal securities laws). Except as disclosed in Schedule 3(r): (i) none of the
Company’s or any Subsidiary’s capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary; (ii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its Subsidiaries;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any amounts filed in connection with the Company or any
of its Subsidiaries; (v) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix)
neither the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect. The Company has furnished to the Buyers true, correct and complete
copies of the Company’s Certificate of Incorporation, as amended and as in
effect on the date hereof (the “Articles of Incorporation”),
and the Company’s bylaws, as amended and as in effect on the date hereof (the
“Bylaws”), and the terms
of all securities convertible into, or exercisable or exchangeable for, shares
of Common Stock and the material rights of the holders thereof in respect
thereto.

       

      (s)           Indebtedness and Other
Contracts.  Except
as disclosed on Schedule 3(s) or in the SEC Documents, neither the Company nor
any of its Subsidiaries (i) has any outstanding Indebtedness (as defined below),
(ii) is a party to any contract, agreement or instrument, the violation of
which, or default under which, by the other party(ies) to such contract,
agreement or instrument could reasonably be expected to result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in
the

       

      
        
           

        

        
          - 9
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      aggregate, in a Material Adverse Effect, or (iv) is a party to any
contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have
a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of
any Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

       

      (t)           Absence of
Litigation.  There
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or
any of the Company’s or its Subsidiaries’ officers or directors which is outside
of the ordinary course of business or individually or in the aggregate material
to the Company or any of its Subsidiaries. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current of former director or officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933
Act or the 1934 Act.

       

      (u)           Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such Subsidiary has any reason to believe
that it will be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.

       

      (v)           Employee
Relations.  Except
as set forth in the SEC Reports, neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any member of a
union.  The Company believes that its and its Subsidiaries’ relations
with their respective employees are good.  No executive officer (as
defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of
the

       

      
        
           

        

        
          - 10
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      Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. No executive officer or other key employee of the Company or any of
its Subsidiaries is, or is now expected to be, in violation of any material term
of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment of each such
executive officer or other key employee (as the case may be) does not subject
the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters.  The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

       

      (w)           Title.  Except
as disclosed in footnote 10 of the Company’s most recent Annual Report on Form
10-K, the Company and its Subsidiaries have good and marketable title in fee
simple to all real property, and have good and marketable title to all personal
property, owned by them which is material to the business of the Company and its
Subsidiaries, in each case, free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or any of its Subsidiaries.

       

      (x)           Intellectual Property
Rights. The
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, original works, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted.  None of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three
years from the date of this Agreement.  The Company has no knowledge
of any infringement by the Company or any of its Subsidiaries of Intellectual
Property Rights of others.  There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding their Intellectual Property Rights.  The Company is not
aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and each
of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property
Rights.

       

      (y)           Environmental
Laws. The
Company and its Subsidiaries (i) are in compliance with all Environmental Laws
(as defined below), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.  The term
“Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.

       

      
        
           

        

        
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      (z)           Subsidiary
Rights. The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive distributions on,
all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.

       

      (aa)           Tax
Status. The
Company and each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company and its
Subsidiaries know of no basis for any such claim. The Company is not operated in
such a manner as to qualify as a passive foreign investment company, as defined
in Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.

       

      (bb)           Internal Accounting and
Disclosure Controls. Except
as disclosed in Item 9A of the Company’s most recent Annual Report on Form 10-K,
the Company and each of its Subsidiaries maintains internal control over
financial reporting (as such term is defined in Rule 13a-15(f) under the 1934
Act) that is effective to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, including
that (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that
are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. Neither the Company nor any of its Subsidiaries has received any
notice or correspondence from any accountant or other Person relating to any
potential material weakness or significant deficiency in any part of the
internal controls over financial reporting of the Company or any of its
Subsidiaries.

       

      (cc)           Off Balance Sheet
Arrangements. There
is no transaction, arrangement, or other relationship between the Company or any
of its Subsidiaries and an unconsolidated or other off balance sheet entity that
is required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

       

      (dd)           Investment Company
Status. The
Company is not, and upon consummation of the sale of the Securities will not be,
an “investment company,” an affiliate of an “investment company,” a company
controlled by an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company” as such terms
are defined in the Investment Company Act of  1940, as
amended.

       

      (ee)           Acknowledgement Regarding
Buyers’ Trading Activity. It is
understood and acknowledged by the Company that (i) following the public
disclosure of the transactions contemplated by the Transaction Documents in
accordance with the terms thereof, none of the Buyers have been asked by the
Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the
Company or any of its Subsidiaries, to desist from effecting any transactions in
or with respect to (including, without limitation, purchasing or selling, long
and/or

       

      
        
           

        

        
          - 12
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      short) any securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold any of the Securities for any
specified term; (ii) any Buyer, and counterparties in “derivative” transactions
to which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock which was established prior to such Buyer’s
knowledge of the transactions contemplated by the Transaction Documents; and
(iii) each Buyer shall not be deemed to have any affiliation with or control
over any arm’s length counterparty in any “derivative” transaction. The Company
further understands and acknowledges that following the public disclosure of the
transactions contemplated by the Transaction Documents pursuant to the Press
Release (as defined below) one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
and/or number of the Warrant Shares deliverable with respect to the Securities
are being determined and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other
Transaction Document or any of the documents executed in connection herewith or
therewith.

       

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

       

      (gg)           U.S. Real Property Holding
Corporation. Neither
the Company nor any of its Subsidiaries is, or has ever been, and so long as any
of the Securities are held by any of the Buyers, shall become, a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company and each Subsidiary shall so
certify upon any Buyer’s request.

       

      (hh)           Registration
Eligibility. The Company is eligible to register the Registrable
Securities for resale by the Buyers using Form S-3 promulgated under the 1933
Act.

       

      (ii)           Transfer Taxes. On
the Closing Date, all stock transfer or other taxes (other than income or
similar taxes) which are required to be paid in connection with the issuance,
sale and transfer of the Securities to be sold to each Buyer hereunder will be,
or will have been, fully paid or provided for by the Company, and all laws
imposing such taxes will be or will have been complied with.

       

      (jj)           Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by
the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

       

      (kk)           Shell Company Status.
The Company is not, and has never been, an issuer identified in, or subject to,
Rule 144(i).

       

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

       

      
        
           

        

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

       

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

       

      (oo)           Disclosure.  The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf of
the Company or any of its Subsidiaries is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each press release
issued by the Company or any of its Subsidiaries during the twelve (12) months
preceding the date of this Agreement did not at the time of release contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not
misleading.  No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, liabilities, prospects, operations (including results
thereof) or conditions (financial or otherwise), which, under applicable law,
rule or regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

       

      
        	
                4.

              	
                COVENANTS.

              

      

       

      (a)           Best
Efforts. Each
Buyer shall use its best efforts to timely satisfy each of the conditions to be
satisfied by it as provided in Section 6 of this Agreement. The Company shall
use its best efforts to timely satisfy each of the conditions to be satisfied by
it as provided in Section 7 of this
Agreement.

       

      (b)           Form D and Blue
Sky. The
Company shall file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to, qualify the Securities for sale to the Buyers at the
Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date. Without limiting any other obligation of
the Company under this Agreement, the Company shall timely make all filings and
reports relating to the offer and sale of the Securities required under all
applicable securities laws (including, without limitation, all applicable
federal securities laws and all applicable “Blue Sky” laws), and the Company
shall comply with all applicable federal, state and local laws, statutes, rules,
regulations and the like relating to the offering and sale of the Securities to
the Buyers.

       

      (c)           Reporting
Status. Until
the date on which the Buyers shall have sold all of the Registrable Securities
(the “Reporting
Period”), the Company shall timely file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would no longer require or otherwise
permit such termination.

       

      
        
           

        

        
          - 14
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      (d)           Use of
Proceeds. The
Company shall use the proceeds from the sale of the Securities solely as set
forth on Schedule 4(d), and, without limitation of the foregoing, none of
such proceeds shall be used, directly or indirectly, for (i) the satisfaction of
any debt of the Company or any of its Subsidiaries (other than payment of trade
payables incurred after the date hereof in the ordinary course of business of
the Company and its Subsidiaries and consistent with prior practices), (ii) the
redemption of any securities of the Company or (iii) the settlement of any
outstanding litigation.

       

      (e)           Financial
Information. The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q, any interim reports or any consolidated balance sheets, income
statements, stockholders’ equity statements and/or cash flow statements for any
period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, (ii) on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries and (iii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.

       

      (f)           Listing. The
Company shall promptly secure the listing or designation for quotation (as the
case may be) of all of the Registrable Securities upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed or designated for quotation (as the case may be) (subject to
official notice of issuance) and shall maintain such listing or designation for
quotation (as the case may be) of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system. The Company shall maintain
the Common Stock’s listing or designation for quotation (as the case may be) on
the Principal Market, The New York Stock Exchange, the Nasdaq Global Select
Market, the Nasdaq Global Market or the Nasdaq Capital Market (each, an “Eligible
Market”).  Neither the Company nor any of its Subsidiaries
shall take any action which could be reasonably expected to result in the
delisting or suspension of the Common Stock on an Eligible Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(f).

       

      (g)           Fees.  The
Company shall reimburse 2035718 Ontario Inc. (“Ontario”) or its designee(s)
for all costs and expenses incurred by it or its affiliates in connection with
the transactions contemplated by the Transaction Documents (including, without
limitation, all legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence and regulatory filings in connection
therewith) in a non-accountable amount equal to $15,000, which amount shall be
withheld by Ontario from its Purchase Price at the Closing or paid by the
Company upon termination of this Agreement on demand by Ontario so long as such
termination did not occur as a result of a material breach by Ontario of any of
its obligations hereunder (as the case may be).  The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby (including,
without limitation, any fees payable to the Placement Agent, who is the
Company’s sole placement agent in connection with the transactions contemplated
by this Agreement). The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys’ fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment.  Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.

       

      (h)           Pledge of
Securities.
Notwithstanding anything to the contrary contained in this Agreement, the
Company acknowledges and agrees that the Securities may be pledged by a Buyer in
connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and no Buyer effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise

       

      
        
           

        

        
          - 15
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      make any delivery to the Company pursuant to this Agreement or any other
Transaction Document. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.

       

      (i)           Disclosure of Transactions
and Other Material Information. The
Company shall, on or before 9:30 a.m., New York time, (but in no event prior to
9:15 a.m., New York time) on the first (1st)
Business Day after the date of this Agreement, issue a press release (the “Press Release”) reasonably
acceptable to the Buyers disclosing all the material terms of the transactions
contemplated by the Transaction Documents.  On or before 9:30 a.m.,
New York time, (but in no event prior to 9:15 a.m., New York time) on the fourth
(4th)
Business Day after the date of this Agreement, the Company shall file a Current
Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching all the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement), the form of
Warrants and the form of the Registration Rights Agreement) (including all
attachments, the “8-K
Filing”). From and after the issuance of the Press Release, the Company
shall have disclosed all material, non-public information (if any) delivered to
any of the Buyers by the Company or any of its Subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. The Company shall not,
and the Company shall cause each of its Subsidiaries and each of its and their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material, non-public information regarding the Company or any of its
Subsidiaries from and after the issuance of the Press Release without the
express prior written consent of such Buyer. In the event of a breach by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents (as determined in the reasonable good faith
judgment of such Buyer) of any of the foregoing covenants or any of the
covenants contained in Section 4(o), in addition to any other remedy provided herein
or in the Transaction Documents, such Buyer shall have the right to make a
public disclosure, in the form of a press release, public advertisement or
otherwise, of such material, non-public information without the prior approval
by the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees or agents. No Buyer shall have any liability to
the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such disclosure.
Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of the applicable Buyer, the Company shall not (and shall
cause each of its Subsidiaries and affiliates to not) disclose the name of such
Buyer in any filing, announcement, release or otherwise.

       

      (j)           Additional Registration
Statements.  Other than a primary shelf registration statement
on Form S-3 (but in no event shall the Company file such a registration
statement prior to the filing of the initial Registration Statement pursuant to
Section 2(a) of the Registration Rights Agreement), until the Applicable Date
(as defined below) and at any time thereafter while any Registration Statement
is not effective or the prospectus contained therein is not available for use,
the Company shall not file a registration statement under the 1933 Act relating
to securities that are not the Registrable Securities. “Applicable Date” means the
first date on which (a) the resale by the Buyers of all Registrable Securities
is covered by one or more effective Registration Statements (as defined in the
Registration Rights Agreement) (and each prospectus contained therein is
available for use on such date) or (b) all of the Registrable Securities have
been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 (assuming
cashless exercise of the Warrants) without the requirement for the Company to be
in compliance with the current public information required under Rule 144 and
without volume or manner-of-sale restrictions.

       

      
        
           

        

        
          - 16
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      (k)           Additional Issuance of
Securities. The
Company agrees that for the period commencing on the date hereof and ending on
the date immediately following the thirty (30) Trading Day (as defined in the
Warrants) anniversary of the Applicable Date (provided that such period shall be
extended by the number of days during such period and any extension thereof
contemplated by this proviso on which the Registration Statement is not
effective or any prospectus contained therein is not available for use) (the
“Restricted Period”), neither the Company
nor any of its Subsidiaries shall directly or indirectly issue, offer, sell,
grant any option or right to purchase, or otherwise dispose of (or announce any
issuance, offer, sale, grant of any option or right to purchase or other
disposition of) any equity security or any equity-linked or related security
(including, without limitation, any “equity security” (as that term is defined
under Rule 405 promulgated under the 1933 Act), any Convertible Securities, any
debt, any preferred stock or any purchase rights (any such issuance, offer,
sale, grant, disposition or announcement (whether occurring during the
Restricted Period or at any time thereafter) is referred to as a “Subsequent Placement”).
Notwithstanding the foregoing, this Section 4(k) shall not apply in respect of the issuance of (A)
shares of Common Stock or standard options to purchase Common Stock to
directors, officers or employees of the Company in their capacity as such
pursuant to an Approved Share Plan (as defined below), provided that (1) all
such issuances (taking into account the shares of Common Stock issuable upon
exercise of such options) after the date hereof pursuant to this clause (A) do
not, in the aggregate, exceed more than 5% of the Common Stock issued and
outstanding immediately prior to the date hereof and (2) the exercise price of
any such options is not lowered, none of such options are amended to increase
the number of shares issuable thereunder and none of the terms or conditions of
any such options are otherwise materially changed in any manner that adversely
affects any of the Buyers, (B) shares of Common Stock issued upon the conversion
or exercise of Convertible Securities (other than standard options to purchase
Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (A) above) issued prior to the date hereof, provided that the conversion
or exercise price of any such Convertible Securities (other than standard
options to purchase Common Stock issued pursuant to an Approved Share Plan that
are covered by clause (A) above) is not lowered, none of such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) are amended to
increase the number of shares issuable thereunder and none of the terms or
conditions of any such Convertible Securities (other than standard options to
purchase Common Stock issued pursuant to an Approved Share Plan that are covered
by clause (A) above) are otherwise materially changed in any manner that
adversely affects any of the Buyers, and (C) the Warrant Shares (each of the
foregoing in clauses (A) through (C), collectively the “Excluded Securities”). “Approved Share Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any
employee, officer or director for services provided to the Company in their
capacity as such. “Convertible
Securities” means any capital stock or other security of the Company or
any of its Subsidiaries that is at any time and under any circumstances directly
or indirectly convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any capital stock or other
security of the Company (including, without limitation, Common Stock) or any of
its Subsidiaries.

       

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

       

      (m)           Conduct of
Business.  The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.

       

      (n)           Variable Rate
Transaction. Until all of the Common Shares and Warrants have been sold
by the Buyers, the Company and each Subsidiary shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Placement
involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company or any Subsidiary (i) issues or sells
any Convertible Securities either (A) at

       

      
        
           

        

        
          - 17
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      a conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of, or quotations for, the shares of
Common Stock at any time after the initial issuance of such Convertible
Securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such
Convertible Securities or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock, other than pursuant to a customary “weighted average”
anti-dilution provision or (ii) enters into any agreement (including, without
limitation, an equity line of credit, but not including an at the market
offering whereby a registered broker-dealer is selling the securities of the
Company as agent for the Company) whereby the Company or any Subsidiary may sell
securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Buyer shall be entitled to obtain
injunctive relief against the Company and its Subsidiaries to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

       

      (o)           Participation Right.
From the date hereof until the earlier of (i) the six (6) month anniversary of
the Applicable Date and (ii) the nine (9) month anniversary of the Closing Date,
neither the Company nor any of its Subsidiaries shall, directly or indirectly,
effect any Subsequent Placement unless the Company shall have first complied
with this Section 4(o). The Company acknowledges and agrees that the
right set forth in this Section 4(o) is a right granted by the Company, separately, to
each Buyer.

       

      (i)           At
least five (5) Trading Days prior to any proposed or intended Subsequent
Placement, the Company shall deliver to each Buyer a written notice of its
proposal or intention to effect a Subsequent Placement (each such notice, a
“Pre-Notice”), which
Pre-Notice shall not contain any information (including, without limitation,
material, non-public information) other than: (i) a statement that the Company
proposes or intends to effect a Subsequent Placement, (ii) a statement that the
statement in clause (i) above does not constitute material, non-public
information and (iii) a statement informing such Buyer that it is entitled to
receive an Offer Notice (as defined below) with respect to such Subsequent
Placement upon its written request. Upon the written request of a Buyer
within three (3) Trading Days after the Company’s delivery to such Buyer of such
Pre-Notice, and only upon a written request by such Buyer, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver to
such Buyer an irrevocable written notice (the “Offer Notice”) of any proposed
or intended issuance or sale or exchange (the “Offer”) of the securities
being offered (the “Offered
Securities”) in a Subsequent Placement, which Offer Notice shall (w)
identify and describe the Offered Securities, (y) describe the price and other
terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged (which may be
expressed as a percentage to the then market price of the Common Stock) and (z)
offer to issue and sell to or exchange with such Buyer in accordance with the
terms of the Offer 100% of the Offered Securities, provided that the number of
Offered Securities which such Buyer shall have the right to subscribe for under
this Section 4(o)
shall be (a) based on such Buyer’s pro rata portion of the aggregate number of
Common Shares purchased hereunder by all Buyers (the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of other
Buyers as such Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the “Undersubscription
Amount”).

      

      (ii)           To
accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the fifth (5th)
Business Day after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth
the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and,
if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of
Acceptance”). If the Basic Amounts subscribed for by all Buyers are less
than the total of all of the Basic Amounts, then such Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for;

      
        
           

        

        
          - 18
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       provided,
however, if the Undersubscription Amounts subscribed for exceed the difference
between the total of all the Basic Amounts and the Basic Amounts subscribed for
(the “Available
Undersubscription Amount”), such Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent it deems reasonably
necessary. Notwithstanding the foregoing, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to each Buyer a new Offer Notice and the Offer
Period shall expire on the fifth (5th)
Business Day after such Buyer’s receipt of such new Offer Notice.

      

      (iii)           The
Company shall have five (5) days from the expiration of the Offer Period above
(i) to offer, issue, sell or exchange all or any part of such Offered Securities
as to which a Notice of Acceptance has not been given by a Buyer (the “Refused Securities”) pursuant
to a definitive agreement(s) (the “Subsequent Placement
Agreement”), but only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.

      

      (iv)           In
the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section 4(o)(iii) above), then such Buyer may, at its sole option
and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that such Buyer elected
to purchase pursuant to Section 4(o)(ii) above multiplied
by a fraction, (i) the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue, sell or exchange
(including Offered Securities to be issued or sold to Buyers pursuant to this
Section 4(o) prior to
such reduction) and (ii) the denominator of which shall be the original amount
of the Offered Securities. In the event that any Buyer so elects to reduce the
number or amount of Offered Securities specified in its Notice of Acceptance,
the Company may not issue, sell or exchange more than the reduced number or
amount of the Offered Securities unless and until such securities have again
been offered to the Buyers in accordance with Section 4(o)(i) above.

      

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

      

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

      

      (vii)           The
Company and each Buyer agree that if any Buyer elects to participate in the
Offer, neither the Subsequent Placement Agreement with respect to such Offer nor
any other transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provision whereby such Buyer shall
be required to agree to any restrictions on trading as to any securities of the
Company issued under this Agreement or be required to consent to any amendment
to

      
        
           

        

        
          - 19
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      or
termination of, or grant any waiver, release or the like under or in connection
with, any agreement previously entered into with the Company or any instrument
received from the Company.

      

      (viii)           Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to by such Buyer, the
Company shall either confirm in writing to such Buyer that the transaction with
respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case in such a
manner such that such Buyer will not be in possession of any material,
non-public information, by the fifth (5th)
Business Day following delivery of the Offer Notice. If by such fifth (5th)
Business Day, no public disclosure regarding a transaction with respect to the
Offered Securities has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be in possession of any
material, non-public information with respect to the Company or any of its
Subsidiaries. Should the Company decide to pursue such transaction with respect
to the Offered Securities, the Company shall provide such Buyer with another
Offer Notice in accordance with, and subject to, the terms of this Section 4(o) and such Buyer will
again have the right of participation set forth in this Section 4(o). The Company shall
not be permitted to deliver more than one Offer Notice to such Buyer in any
sixty (60) day period, except as expressly contemplated by the last sentence of
Section 4(o)(ii).

       

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

       

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

       

      (q)           Corporate Existence.
So long as any Buyer owns any Warrants, the Company shall not be party to any
Fundamental Transaction (as defined in the Warrants) unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Warrants.

       

      
        	
                5.

              	
                REGISTER;
      TRANSFER AGENT INSTRUCTIONS;
LEGEND.

              

      

       

      (a)           Register. The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Common Shares and the Warrants in which the
Company shall record the name and address of the Person in whose name the Common
Shares and the
Warrants have been issued (including the name and address of each transferee),
the number of Common Shares held by such Person and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.

       

      (b)           [Reserved]

       

      (c)           Legends. Each
Buyer understands that the Securities have been issued (or will be issued in the
case of the Warrant Shares) pursuant to an exemption from registration or
qualification under the 1933 Act and applicable state securities laws, and
except as set forth below, the Securities shall bear any legend as required by
the “blue sky” laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):

       

      [NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF

       

      
        
           

        

        
          - 20
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      1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY
THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

       

      
      

      (d)         Removal of Legends. Certificates
evidencing Securities shall not be required to contain the legend set forth in
Section 5(c) above or
any other legend (i) while a registration statement (including a Registration
Statement) covering the resale of such Securities is effective under the 1933
Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming
the transferor is not an affiliate of the Company), (iii) if such Securities are
eligible to be sold, assigned or transferred under Rule 144 (provided that a
Buyer provides the Company with reasonable assurances that such Securities are
eligible for sale, assignment or transfer under Rule 144 which shall not include
an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the
Company with an opinion of counsel to such Buyer, in a generally acceptable
form, to the effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of the 1933 Act
or (v) if such legend is not required under applicable requirements of the 1933
Act (including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC).  If a legend is not required
pursuant to the foregoing, the Company shall no later than two (2) Trading Days
following the delivery by a Buyer to the Company or the transfer agent (with
notice to the Company) of a legended certificate representing such Securities
(endorsed or with stock powers attached, signatures guaranteed, and otherwise in
form necessary to affect the reissuance and/or transfer, if applicable),
together with any other deliveries from such Buyer as may be required above in
this Section 5(d), as
directed by such Buyer, either: (A) provided that the Company’s transfer agent
is participating in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program and such Securities are Common Shares or Warrant
Shares, credit the aggregate number of shares of Common Stock to which such
Buyer shall be entitled to such Buyer’s or its designee’s balance account with
DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s
transfer agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver (via reputable overnight courier) to such
Buyer, a certificate representing such Securities that is free from all
restrictive and other legends, registered in the name of such Buyer or its
designee (the date by which such credit is so required to be made to the balance
account of such Buyer’s or such Buyer’s nominee with DTC or such certificate is
required to be delivered to such Buyer pursuant to the foregoing is referred to
herein as the “Required
Delivery Date”). The Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent for the Common Stock (“Transfer Agent”) to effect the
removal of the legend hereunder on each Effective Date (as defined in the
Registration Rights Agreement).  Any fees (with respect to the
Transfer Agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of the Securities
shall be borne by the Company.

       

      (e)           Failure to Timely Deliver;
Buy-In.  If
the Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer
by the second (2nd)
Trading Day following the Required Delivery Date a certificate representing the
Securities so delivered to the Company by such Buyer that is free from all
restrictive and other legends or (ii) credit the balance account of such Buyer’s
or such Buyer’s nominee with DTC for such number of shares of Common Shares or
Warrant Shares so delivered to the Company, then, in addition to all other
remedies available to such Buyer, the Company shall pay in cash to such Buyer on
each day after the Required Delivery Date that the issuance or credit of such
shares is not timely effected an amount equal to 1% of the product of (A) the
sum of the number of shares of Common Shares or Warrant Shares (as the case may
be) not issued to such Buyer on a timely basis and to which such Buyer is
entitled and (B) the Closing Sale Price (as defined in the Warrants) of the
Common Stock on the Trading Day immediately preceding the Required Delivery
Date.  In addition to the foregoing, if the Company fails to so
properly deliver such unlegended certificates or so properly credit the balance
account of such Buyer’s or such Buyer’s nominee with DTC by the Required
Delivery Date, and if on or after the Required Delivery Date such Buyer
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Buyer of shares of Common Stock that
such Buyer anticipated receiving from the Company without any restrictive
legend, then, in addition to all other remedies available to such Buyer, the
Company shall, within three (3) Trading Days after such Buyer’s request and in
such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount
equal to such Buyer’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate or credit such Buyer’s
balance account shall terminate and such shares shall be cancelled, or (ii)
promptly honor its obligation to deliver to such Buyer a certificate or
certificates or credit such Buyer’s DTC account representing such number of
shares of Common Stock that would have been issued if the Company timely
complied with its obligations hereunder and pay cash to such Buyer in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Shares or Warrant Shares (as the case may be) that
the Company was required to deliver to such Buyer by the Required Delivery Date
times (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the Required Delivery Date.

       

      
         

        
          
             

          

          
            - 21
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                6.

              	
                CONDITIONS
      TO THE COMPANY’S OBLIGATION TO
SELL.

              

      

       

      (a)           The
obligation of the Company hereunder to issue and sell the Common Shares and the related Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

       

      (i)           Such
Buyer shall have executed each of the other Transaction Documents to which it is
a party and delivered the same to the Company.

       

      (ii)           Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less, in the case of Ontario, the amounts withheld pursuant to Section
4(g)) for the Common Shares and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.

       

      (iii)           The
representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date),
and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.

       

      
        	
                7.

              	
                CONDITIONS
      TO EACH BUYER’S OBLIGATION TO
PURCHASE.

              

      

       

      (a)           The
obligation of each Buyer hereunder to purchase the Common Shares and the related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:

       

      (i)           The
Company shall have duly executed and delivered to such Buyer (A) each of
the other Transaction Documents and (B) the Common Shares (in the number as is
set forth across from such Buyer’s name in column (3) of the Schedule of
Buyers) and the
related Warrants (for the number of Warrant Shares as is set forth across from
such Buyer’s name in column (4) of the Schedule of Buyers) being purchased by
such Buyer at the Closing pursuant to this Agreement.

       

      (ii)           Such
Buyer shall have received the opinion of Schneider Weinberger & Beilly
LLP, the
Company’s counsel, dated as of the Closing Date, in the form acceptable to such
Buyer.

       

      (iii)           Each
and every representation and warranty of the Company shall be true and correct
as of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date) and the Company shall
have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with
by the Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form acceptable to such
Buyer.

      
         

        
          
             

          

          
            - 22
-

            
              

            

          

          
             

          

        

      (iv)           The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum maintenance requirements of the Principal
Market.

       

      (v)           The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities, including
without limitation, those required by the Principal Market.

       

      (vi)           No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents.

       

      (vii)           Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse
Effect.

       

      
        	
                8.

              	
                TERMINATION.

              

      

       

      In the
event that the Closing shall not have occurred with respect to a Buyer within
ten (10) days of the date hereof, then such Buyer shall have the right to
terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided, however, (i) the right to terminate this
Agreement under this Section 8 shall not be
available to such Buyer if the failure of the transactions contemplated by this
Agreement to have been consummated by such date is the result of such Buyer’s
breach of this Agreement and (ii) the abandonment of the sale and purchase of
the Common Shares and the Warrants shall be applicable only to such Buyer
providing such written notice, provided further that no such termination shall
affect any obligation of the Company under this Agreement to reimburse such
Buyer for the expenses described in Section 4(g)
above. Nothing contained in this Section 8 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents.

      

      
        	
                9.

              	
                MISCELLANEOUS.

              

      

       

      (a)           Governing Law; Jurisdiction;
Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.  Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan.  Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law.  If either party shall commence an action or proceeding to
enforce any provisions of the Transaction Documents, then, in addition to the
obligations of the Company under Section 4.8, the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.  EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

      
         

        
          
             

          

          
            - 23
-

            
              

            

          

          
             

          

        

      

       

      (b)           Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original
thereof.

       

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

       

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

       

      (e)           Entire Agreement;
Amendments. This
Agreement, the other Transaction Documents and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf solely with respect
to the matters contained herein and therein, and this Agreement, the other
Transaction Documents, the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein contain the entire
understanding of the parties solely with respect to the matters covered herein
and therein; provided, however, nothing contained in this Agreement or any other
Transaction Document shall (or shall be deemed to) (i) have any effect on any
agreements any Buyer has entered into with the Company or any of its
Subsidiaries prior to the date hereof with respect to any prior investment made
by such Buyer in the Company or (ii) waive, alter, modify or amend in any
respect any obligations of the Company or any of its Subsidiaries, or any rights
of or benefits to any Buyer or any other Person, in any agreement entered into
prior to the date hereof between or among the Company and/or any of its
Subsidiaries and any Buyer and all such agreements shall continue in full force
and effect. Except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended or waived other than by an instrument in writing signed by the Company
and the holders of at least a majority of the Common Shares initially issued
hereunder on the Closing Date, and any amendment or to, or waiver of any
provision of, this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable, provided that any party may give a waiver in writing as to itself.
No such amendment or waiver (unless given pursuant to the foregoing proviso in
the case of a waiver) shall be effective to the extent that it applies to less
than all of the Buyers and holders of Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, all holders
of Common Shares or all holders of the Warrants (as the case may be). The
Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company, any Subsidiary or otherwise.
As a material inducement for each Buyer to enter into this Agreement, the
Company expressly acknowledges and agrees that (i) no due diligence or other
investigation conducted by a Buyer, any of its advisors or any of its
representatives shall affect such Buyer’s right to rely on, or shall modify or
qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other
Transaction Document and (ii) unless a provision of this Agreement or any other
Transaction Document is expressly preceded by the phrase “except as disclosed in
the SEC Documents,” nothing contained in any of the SEC Documents shall affect
such Buyer’s right to rely on, or shall modify or qualify in any manner or be an
exception to any of, the Company’s representations and warranties contained in
this Agreement or any other Transaction Document

      
         

        
          
             

          

          
            - 24
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      (f)           Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) Business Day after deposit with an overnight courier service
with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:

       

      If to the
Company:

       

      One Waters Park Drive

      Suite 98

      San Mateo, California
94403

      Telephone:
(650) 212-7620

      Facsimile:
(650) 212 7630

      Attention:  Raymond
Yong Xia

      e-mail:
Raymond@armcometals.com

      

      With a
copy (for informational purposes only) to:

       

      James M.
Schneider, Esq.

      Schneider
Weinberger &
Beilly LLP

      2200
Corporate Blvd. N.W., Suite 210

      Boca
Raton, FL 33431

      Tel:
(561) 362-9595

      Fax:
(561) 362-9612

      e-mail:  jim@swblaw.net

      

      If to the
Transfer Agent:

       

      Action
Stock Transfer Corp.

      7069
Highland Drive, Suite 300

      Salt Lake
City, Utah 84121

      Telephone:  (801)
274-1088

      Facsimile:  (801)
274-1099

      Attention:  Justeene
Blankenship

      e-mail:
justblank2000@yahoo.com

      
         

        
          
             

          

          
            - 25
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      If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers or to such other address and/or facsimile number and/or to the attention
of such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

       

      (g)           Successors and
Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including, as contemplated below, any
assignee of any of the Securities. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
holders of at least a majority of the aggregate number of Registrable Securities
issued and issuable under the Transaction Documents, including, without
limitation, by way of a Fundamental Transaction (as defined in the Warrants)
(unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Warrants). A Buyer may assign some or
all of its rights hereunder in connection with any transfer of any of its
Securities without the consent of the Company, in which event such assignee
shall be deemed to be a Buyer hereunder with respect to such assigned
rights.

       

      (h)           No Third Party
Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 9(k).

       

      (i)           Survival. The
representations, warranties, agreements and covenants shall survive the Closing.
Each Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.

       

      (j)           Further
Assurances. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

       

      (k)           Indemnification.  In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in any of the Transaction Documents, (b) any breach of any covenant,
agreement or obligation of the Company contained in any of the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure properly made by such Buyer pursuant to Section 4(i), or
(iv) the status of such Buyer or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the Transaction Documents.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.

      
         

        
          
             

          

          
            - 26
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      (l)           No Strict
Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.

       

      (m)           Remedies.  Each
Buyer and each holder of any Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.

       

      (n)           Withdrawal
Right.
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Transaction Documents, whenever any Buyer exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.

       

      (o)           Payment Set Aside;
Currency. To the
extent that the Company makes a payment or payments to any Buyer hereunder or
pursuant to any of the other Transaction Documents or any of the Buyers enforce
or exercise their rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred. Until the Warrants
are no longer outstanding, the Company shall not effect any stock combination,
reverse stock split or other similar transaction (or make any public
announcement or disclosure with respect to any of the foregoing) without the
prior written consent of at least a majority of the Common Shares initially
issued hereunder on the Closing Date. Unless otherwise expressly indicated, all
dollar amounts referred to in this Agreement and the other Transaction Documents
are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted in the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. “Exchange Rate” means, in
relation to any amount of currency to be converted into U.S. Dollars pursuant to
this Agreement, the U.S. Dollar exchange rate as published in the Wall Street
Journal on the relevant date of calculation.

       

      
        	
                 
      

              	
                (p)

              	
                Judgment
      Currency.

              

      

       

      (i)           If
for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 9(p) referred to as the
“Judgment Currency”) an
amount due in U.S. Dollars under this Agreement or any other Transaction
Document, the conversion shall be made at the Exchange Rate prevailing on the
Trading Day immediately preceding: (1) the date actual payment of the amount
due, in the case of any proceeding in the courts of Illinois or in the courts of
any other jurisdiction that will give effect to such conversion being made on
such date or (2) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 9(p)(i) being hereinafter referred to as the “Judgment Conversion
Date”).

       

      
        
           

        

        
          - 27
-

          
            

          

        

        
           

        

      

       

      (ii)           If
in the case of any proceeding in the court of any jurisdiction referred to in
Section 9(p)(i) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of U.S. Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

       

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

       

      (q)           Independent Nature of
Buyers’ Obligations and Rights

       

      .  The
obligations of each Buyer under the Transaction Documents are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document.  Nothing contained herein or in any other
Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as, and the Company
acknowledges that the Buyers do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or
entity with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and the Company acknowledges that the
Buyers are not acting in concert or as a group, and the Company shall not assert
any such claim, with respect to such obligations or the transactions
contemplated by the Transaction Documents. The decision of each Buyer to
purchase Securities pursuant to the Transaction Documents has been made by such
Buyer independently of any other Buyer. Each Buyer acknowledges that no other
Buyer has acted as agent for such Buyer in connection with such Buyer making its
investment hereunder and that no other Buyer will be acting as agent of such
Buyer in connection with monitoring such Buyer’s investment in the Securities or
enforcing its rights under the Transaction Documents. The Company and each Buyer
confirms that each Buyer has independently participated with the Company in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.  The use of a single agreement to
effectuate the purchase and sale of the Securities contemplated hereby was
solely in the control of the Company, not the action or decision of any Buyer,
and was done solely for the convenience of the Company and not because it was
required or requested to do so by any Buyer.  It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Buyer, solely, and
not between the Company and the Buyers collectively and not between and among
the Buyers.

       

      [signature pages
follow]

       

      
        
           

        

        
          - 28
-

          
            

          

        

        
           

        

      

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

       

      

      
        	
                COMPANY:

                 

              
	
                CHINA
      ARMCO METALS, INC.

                By:

                Name:
      __________________

                Title:  __________________

              
	 
      

      

      

      
        
           

        

        
          - 29
-

          
            

          

        

        
           

        

      

      

      
        	
                [BUYER
      SIGNATURE PAGES TO CNAM SECURITIES PURCHASE AGREEMENT]

                 

                IN
      WITNESS WHEREOF, the undersigned have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories
      as of the date first indicated above.

                Name
      of Buyer:
      ________________________________________________________

                Signature of Authorized
      Signatory of Buyer: _________________________________

                Name
      of Authorized Signatory:
      _______________________________________________

                Title
      of Authorized Signatory:
      ________________________________________________

                Email
      Address of Authorized
      Signatory:_________________________________________

                Facsimile
      Number of Authorized Signatory:
      __________________________________________

                Address
      for Notice of Buyer:

                 

                 

                 

                Address
      for Delivery of Securities for Buyer (if not same as address for
      notice):

                 

                 

                 

                Purchase
      Price: $_________________

                 

                Common
      Shares: _________________

                 

                Warrant
      Shares: __________________

                 

                EIN
      Number:

              

      

      
        
           

        

        
          - 30
-

          
            

          

        

        
           

        

      

      SCHEDULE
OF BUYERS

      
 

      
        
          	
                  (1)

                	
                  (2)

                	
                  (3)

                	
                  (4)

                	
                  (5)

                	
                  (6)

                
	 
      	 
      	 
      	 
      	 
      	 
      
	
                  
                     

                    Buyer

                  

                	
                  
                     

                    Address
      and Facsimile Number

                  

                	
                  
                     

                    Number
      of Common Shares

                  

                	
                  
                     

                    Number
      of Warrant Shares

                  

                	
                  
                    Purchase
      Price

                  

                	
                  
                    Legal
      Representative’s

                    Address
      and Facsimile Number

                  

                
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      

        

      

       

      

        
          
             

          

          
            - 31
-ex10-21.htm

     

    
      

      

    

    Exhibit
10-21

    REGISTRATION
RIGHTS AGREEMENT

     

    This REGISTRATION RIGHTS AGREEMENT
(this “Agreement”),
dated as of April ___, 2010, is by and among China Armco Metals, Inc., a Nevada
corporation with offices located at One Waters Park Drive, Suite 98, San Mateo,
CA (the “Company”),
and each of the undersigned buyers (each, a “Buyer,” and collectively, the
“Buyers”).

     

    RECITALS

     

    A.           In
connection with the Securities Purchase Agreement by and among the parties
hereto, dated as of April 20, 2010 (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) shares (the “Common
Shares”) of the Company’s common stock, $0.001 par value (the “Common Stock”) and (ii) the
Warrants (as defined in the Securities Purchase Agreement) which will be
exercisable to purchase Warrant Shares (as defined in the Securities Purchase
Agreement) in accordance with the terms of the Warrants.

     

    B.           To
induce the Buyers to consummate the transactions contemplated by the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
“1933 Act”), and
applicable state securities laws.

     

    AGREEMENT

     

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

     

    
      	
              1.  

            	
              Definitions.

            

    

     

    Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement.  As used in
this Agreement, the following terms shall have the following
meanings:

     

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

     

    (b) “Closing Date” shall have the
meaning set forth in the Securities Purchase Agreement.

     

    (c) “Effective Date” means the date
that the applicable Registration Statement has been declared effective by the
SEC.

     

    (d) “Effectiveness Deadline” means
(i) with respect to the initial Registration Statement required to be filed
pursuant to Section 2(a), the earlier of the (A)
90th
calendar day after the Closing Date (or the 120th
calendar day after the Closing Date in the event that such Registration
Statement is subject to review by the SEC) and (B) 5th
Business Day after the date the Company is notified (orally or in writing,
whichever is earlier) by the SEC that such Registration Statement will not be
reviewed or will not be subject to further review and (ii) with respect to any
additional Registration Statements that may be required to be filed by the
Company pursuant to this Agreement, the earlier of the (A) 90th
calendar day following the date on which the Company

     

    

    
      
        
           

        

        
          - 1
-

          
            

          

        

        
           

        

      

    

    

    was required to file such additional Registration Statement (or the 120th
calendar day after such date in the event that such Registration Statement is
subject to review by the SEC) and (B) 5th Business Day after the date the
Company is notified (orally or in writing, whichever is earlier) by the SEC that
such Registration Statement will not be reviewed or will not be subject to
further review.

     

    (e) “Filing Deadline” means (i)
with respect to the initial Registration Statement required to be filed pursuant
to Section 2(a), June 1, 2010 and (ii) with respect
to any additional Registration Statements that may be required to be filed by
the Company pursuant to this Agreement, the date on which the Company was
required to file such additional Registration Statement pursuant to the terms of
this Agreement.

     

    (f) “Investor” means a Buyer or any
transferee or assignee of any Registrable Securities or
Warrants, as applicable, to whom a Buyer assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 and any transferee or assignee thereof to whom a
transferee or assignee of any Registrable Securities or Warrants, as applicable,
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.

     

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

     

    (h) “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the
SEC.

     

    (i) “Registrable Securities” means
(i) the Common Shares, (ii) the Warrant Shares and (iii) any capital stock of
the Company issued or issuable with respect to the Common Shares, the Warrant
Shares or the Warrants, including, without limitation, (1) as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise and (2) shares of capital stock of the Company into which the shares
of Common Stock are converted or exchanged and shares of capital stock of a
Successor Entity (as defined in the Warrants) into which the shares of Common
Stock are converted or exchanged, in each case, without regard to any
limitations on exercise of the Warrants.

     

    (j) “Registration Statement” means
a registration statement or registration statements of the Company filed under
the 1933 Act covering Registrable Securities.

     

    (k) “Required Holders” means the
holders of at least a majority of the Registrable Securities.

     

    (l) “Required Registration Amount”
means 100% of the sum of (i) the Common Shares issued and (ii) the maximum
number of Warrant Shares issued and issuable pursuant to the Warrants as of the
Trading Day (as defined in the Warrants) immediately preceding the applicable
date of determination (without taking into account any limitations on the
exercise of the Warrants set forth therein), all subject to adjustment as
provided in Section 2(d).

     

    (m) “Rule 144” means Rule 144
promulgated by the SEC under the 1933 Act, as such rule may be amended from time
to time, or any other similar or successor rule or regulation of the SEC that
may at any time permit the Investors to sell securities of the Company to the
public without registration.

     

    (n) “Rule 415” means Rule 415
promulgated by the SEC under the 1933 Act, as such rule may be amended from time
to time, or any other similar or successor rule or regulation of the SEC
providing for offering securities on a continuous or delayed basis.

     

    (o) “SEC” means the United States
Securities and Exchange Commission or any successor thereto.

     

    

    
      
        
           

        

        
          - 2
-

          
            

          

        

        
           

        

      

    

     

    
      	
              2.  

            	
              Registration.

            

    

     

    (a) Mandatory
Registration.  The Company shall prepare and, as soon as
practicable, but in no event later than the Filing Deadline, file with the SEC
an initial Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities, provided that such initial Registration Statement shall
register for resale at least the number of shares of Common Stock equal to the
Required Registration Amount as of the date such Registration Statement is
initially filed with the SEC, provided further that if Form S-3 is unavailable
for such a registration, the Company shall use such other form as is required by
Section 2(c). Such
initial Registration Statement, and each other Registration Statement required
to filed pursuant to the terms of this Agreement, shall contain (except if
otherwise directed by the Required Holders) the “Selling Stockholders”
and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit
B. The Company shall use its best efforts to have such initial
Registration Statement, and each other Registration Statement required to filed
pursuant to the terms of this Agreement, declared effective by the SEC as soon
as practicable, but in no event later than the applicable Effectiveness Deadline
for such Registration Statement.

     

    (b) [RESERVED]

     

    (c) Ineligibility to Use Form
S-3. In the event that Form S-3 is not available for the registration of
the resale of Registrable Securities hereunder, the Company shall (i) register
the resale of the Registrable Securities on another appropriate form reasonably
acceptable to the Required Holders and (ii) undertake to register the resale of
the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of all Registration
Statements then in effect until such time as a Registration Statement on Form
S-3 covering the resale of all the Registrable Securities has been declared
effective by the SEC.

     

    (d) Sufficient Number of Shares
Registered. In the event the number of shares available under any
Registration Statement is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement, the Company
shall amend such Registration Statement (if permissible), or file with the SEC a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required Registration Amount
as of the Trading Day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable,
but in any event not later than fifteen (15) days after the necessity therefor
arises (but taking account of any Staff position with respect to the date on
which the Staff will permit such amendment to the Registration Statement and/or
such new Registration Statement (as the case may be) to be filed with the SEC).
The Company shall use its best efforts to cause such amendment to such
Registration Statement and/or such new Registration Statement (as the case may
be) to become effective as soon as practicable following the filing thereof with
the SEC, but in no event later than the applicable Effectiveness Deadline for
such Registration Statement. For purposes of the foregoing provision, the number
of shares available under a Registration Statement shall be deemed “insufficient
to cover all of the Registrable Securities” if at any time the number of shares
of Common Stock available for resale under the applicable Registration Statement
is less than the product determined by multiplying (i) the Required Registration
Amount as of such time by (ii) 0.90. The calculation set forth in the foregoing
sentence shall be made without regard to any limitations on exercise of the
Warrants (and such calculation shall assume that the Warrants are then fully
exercisable for shares of Common Stock at the then-prevailing applicable
Exercise Price).

     

    (e) Effect of Failure to File
and Obtain and Maintain Effectiveness of any Registration Statement. If
(i) a Registration Statement covering the resale of all of the Registrable
Securities required to be covered thereby (disregarding any reduction pursuant
to Section 2(f)) and
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the Filing Deadline for such Registration Statement (a
“Filing Failure”) (it
being understood that if the Company files a Registration Statement without
affording each Investor the opportunity to review and comment on the same as
required by Section 3(c) hereof, the

     

    

    
      
        
           

        

        
          - 3
-

          
            

          

        

        
           

        

      

    

    

    Company shall be deemed to not have satisfied this clause (i)(A) and such
event shall be deemed to be a Filing Failure) or (B) not declared effective by
the SEC on or before the Effectiveness Deadline for such Registration Statement
(an “Effectiveness Failure”) (it being understood that if on the Business Day
immediately following the Effective Date for such Registration Statement the
Company shall not have filed a “final” prospectus for such Registration
Statement with the SEC under Rule 424(b) in accordance with Section 3(b) (whether or not such a prospectus is technically
required by such rule), the Company shall be deemed to not have satisfied this
clause (i)(B) and such event shall be deemed to be an Effectiveness Failure),
(ii) other than during an Allowable Grace Period (as defined below), on any day
after the Effective Date of a Registration Statement sales of all of the
Registrable Securities required to be included on such Registration Statement
(disregarding any reduction pursuant to Section 2(f)) cannot be made pursuant to such Registration
Statement (including, without limitation, because of a failure to keep such
Registration Statement effective, a failure to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, a
suspension or delisting of (or a failure to timely list) the shares of Common
Stock on the Principal Market (as defined in the Securities Purchase Agreement),
or a failure to register a sufficient number of shares of Common Stock or by
reason of a stop order) or the prospectus contained therein is not available for
use for any reason (a “Maintenance Failure”), or (iii) if a Registration
Statement is not effective for any reason or the prospectus contained therein is
not available for use for any reason, the Company fails to file with the SEC any
required reports under Section 13 or 15(d) of the 1934 Act such that it is not
in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) (a “Current
Public Information Failure”) as a result of which any of the Investors are
unable to sell Registrable Securities without restriction under Rule 144
(including, without limitation, volume restrictions), then, as partial relief
for the damages to any holder by reason of any such delay in, or reduction of,
its ability to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to one (1%) percent of the
Purchase Price (as defined in the Securities Purchase Agreement) of such
Investor’s Registrable Securities (1) on the date of such Filing Failure,
Effectiveness Failure, Maintenance Failure or Current Public Information
Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a
Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure
until such Effectiveness Failure is cured; (III) a Maintenance Failure until
such Maintenance Failure is cured; and (IV) a Current Public Information Failure
until the earlier of (i) the date such Current Public Information Failure is
cured and (ii) such time that such public information is no longer required
pursuant to Rule 144 (in each case, pro rated for periods totaling less than
thirty (30) days). The payments to which a holder of Registrable Securities
shall be entitled pursuant to this Section 2(e) are referred to herein as “Registration Delay
Payments.” Following the initial Registration Delay Payment for any particular
event or failure (which shall be paid on the date of such event or failure, as
set forth above), without limiting the foregoing, if an event or failure giving
rise to the Registration Delay Payments is cured prior to any thirty (30) day
anniversary of such event or failure, then such Registration Delay Payment shall
be made on the third (3rd) Business Day after such cure. In the event the
Company fails to make Registration Delay Payments in a timely manner in
accordance with the foregoing, such Registration Delay Payments shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for
partial months) until paid in full.  Notwithstanding anything herein
to the contrary, (i) in no event shall the Registration Delay Payments paid to
an Investor exceed, in the aggregate, more than 9% of the Purchase Price of such
Investor’s Registrable Securities on the Closing Date and (ii) in no event shall
Registration Delay Payments accrue during any periods that all Registrable
Securities may be resold by such Investor without restriction (including,
without limitation, volume limitations) pursuant to Rule 144 (taking account of
any Staff position with respect to “affiliate” status and assuming cashless
exercise of the Warrants) and without the need for current public information
required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

     

    (f) Offering.
Notwithstanding anything to the contrary contained in this Agreement, but
subject to the payment of the Registration Delay Payments pursuant to Section 2(e), in the event the
staff of the SEC (the “Staff”) or the SEC seeks to
characterize any offering pursuant to a Registration Statement filed
pursuant to this Agreement as constituting an offering of securities by, or
on behalf of, the Company, or in any other manner,

     

    
      
        
           

        

        
          - 4
-

          
            

          

        

        
           

        

      

    

    

    such that the Staff or the SEC do not permit such
Registration Statement to become effective and used for resales in a manner that
does not constitute such an offering and that permits the continuous resale at
the market by the Investors participating therein (or as otherwise may
be acceptable to each Investor) without being named therein as an “underwriter,”
then the Company shall reduce the number of shares to be included in such
Registration Statement by all Investors until such time as the Staff and
the SEC shall so permit such Registration Statement to become effective as
aforesaid. In making such reduction, the Company shall reduce the number of
shares to be included by all Investors on a pro rata basis (based upon the
number of Registrable Securities otherwise required to be included for each
Investor) unless the inclusion of shares by a particular Investor or a
particular set of Investors are resulting in the Staff or the SEC’s “by or
on behalf of the Company” offering position, in which event the shares held by
such Investor or set of Investors shall be the only shares subject to reduction
(and if by a set of Investors on a pro rata basis by such Investors or on such
other basis as would result in the exclusion of the least number of shares by
all such Investors).  In addition, in the event that the Staff or the SEC
requires any Investor seeking to sell securities under a Registration
Statement filed pursuant to this Agreement to be specifically identified as
an “underwriter” in order to permit such Registration Statement to
become effective, and such Investor does not consent to being so named as an
underwriter in such Registration Statement, then, in each such case, the
Company shall reduce the total number of Registrable Securities to be
registered on behalf of such Investor, until such time as the
Staff or the SEC does not require such identification or until such Investor
accepts such identification and the manner thereof. Any reduction pursuant
to this paragraph will first reduce all Registrable Securities other than
those issued pursuant to the Securities Purchase Agreement. In the event of
any reduction in Registrable Securities pursuant to this paragraph, an
affected Investor shall have the right to require, upon delivery of a written
request to the Company signed by such Investor, the Company to file a
registration statement within thirty (30) days of such request (subject to any
restrictions imposed by Rule 415 or required by the Staff or the SEC)
for resale by such Investor in a manner acceptable to such Investor, and the
Company shall following such request cause to be and keep effective such
registration statement in the same manner as otherwise contemplated in this
Agreement for registration statements hereunder, in each case until such
time as: (i) all Registrable Securities held by such Investor have been
registered and sold pursuant to an effective Registration Statement in a manner
acceptable to such Investor or (ii) all Registrable Securities may be
resold by such Investor without restriction (including, without limitation,
volume limitations) pursuant to Rule 144 (taking account of any Staff position
with respect to “affiliate” status and assuming cashless exercise of the
Warrants) and without the need for current public information required by Rule
144(c)(1) (or Rule 144(i)(2), if applicable) or (iii) such Investor agrees to be
named as an underwriter in any such Registration Statement in a manner
acceptable to such Investor as to all Registrable Securities held by such
Investor and that have not theretofore been included in a Registration Statement
under this Agreement (it being understood that the special demand right under
this sentence may be exercised by an Investor multiple times and with respect to
limited amounts of Registrable Securities in order to permit the resale thereof
by such Investor as contemplated above).

     

    (g) Piggyback
Registrations. Without limiting any obligation of the Company hereunder
or under the Securities Purchase Agreement, if there is not an effective
Registration Statement covering all of the Registrable Securities or the
prospectus contained therein is not available for use and the Company shall
determine to prepare and file with the SEC a registration statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 (each as
promulgated under the 1933 Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the Company’s stock
option or other employee benefit plans), then the Company shall deliver to each
Investor a written notice of such determination and, if within fifteen (15) days
after the date of the delivery of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all
or any part of such Registrable Securities such Investor requests to be
registered; provided, however, the Company shall not be required to register any
Registrable Securities pursuant to this Section 2(g) that are eligible for resale pursuant to Rule 144
without restriction (including, without limitation, volume restrictions) and
without the need for current public information required by Rule 144(c)(1) (or
Rule 144(i)(2), if applicable) or that are the subject of a then-effective
Registration Statement.

     

    
      
        
           

        

        
          - 5
-

          
            

          

        

        
           

        

      

    

     

    (h) Allocation of Registrable
Securities. The initial number of Registrable Securities included in any
Registration Statement and any increase in the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time such
Registration Statement covering such initial number of Registrable Securities or
increase thereof is declared effective by the SEC. In the event that an Investor
sells or otherwise transfers any of such Investor’s Registrable Securities, each
transferee or assignee (as the case may be) that becomes an Investor shall be
allocated a pro rata portion of the then-remaining number of Registrable
Securities included in such Registration Statement for such transferor or
assignee (as the case may be). Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.

     

    (i) No Inclusion of Other
Securities. In no event shall the Company include any securities other
than Registrable Securities on any Registration Statement without the prior
written consent of the Required Holders. Until the Applicable Date (as defined
in the Securities Purchase Agreement), the Company shall not enter into any
agreement providing any registration rights to any of its security
holders.

     

    
      	
              3.  

            	
              Related
      Obligations.

            

    

     

    The
Company shall use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof, and,
pursuant thereto, the Company shall have the following obligations:

     

    (a) The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to all the Registrable Securities (but in no event later than the
applicable Filing Deadline) and use its best efforts to cause such Registration
Statement to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). Subject to Allowable Grace
Periods, the Company shall keep each Registration Statement effective (and the
prospectus contained therein available for use) pursuant to Rule 415 for resales
by the Investors on a delayed or continuous basis at then-prevailing market
prices (and not fixed prices) at all times until the earlier of (i) the date as
of which all of the Investors may sell all of the Registrable Securities
required to be covered by such Registration Statement (disregarding any
reduction pursuant to Section 2(f)) without
restriction pursuant to Rule 144 (including, without limitation, volume
restrictions) and without the need for current public information required by
Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the
Investors shall have sold all of the Registrable Securities covered by such
Registration Statement (the “Registration Period”).
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall ensure that, when filed and at all times while effective, each
Registration Statement (including, without limitation, all amendments and
supplements thereto) and the prospectus (including, without limitation, all
amendments and supplements thereto) used in connection with such Registration
Statement (1) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading and (2) will disclose
(whether directly or through incorporation by reference to other SEC filings to
the extent permitted) all material information regarding the Company and its
securities. The Company shall submit to the SEC, within one (1) Business Day
after the later of the date that (i) the Company learns that no review of a
particular Registration Statement will be made by the Staff or that the Staff
has no further comments on a particular Registration Statement (as the case may
be) and (ii) the consent of Legal Counsel is obtained pursuant to Section 3(c) (which consent shall
be immediately sought), a request for acceleration of effectiveness of such
Registration Statement to a time and date not later than forty-eight (48) hours
after the submission of such request.

     

    

    
      
        
           

        

        
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(b) Subject to Section 3(r) of this Agreement, the Company shall prepare and
file with the SEC such amendments (including, without limitation, post-effective
amendments) and supplements to each Registration Statement and the prospectus
used in connection with each such Registration Statement, which prospectus is to
be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep each such Registration Statement effective at all times during
the Registration Period for such Registration Statement, and, during such
period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company required to be covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement; provided, however, by 8:30 a.m. (New York time) on the
Business Day immediately following each Effective Date, the Company shall file
with the SEC in accordance with Rule 424(b) under the 1933 Act the final
prospectus to be used in connection with sales pursuant to the applicable
Registration Statement (whether or not such a prospectus is technically required
by such rule). In the case of amendments and supplements to any Registration
Statement which are required to be filed pursuant to this Agreement (including,
without limitation, pursuant to this Section 3(b)) by reason of the Company filing a report on Form
10-Q or Form 10-K or any analogous report under the Securities Exchange Act of
1934, as amended (the “1934
Act”), the Company shall have incorporated such report by reference into
such Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement such
Registration Statement.

     

    (c) The
Company shall (A) permit Legal Counsel and legal counsel for each other Investor
to review and comment upon (i) each Registration Statement at least five (5)
Business Days prior to its filing with the SEC and (ii) all amendments and
supplements to each Registration Statement (including, without limitation, the
prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor
reports) within a reasonable number of days prior to their filing with the SEC,
and (B) not file any Registration Statement or amendment or supplement thereto
in a form to which Legal Counsel or any legal counsel for any other Investor
reasonably objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement or any amendment or supplement
thereto or to any prospectus contained therein without the prior consent of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall promptly furnish to Legal Counsel and legal counsel for each other
Investor, without charge, (i) copies of any correspondence from the SEC or the
Staff to the Company or its representatives relating to each Registration
Statement, provided that such correspondence shall not contain any material,
non-public information regarding the Company or any of its Subsidiaries (as
defined in the Securities Purchase Agreement), (ii) after the same is
prepared and filed with the SEC, one (1) copy of each Registration Statement and
any amendment(s) and supplement(s) thereto, including, without limitation,
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of each Registration Statement, one (1) copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel and legal
counsel for each other Investor in performing the Company’s obligations pursuant
to this Section 3.

     

    (d) The
Company shall promptly furnish to each Investor whose Registrable Securities are
included in any Registration Statement, without charge, (i) after the same is
prepared and filed with the SEC, at least one (1) copy of each Registration
Statement and any amendment(s) and supplement(s) thereto, including, without
limitation, financial statements and schedules, all documents incorporated
therein by reference, if requested by an Investor, all exhibits and each
preliminary prospectus, (ii) upon the effectiveness of each Registration
Statement, ten (10) copies of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request from time to time) and (iii) such
other documents, including, without limitation, copies of any preliminary or
final prospectus, as such Investor may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by such
Investor.

     

    

    
      
        
           

        

        
          - 7
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(e) The Company shall use its best efforts to (i) register and qualify, unless
an exemption from registration and qualification applies, the resale by
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including, without limitation, post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, the
Company shall not be required in connection therewith or as a condition thereto
to (x) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any
such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction. The Company shall promptly notify Legal Counsel, legal
counsel for each other Investor and each Investor who holds Registrable
Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or “blue sky” laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.

     

    (f) The
Company shall notify Legal Counsel, legal counsel for each other Investor and
each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, non-public
information regarding the Company or any of its Subsidiaries), and, subject to
Section 3(r), promptly
prepare a supplement or amendment to such Registration Statement and such
prospectus contained therein to correct such untrue statement or omission and
deliver ten (10) copies of such supplement or amendment to Legal Counsel, legal
counsel for each other Investor and each Investor (or such other number of
copies as Legal Counsel, legal counsel for each other Investor or such Investor
may reasonably request). The Company shall also promptly notify Legal Counsel,
legal counsel for each other Investor and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal
Counsel, legal counsel for each other Investor and each Investor by facsimile or
e-mail on the same day of such effectiveness and by overnight mail), and when
the Company receives written notice from the SEC that a Registration Statement
or any post-effective amendment will be reviewed by the SEC, (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate; and (iv) of the receipt of any request by the SEC or any other
federal or state governmental authority for any additional information relating
to the Registration Statement or any amendment or supplement thereto or any
related prospectus. The Company shall respond as promptly as practicable to any
comments received from the SEC with respect to each Registration Statement or
any amendment thereto (it being understood and agreed that the Company’s
response to any such comments shall be delivered to the SEC no later than five
(5) days after the receipt thereof).

     

    (g) The
Company shall (i) use its best efforts to prevent the issuance of any stop order
or other suspension of effectiveness of each Registration Statement or the use
of any prospectus contained therein, or the suspension of the qualification, or
the loss of an exemption from qualification, of any of the Registrable
Securities for sale in any jurisdiction and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and (ii) notify Legal Counsel, legal counsel for each other
Investor and each Investor who holds Registrable Securities of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.

     

    

    
      
        
           

        

        
          - 8
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(h) If any Investor may be required under applicable securities law to be
described in any Registration Statement as an underwriter and such Investor
consents to so being named an underwriter, at the request of any Investor, the
Company shall furnish to such Investor, on the date of the effectiveness of such
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the Investors, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the
Investors.

     

    (i) If any
Investor may be required under applicable securities law to be described in any
Registration Statement as an underwriter and such Investor consents to so being
named an underwriter, upon the written request of such Investor, the Company
shall make available for inspection by (i) such Investor, (ii) legal counsel for
such Investor and (iii) one (1) firm of accountants or other agents retained by
such Investor (collectively, the “Inspectors”), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, each Inspector shall agree in writing to
hold in strict confidence and not to make any disclosure (except to such
Investor) or use of any Record or other information which the Company’s board of
directors determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (1) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (2) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (3) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this Agreement or any other Transaction
Document (as defined in the Securities Purchase Agreement). Such Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and such Investor, if any) shall
be deemed to limit any Investor’s ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and
regulations.

     

    (j) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
to be disclosed in such Registration Statement pursuant to the 1933 Act, (iii)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
Transaction Document. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at such
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

     

    (k) Without
limiting any obligation of the Company under the Securities Purchase Agreement,
the Company shall use its best efforts either to (i) cause all of the
Registrable Securities covered by each Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, (ii) secure
designation and quotation of all of the Registrable Securities

     

    

    
      
        
           

        

        
          - 9
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    covered
by each Registration Statement on the OTC Bulletin Board, or (iii) if, despite
the Company’s best efforts to satisfy the preceding clauses (i) or (ii) the
Company is unsuccessful in satisfying the preceding clauses (i) or (ii), without
limiting the generality of the foregoing, to use its best efforts to arrange for
at least two market makers to register with the Financial Industry Regulatory
Authority (“FINRA”) as
such with respect to such Registrable Securities. In addition, the Company shall
cooperate with each Investor and any broker or dealer through which any such
Investor proposes to sell its Registrable Securities in effecting a filing with
FINRA pursuant to FINRA Rule 5110 as requested by such Investor. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 3(k).

     

          
(l) The
Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts (as the case may
be) as the Investors may reasonably request from time to time and registered in
such names as the Investors may request.

     

    (m) If
requested by an Investor, the Company shall as soon as practicable after receipt
of notice from such Investor and subject to Section 3(r) hereof, (i)
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement or prospectus contained therein if
reasonably requested by an Investor holding any Registrable
Securities.

     

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

     

    (o) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the applicable Effective Date of each Registration
Statement.

     

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

     

    (q) Within
one (1) Business Day after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.

     

    (r) Notwithstanding
anything to the contrary herein (but subject to the last sentence of this
Section 3(r)), at any
time after the Effective Date of a particular Registration Statement, the
Company may delay the disclosure of material, non-public information concerning
the Company or any of its Subsidiaries the disclosure of which at the time is
not, in the good faith opinion of the board of directors of the Company, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a “Grace
Period”), provided that the Company shall promptly notify the Investors
in writing of the (i) existence of material, non-public information giving rise
to a Grace Period (provided that in each such notice the Company shall
not

     

    

    
      
        
           

        

        
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    disclose the content of such material, non-public information to any of the
Investors) and the date on which such Grace Period will begin and (ii) date
on which such Grace Period ends, provided further that (I) no Grace Period shall
exceed ten (10) consecutive days and during any three hundred sixty five (365)
day period all such Grace Periods shall not exceed an aggregate of thirty (30)
days, (II) the first day of any Grace Period must be at least five (5) Trading
Days after the last day of any prior Grace Period and (III) no Grace Period may
exist during the sixty (60) Trading Day period immediately following the
Effective Date of such Registration Statement (provided that such sixty (60)
Trading Day period shall be extended by the number of Trading Days during such
period and any extension thereof contemplated by this proviso during which such
Registration Statement is not effective or the prospectus contained therein is
not available for use) (each, an “Allowable Grace Period”). For purposes of
determining the length of a Grace Period above, such Grace Period shall begin on
and include the date the Investors receive the notice referred to in clause (i)
above and shall end on and include the later of the date the Investors receive
the notice referred to in clause (ii) above and the date referred to in such
notice. The provisions of Section 3(g) hereof shall not be applicable during the period
of any Allowable Grace Period. Upon expiration of each Grace Period, the Company
shall again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable. Notwithstanding anything to the contrary contained in this
Section 3(r), the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which such Investor has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the particular
Registration Statement to the extent applicable, prior to such Investor’s
receipt of the notice of a Grace Period and for which the Investor has not yet
settled.

     

    (s) The
Company shall use its best efforts to maintain eligibility for use of Form S-3
(or any successor form thereto) for the registration of the resale of all the
Registrable Securities.

     

    (t) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by each Investors of its Registrable Securities pursuant
to each Registration Statement.

     

    
      	
              4.  

            	
              Obligations of the
      Investors.

            

    

     

    (a) At least
five (5) Business Days prior to the first anticipated filing date of each
Registration Statement, the Company shall notify each Investor in writing of the
information the Company requires from each such Investor with respect to such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect and maintain
the effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.

     

    (b) Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of each Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.

     

    (c) Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor’s receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary in this Section
4(c), the Company
shall cause

     

    

    
      
        
           

        

        
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    its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which such Investor has entered into a contract for sale prior to the
Investor’s receipt of a notice from the Company of the happening of any event of
the kind described in Section 3(g) or the first
sentence of Section 3(f) and for which such
Investor has not yet settled.

     

    (d) Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it in connection with sales of
Registrable Securities pursuant to a Registration Statement.

     

    
      	
              5.  

            	
              Expenses of
      Registration.

            

    

     

          
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, FINRA filing fees (if any) and fees and
disbursements of counsel for the Company shall be paid by the
Company.

     

    
      	
              6.  

            	
              Indemnification.

            

    

     

    (a) In the
event any Registrable Securities are included in any Registration Statement
under this Agreement, to the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor and each of
its directors, officers, shareholders, members, partners, employees, agents,
advisors, representatives (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding the lack of such title or
any other title) and each Person, if any, who controls such Investor within the
meaning of the 1933 Act or the 1934 Act and each of the directors, officers,
shareholders, members, partners, employees, agents, advisors, representatives
(and any other Persons with a functionally equivalent role of a Person holding
such titles notwithstanding the lack of such title or any other title) of such
controlling Persons (each, an “Indemnified Person”), against
any losses, obligations, claims, damages, liabilities, contingencies, judgments,
fines, penalties, charges, costs (including, without limitation, court costs,
reasonable attorneys’ fees and costs of defense and investigation), amounts paid
in settlement or expenses, joint or several, (collectively, “Claims”) incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, “Violations”). Subject to
Section 6(c), the
Company shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to

     

    

    
      
        
           

        

        
          - 12
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    the contrary contained herein, the indemnification agreement contained in
this Section 6(a): (i)
shall not apply to a Claim by an Indemnified Person arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of such
Registration Statement or any such amendment thereof or supplement thereto and
(ii) shall not be available to a particular Investor to the extent such Claim is
based on a failure of such Investor to deliver or to cause to be delivered the
prospectus made available by the Company (to the extent applicable), including,
without limitation, a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section 3(d) and then only if, and to the extent that,
following the receipt of the corrected prospectus no grounds for such Claim
would have existed; and (iii) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
any of the Registrable Securities by any of the Investors pursuant to Section 9.

     

    (b) In
connection with any Registration Statement in which an Investor is
participating, such Investor agrees to severally and not jointly indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within the meaning
of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case, to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c) and
the below provisos in this Section 6(b), such Investor will reimburse an Indemnified Party
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
the indemnity agreement contained in this Section 6(b) and the agreement
with respect to contribution contained in Section 7
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld or delayed, provided further that such Investor
shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
applicable sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of any of the Registrable Securities by any of the
Investors pursuant to Section 9.

     

    (c) Promptly
after receipt by an Indemnified Person or Indemnified Party (as the case may be)
under this Section 6 of notice of the commencement
of any action or proceeding (including, without limitation, any governmental
action or proceeding) involving a Claim, such Indemnified Person or Indemnified
Party (as the case may be) shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party (as the case may be); provided,
however, an Indemnified Person or Indemnified Party (as the case may be) shall
have the right to retain its own counsel with the fees and expenses of such
counsel to be paid by the indemnifying party if: (i) the indemnifying party has
agreed in writing to pay such fees and expenses; (ii) the indemnifying party
shall have failed promptly to assume the defense of such Claim and to employ
counsel reasonably satisfactory to such Indemnified Person or Indemnified Party
(as the case may be) in any such Claim; or (iii) the named parties to any such
Claim (including, without limitation, any impleaded parties) include both such
Indemnified Person or Indemnified Party (as the case may be) and the
indemnifying party, and such Indemnified Person or such

     

    

    
      
        
           

        

        
          - 13
-

          
            

          

        

        
           

        

      

    

    

    Indemnified Party (as the case may be) shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Person or such Indemnified Party and the indemnifying
party (in which case, if such Indemnified Person or such Indemnified Party (as
the case may be) notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, then the
indemnifying party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party, provided further
that in the case of clause (iii) above the indemnifying party shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for such Indemnified Person or Indemnified Party (as the case may
be). The Indemnified Party or Indemnified Person (as the case may be) shall
reasonably cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person (as the case may be) which relates
to such action or Claim. The indemnifying party shall keep the Indemnified Party
or Indemnified Person (as the case may be) reasonably apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent; provided,
however, the indemnifying party shall not unreasonably withhold, delay or
condition its consent.  No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person (as the case may
be), consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person (as
the case may be) of a release from all liability in respect to such Claim or
litigation, and such settlement shall not include any admission as to fault on
the part of the Indemnified Party. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person (as the case may be) with respect to all
third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party (as the case may be) under this Section
6, except to the extent that the indemnifying party
is materially and adversely prejudiced in its ability to defend such
action.

     

    (d) No Person
involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to indemnification from any Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation.

     

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

     

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

     

    
      	
              7.  

            	
              Contribution.

            

    

     

            
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided,
however: (i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set
forth in Section 6 of this Agreement, (ii) no
Person involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of

     

    

    
      
        
           

        

        
          - 14
-

          
            

          

        

        
           

        

      

    

    

    Registrable Securities who was not guilty of fraudulent misrepresentation;
and (iii) contribution by any seller of Registrable Securities shall be limited
in amount to the amount of net proceeds received by such seller from the
applicable sale of such Registrable Securities pursuant to such Registration
Statement. Notwithstanding the provisions of this Section 7, no Investor shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Investor from the applicable sale of the Registrable Securities
subject to the Claim exceeds the amount of any damages that such Investor has
otherwise been required to pay, or would otherwise be required to pay under
Section 6(b), by reason of such untrue or alleged
untrue statement or omission or alleged omission.

     

    
      	
              8.  

            	
              Reports Under the 1934
      Act.

            

    

     

    With a
view to making available to the Investors the benefits of Rule 144, the Company
agrees to:

     

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

     

    (b) file with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood and agreed that nothing herein
shall limit any obligations of the Company under the Securities Purchase
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and

     

    (c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting, submission and posting requirements of Rule 144 and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company with the
SEC if such reports are not publicly available via EDGAR, and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.

     

    
      	
              9.  

            	
              Assignment of
      Registration Rights.

            

    

     

    All or
any portion of the rights under this Agreement shall be automatically assignable
by each Investor to any transferee or assignee (as the case may be) of all or
any portion of such Investor’s Registrable Securities or Warrants if: (i) such
Investor agrees in writing with such transferee or assignee (as the case may be)
to assign all or any portion of such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such transfer or
assignment (as the case may be); (ii) the Company is, within a reasonable time
after such transfer or assignment (as the case may be), furnished with written
notice of (a) the name and address of such transferee or assignee (as the case
may be), and (b) the securities with respect to which such registration rights
are being transferred or assigned (as the case may be); (iii) immediately
following such transfer or assignment (as the case may be) the further
disposition of such securities by such transferee or assignee (as the case may
be) is restricted under the 1933 Act or applicable state securities laws if so
required; (iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence such transferee or assignee (as the
case may be) agrees in writing with the Company to be bound by all of the
provisions contained herein; (v) such transfer or assignment (as the case may
be) shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement and the Warrants (as the case may be); and (vi)
such transfer or assignment (as the case may be) shall have been conducted in
accordance with all applicable federal and state securities laws.

    

      
        
           

        

        
          - 15
-

          
            

          

        

        
           

        

      

    

     

    
      	
              10.  

            	
              Amendment of
      Registration Rights.

            

    

     

    Provisions
of this Agreement may be amended only with the written consent of the Company
and the Required
Holders. Any amendment effected in accordance with this Section 10 shall be binding upon each Investor and the
Company. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of this Agreement unless the same consideration also is offered to
all of the parties to this Agreement.

     

    
      	
              11.  

            	
              Miscellaneous.

            

    

     

    (a) Solely
for purposes of this Agreement, a Person is deemed to be a holder of Registrable
Securities whenever such Person owns, or is deemed to own, of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from such record owner of such Registrable
Securities.

     

    (b) Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
(iii) with respect to Section 3(c), by electronic
mail (provided confirmation of transmission is electronically generated and kept
on file by the sending party); or (iv) one (1) Business Day after deposit with a
nationally recognized overnight delivery service with next day delivery
specified, in each case, properly addressed to the party to receive the same.
The addresses and facsimile numbers for such communications shall
be:

     

    If to the
Company:

     

    One Waters Park Drive

    Suite 98

    San Mateo, California
94403

    Telephone:  (650)
212-7620

    Telephone:
(650) 212-7620

    Facsimile:
(650) 212 7630

    Attention:  Raymond
Yong Xia

    e-mail:
Raymond@armcometals.com

    

    With a
copy (for informational purposes only) to:

     

    James M.
Schneider, Esq.

    Schneider
Weinberger &
Beilly LLP

    2200
Corporate Blvd. N.W., Suite 210

    Boca
Raton, FL 33431

    Tel:
(561) 362-9595

    Fax:
(561) 362-9612

    e-mail:  jim@swblaw.net

    

    If to the
Transfer Agent:

     

    Action
Stock Transfer Corp.

    7069
Highland Drive, Suite 300

    Salt Lake
City, Utah 84121

    Telephone:  (801)
274-1088

    Facsimile:  (801)
274-1099

    Attention:  Justeene
Blankenship

    e-mail:
justblank2000@yahoo.com

    

      
        
           

        

        
          - 16
-

          
            

          

        

        
           

        

      

    

     

    If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers
attached to the Securities Purchase Agreement, with copies to such Buyer’s
representatives as set forth on the Schedule of Buyers, or to such other address
and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five
(5) days prior to the effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine or electronic mail transmission containing the
time, date, recipient facsimile number or electronic mail address and an image
of the first page of such transmission or (C) provided by a courier or overnight
courier service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

     

    (c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof. The Company and each Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each party hereto shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement by any other party hereto and to enforce
specifically the terms and provisions hereof (without the necessity of showing
economic loss and without any bond or other security being required), this being
in addition to any other remedy to which any party may be entitled by law or
equity.

     

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

    

      
        
           

        

        
          - 17
-

          
            

          

        

        
           

        

      

    

     

    (e) This
Agreement, the other Transaction Documents, the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto and thereto solely with respect to
the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein supersede all prior agreements and understandings among the parties
hereto solely with respect to the subject matter hereof and thereof; provided,
however, nothing contained in this Agreement or any other Transaction Document
shall (or shall be deemed to) (i) have any effect on any agreements any Investor
has entered into with the Company or any of its Subsidiaries prior to the date
hereof with respect to any prior investment made by such Investor in the
Company, (ii) waive, alter, modify or amend in any respect any obligations of
the Company or any of its Subsidiaries or any rights of or benefits to any
Investor or any other Person in any agreement entered into prior to the date
hereof between or among the Company and/or any of its Subsidiaries and any
Investor and all such agreements shall continue in full force and effect or
(iii) limit any obligations of the Company under any of the other Transaction
Documents.

     

    (f) Subject
to compliance with Section 9 (if applicable), this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto. This Agreement is not for
the benefit of, nor may any provision hereof be enforced by, any Person, other
than the parties hereto, their respective permitted successors and assigns and
the Persons referred to in Sections 6 and 7 hereof.

     

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

     

    (h) This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original
thereof.

     

    (i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (j) The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party. Notwithstanding anything to the contrary set forth
in Section 10, terms used in this Agreement but
defined in the other Transaction Documents shall have the meanings ascribed to
such terms on the Closing Date in such other Transaction Documents unless
otherwise consented to in writing by each Investor.

     

    (k) All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.

     

    (l) The
obligations of each Investor under this Agreement and the other Transaction
Documents are several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under this Agreement or any other Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Investor pursuant hereto or thereto, shall be deemed to
constitute the Investors as, and the Company acknowledges that the Investors do
not so constitute, a partnership, an association, a joint venture or any other
kind of group or entity, or create a presumption that the Investors are in any
way acting in concert or as a group or entity with respect to such obligations
or the transactions contemplated by the Transaction Documents or any matters,
and the Company acknowledges that the Investors are not acting in concert or as
a group, and the Company shall not assert any such claim, with respect to such
obligations or the transactions contemplated by this Agreement or any of the
other the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of the Company contained herein was
solely in the control of the Company, not the action or decision of any
Investor, and was done solely for the convenience of the Company and not because
it was required or requested to do so by any Investor. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and an Investor, solely,
and not between the Company and the Investors collectively and not between and
among Investors.

     

    [signature pages
follow]

     

    
      
        
           

        

        
          - 18
-

          
            

          

        

        
           

        

      

    

    

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

     

    

    
      	
              COMPANY:

               

            
	
              CHINA
      ARMCO METALS, INC.

              By:

              Name:

              Title:

               

            

    

    

    

    
      
        
           

        

        
          - 19
-

          
            

          

        

        
           

        

      

    

    

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

     

    

    Name of
Buyer: ________________________________________________________

    Signature of Authorized Signatory of
Buyer: _________________________________

    Name of
Authorized Signatory:
_______________________________________________

    Title of
Authorized Signatory:
________________________________________________

    

    

    
      
        
           

        

        
          - 20
-

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
A

     

    FORM OF NOTICE OF
EFFECTIVENESS

     

    OF REGISTRATION
STATEMENT

     

    ______________________

     

    ______________________

     

    ______________________

     

    Attention:  _____________

     

    Re:           China
Armco Metals, Inc.

     

    Ladies
and Gentlemen:

     

     

    [We
are][I am] counsel to China Armco Metals, Inc., a Nevada corporation (the “Company”), and have
represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities
Purchase Agreement”) entered into by and among the Company and the buyers
named therein (collectively, the “Holders”) pursuant to which
the Company issued to the Holders shares of the Company’s common stock, $0.001
par value per share (the “Common Stock”) (the “Common Shares”) and warrants
exercisable for shares of Common Stock (the “Warrants”). Pursuant to the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the common Shares and the shares of Common Stock issuable
upon exercise of the Warrants, under the Securities Act of 1933, as amended (the
“1933 Act”). In
connection with the Company’s obligations under the Registration Rights
Agreement, on ____________ ___, 20__, the Company filed a Registration Statement
on Form S-3 (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the
Registrable Securities which names each of the Holders as a selling stockholder
thereunder.

     

    In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no
knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.

     

    This
letter shall serve as our standing opinion to you that the Common Shares and the
shares of Common Stock underlying the Warrants are freely transferable by the
Holders pursuant to the Registration Statement. You need not require further
letters from us to effect any future legend-free issuance or reissuance of such
shares of Common Stock to the Holders.

     

     

    Very
truly yours,

     

    [ISSUER’S
COUNSEL]

     

    By:_____________________

    

     

    CC:           [LIST NAMES OF
HOLDERS]

     

    

    
      
        
           

        

        
          - 21
-

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
B

    

    SELLING
STOCKHOLDERS

     

    The
shares of common stock being offered by the selling stockholders are those
issuable to the selling stockholders upon conversion of the notes and exercise
of the warrants. For additional information regarding the issuance of the notes
and the warrants, see “Private Placement of Notes and Warrants” above. We are
registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the notes and the warrants issued pursuant to the Securities
Purchase Agreement, the selling stockholders have not had any material
relationship with us within the past three years.

     

    The table
below lists the selling stockholders and other information regarding the
beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of
the shares of common stock held by each of the selling stockholders. The second
column lists the number of shares of common stock beneficially owned by the
selling stockholders, based on their respective ownership of shares of common
stock, notes and warrants, as of ________, 2010, assuming conversion of the
notes and exercise of the warrants held by each such selling stockholder on that
date but taking account of any limitations on conversion and exercise set forth
therein.

     

    The third
column lists the shares of common stock being offered by this prospectus by the
selling stockholders and does not take in account any limitations on (i)
conversion of the notes set forth therein or (ii) exercise of the warrants set
forth therein.

     

    In
accordance with the terms of a registration rights agreement with the holders of
the notes and the warrants, this prospectus generally covers the resale of 100%
of the sum of (i) the maximum number of shares of common stock issuable upon
conversion of the notes and (ii) the maximum number of shares of common stock
issuable upon exercise of the warrants, in each case, determined as if the
outstanding notes and warrants were converted or exercised (as the case may be)
in full (without regard to any limitations on conversion or exercise contained
therein) as of the trading day immediately preceding the date this registration
statement was initially filed with the SEC. Because the conversion price of the
notes and the exercise price of the warrants may be adjusted, the number of
shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of
all of the shares offered by the selling stockholders pursuant to this
prospectus.

     

    Under the
terms of the notes and the warrants, a selling stockholder may not convert the
notes or exercise the warrants to the extent (but only to the extent) such
selling stockholder or any of its affiliates would beneficially own a number of
shares of our common stock which would exceed 4.9%. The number of shares in the
second column reflects these limitations. The selling stockholders may sell all,
some or none of their shares in this offering.  See “Plan of
Distribution.”

     

    

    
      
        
           

        

        
          - 22
-

          
            

          

        

        
           

        

      

    

    

    
      	
               

               

              Name of Selling Stockholder

            	
              Number of Shares of Common Stock Owned Prior to
      Offering

            	
              Maximum Number of  Shares of Common
      Stock to be Sold Pursuant to this Prospectus

            	
              Number of  Shares of Common Stock of
      Owned After Offering

            

    

     

    
      
        
           

        

        
          - 23
-

          
            

          

        

        
           

        

      

    

    

    PLAN
OF DISTRIBUTION

     

    We are
registering the shares of common stock issuable upon conversion of the notes and
exercise of the warrants to permit the resale of these shares of common stock by
the holders of the notes and warrants from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of common stock.  We will bear all fees and
expenses incident to our obligation to register the shares of common
stock.

     

    The
selling stockholders may sell all or a portion of the shares of common stock
held by them and offered hereby from time to time directly or through one or
more underwriters, broker-dealers or agents. If the shares of common stock are
sold through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent’s commissions.
The shares of common stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale or at negotiated prices. These sales may be
effected in transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:

     

    
      	
              ·  

            	
              on
      any national securities exchange or quotation service on which the
      securities may be listed or quoted at the time of
  sale;

            

    

     

    
      	
              ·  

            	
              in
      the over-the-counter market;

            

    

     

    
      	
              ·  

            	
              in
      transactions otherwise than on these exchanges or systems or in the
      over-the-counter market;

            

    

     

    
      	
              ·  

            	
              through
      the writing or settlement of options, whether such options are listed on
      an options exchange or otherwise;

            

    

     

    
      	
              ·  

            	
              ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

            

    

     

    
      	
              ·  

            	
              block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;

            

    

     

    
      	
              ·  

            	
              purchases
      by a broker-dealer as principal and resale by the broker-dealer for its
      account;

            

    

     

    
      	
              ·  

            	
              an
      exchange distribution in accordance with the rules of the applicable
      exchange;

            

    

     

    
      	
              ·  

            	
              privately
      negotiated transactions;

            

    

     

    
      	
              ·  

            	
              short
      sales made after the date the Registration Statement is declared effective
      by the SEC;

            

    

     

    
      	
              ·  

            	
              agreements
      entered into between broker-dealers and a selling securityholder to sell a
      specified number of such shares at a stipulated price per
      share;

            

    

     

    
      	
              ·  

            	
              a
      combination of any such methods of sale;
and

            

    

     

    
      	
              ·  

            	
              any
      other method permitted pursuant to applicable
  law.

            

    

    
       

      
        
           

        

        
          - 24
-

          
            

          

        

        
           

        

      

    

     

    The
selling stockholders may also sell shares of common stock under Rule 144
promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholders may transfer
the shares of common stock by other means not described in this prospectus. If
the selling stockholders effect such transactions by selling shares of common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the selling stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and
deliver shares of common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.

     

    The
selling stockholders may pledge or grant a security interest in some or all of
the notes, warrants or shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending, if necessary, the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of common stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this
prospectus.

     

    To the
extent required by the Securities Act and the rules and regulations thereunder,
the selling stockholders and any broker-dealer participating in the distribution
of the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the shares of common stock is made, a prospectus supplement, if
required, will be distributed, which will set forth the aggregate amount of
shares of common stock being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions
and other terms constituting compensation from the selling stockholders and any
discounts, commissions or concessions allowed or re-allowed or paid to
broker-dealers.

     

    Under the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.

     

    There can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the registration statement, of which this
prospectus forms a part.

     

    The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of common stock
by the selling stockholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the shares of common stock to engage in market-making
activities with respect to the shares of common stock. All of the foregoing may
affect the marketability of the shares of common stock and the ability of any
person or entity to engage in market-making activities with respect to the
shares of common stock.

    
       

      
        
           

        

        
          - 25
-

          
            

          

        

        
           

        

      

    

     

    We will
pay all expenses of the registration of the shares of common stock pursuant to
the registration rights agreement, estimated to be
$[     ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, a selling stockholder
will pay all underwriting discounts and selling commissions, if any. We will
indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act in accordance with the registration rights
agreements or the selling stockholders will be entitled to contribution. We may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the selling stockholder specifically for use in this
prospectus, in accordance with the related registration rights agreements or we
may be entitled to contribution.

    

          Once
sold under the registration statement, of which this prospectus forms a part,
the shares of common stock will be freely tradable in the hands of persons other
than our affiliates.

    

    
      
        
           

        

        
          - 26
-

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