Document:

Unassociated Document

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of August 22, 2008, between China BAK Battery, Inc., a Nevada
      corporation (the “Company”),
      and
      each purchaser identified on the signature pages hereto (each, a “Purchaser”
and
      collectively, the “Purchasers”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      an effective registration statement under the Securities Act of 1933, as amended
      (the “Securities
      Act”),
      the
      Company desires to issue and sell to each Purchaser, and each Purchaser,
      severally and not jointly, desires to purchase from the Company, securities
      of
      the Company as more fully described in this Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Purchaser agree as
      follows:

     

    ARTICLE
      I.

    DEFINITIONS

     

    1.1 Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings set forth in this Section
      1.1:

     

    “Action”
shall
      have the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person as such
      terms are used in and construed under Rule 405 under the Securities Act. With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

    “Board
      of Directors”
means
      the board of directors of the Company.

     

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

     

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.001 per share, and any other
      class
      of securities into which such securities may hereafter be reclassified or
      changed into. 

     

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

     

    “Company
      Counsel”
means
      Thelen Reid Brown Raysman & Steiner LLP. 

     

    “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered concurrently herewith.

     

    “Evaluation
      Date”
shall
      have the meaning ascribed to such term in Section 3.1(r). 

     

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

    

    “Exchange
      Rate”
shall
      have the meaning ascribed to such term in Section 5.19.

    

    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Governmental
      Body”
      shall
      mean any: (a) nation, state, commonwealth, province, territory, county,
      municipality, district or other jurisdiction of any nature; (b) federal, state,
      local, municipal, foreign or other government; or (c) governmental or
      quasi-governmental authority of any nature (including any governmental or
      administrative division, department, agency, commission, instrumentality,
      official, organization, unit, body or entity) and any court or other
      tribunal.

     

    “Incorporated
      Documents”
means
      the documents, if any, which may be incorporated by reference in the
      Registration Statement, the Prospectus and any Prospectus
      Supplement.

     

    “Indebtedness”
shall
      have the meaning ascribed to such term in Section 3.1(y).

     

    “Indemnified
      Liabilities”
shall
      have the meaning ascribed to such term in Section 4.6.

     

    “Insolvent”
shall
      have the meaning ascribed to such term in Section 3.1(y).

    

    “Intellectual
      Property Rights”
shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Judgment
      Conversion Date”
shall
      have the meaning ascribed to such term in Section 5.20(a)(ii).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Judgment
      Currency”
shall
      have the meaning ascribed to such term in Section 5.20(a).

    

    “Legal
      Requirement” shall
      mean any federal state, local, municipal, foreign or other law, statute,
      constitution, principle of common law, resolution, ordinance, code, edict,
      decree, rule, regulation, ruling or requirement issued, enacted, adopted,
      promulgated, implemented or otherwise put into effect by or under the authority
      of any Governmental Body (or under the authority of any national securities
      exchange upon which the Common Stock is then listed or traded). Reference to
      any
      Legal Requirement means such Legal Requirement as amended, modified, codified,
      replaced or reenacted, in whole or in part, and in effect from time to time,
      and
      reference to any section or other provision of any Legal Requirement means
      that
      provision of such Legal Requirement from time to time in effect and constituting
      the substantive amendment, modification, codification, replacement or
      reenactment of such section or other provision.

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.

     

    “Material
      Adverse Effect”
shall
      have the meaning assigned to such term in Section 3.1(b).

     

    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(m).

     

    “PRC”
means,
      for the purpose of this Agreement, the People’s Republic of China, not including
      Taiwan, Hong Kong and Macau.

     

    “Per
      Unit Purchase Price”
equals
      $3.90, subject to adjustment for reverse and forward stock splits, stock
      dividends, stock combinations and other similar transactions of the Common
      Stock
      that occur after the date of this Agreement.

     

    “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an informal investigation or partial proceeding, such as a
      deposition), whether commenced or threatened.

     

    “Prospectus”
means
      the base prospectus contained in the Registration Statement.

     

    “Prospectus
      Supplement”
means
      the supplement to the Prospectus complying with Rule 424(b) of the Securities
      Act that is filed with the Commission and delivered by the Company to each
      Purchaser at the Closing.

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.6.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Registration
      Statement”
means
      the effective registration statement with Commission file No. 333-151985 which
      registers the sale of the Shares, the Warrants and the Warrant Shares to the
      Purchasers.

     

    “Required
      Approvals”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule. 

     

    “SEC
      Reports”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Securities”
means
      the Shares, the Warrants and the Warrant Shares. 

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Shares”
means
      the shares of Common Stock issued or issuable to each Purchaser pursuant to
      this
      Agreement.

     

    “Short
      Sales”
      include, without limitation, all “short sales” as defined in Rule 200
      promulgated under Regulation SHO under the Exchange Act and all types of direct
      and indirect stock pledges, forward sale contracts, options, puts, calls, swaps
      and similar arrangements (including on a total return basis), and sales and
      other transactions through non-US broker dealers or foreign regulated
      brokers. 

     

    “Subscription
      Amount”
means,
      as to each Purchaser, the aggregate amount to be paid for Shares and Warrants
      purchased hereunder as specified below such Purchaser’s name on the signature
      page of this Agreement next to the heading “Subscription Amount,” in United
      States dollars and in immediately available funds.

     

    “Subsidiary”
means
      any entity
      in
      which
      the Company directly
      or indirectly, owns capital stock or holds an equity or similar interest and
      shall, where applicable, include any subsidiary of the Company formed or
      acquired after the date hereof.

    

    “Trading
      Day”
means
      a
      day on which the principal Trading Market for the Common Stock is open for
      trading.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or
      the
      New York Stock Exchange.

     

    “Transaction
      Documents”
means
      this Agreement, the Warrants and any other documents or agreements executed
      in
      connection with the transactions contemplated hereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Transfer
      Agent”
means
      Securities Transfer Corporation, the current transfer agent of the Company,
      with
      a mailing address of 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034 and
      a
      facsimile number of (469) 633-0088, and any successor transfer agent of the
      Company.

     

    “Warrants”
means,
      collectively, the Common Stock purchase warrants delivered to the Purchasers
      at
      the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
      be
      exercisable after the date hereof and have a term of sixty days, in the form
      of
Exhibit
      A
      attached
      hereto. 

     

    “Warrant
      Shares”
means
      the shares of Common Stock issued or issuable upon exercise of the Warrants.
      

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing.
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, the Company agrees to sell, and the Purchasers, severally and not
      jointly, agree to purchase, up to an aggregate of $32,000,000 of Shares and
      Warrants. Each Purchaser shall deliver to the Company, via wire transfer or
      a
      certified check, immediately available funds equal to its Subscription Amount
      and the Company shall deliver to each Purchaser its respective Shares and a
      Warrant as determined pursuant to Section 2.2(a)(iii) and Section 2.2(a)(iv),
      respectively, and the Company and each Purchaser shall deliver the other items
      set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
      covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
      occur at the offices of Winston & Strawn LLP (counsel to Brean Murray,
      Carret & Co., LLC ("BMC")), with an office located at 200 Park Avenue, New
      York, NY 10166, or such other location as the parties shall mutually
      agree.

     

    2.2 Deliveries.
      

     

    (a) On
      or
      prior to the Closing Date, the Company shall deliver or cause to be delivered
      to
      each Purchaser the following:

     

    (i) this
      Agreement duly executed by the Company;

     

    (ii) a
      legal
      opinion of Company Counsel in form and substance reasonably acceptable to the
      Purchasers; 

     

    (iii) delivery
      via the Depository Trust Company Deposit Withdrawal Agent Commission System
      (“DWAC”)
      Shares
      equal to such Purchaser’s Subscription Amount divided by the Per Unit Purchase
      Price, registered in the name of such Purchaser; and

     

    (iv) a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 100% of such Purchaser’s Subscription Amount divided by
      the Per Unit Purchase Price. 

     

    (v) the
      Prospectus and Prospectus Supplement (which may be delivered in accordance
      with
      Rule 172 under the Securities Act).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) On
      or
      prior to the Closing Date, each Purchaser shall deliver or cause to be delivered
      to the Company the following:

     

    (i) this
      Agreement duly executed by such Purchaser; and

     

    (ii) such
      Purchaser’s Subscription Amount
      (less
      any amount contemplated in Section 4.12)
      by wire
      transfer to the account as specified in writing by the Company.

     

    2.3 Closing
      Conditions. 

     

    (a) The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions being met:

     

    (i) the
      delivery by each Purchaser of the items set forth in Section 2.2(b) of this
      Agreement; and

     

    (b) The
      respective obligations of the Purchasers hereunder in connection with the
      Closing are subject to the following conditions being met:

     

    (i) the
      accuracy in all respects on the Closing Date of the representations and
      warranties of the Company contained herein;

     

    (ii) all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed; 

     

    (iii) the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement; 

     

    (iv) there
      shall have been no Material Adverse Effect with respect to the Company since
      the
      date hereof;

     

    (v) no
      stop
      order suspending the effectiveness of the Registration Statement or any part
      thereof shall have been issued and no proceeding for that purpose shall have
      been initiated or threatened by the Commission; no order preventing or
      suspending the use of any Prospectus Supplement shall have been issued and
      no
      proceeding for that purpose shall have been initiated or threatened by the
      Commission; no order having the effect of ceasing or suspending the distribution
      of the Securities or any other securities of the Company shall have been issued
      by any securities commission, securities regulatory authority or stock exchange
      and no proceedings for that purpose shall have been instituted or shall be
      pending or, to the knowledge of the Company, contemplated by any securities
      commission, securities regulatory authority or stock exchange; all requests
      for
      additional information on the part of the Commission shall have been complied
      with;

     

    (vi) the
      Company shall have delivered a certificate of the Company, dated as of the
      Closing Date and signed by the Chief Executive Officer and Chief Financial
      Officer of the Company (which shall also be considered a representation and
      warranty of the Company for purposes of this Agreement), to the effect that:
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (1) the
      representations and warranties of the Company in this Agreement are true and
      correct, as if made on and as of such Closing Date, and the Company has complied
      with all the agreements and satisfied all the conditions on its part to be
      performed or satisfied at or prior to such Closing Date; 

     

    (2) no
      stop
      order suspending the effectiveness of the Registration Statement or the use
      of
      the Prospectus or any Prospectus Supplement has been issued and no proceedings
      for that purpose have been instituted or are pending or, to the Company’s
      knowledge, threatened under the Securities Act; no order having the effect
      of
      ceasing or suspending the distribution of the Securities or any other securities
      of the Company has been issued by any securities commission, securities
      regulatory authority or stock exchange in the United States and no proceedings
      for that purpose have been instituted or are pending or, to the knowledge of
      the
      Company, contemplated by any securities commission, securities regulatory
      authority or stock exchange in the United States; 

     

    (3)when
      the
      Registration Statement became effective, at the sale time, and at all times
      subsequent thereto up to the delivery of such certificate, the Registration
      Statement and the Incorporated Documents, if any, when such documents became
      effective or were filed with the Commission, contained all information required
      to be included therein by the Securities Act and the Exchange Act and the
      applicable rules and regulations of the Commission thereunder, as the case
      may
      be, and in all material respects conformed to the requirements of the Securities
      Act and the Exchange Act and the applicable rules and regulations of the
      Commission thereunder, as the case may be, and the Registration Statement and
      the Incorporated Documents did not and do not include 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 light of the circumstances
      under which they were made, not misleading and, since the effective date of
      the
      Registration Statement, there has occurred no event required by the Securities
      Act and the rules and regulations of the Commission thereunder to be set forth
      in the SEC Reports which has not been so set forth;

     

    (vii) from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market, and, at
      any time prior to the Closing Date, trading in securities generally as reported
      by Bloomberg L.P. shall not have been suspended or limited, or minimum prices
      shall not have been established on securities whose trades are reported by
      such
      service, or on any Trading Market, nor shall a banking moratorium have been
      declared either by the United States or New York State authorities nor shall
      there have occurred any material outbreak or escalation of hostilities or other
      national or international calamity of such magnitude in its effect on, or any
      material adverse change in, any financial market which, in each case, in the
      reasonable judgment of each Purchaser, makes it impracticable or inadvisable
      to
      purchase the Securities at the Closing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1 Representations
      and Warranties of the Company. Except
      as
      set forth in the Disclosure Schedules, which Disclosure Schedules shall be
      deemed a part hereof and shall qualify any representation or warranty otherwise
      made herein to the extent of the disclosure contained in the corresponding
      section of the Disclosure Schedules, the Company hereby makes the following
      representations and warranties to each Purchaser:

     

    (a) Subsidiaries.
      All of
      the Subsidiaries of the Company are set forth in the SEC Reports. Except as
      disclosed in the SEC Reports, the Company owns, directly or indirectly, all
      of
      the capital stock or other equity interests of each Subsidiary free and clear
      of
      any Liens, and all of the issued and outstanding shares of capital stock of
      each
      Subsidiary are validly issued and are fully paid, non-assessable and free of
      preemptive and similar rights to subscribe for or purchase securities. The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    (b) Organization
      and Qualification.
      The
      Company and each of the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation or default of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each of the Company and the Subsidiaries is duly qualified
      to
      conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in (i) a material adverse effect on
      the
      legality, validity or enforceability of any Transaction Document, (ii) a
      material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s ability to perform on a timely basis its obligations under any
      Transaction Document (any of (i), (ii) or (iii), a “Material
      Adverse Effect”)
      and no
      Proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification.

     

    (c) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations hereunder and thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated hereby and thereby
      have
      been duly authorized by all necessary action on the part of the Company and
      no
      further action is required by the Company, the Board of Directors or the
      Company’s stockholders in connection therewith other than in connection with the
      Required Approvals. Each Transaction Document has been (or upon delivery will
      have been) duly executed by the Company and, when delivered in accordance with
      the terms hereof and thereof, will constitute the valid and binding obligation
      of the Company enforceable against the Company in accordance with its terms,
      except (i) as limited by general equitable principles and applicable bankruptcy,
      insolvency, reorganization, moratorium and other laws of general application
      affecting enforcement of creditors’ rights generally, (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other
      equitable remedies and (iii) insofar as indemnification and contribution
      provisions may be limited by Legal Requirements.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      the issuance and sale of the Securities and the consummation by the Company
      of
      the other transactions contemplated hereby and thereby do not and will not
      (i)
      conflict with or violate any provision of the Company’s or any Subsidiary’s
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents, or (ii) conflict with, or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, result
      in the creation of any Lien upon any of the properties or assets of the Company
      or any Subsidiary, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or both)
      of,
      any agreement, credit facility, debt or other instrument (evidencing a Company
      or Subsidiary debt or otherwise) or other understanding to which the Company
      or
      any Subsidiary is a party or by which any property or asset of the Company
      or
      any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
      conflict with or result in a violation of any Legal Requirement or other
      restriction of any court or Governmental Body to which the Company or a
      Subsidiary is subject (including federal and state securities laws and
      regulations), or by which any property or asset of the Company or a Subsidiary
      is bound or affected; except in the case of each of clauses (ii) and (iii),
      such
      as could not have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (e) Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other Governmental Body or other Person in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.2
      of this Agreement, (ii) the filing with the Commission of the Prospectus
      Supplement, and (iii) such filings as are required to be made under applicable
      state securities laws (collectively, the “Required
      Approvals”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f) Issuance
      of the Securities; Registration.
      The
      Securities are duly authorized and, when issued and paid for in accordance
      with
      the applicable Transaction Documents, will be duly and validly issued, fully
      paid and nonassessable, free and clear of all Liens (other
      than Liens arising as the result of a pledge of the Securities by the
      Purchaser).
      The
      Warrant Shares, when issued in accordance with the terms of the Warrants, will
      be validly issued, fully paid and nonassessable, free and clear of all Liens
      other than restrictions on transfer provided in the Transaction Documents
      (and
      other
      than Liens arising as the result of a pledge of the Securities by the
      Purchaser).
      The
      Company has reserved from its duly authorized capital stock the maximum number
      of shares of Common Stock issuable pursuant to this Agreement and the Warrants.
      The Company has prepared and filed the Registration Statement in conformity
      with
      the requirements of the Securities Act, which became effective on July 10,
      2008 (the “Effective
      Date”),
      including the Prospectus, and such amendments and supplements thereto as may
      have been required to the date of this Agreement. The Registration Statement
      is
      effective under the Securities Act and no stop order preventing or suspending
      the effectiveness of the Registration Statement or suspending or preventing
      the
      use of the Prospectus has been issued by the Commission and no proceedings
      for
      that purpose have been instituted or, to the knowledge of the Company, are
      threatened by the Commission. The Company proposes to file the Prospectus
      Supplement with the Commission pursuant to Rule 424(b). At the time the
      Registration Statement and any amendments thereto became effective, at the
      date
      of this Agreement and at the Closing Date, the Registration Statement and any
      amendments thereto conformed and will conform in all material respects to the
      requirements of the Securities Act and did not and will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein not misleading;
      and
      the Prospectus and any amendments or supplements thereto, at the time the
      Prospectus or any amendment or supplement thereto was issued and at the Closing
      Date, conformed and will conform in all material respects to the requirements
      of
      the Securities Act and did not and will not contain an untrue statement of
      a
      material fact or omit to state a material fact necessary in order to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading.

     

    (g) Capitalization.
      The
      capitalization of the Company is as set forth in the SEC Reports. Except as
      set
      forth in the SEC Reports, the Company has not issued any capital stock since
      its
most
      recently filed periodic report under the Exchange Act, other
      than pursuant to the exercise of stock options under the Company’s incentive
      plans, the issuance of shares of Common Stock pursuant to the Company’s
      incentive plans and pursuant to the conversion or exercise of Common Stock
      Equivalents outstanding as of the date of the most recently filed periodic
      report under the Exchange Act. No Person has any right of first refusal,
      preemptive right, right of participation, or any similar right to participate
      in
      the transactions contemplated by the Transaction Documents. Except as a result
      of the purchase and sale of the Securities or except as set forth in the SEC
      Reports, there are no outstanding options, warrants, scrip rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities,
      rights or obligations convertible into or exercisable or exchangeable for,
      or
      giving any Person any right to subscribe for or acquire, any shares of Common
      Stock, or contracts, commitments, understandings or arrangements by which the
      Company or any Subsidiary is or may become bound to issue additional shares
      of
      Common Stock or Common Stock Equivalents. The issuance and sale of the
      Securities will not obligate the Company to issue shares of Common Stock or
      other securities to any Person (other than the Purchasers) and will not result
      in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under any of such securities. All of the
      outstanding shares of capital stock of the Company are validly issued, fully
      paid and nonassessable, have been issued in compliance with all federal and
      state securities laws, and none of such outstanding shares was issued in
      violation of any preemptive rights or similar rights to subscribe for or
      purchase securities. No approval or authorization of any stockholder or others,
      or further approval by the Board of Directors is required for the issuance
      and
      sale of the Securities. Except as disclosed in the SEC Reports, there are no
      stockholders agreements, voting agreements or other similar agreements with
      respect to the Company’s capital stock to which the Company is a party or, to
      the knowledge of the Company, between or among any of the Company’s
      stockholders.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (h) SEC
      Reports; Financial Statements.
      Except
      as set forth in Schedule
      3.1(h),
      the
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by the Company under the Securities Act and the Exchange
      Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
      preceding the date hereof (or such shorter period as the Company was required
      by
      law or regulation to file such material) (the foregoing materials, including
      the
      exhibits thereto and documents incorporated by reference therein, together
      with
      the Prospectus and the Prospectus Supplement, being collectively referred to
      herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act, as applicable,
      and
      none of the SEC Reports, when filed, 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. The Incorporated
      Documents, if any, when they became effective or were filed with the Commission,
      as the case may be, conformed in all material respects to the requirements
      of
      the Securities Act and the Exchange Act, as applicable, and the applicable
      rules
      and regulations of the Commission thereunder, and none of such documents
      contained any untrue statement of a material fact or omitted to state a material
      fact necessary to make the statements therein not misleading; and any further
      documents so filed and incorporated by reference in the Prospectus or any
      Prospectus Supplement, if any, when such documents become effective or are
      filed
      with the Commission, as the case may be, will conform in all material respects
      to the requirements of the Securities Act and the Exchange Act, as applicable,
      and the applicable rules and regulations of the Commission thereunder, and
      will
      not contain any untrue statement of a material fact or omit to state a material
      fact necessary to make the statements therein not misleading. The financial
      statements of the Company included in the SEC Reports complied in all material
      respects with applicable accounting requirements and the rules and regulations
      of the Commission with respect thereto as in effect at the time of filing.
      Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal
      year-end audit adjustments.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i) Material
      Changes; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior
      to the date hereof or in the Prospectus Supplement, (i) there has been no event,
      occurrence or development that has had or that could reasonably be expected
      to
      result in a Material Adverse Effect, (ii) the Company has not incurred any
      liabilities (contingent or otherwise) other than (A) trade payables and accrued
      expenses incurred in the ordinary course of business consistent with past
      practice and (B) liabilities not required to be reflected in the Company’s
      financial statements pursuant to GAAP or disclosed in filings made with the
      Commission, (iii) the Company has not altered its method of accounting, (iv)
      the
      Company has not declared or made any dividend or distribution of cash or other
      property to its stockholders or purchased, redeemed or made any agreements
      to
      purchase or redeem any shares of its capital stock and (v) the Company has
      not
      issued any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company incentive plans. The Company does not have pending
      before the Commission any request for confidential treatment of information.
      Except for the issuance of the Securities contemplated by this Agreement or
      as
      set forth on Schedule
      3.1(i),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      under applicable securities laws at the time this representation is made that
      has not been publicly disclosed at least one Trading Day prior to the date
      that
      this representation is made.

     

    (j) Litigation.
      Except
      as disclosed in the SEC Reports, there is no action, suit, inquiry, notice
      of
      violation, Proceeding or investigation pending or, to the knowledge of the
      Company, threatened against or affecting the Company, any Subsidiary or any
      of
      their respective properties before or by any court, arbitrator, governmental
      or
      administrative agency or regulatory authority (federal, state, county, local
      or
      foreign) (collectively, an “Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of the Transaction Documents or the Securities or (ii) could, if there
      were
      an unfavorable decision, have or reasonably be expected to result in a Material
      Adverse Effect. Except as disclosed in the SEC Reports, neither the Company
      nor
      any Subsidiary, nor any director or officer thereof, is or has been the subject
      of any Action involving a claim of violation of or liability under federal
      or
      state securities laws or a claim of breach of fiduciary duty. There has not
      been, and to the knowledge of the Company, there is not pending or contemplated,
      any investigation by the Commission involving the Company or, to the knowledge
      of the Company, any current or former director or officer of the Company. The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (k) Labor
      Relations.
      No
      labor dispute exists or, to the knowledge of the Company, is imminent with
      respect to any of the employees of the Company which could reasonably be
      expected to result in a Material Adverse Effect. Except as disclosed in the
      SEC
      Reports, neither the Company nor any of its Subsidiaries is a party to a
      collective bargaining agreement, and the Company and its Subsidiaries believe
      that their relationships with their employees are good. No executive officer
      of
      the Company, to the knowledge of the Company, is, or is now expected to be,
      in
      violation of any material term of any employment contract, confidentiality,
      disclosure or proprietary information agreement or non-competition agreement,
      or
      any other contract or agreement or any restrictive covenant in favor of any
      third party, and the continued employment of each such executive officer 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 U.S. and PRC Legal Requirements relating to employment
      and
      employment practices, terms and conditions of employment and wages and hours,
      except where the failure to be in compliance could not, individually or in
      the
      aggregate, reasonably be expected to have a Material Adverse
      Effect.

     

    (l) Compliance.
      Except
      as disclosed on Schedule
      3.1(l),
      neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or Governmental Body, or (iii) is or has been in violation of any
      statute, rule or regulation of any Governmental Body, including without
      limitation, all Legal Requirements applicable to its business and all such
      laws
      that affect the environment, except in each case as could not have or reasonably
      be expected to result in a Material Adverse Effect.

     

    (m) Regulatory
      Permits.
      Except
      as disclosed in the SEC Reports, the Company and the Subsidiaries possess all
      certificates, authorizations and permits issued by the appropriate federal,
      state, local or foreign regulatory authorities necessary to conduct their
      respective businesses as described in the SEC Reports, except where the failure
      to possess such permits could not reasonably be expected to result in a Material
      Adverse Effect (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation or modification of any Material Permit.

     

    (n) Title
      to Assets.
      Except
      as disclosed in the SEC Reports, the Company and the Subsidiaries have valid
      land use rights for all real property owned by them and good and marketable
      title in all personal property owned by them that is material to the business
      of
      the Company and the Subsidiaries, in each case free and clear of all Liens,
      except for Liens as do not materially affect the value of such property and
      do
      not materially interfere with the use made and proposed to be made of such
      property by the Company and the Subsidiaries and Liens for the payment of
      federal, state or other taxes, the payment of which is neither delinquent nor
      subject to penalties. Except as disclosed in the SEC Reports, any real property
      and facilities held under lease by the Company and the Subsidiaries are held
      by
      them under valid, subsisting and enforceable leases with which the Company
      and
      the Subsidiaries are in compliance.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (o) Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      trade secrets, inventions, copyrights, licenses and other intellectual property
      rights and similar rights necessary or material for use in connection with
      their
      respective businesses as described in the SEC Reports and which the failure
      to
      so have could have a Material Adverse Effect (collectively, the “Intellectual
      Property Rights”).
      Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary
      has received a written notice that any of the Intellectual Property Rights
      used
      by the Company or any Subsidiary violates or infringes upon the intellectual
      property rights of any Person. Except as disclosed in the SEC Reports, to the
      knowledge of the Company, all such Intellectual Property Rights are enforceable
      and there is no existing infringement by another Person of any of the
      Intellectual Property Rights. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their intellectual properties, except where failure to do so could
      not, individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    (p) Insurance.
      Except
      as set forth in the SEC Reports, the Company and the Subsidiaries are insured
      by
      insurers of recognized financial responsibility against such losses and risks
      and in such amounts as the Company deems adequate for the businesses in which
      the Company and the Subsidiaries are engaged, including, but not limited to,
      directors and officers insurance. Neither the Company nor any Subsidiary has
      any
      reason to believe that it will not be able to renew its existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business without a
      significant increase in cost. 

     

    (q) Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction of a value of $120,000 or
      greater with the Company or any of its Subsidiaries which would be required
      to
      be reported under Item 404 of Regulation S-K with the Company or any Subsidiary
      (other than for services as employees, officers and directors), including any
      contract, agreement or other arrangement providing for the furnishing of
      services to or by, providing for rental of real or personal property to or
      from,
      or otherwise requiring payments to or from any officer, director or such
      employee or, to the knowledge of the Company, any entity in which any officer,
      director, or any such employee has a substantial interest or is an officer,
      director, trustee or partner other than for (i) payment of salary or consulting
      fees for services rendered, (ii) reimbursement for expenses incurred on behalf
      of the Company and (iii) other employee benefits, including stock option
      agreements under any stock option plan of the Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (r) Sarbanes-Oxley;
      Internal Accounting Controls.
      The
      Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are applicable to it as of the Closing Date. The
      Company and the Subsidiaries maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization, and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. The Company has established disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) for the Company and designed such disclosure controls and procedures
      to ensure that information required to be disclosed by the Company in the
      reports it files or submits under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the Commission’s
      rules and forms. The Company’s certifying officers have evaluated the
      effectiveness of the Company’s disclosure controls and procedures as of the end
      of the period covered by the Company’s most recently filed periodic report under
      the Exchange Act (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no changes in the
      Company’s internal control over financial reporting (as such term is defined in
      the Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.

     

    (s) Certain
      Fees.
      Except
      as set forth in the Prospectus Supplement, no brokerage or finder’s fees or
      commissions are or will be payable by the Company to any broker, financial
      advisor or consultant, finder, placement agent, investment banker, bank or
      other
      Person with respect to the transactions contemplated by the Transaction
      Documents. The Purchasers shall have no obligation with respect to any fees
      or
      with respect to any claims made by or on behalf of other Persons for fees of
      a
      type contemplated in this Section 3.1(s) that may be due in connection with
      the
      transactions contemplated by the Transaction Documents.

     

    (t) Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after receipt of
      payment for the Securities, will not be or be an Affiliate of, an “investment
      company” within the meaning of the Investment Company Act of 1940, as amended.
      The Company shall conduct its business in a manner so that it will not become
      subject to the Investment Company Act of 1940, as amended.

     

    (u) Registration
      Rights.
      Except
      as disclosed in the SEC Reports, no Person has any right to cause the Company
      to
      effect the registration under the Securities Act of any securities of the
      Company.

     

    (v) Listing
      and Maintenance Requirements.
      The
      Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
      Act, and the Company has taken no action designed to, or which is likely to
      have
      the effect of, terminating the registration of the Common Stock under the
      Exchange Act nor has the Company received any notification that the Commission
      is contemplating terminating such registration. The Company has not, in the
      12
      months preceding the date hereof, received notice from any Trading Market on
      which the Common Stock is or has been listed or quoted to the effect that the
      Company is not in compliance with the listing or maintenance requirements of
      such Trading Market. The Company is, and has no reason to believe that it will
      not in the foreseeable future continue to be, in compliance with all such
      listing and maintenance requirements; provided, the Company makes no warranty
      as
      to the future price of its Common Stock and its impact on such listing or
      maintenance requirements.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (w) Application
      of Takeover Protections.
      The
      Company and the Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s articles of
      incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a result
      of the Purchasers and the Company fulfilling their obligations or exercising
      their rights under the Transaction Documents, including, without limitation,
      as
      a result of the Company’s issuance of the Securities and the Purchasers’
ownership of the Securities.

     

    (x) No
      Integrated Offering.
      Assuming
      the accuracy of the Purchasers’ representations and warranties set forth in
      Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
      acting on its or their behalf has, directly or indirectly, made any sales of
      any
      security, under circumstances that would cause this offering of the Securities
      to be integrated with prior offerings by the Company for purposes of any
      applicable shareholder approval provisions of any Trading Market on which any
      of
      the securities of the Company are listed or designated.

     

    (y) Indebtedness.
      The
      Company does not intend to incur debts beyond its ability to pay such debts
      as
      they mature (taking into account the timing and amounts of cash to be payable
      on
      or in respect of its debt). Neither the Company nor any of its Subsidiaries
      has
      taken any steps to seek protection pursuant to any bankruptcy law nor does
      the
      Company have any knowledge or reason to believe that its 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 3.1(y), "Insolvent" means, with respect to any Person (i) the present
      fair saleable value of such Person's assets is less than the amount required
      to
      pay such Person's total Indebtedness (as defined in this Section 3.1(y)), (ii)
      such Person is unable to pay its debts and liabilities, subordinated, contingent
      or otherwise, as such debts and liabilities become absolute and matured, (iii)
      such Person intends to incur or believes that it will incur debts that would
      be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be conducted.
      Except as set forth on Schedule
      3.1(y),
      the SEC
      Reports set forth as of the respective dates thereof all outstanding secured
      and
      unsecured Indebtedness of the Company or any Subsidiary, or for which the
      Company or any Subsidiary has commitments. For the purposes of this Agreement,
      “Indebtedness”
means
      (a) any liabilities for borrowed money or amounts owed in excess of $50,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations in respect
      of
      indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments
      in excess of $50,000 due under leases required to be capitalized in accordance
      with GAAP. Neither
      the Company nor any Subsidiary is in default with respect to any
      Indebtedness.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (z) Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect, the Company and each
      Subsidiary has filed all necessary federal, state and foreign income and
      franchise tax returns and has paid or accrued all taxes shown as due thereon,
      and the Company has no knowledge of a tax deficiency which has been asserted
      or
      threatened against the Company or any Subsidiary.
      There
      are no transfer taxes or other similar fees or charges under any Legal
      Requirement in the United States or any state or any political subdivision
      thereof, required to be paid by the Company in connection with the execution
      and
      delivery of this Agreement or the sale by the Company of the Securities. No
      stamp or other issuance or transfer taxes or duties and no capital gains,
      income, withholding or other taxes are payable by or on behalf of the Purchasers
      to the United States or the PRC or any political subdivision or taxing authority
      thereof or therein in connection with (A) the issuance of the Securities by
      the
      Company, and (B) the consummation by the Company of any other transaction
      contemplated in this Agreement or the performance by the Company of its
      obligations under this Agreement.

     

    (aa) Foreign
      Corrupt Practices.
      Neither
      the Company, nor any agent or other person acting on behalf of the Company,
      has
      (i) directly or indirectly, used any funds for unlawful contributions, gifts,
      entertainment or other unlawful expenses related to foreign or domestic
      political activity, (ii) made any unlawful payment to foreign or domestic
      government officials or employees or to any foreign or domestic political
      parties or campaigns from corporate funds, (iii) failed to disclose fully any
      contribution made by the Company (or made by any person acting on its behalf
      of
      which the Company is aware) which is in violation of law, or (iv) violated
      in
      any material respect any provision of the Foreign Corrupt Practices Act of
      1977,
      as amended.

     

    (bb) Accountants.
      The
      Company’s accountants are identified in the Prospectus or Prospectus Supplement.
      Such accountants, who the Company expects will express their opinion with
      respect to the financial statements to be included in the Company’s Annual
      Report on Form 10-K for the year ending September 30, 2008, are a registered
      public accounting firm as required by the Securities Act. 

     

    (cc) Regulation
      M Compliance. 
      The Company has not, and no one acting on its behalf has, (i) taken, directly
      or
      indirectly, any action designed to cause or to result in the stabilization
      or
      manipulation of the price of any security of the Company 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, or (iii) paid
      or agreed to pay to any Person any compensation for soliciting another to
      purchase any other securities of the Company, other than, in the case of clauses
      (ii) and (iii), compensation paid to the Company’s placement agent in connection
      with the placement of the Securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (dd) U.S.
      Real Property Holding Corporation.
      The
      Company is not and has never been 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 shall so certify upon any Purchaser's
      request.

     

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

     

    (ff) Other
      Representations and Warranties Relating to the Company and
      Subsidiaries.
      

     

    (i) All
      consents, approvals, authorizations or licenses requisite under PRC Legal
      Requirements for the due and proper establishment and operation of the Company
      and Subsidiaries have been duly obtained from the relevant PRC Governmental
      Bodies and are in full force and effect; except where the failure to obtain
      any
      such consent, approval, authorization or license or maintain the same in full
      force and effect would not have, or be reasonably likely to result in, a
      Material Adverse Effect. 

     

    (ii) Except
      as
      set forth on Schedule
      3.1(ff)(ii),
      all
      filings
      and registrations with the PRC Governmental Bodies required in respect of the
      Company and Subsidiaries and their capital structure and operations including,
      without limitation, the registration with the Ministry of Commerce, the China
      Securities Regulatory Commission, the State Administration of Industry, or
      their
      respective local divisions of Commerce, the State Administration of Foreign
      Exchange, tax bureau and customs authorities have been duly completed in
      accordance with the relevant PRC Legal Requirements, except where, the failure
      to complete such filings and registrations does not, and would not, individually
      or in the aggregate, have a Material Adverse Effect.

     

    (iii) The
      Company and Subsidiaries have complied with all relevant PRC Legal Requirements
      regarding the contribution and payment of its registered share capital, the
      payment schedule of which has been approved by the relevant PRC Governmental
      Bodies. There are no outstanding commitments made by the Company or any
      Subsidiary (or any of their shareholders) to sell any equity interest in the
      Company or any Subsidiary.

     

    (iv) Neither
      the Company nor any Subsidiary has received any letter or notice from any
      relevant PRC Governmental Body notifying it of revocation of any licenses or
      qualifications issued to it or any subsidy granted to it by any PRC Governmental
      Body for non-compliance with the terms thereof or with applicable PRC Legal
      Requirements, or the lack of compliance or remedial actions in respect of the
      activities carried out by the Company or any Subsidiary, except such revocation
      as does not, and would not, individually or in the aggregate, have a Material
      Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (v) The
      Company and Subsidiaries have conducted their business activities within the
      permitted scope of business or have otherwise operated their business in
      compliance with all relevant Legal Requirements and with all requisite licenses
      and approvals granted by competent PRC Governmental Bodies other than such
      non-compliance that do not, and would not, individually or in the aggregate,
      have a Material Adverse Effect. As to licenses, approvals and government grants
      and concessions requisite or material for the conduct of any material part
      of
      the Company or Subsidiaries’ business which is subject to periodic renewal, the
      Company has no knowledge of any reasons for which such requisite renewals will
      not be granted by the relevant PRC Governmental Bodies.

     

    (vi) With
      regard to employment and staff or labor, the Company and Subsidiaries have
      complied with all applicable PRC Legal Requirements in all material respects,
      including, without limitation, those pertaining to welfare funds, social
      benefits, medical benefits, insurance, retirement benefits, pensions or the
      like, other than such non-compliance that do not, and would not, individually
      or
      in the aggregate, have a Material Adverse Effect.

     

    (gg) Disclosure.
      Neither
      the Company nor any Person acting on its behalf has provided any Purchaser
      or
      its respective agents or counsel with any information that constitutes material,
      non-public information concerning the Company, the Subsidiaries or their
      respective businesses, except insofar as the existence and terms of the proposed
      transactions contemplated hereunder may constitute such information. The Company
      understands and confirms that the Purchasers will rely on the foregoing
      representations and covenants in effecting transactions in securities of the
      Company. All disclosure provided to the Purchasers regarding the Company and
      its
      businesses and the transactions contemplated hereby, furnished by or on behalf
      of the Company (including their representations and warranties set forth in
      this
      Agreement and the disclosure set forth in any diligence report or business
      plan
      provided by the Company or any Person acting on the Company’s behalf) are true
      and correct and do 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 light of the circumstances under which they were made, not
      misleading.

     

    (hh) Acknowledgment
      Regarding Each Purchaser’s Purchase of the Securities. The Company acknowledges
      and agrees that each Purchaser is acting solely in the capacity of arm’s length
      purchaser with respect to this Agreement and the other Transaction Documents
      and
      the transactions contemplated hereby and thereby, and that no Purchaser is
      (i)
      an officer or director of the Company, (ii) an “affiliate” of the Company (as
      defined in Rule 144 under the Securities Act (including any successor rule,
      “Rule 144”)) or (iii) a “beneficial owner” of more than 10% of the Common Stock
      (as defined for purposes of Rule 13d-3 of the Exchange Act). The Company further
      acknowledges that no Purchaser is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to this Agreement or
      the
      other Transaction Documents and the transactions contemplated hereby and
      thereby, and any advice given by a Purchaser or any of its representatives
      or
      agents in connection with this Agreement or the other Transaction Documents
      and
      the transactions contemplated hereby and thereby is merely incidental to such
      Purchaser’s purchase of the Shares. The Company further represents to each
      Purchaser that the Company’s decision to enter into this Agreement and the other
      Transaction Documents has been based solely on the independent evaluation by
      the
      Company and its representatives.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.2 Representations
      and Warranties of the Purchasers. Each
      Purchaser, for itself and for no other Purchaser, hereby represents and warrants
      as of the date hereof and as of the Closing Date to the Company as
      follows:

     

    (a) Organization;
      Authority.
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The execution and delivery of
      this
      Agreement and performance by such Purchaser of the transactions contemplated
      by
      this Agreement have been duly authorized by all necessary corporate or similar
      action on the part of such Purchaser. Each Transaction Document to which it
      is a
      party has been duly executed by such Purchaser, and when delivered by such
      Purchaser in accordance with the terms hereof, will constitute the valid and
      legally binding obligation of such Purchaser, enforceable against it in
      accordance with its terms, except (i) as limited by general equitable principles
      and applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws
      of general application affecting enforcement of creditors’ rights generally,
      (ii) as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies and (iii) insofar as
      indemnification and contribution provisions may be limited by Legal
      Requirements.

     

    (b) Ordinary
      Course; Regulation M.
      Such
      Purchaser is acquiring the Shares and Warrants hereunder in the ordinary course
      of its business. Such Purchaser has complied with the provisions of Rule 105
      of
      Regulation M in connection with the purchase of the Shares and
      Warrants.

     

    (c) Purchaser
      Status.
      At the
      time such Purchaser was offered the Shares and Warrants, it was, and at the
      date
      hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1),
      (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
      institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
      Purchaser is not required to be registered as a broker-dealer under Section
      15
      of the Exchange Act. 

     

    (d) Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of such
      investment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (e) Information.
      Such
      Purchaser 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 Purchaser. Such Purchaser 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 Purchaser or its advisors,
      if any, or its representatives shall modify, amend or affect such Purchaser's
      right to rely on the Company's representations and warranties contained herein.
      

     

    (f) Certain
      Trading Activities.
      Such
      Purchaser has not directly or indirectly, nor has any Person acting on behalf
      of
      or pursuant to any understanding with such Purchaser, engaged in any purchase
      or
      sale in the securities of the Company (including, without limitations, any
      Short
      Sales involving the Company’s securities) since the time
      that
      such Purchaser was first contacted by the Company or any placement agent acting
      on behalf of the Company regarding this
      investment in the Company. Such Purchaser covenants that neither it nor any
      Person acting on its behalf or pursuant to any understanding with it will engage
      in any purchase or sale in the securities of the Company (including Short Sales)
      prior to the time that the transactions contemplated by this Agreement are
      publicly disclosed
      pursuant
      to the Press Release (as defined below).

     

    (g) No
      Governmental Review.
      Such
      Purchaser 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.

     

    (h) Independent
      Investment Decision.
      Such
      Purchaser has independently evaluated the merits of its decision to purchase
      the
      Securities pursuant to the Transaction Documents, and such Purchaser confirms
      that it has not relied on the advice of any other Purchaser’s business and/or
      legal counsel in making such decision. Such Purchaser has not relied on the
      business or legal advice of BMC or any of its agents, counsel or Affiliates
      in
      making its investment decision hereunder, and confirms that none of such Persons
      has made any representations or warranties to such Purchaser in connection
      with
      the transactions contemplated by the Transaction Documents.

     

    (i) Limited
      Ownership. 
      The
      purchase by such Purchaser of the Securities issuable to it at the Closing
      will
      not result in such Purchaser (individually or together with any other Person
      with whom such Purchaser has identified, or will have identified, itself as
      part
      of a “group” in a public filing made with the Commission involving the Company’s
      securities) acquiring, or obtaining the right to acquire, in excess of 19.999%
      of the outstanding shares of Common Stock or the voting power of the Company
      on
      a post transaction basis that assumes that the Closing shall have occurred.
      Such
      Purchaser does not presently intend to, alone or together with others, make
      a
      public filing with the Commission to disclose that it has (or that it together
      with such other Persons have) acquired, or obtained the right to acquire, as
      a
      result of the Closing (when added to any other securities of the Company that
      it
      or they then own or have the right to acquire), in excess of 19.999% of the
      outstanding shares of Common Stock or the voting power of the Company on a
      post
      transaction basis that assumes that the Closing shall have
      occurred.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 Integration.
      The Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities for
      purposes of the rules and regulations of any Trading Market such that it would
      require shareholder approval prior to the closing of such other transaction
      unless shareholder approval is obtained before the closing of such subsequent
      transaction.

     

    4.2 Securities
      Laws Disclosure; Publicity. The Company shall, by 9:30 a.m. (New York City
      time) on the Trading Day immediately following the date hereof, issue a press
      release (the “Press Release”) disclosing the material terms of the
      transactions contemplated hereby, and within 4 Trading Days file a Current
      Report on Form 8-K, and shall attach this Agreement and the form of Warrant
      thereto. The Company and each Purchaser shall consult with each other in issuing
      any other press releases with respect to the transactions contemplated hereby,
      and neither the Company nor any Purchaser shall issue any such press release
      or
      otherwise make any such public statement without the prior consent of the
      Company, with respect to any press release of any Purchaser, or without the
      prior consent of each Purchaser, with respect to any press release of the
      Company, which consent shall not unreasonably be withheld or delayed, except
      if
      such disclosure is required by law, in which case the disclosing party shall
      promptly provide the other party with prior notice of such public statement
      or
      communication. Notwithstanding the foregoing, the Company shall not publicly
      disclose the name of any Purchaser, or include the name of any Purchaser in
      any
      filing with the Commission or any regulatory agency or Trading Market, without
      the prior written consent of such Purchaser, except (i) as required by federal
      securities law in connection with the filing of final Transaction Documents
      (including signature pages thereto) with the Commission and (ii) to the extent
      such disclosure is required by law or Trading Market regulations, in which
      case
      the Company shall provide the Purchasers with prior notice of such disclosure
      permitted under this clause (ii).

     

    4.3 Shareholder
      Rights Plan. No claim will be made or enforced by the Company or, with the
      consent of the Company, any other Person, that any Purchaser is an “Acquiring
      Person” under any control share acquisition, business combination, poison pill
      (including any distribution under a rights agreement) or similar anti-takeover
      plan or arrangement in effect or hereafter adopted by the Company, or that
      any
      Purchaser could be deemed to trigger the provisions of any such plan or
      arrangement, by virtue of receiving Securities under the Transaction Documents
      or under any other agreement between the Company and the Purchasers, provided
      that no Purchaser, together with its Affiliates, will beneficially hold more
      than 15% of the Common Stock outstanding as of the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.4 Non-Public
      Information. Except with respect to the material terms and conditions of the
      transactions contemplated by the Transaction Documents, the Company covenants
      and agrees that neither it nor any other Person acting on its behalf will
      provide any Purchaser or its agents or counsel with any information that the
      Company believes constitutes material non-public information, unless prior
      thereto such Purchaser shall have executed a written agreement regarding the
      confidentiality and use of such information. From
      and
      after the filing of the Press Release, no Purchaser shall be in possession
      of
      any material, nonpublic information received from the Company, any of its
      Subsidiaries or any of its respective officers, directors, employees or agents,
      that is not disclosed in the Press Release. The Company shall not disclose
      the
      identity of any Purchaser in any filing with the SEC except as required by
      the
      rules and regulations of the SEC thereunder. The Company shall not, and shall
      cause each of its Subsidiaries and its and each of their respective officers,
      directors, employees and agents, not to, provide any Purchaser with any
      material, nonpublic information regarding the Company or any of its Subsidiaries
      from and after the filing of the Press Release without the express written
      consent of such Purchaser. In the event of a breach of the foregoing covenant
      by
      the Company, any of its Subsidiaries, or any of its or their respective
      officers, directors, employees and agents, in addition to any other remedy
      provided herein or in the Transaction Documents, a Purchaser may notify the
      Company, and the Company shall make public disclosure of such material nonpublic
      information within two (2) Trading Days of such notification.
      The
      Company understands and confirms that each Purchaser shall be relying on the
      foregoing covenant in effecting transactions in securities of the
      Company.

     

    4.5 Use
      of
      Proceeds. The Company shall use the net proceeds from the sale of the
      Securities hereunder as set forth in the Prospectus Supplement and not to redeem
      any Common Stock or Common Stock Equivalents.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.6 Indemnification
      of Purchasers. Subject to the provisions of this Section 4.6, the Company
      will indemnify and hold each Purchaser and its directors, officers,
      shareholders, members, partners, employees and agents (and any other Persons
      with a functionally equivalent role of a Person holding such titles
      notwithstanding a lack of such title or any other title), each Person who
      controls such Purchaser (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, shareholders,
      agents, members, partners or employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles notwithstanding
      a
      lack of such title or any other title) of such controlling persons (each, a
      “Purchaser Party”) harmless from any and all losses, liabilities, obligations,
      claims, contingencies, damages, costs and out-of pocket expenses, including
      all
      judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation
      (the
“Indemnified Liabilities”)
      that any
      such Purchaser Party may suffer or incur as a result of or relating to (a)
      any
      breach of any of the representations, warranties, covenants or agreements made
      by the Company in this Agreement or in the other Transaction Documents, (b)
      any
      action instituted against a Purchaser, or any of them or their respective
      Affiliates, by any third
      party,
      with
      respect to any of the transactions contemplated by the Transaction Documents
      (except
      to
      the extent
      such
      action is based upon conduct
      by such Purchaser which constitutes fraud, gross negligence or willful
      misconduct),
      (c)
      any untrue statement or alleged untrue statement of a material fact contained
      in
      the Registration Statement, or any amendment thereto, including any information
      deemed to be a part thereof pursuant to Rule 430A, Rule 430B and Rule 430C
      under
      the Securities Act, or the omission or alleged omission therefrom of a material
      fact required to be stated therein or necessary to make the statements therein
      not misleading, or (d) upon any untrue statement or alleged untrue statement
      of
      a material fact contained in the Prospectus, any Prospectus Supplement or any
      Incorporated Document (or any amendment or supplement thereto), or the omission
      or alleged omission therefrom of a material fact necessary in order to make
      the
      statements therein, in the light of the circumstances under which they were
      made, not misleading. If any action shall be brought against any Purchaser
      Party
      in respect of which indemnity may be sought pursuant to this Agreement, such
      Purchaser Party shall promptly notify the Company in writing, and the Company
      shall have the right to assume the defense thereof with counsel of its own
      choosing reasonably acceptable to the Purchaser Party. To the extent that a
      Purchaser Party fails to provide timely notice of a claim for indemnity under
      this Section 4.6, and such failure materially prejudices the Company’s ability
      to defend against such claim, then the Company shall have no obligation under
      this Section 4.6 to indemnify the Purchaser Party for the claim (or portion
      thereof) that was so affected. Any Purchaser Party shall have the right to
      employ separate counsel in any such action and participate in the defense
      thereof, but the fees and expenses of such counsel shall be at the expense
      of
      such Purchaser Party except to the extent that (i) the employment thereof has
      been specifically authorized by the Company in writing, (ii) the Company has
      failed after a reasonable period of time to assume such defense and to employ
      counsel or (iii) in such action there is, in the reasonable opinion of such
      separate counsel, a material conflict on any material issue between the position
      of the Company and the position of such Purchaser Party, in which case the
      Company shall be responsible for the reasonable fees and expenses of no more
      than one such separate counsel. Legal
      counsel referred to in the immediately proceeding sentence shall be selected
      by
      the Purchasers holding at least a majority of the Shares issued and issuable
      hereunder. The
      Company will not be liable to any Purchaser Party under this Agreement (i)
      for
      any settlement by a Purchaser Party effected without the Company’s prior written
      consent, which shall not be unreasonably withheld or delayed; or (ii)
      to
      the extent, but only to the extent, that a loss, claim, damage or liability
      is
      attributable to any
      conduct
      by such Purchaser which constitutes fraud, gross negligence, or willful
      misconduct.
      The
      Company shall not, without the prior written consent of the Purchaser Party,
      which consent shall not be unreasonably withheld, conditioned or delayed,
      consent to entry of any judgment or enter into any settlement or other
      compromise which (i) does not include as an unconditional term thereof giving
      by
      the claimant or plaintiff to such Purchaser Party of a release from all
      liability in respect to such Indemnified Liabilities or litigation, (ii)
      requires any admission of wrongdoing by such Purchaser Party, or (iii) obligates
      or requires a Purchaser Party to take, or refrain from taking, any action.
      Following indemnification as provided for hereunder, the indemnifying party
      shall be subrogated to all rights of the Purchaser Party with respect to all
      third parties, firms or corporations relating to the matter for which
      indemnification has been made. 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. The indemnification
      required by this Section 4.6 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 Liabilities are incurred. The indemnity agreements
      contained herein shall be in addition to (x) any cause of action or similar
      right of the Purchaser Party against the indemnifying party or others, and
      (y)
      any liabilities the indemnifying party may be subject to pursuant to the
      law.

     

    4.7 Reservation
      of Common Stock.
      As of
      the date hereof, the Company has reserved and the Company shall continue to
      reserve and keep available at all times, free of preemptive rights, a sufficient
      number of shares of Common Stock for the purpose of enabling the Company to
      issue Shares pursuant to this Agreement and Warrant Shares pursuant to any
      exercise of the Warrants. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.8 Listing
      of Common Stock. The
      Company hereby agrees to
      maintain the listing of the Common Stock on a Trading Market, and as soon as
      reasonably practicable following the Closing (but not later than the Closing
      Date) to list all of the Shares on such Trading Market. The Company further
      agrees, if the Company applies to have the Common Stock traded on any other
      Trading Market, it will include in such application all of the Shares, and
      will
      take such other action as is reasonably necessary to cause all of the Shares
      to
      be listed on such other Trading Market as promptly as possible. The Company
      shall
      continue
      the listing and trading of its Common Stock on a Trading Market and will comply
      in all respects with the Company’s reporting, filing and other obligations under
      the bylaws or rules of the Trading Market.

     

    4.9 Equal
      Treatment of Purchasers. 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 is also offered
      to
      all of the parties to the Transaction Documents. For clarification purposes,
      this provision constitutes a separate right granted to each Purchaser by the
      Company and negotiated separately by each Purchaser, and is intended for the
      Company to treat the Purchasers as a class and shall not in any way be construed
      as the Purchasers acting in concert or as a group with respect to the purchase,
      disposition or voting of Securities or otherwise.

     

    4.10 Confidentiality
      After The Date Hereof. Each Purchaser, severally and not jointly with the
      other Purchasers, covenants that until the time the transactions contemplated
      by
      this Agreement are publicly disclosed by the Company pursuant to the Press
      Release as described in Section 4.2, such Purchaser will maintain the
      confidentiality of the existence and terms of this transaction and the
      information included in the Disclosure Schedules.  

     

    4.11 No
      Manipulation of Price.  The Company will not take, directly or
      indirectly, any action designed to cause or result in, or that has constituted
      or might reasonably be expected to constitute, the stabilization or manipulation
      of the price of any securities of the Company.

     

    4.12 Variable
      Securities. For so long as any Warrants remain outstanding, the Company
      shall not, in any manner, issue or sell any rights, warrants or options to
      subscribe for or purchase Common Stock or directly or indirectly convertible
      into or exchangeable or exercisable for Common Stock at a price which varies
      or
      may vary with the market price of the Common Stock, including by way of one
      or
      more reset(s) to any fixed price unless the conversion, exchange or exercise
      price of any such security cannot be less than the then applicable Exercise
      Price (as defined in the Warrants) with respect to the Common Stock into which
      any Warrant is exercisable. This provision shall not prohibit the Company from
      issuing or selling any securities that contain customary anti-dilution
      provisions. 

     

    4.13 Warrant
      Shares. If all or any portion of a Warrant is exercised at a time when there
      is an effective registration statement to cover the issuance or resale of the
      Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant
      Shares issued pursuant to any such exercise shall be issued free of all legends.
      If at any time following the date hereof the Registration Statement (or any
      subsequent registration statement registering the Warrant Shares) is not
      effective or is not otherwise available for the sale or resale of the Warrant
      Shares, the Company shall immediately notify the holders of the Warrants in
      writing that such registration statement is not then effective and thereafter
      shall promptly notify such holders when the registration statement is effective
      again and available for the sale or resale of the Warrant Shares. The Company
      shall use its best efforts to keep a registration statement (including the
      Registration Statement) registering the issuance or resale of the Warrant Shares
      effective during the term of the Warrants; provided, such obligation will
      terminate when all Warrant Shares may be sold pursuant to Rule 144 or any
      successor. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1 Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before the tenth day
      following the date of this Agreement; provided, however, that no
      such termination will affect the right of any party to sue for any breach by
      the
      other party (or parties).

     

    5.2 Fees
      and Expenses. At
      the
      Closing, the Company shall reimburse Empery Asset Master Ltd. for its reasonable
      expenses incurred in connection with this Agreement and the Transaction
      Documents, including, without limitation, reasonable legal fees and expenses,
      up
      to a maximum of $10,000, which amount may be withheld by such Purchaser from
      its
      Subscription Amount at the Closing. In addition, (i) Hudson Bay Fund, LP may
      withhold $86,428 from its Subscription Amount, (ii) Hudson Bay Overseas Fund,
      Ltd. may withhold $114,568 from its Subscription Amount and (iii) any of Enable
      Growth Partners LP, Enable Opportunity Partners LP and Pierce Diversified
      Strategy Master Fund LLC may withhold $200,996, in the aggregate, from its
      Subscription Amount, all in satisfaction of registration delay payments owed
      by
      the Company to each of them. 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 Purchaser) relating to or arising out
      of
      the transactions contemplated hereby, including, without limitation, any fees
      or
      commissions payable to the Agent. The Company shall pay, and hold each Purchaser
      harmless against, any liability, loss or expense (including, without limitation,
      reasonable attorney's fees and out-of-pocket expenses) arising in connection
      with any claim relating to any such payment. Except
      as
      expressly set forth in the Transaction Documents to the contrary, each party
      shall pay the fees and expenses of its advisers, counsel, accountants and other
      experts, if any, and all other expenses incurred by such party incident to
      the
      negotiation, preparation, execution, delivery and performance of this Agreement.
      The Company shall pay all Transfer Agent fees, stamp taxes and other taxes
      and
      duties levied in connection with the delivery of any Securities to the
      Purchasers.

     

    5.3 Entire
      Agreement. The Transaction Documents, together with the exhibits and
      schedules thereto, the Prospectus and the Prospectus Supplement, contain the
      entire understanding of the parties with respect to the subject matter hereof
      and supersede all prior agreements and understandings, oral or written, with
      respect to such matters, which the parties acknowledge have been merged into
      such documents, exhibits and schedules.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.4 Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
      2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    5.5 Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in a
      written instrument signed, in the case of an amendment, by the Company and
      the
      Purchasers of at least a majority of the Securities still held by the Purchasers
      or, in the case of a waiver, by the party against whom enforcement of any such
      waived provision is sought. No waiver of any default with respect to any
      provision, condition or requirement of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any subsequent default or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of any party to exercise any right hereunder in any manner
      impair the exercise of any such right.

     

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

     

    5.7 Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of the parties and their successors and permitted assigns. The Company may
      not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Purchaser (other than by merger). Any Purchaser may
      assign any or all of its rights under this Agreement to any Person to whom
      such
      Purchaser assigns or transfers any Securities, provided such transferee agrees
      in writing to be bound, with respect to the transferred Securities, by the
      provisions of the Transaction Documents that apply to the
“Purchasers.”

     

    5.8 No
      Third-Party Beneficiaries. This Agreement is intended for the benefit of the
      parties hereto and their respective successors and permitted assigns and is
      not
      for the benefit of, nor may any provision hereof be enforced by, any other
      Person, except as otherwise set forth in Section 4.6, except that BMC is a
      third
      party beneficiary of the representations and warranties of the Company contained
      in this Agreement as if it was a party hereto. Accordingly, all representations
      and warranties of the Company made to the Purchasers shall have also been deemed
      to be made directly to BMC. Further, BMC is hereby accorded all of the benefits
      of Section 4.6 as if it was a Purchaser Party, and all references to Purchaser
      Parties shall be deemed to include BMC and its directors, officers,
      shareholders, agents, members, partners or employees (and any other Persons
      with
      a functionally equivalent role of a Person holding such titles notwithstanding
      a
      lack of such title or any other title) of such controlling persons.

     

    5.9 Arbitration.
      Any dispute, controversy or claim arising out of or relating to this Agreement,
      or the breach, termination or invalidity thereof, shall be settled definitively
      and exclusively by arbitration in accordance with the Commercial Arbitration
      Rules of the American Arbitration Association by a single arbitrator appointed
      in accordance with said Rules. The arbitration shall take place in New York,
      New
      York, United States of America. The language to be used in the arbitral
      proceedings shall be English. The arbitrator shall apply the law of the State
      of
      New York, United States of America, without regard for its principles of
      conflict of laws. Judgment upon the award may be entered in any court having
      jurisdiction thereof. If either party shall commence a Proceeding to enforce
      any
      provisions of a Transaction Document, then the prevailing party in such
      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 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 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. The Company hereby appoints Thelen Reid Brown
      Raysman & Steiner LLP, with offices at 701 Eighth Street, N.W., Washington,
      D.C. 20001, as its agent for service of process in New York. Nothing contained
      herein shall be deemed to limit in any way any right to serve process in any
      manner permitted by law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.10 Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Securities.

     

    5.11 Execution.
      This Agreement may be executed in two or more counterparts, all of which when
      taken together 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, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or by e-mail delivery of a “.pdf” format data file, such signature
      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
      facsimile or “.pdf” signature page were an original thereof.

     

    5.12 Severability.
      If any term, provision, covenant or restriction of this Agreement is held by
      a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their commercially
      reasonable efforts to find and employ an alternative means to achieve the same
      or substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    5.13 Replacement
      of Securities. If any certificate or instrument evidencing any Securities is
      mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
      issued in exchange and substitution for and upon cancellation thereof (in the
      case of mutilation), or in lieu of and substitution therefor, a new certificate
      or instrument, but only upon receipt of an affidavit of loss or presentation
      of
      other evidence reasonably satisfactory to the Company of such loss, theft or
      destruction. The applicant for a new certificate or instrument under such
      circumstances shall also pay any reasonable third-party costs (including
      customary indemnity) associated with the issuance of such replacement
      Securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.14 Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, each of the Purchasers and the Company
      will be entitled to specific performance under the Transaction Documents. The
      parties agree that monetary damages may not be adequate compensation for any
      loss incurred by reason of any breach of obligations contained in the
      Transaction Documents and hereby agrees to waive and not to assert in any action
      for specific performance of any such obligation the defense that a remedy at
      law
      would be adequate.

     

    5.15 Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a Purchaser enforces or
      exercises its rights 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, 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.

     

    5.16 Independent
      Nature of Purchasers’ Obligations and Rights. The obligations of each
      Purchaser under any Transaction Document are several and not joint with the
      obligations of any other Purchaser, and no Purchaser shall be responsible in
      any
      way for the performance or non-performance of the obligations of any other
      Purchaser under any Transaction Document. Nothing contained herein or in any
      other Transaction Document, and no action taken by any Purchaser pursuant
      thereto, shall be deemed to constitute the Purchasers as a partnership, an
      association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents. Each Purchaser shall be entitled to independently protect
      and enforce its rights, including, without limitation, the rights arising out
      of
      this Agreement or out of the other Transaction Documents, and it shall not
      be
      necessary for any other Purchaser to be joined as an additional party in any
      proceeding for such purpose. Each Purchaser has been represented by its own
      separate legal counsel in their review and negotiation of the Transaction
      Documents. Winston & Strawn LLP does not represent any of the Purchasers,
      only Brean Murray, Carret & Co., LLC. The Company has elected to provide all
      Purchasers with the same terms and Transaction Documents for the convenience
      of
      the Company and not because it was required or requested to do so by the
      Purchasers.

     

    5.17 Saturdays,
      Sundays, Holidays, etc. If
      the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall not be a Business Day, then such action
      may be taken or such right may be exercised on the next succeeding Business
      Day.

     

    5.18 Construction.
      The parties agree that each of them and/or their respective counsel has reviewed
      and had an opportunity to revise the Transaction Documents and, therefore,
      the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.19 Currency.
      Unless otherwise indicated, all dollar amounts referred to in this Agreement
      are
      in United States Dollars. All amounts owing under this Agreement or any
      Transaction Document shall be paid in US dollars. All amounts denominated in
      other currencies shall be converted in the US 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 US dollars
      pursuant to this Agreement, the US dollar exchange rate as published in The
      Wall
      Street Journal on the relevant date of calculation.

     

    5.20 Judgment
      Currency.
      

     

    (a) 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 5.20 referred to as
      the
      "Judgment Currency") an amount due in US Dollars under this Agreement, the
      conversion shall be made at the Exchange Rate prevailing on the Business Day
      immediately preceding:

     

    (b) date
      of
      actual payment of the amount due, in the case of any proceeding in the courts
      of
      New York or in the courts of any other jurisdiction that will give effect to
      such conversion being made on such date: or

     

    (i) 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 being hereinafter referred to as the "Judgment
      Conversion Date").

     

    (c) If
      in the
      case of any proceeding, 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 US 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.

     

    (d) 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.

     

    (Signature
      Pages Follow)

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    
      

        
          	
                  CHINA
                    BAK BATTERY, INC.

                	 	
                  Address
                    for Notice:

                  BAK
                    Industrial Park

                  No.
                    1 BAK Street

                  Kuichong
                    Town, Longgang District

                  Shenzhen,
                    People’s Republic of China 518119

                  Attn:
                    President

                
	
                  By:

                	 	 	
                  Fax:
                    86-755-89770527 

                
	 	
                  Name:

                  Title:

                	 	 
	 	 	 
	
                  With
                    a copy to (which shall not constitute notice):

                  Thelen
                    Reid Brown Raysman & Steiner LLP

                  701
                    8th
                    Street NW

                  Washington,
                    D.C. 20001

                  Facsimile:
                    (202) 654-1804

                  Attn.:
                    Louis A. Bevilacqua, Esq.

                	 	 

        

      

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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
      Purchaser: ________________________________________________________

     

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

     

    Name
      of
      Authorized Signatory:
      ____________________________________________________

     

    Title
      of
      Authorized Signatory:
      _____________________________________________________

     

    Email
      Address of
      Purchaser:________________________________________________

     

    Fax
      Number of Purchaser:
      ________________________________________________

     

    Address
      for Notice of Purchaser:

    
 

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

    
 

    Subscription
      Amount: $_________________

    

    Shares:
      _________________

    

    Warrant
      Shares:    

    

    EIN
      Number: 

    

    [PURCHASER
      SIGNATURE PAGES TO CHINA BAK BATTERY, INC. SECURITIES PURCHASE
      AGREEMENT]EXHIBIT
      4.1

     

    UNLESS
      PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
      TRADE THE SECURITY BEFORE DECEMBER 22, 2008.

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
      1933,
      AS AMENDED (THE ''SECURITIES ACT''), AND ACCORDINGLY, MAY NOT BE OFFERED OR
      SOLD
      EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
      HOLDER (1) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITY
      EVIDENCED HEREBY, EXCEPT (A) TO THE ISSUER; (B) TO PERSONS OTHER THAN U.S.
      PERSONS OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
      SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
      RULE
      144 ADOPTED UNDER THE SECURITIES ACT OR ANOTHER AVAILABLE EXEMPTION UNDER THE
      SECURITIES ACT (IF AVAILABLE); OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT, AND (2) AGREES THAT IT WILL, PRIOR TO ANY
      TRANSFER OF THIS SECURITY PURSUANT TO SUBPARAGRAPH (B) OR (C) ABOVE, FURNISH
      TO
      THE ISSUER OR ISSUER'S COUNSEL SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
      INFORMATION AS MAY BE REQUIRED BY THE ISSUER TO CONFIRM THAT SUCH TRANSFER
      IS
      BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
      THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
      ''UNITED STATES'' AND ''U.S. PERSON'' HAVE THE MEANING GIVEN TO THEM BY
      REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE, THE HOLDER HEREOF WILL
      NOT,
      DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS
      SECURITY, EXCEPT AS PERMITTED BY THE SECURITIES ACT.

     

    THE
      OPTIONS REPRESENTED BY THIS COMPENSATION OPTION CERTIFICATE HAVE NOT BEEN AND
      WILL NOT BE REGISTERED UNDER THE SECURITIES ACT. THE SECURITIES TO BE ISSUED
      UPON EXERCISE OF SUCH OPTIONS WILL NOT BE INITIALLY REGISTERED AND MAY OR MAY
      NOT LATER BECOME REGISTERED FOR RESALE UNDER THE SECURITIES ACT. NEITHER ANY
      OPTION REPRESENTED BY THIS COMPENSATION OPTION CERTIFICATE NOR ANY SECURITIES
      ISSUED UPON EXERCISE OF SUCH OPTION MAY BE EXERCISED BY OR ON BEHALF OF ANY
      U.S.
      PERSON, AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED PURSUANT TO THE
      SECURITIES ACT, UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION
      FROM
      SUCH REGISTRATION IS AVAILABLE.

     

    COMPENSATION
      OPTION TO PURCHASE COMMON SHARES OF

     

    APOLLO
      GOLD CORPORATION

     

    
      	
              Compensation
                Option Certificate 

              No.:
                CO-2008/003

            	
              No.
                of Common Shares under 

              Compensation
                Options: 1,020,000

            

    

     

    For
      value
      received, Apollo Gold Corporation (the "Corporation")
      hereby
      grants to HAYWOOD SECURITIES INC., 2000-400 Burrard Street, Vancouver, British
      Columbia, V6C 3A6 (the "Holder"),
      the
      right and option, subject to the terms and conditions set forth in this
      compensation option certificate (the "Compensation
      Option Certificate"),
      to
      purchase from the Corporation, up to 1,020,000 common shares of the Corporation
      (the "Common
      Shares")
      at an
      exercise price of $0.50 per Common Share (the "Exercise
      Price")
      at any
      time and from time to time up to 4:00 p.m. (Toronto time) on February 21,
      2010 (the
      "Expiry
      Time"),
      upon
      and subject to the terms and conditions set forth herein.

     

    
      	
              1.

            	
              Definitions

            

    

     

    In
      this
      Compensation Option Certificate, unless there is something in the subject matter
      or context inconsistent therewith, the following terms shall have the following
      meanings respectively:

     

    
      	 	
              (a)

            	
              "AMEX"
                means the American Stock Exchange;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (b)

            	
              "Business
                Day"
                means any day other than a Saturday, Sunday, statutory or civic holiday
                or
                a day on which the principal banking institutions are closed in the
                City
                of Toronto, Ontario or the State of
                Colorado;

            

    

     

    
      	 	
              (c)

            	
              "Compensation
                Options"
                means the compensation options to purchase Common Shares, having
                the
                attributes and issued pursuant to the terms and provisions set out
                hereunder;

            

    

     

    
      	 	
              (d)

            	
              "Current
                Market Price"
                of the Common Shares at any date means the price per Common Share
                equal to
                the weighted average price at which the Common Shares have traded
                on the
                TSX or, if the Common Shares are not then listed on the TSX, on such
                other
                Canadian stock exchange on which the Common Shares trade as may be
                selected by the directors of the Corporation for such purpose or,
                if the
                Common Shares are not then listed on any Canadian stock exchange,
                in the
                over-the-counter market, during the period of any twenty consecutive
                trading days ending not more than five (5) Business Days before such
                date;
                provided that the weighted average price shall be determined by dividing
                the aggregate sale price of all Common Shares sold on the said exchange
                or
                market, as the case may be, during the said twenty consecutive trading
                days by the total number of Common Shares so sold; and provided further
                that if the Common Shares are not then listed on any Canadian stock
                exchange or traded in the over-the counter market, then the Current
                Market
                Price shall be determined by such firm of independent chartered
                accountants as may be selected by the directors of the
                Corporation;

            

    

     

    
      	 	
              (e)

            	
              "Equity
                Shares"
                means the Common Shares and any shares of any other class or series
                of the
                Corporation which may from time to time be authorized for issue if
                by
                their terms such shares confer on the holders thereof the right to
                participate in the distribution of assets upon the voluntary or
                involuntary liquidation, dissolution or winding up of the Corporation
                beyond a fixed sum or a fixed sum plus accrued
                dividends;

            

    

     

    
      	 	
              (f)

            	
              "Holder"
                means the registered holder of this Compensation Option Certificate
                or any
                additional Compensation Option Certificates issued by the Corporation
                pursuant to the terms hereof;

            

    

     

    
      	 	
              (g)

            	
              "person"
                is to be interpreted broadly and includes an individual, corporation,
                partnership, sole proprietorship, unincorporated syndicate, unincorporated
                organization, trust, trustee, executor, administrator or other legal
                representative, unincorporated organization or organization or any
                group
                or combination thereof and pronouns have a similar extended
                meaning;

            

    

     

    
      	 	
              (h)

            	
              "Subscription
                Form"
                means the form of subscription annexed hereto as Schedule
                "A";

            

    

     

    
      	 	
              (i)

            	
              "Trading
                Day"
                means any day on which the Common Shares are listed and posted for
                trading
                on the TSX and such exchange is open for business or, if not listed
                and
                posted for trading on such exchange, on such stock exchange or quotation
                system on which the Common Shares are then listed and posted (or
                quoted)
                for trading and which is open for business, and, in each case, no
                cease
                trading or similar order is in effect with respect to the Common
                Shares;
                and

            

    

     

    
      	 	
              (j)

            	
              "TSX"
                means the Toronto Stock Exchange.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
              2.

            	
              Expiry
                Time

            

    

     

    After
      the
      Expiry Time, all rights under this Compensation Option Certificate and any
      outstanding Compensation Options evidenced hereby, in respect of which the
      right
      of subscription and purchase herein provided for shall not have been exercised,
      shall wholly cease and terminate and this Compensation Option Certificate and
      the Compensation Options evidenced hereby shall be void and of no value or
      effect.

     

    
      	
              3.

            	
              Exercise
                Procedure

            

    

     

    
      	 	
              (a)

            	
              The
                Holder may exercise its right of purchase hereunder in whole or in
                part at
                any time at or prior to the Expiry Time by surrendering or delivering
                to
                the Corporation prior to the Expiry Time at its principal office
                in
                Colorado: (i) this Compensation Option Certificate together with
                the
                Subscription Form duly completed and executed by the Holder or its
                legal
                representative or attorney, duly appointed by an instrument in writing
                in
                form and manner satisfactory to the Corporation; and (ii) cash or
                a
                certified cheque, money order or bank draft payable to or to the
                order of
                the Corporation in an amount equal to the Exercise Price multiplied
                by the
                number of Common Shares for which subscription is being
                made.

            

    

     

    
      	 	
              (b)

            	
              Any
                Compensation Option Certificate, Subscription Form and cash, certified
                cheque, money order or bank draft referred to in the foregoing subsection
                3(a) shall be deemed to be surrendered only upon delivery
                thereof
                to
                the Corporation at its principal office in the manner provided in
                Section
                29 hereof.

            

    

     

    
      	
              4.

            	
              Entitlement
                to Certificates

            

    

     

    Upon
      delivery and payment as provided for in Section 3 above, the Corporation shall
      cause to be issued to the Holder the Common Shares subscribed for and the Holder
      shall become a shareholder of the Corporation in respect of such Common Shares
      purchased with effect from the date of such delivery and payment and shall
      be
      entitled to delivery of a certificate or certificates evidencing such Common
      Shares. The Corporation shall cause such certificate or certificates to be
      issued and delivered to the Holder at the address or addresses specified in
      the
      Subscription Form as soon as practicable, but in any event, not later than
      seven
      (7) Business Days following such delivery and payment.

     

    
      	
              5.

            	
              Assignment
                or Transfer of Compensation
                Options

            

    

     

    The
      Compensation Options evidenced hereby may be assigned or transferred by the
      Holder or exercised by or for the benefit of any person other than the Holder.
      The Compensation Options evidenced hereby may not be exercised in the United
      States or by or on behalf of a U.S. Person or person in the United States.
      "United States" and "U.S. Person" are as defined in Regulation S under the
      United States Securities Act of 1933, as amended.

     

    
      	
              6.

            	
              Partial
                Exercise and Exchanges

            

    

     

    The
      Holder may subscribe for and purchase a number of Common Shares which is less
      than the number it is entitled to purchase pursuant to this Compensation Option
      Certificate. In the event of any such subscription and purchase prior to the
      Expiry Time, the Holder shall also be entitled to receive, without charge,
      a new
      Compensation Option Certificate in respect of the balance of the Compensation
      Options to purchase Common Shares to which it continues to be entitled pursuant
      to this Compensation Option Certificate.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    This
      Compensation Option Certificate is also exchangeable, without charge, from
      time
      to time, upon surrender hereof by the Holder to the Corporation, for a new
      Compensation Option Certificate or certificates of like tenor representing
      in
      the aggregate the same number of Compensation Options under the Compensation
      Option Certificate so surrendered.

     

    
      	
              7.

            	
              No
                Fractional Common
                Shares

            

    

     

    Notwithstanding
      any adjustment provided for in Section 11 hereof, the Corporation shall not
      be
      required upon the exercise of any Compensation Options to issue fractional
      Common Shares in satisfaction of its obligations hereunder and the Holder
      understands and agrees that it will not be entitled to any cash payment or
      other
      form of compensation in respect of a fractional Common Share that might
      otherwise have been issued.

     

    
      	
              8.

            	
              Not
                a Shareholder

            

    

     

    Nothing
      in this Compensation Option Certificate or in the holding of the Compensation
      Options evidenced hereby shall be construed as conferring upon the Holder any
      right or interest whatsoever as a shareholder of the Corporation.

     

    
      	
              9.

            	
              No
                Obligation to Purchase

            

    

     

    Nothing
      herein contained or done pursuant hereto shall obligate the Holder to purchase
      or pay for, or the Corporation to issue, any Common Shares except those Common
      Shares in respect of which the Holder shall have exercised its right to purchase
      in the manner provided hereunder.

     

    
      	
              10.

            	
              Covenants

            

    

     

    
      	 	
              (a)

            	
              The
                Corporation covenants that: (i) so long as any Compensation Options
                evidenced hereby remain outstanding, it shall reserve and there shall
                remain unissued out of its authorized capital a sufficient number
                of
                Common Shares to satisfy the right of purchase provided for herein;
                and
                (ii) all Common Shares which shall be issued upon the exercise of
                the
                right to purchase provided for herein, upon payment of the Exercise
                Price
                therefor, shall be issued as fully paid and non-assessable and free
                from
                all taxes, liens and charges with respect to the issue thereof, other
                than
                which may arise by virtue of the Holder's personal
                circumstances.

            

    

     

    
      	 	
              (b)

            	
              While
                any Compensation Options evidenced hereby remain outstanding, the
                Corporation shall comply with the securities legislation applicable
                to it
                in order that the Corporation continue as a reporting issuer, or
                analogous
                entity, not in default of any requirements of such
                legislation.

            

    

     

    
      	 	
              (c)

            	
              The
                Corporation shall, at its expense, expeditiously use its commercially
                reasonable best efforts to obtain the listing on the TSX and the
                AMEX of
                the Common Shares issuable upon the exercise of the right to purchase
                provided for herein. The Corporation shall, at its expense, include
                the
                registration of the resale of the Common Shares underlying the
                Compensation Options in its registration statement
                (the "Registration
                Statement")
                filed in connection with the flow-through shares issued on the date
                of
                this Compensation Option Certificate, and, subject to the terms and
                conditions of the registration rights agreement, each dated August
                21,
                2008 (the "Registration
                Rights Agreement"),
                between the Corporation and the subscriber counterparty thereto,
                shall use
                its commercially reasonable efforts to register the resale of the
                Common
                Shares underlying the Options in the United States as soon as possible
                so
                that the legend referred to in Section 27 (d) may be removed. The
                Corporation and the Holder agree to be bound by the terms of the
                Registration Rights Agreement as if they were original parties thereto,
                and the Holder agrees to complete and execute the Notice and Questionnaire
                prior to the Corporation including the Common Shares in the Registration
                Statement.

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (d)

            	
              The
                Corporation shall use its commercially reasonable best efforts to
                do or
                cause to be done all things necessary to preserve and maintain its
                corporate existence.

            

    

     

    
      	
              11.

            	
              Adjustment
                to Exercise Price

            

    

     

    The
      rights of the Holder, including the number of Common Shares issuable upon the
      exercise of each Compensation Option represented hereby, will be adjusted from
      time to time upon the occurrence of the events and in the manner provided in,
      and in accordance with the provisions of, this Section. 

     

    The
      Exercise Price in effect at any time is subject to adjustment from time to
      time
      in the events and in the manner provided as follows:

     

    
      	 	
              (1)

            	
              If
                and whenever at any time after the date hereof the
                Corporation:

            

    

     

    
      	 	
              (a)

            	
              issues
                Common Shares or securities exchangeable for or convertible into
                Common
                Shares to all or substantially all the holders of the Common Shares
                as a
                stock dividend;

            

    

     

    
      	 	
              (b)

            	
              makes
                a distribution on its outstanding Common Shares payable in Common
                Shares
                or securities exchangeable for or convertible into Common
                Shares;

            

    

     

    
      	 	
              (c)

            	
              subdivides
                its outstanding Common Shares into a greater number of shares;
                or

            

    

     

    
      	 	
              (d)

            	
              consolidates
                its outstanding Common Shares into a small number of
                shares;

            

    

     

    (any
      of
      such events being called a "Common
      Share Reorganization"),
      then
      the Exercise Price will be adjusted effective immediately after the effective
      date or record date for the happening of a Common Share Reorganization, as
      the
      case may be, at which the holders of Common Shares are determined for the
      purpose of the Common Share Reorganization by multiplying the Exercise Price
      in
      effect immediately prior to such effective date or record date by a fraction,
      the numerator of which is the number of Common Shares outstanding on such
      effective date or record date before giving effect to such Common Share
      Reorganization and the denominator of which is the number of Common Shares
      outstanding immediately after giving effect to such Common Share Reorganization
      (including, in the case where securities exchangeable for or convertible into
      Common Shares are distributed, the number of Common Shares that would have
      been
      outstanding had all such securities been exchanged for or converted into Common
      Shares on such effective date or record date).

     

    
      	 	
              (2)

            	
              If
                and whenever, at any time after the date hereof, the Corporation
                fixes a
                record date for the issue of rights, options or warrants to the holders
                of
                all or substantially all of its outstanding Common Shares under which
                such
                holders are entitled to subscribe for or purchase Common Shares or
                securities exchangeable for or convertible into Common Shares,
                where:

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (a)

            	
              the
                right to subscribe for or purchase Common Shares or the right to
                exchange
                securities for or convert securities into Common Shares, expires
                not more
                than 45 days after the date of such issue (the period from the record
                date
                to the date of expiry being herein in this Section 11(2) called the
                "Rights
                Period");
                and

            

    

     

    
      	 	
              (b)

            	
              the
                cost per Common Share during the Rights Period (inclusive of any
                cost of
                acquisition of securities exchangeable for or convertible into Common
                Shares in addition to any direct cost of Common Shares) (in this
                Section
                11(2) called the "Per
                Share Cost")
                is less than 95% of the Current Market Price of the Common Shares
                on the
                record date;

            

    

     

    (any
      of
      such events being called a "Rights
      Offering"),
      then
      the Exercise Price will be adjusted effective immediately after the end of
      the
      Rights Period to a price determined by multiplying the Exercise Price in effect
      immediately prior to the end of the Rights Period by a fraction:

     

    
      	 	
              (i)

            	
              the
                numerator of which is the aggregate
                of:

            

    

     

    
      	 	
              A.

            	
              the
                number of Common Shares outstanding as of the record date for the
                Rights
                Offering; and

            

    

     

    
      	 	
              B.

            	
              a
                number determined by dividing the product of the Per Share Cost
                and:

            

    

     

    
      	 	
              (I)

            	
              where
                the event giving rise to the application of this subsection 11(2)
                was the
                issue of rights, options or warrants to the holders of Common Shares
                under
                which such holders are entitled to subscribe for or purchase additional
                Common Shares, the number of Common Shares so subscribed for or purchased
                during the Rights Period; or

            

    

     

    
      	 	
              (II)

            	
              where
                the event giving rise to the application of this subsection 11(2)
                was the
                issue of rights, options or warrants to the holders of Common Shares
                under
                which such holders are entitled to subscribe for or purchase securities
                exchangeable for or convertible into Common Shares, the number of
                Common
                Shares for which those securities so subscribed for or purchased
                during
                the Rights Period could have been exchanged or into which they could
                have
                been converted during the Rights
                Period,

            

    

     

    by
      the
      Current Market Price of the Common Shares as of the record date for the Rights
      Offering; and

     

    
      	 	
              (ii)

            	
              the
                denominator of which is:

            

    

     

    
      	 	
              A.

            	
              in
                the case described in subparagraph 11(2)(i)(B)(I), the number of
                Common
                Shares outstanding; or

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	 	
              B.

            	
              in
                the case described in subparagraph 11(2)(i)(B)(II), the number of
                Common
                Shares that would be outstanding if all the Common Shares described
                in
                subparagraph 11(2)(i)(B)(II) had been
                issued,

            

    

     

    as
      at the
      end of the Rights Period.

     

    Any
      Common Shares owned by or held for the account of the Corporation or any
      subsidiary or affiliate (as such terms are defined in the Securities
      Act
      (Ontario)) of the Corporation will be deemed not to be outstanding for the
      purpose of any such computations.

     

    If
      by the
      terms of the rights, options or warrants referred to in this Section 11(2),
      there is more than one purchase, conversion or exchange price per Common Share,
      the aggregate price of the total number of additional Common Shares offered
      for
      subscription or purchase, or the aggregate conversion or exchange price of
      the
      convertible securities so offered, will be calculated for purposes of the
      adjustment on the basis of:

     

    
      	 	
              (i)

            	
              the
                lowest purchase, conversion or exchange price per Common Share, as
                the
                case may be, if such price is applicable to all Common Shares which
                are
                subject to the rights, options or warrants;
                and

            

    

     

    
      	 	
              (ii)

            	
              the
                average purchase, conversion or exchange price per Common Share,
                as the
                case may be, if the applicable price is determined by reference to
                that
                number of Common Shares acquired.

            

    

     

    To
      the
      extent that any adjustment in the Exercise Price occurs pursuant to this Section
      11(2) as a result of the fixing by the Corporation of a record date for the
      distribution of rights, options or warrants referred to in this Section 11(2),
      the Exercise Price will be readjusted immediately after the expiration of any
      relevant exchange, conversion or exercise right to the Exercise Price which
      would then be in effect based upon the number of Common Shares actually issued
      and remaining issuable after such expiration and will be further readjusted
      in
      such manner upon expiration of any further such right.

     

    If
      the
      Holder has exercised this Compensation Option Certificate in accordance herewith
      during the period beginning after the record date for a Rights Offering and
      ending on the last day of the Rights Period thereunder, the Holder will, in
      addition to the Common Shares to
      which
      it is otherwise entitled upon such exercise, be entitled to that number of
      additional Common Shares equal
      to
      the difference, if any, between (x) the result obtained when the Exercise Price
      in effect immediately prior to the end of such Rights Offering pursuant to
      this
      subsection is multiplied by the number of Common Shares received
      upon the exercise of the Compensation Options represented by this Compensation
      Option Certificate during such period, and the resulting product is divided
      by
      the Exercise Price as adjusted for such Rights Offering pursuant to this
      subsection provided that the provisions of Section 7 will be applicable to
      any
      fractional interest in a Common Share to
      which
      such Holder might otherwise be entitled and (y) the number of Common Shares
      received upon the exercise of the Compensation Options represented by this
      Compensation Option Certificate during such period. Such additional Common
      Shares will
      be
      deemed to have been issued to the Holder immediately following the end of the
      Rights Period and
      a
      certificate for such additional Common Shares will be delivered to such Holder
      within ten (10) Business Days following the end of the Rights
      Period.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (3)

            	
              If
                and whenever at any time after the date hereof, the Corporation fixes
                a
                record date for the issue or the distribution to the holders of all
                or
                substantially all its Common Shares
                of:

            

    

     

    
      	 	
              (i)

            	
              shares
                of the Corporation of any class other than Common
                Shares;

            

    

     

    
      	 	
              (ii)

            	
              rights,
                options or warrants to acquire shares or securities exchangeable
                for or
                convertible into shares or property or other assets of the Corporation
                (other than a right to subscribe for or purchase Common Shares or
                a right
                to exchange securities for or convert securities into Common Shares
                which
                expires not more than 45 days after the date of such issue and the
                cost
                per Common Share during such period (inclusive of any cost of acquisition
                of securities exchangeable for or convertible into Common Shares
                in
                addition to any direct cost of Common Shares) is at least 95% of
                the
                Current Market Price of the Common Shares on the record
                date);

            

    

     

    
      	 	
              (iii)

            	
              evidence
                of indebtedness; or

            

    

     

    
      	 	
              (iv)

            	
              any
                property or other assets,

            

    

     

    and
      if
      such issuance or distribution does not constitute a Common Share Reorganization
      or a Rights Offering (any of such non-excluded events being called a
      "Special
      Distribution"),
      the
      Exercise Price will be adjusted effective immediately after such record date
      to
      a price determined by multiplying the Exercise Price in effect on such record
      date by a fraction:

     

    
      	 	
              (i)

            	
              the
                numerator of which is:

            

    

     

    
      	 	
              A.

            	
              the
                product of the number of Common Shares outstanding on such record
                date and
                the Current Market Price of the Common Shares on such record date;
                less

            

    

     

    
      	 	
              B.

            	
              the
                aggregate fair market value (as determined by action by the auditors
                of
                the Corporation) to the holders of the Common Shares of such securities
                or
                property or other assets so issued or distributed in the Special
                Distribution; and

            

    

     

    
      	 	
              (ii)

            	
              the
                denominator of which is the number of Common Shares outstanding on
                such
                record date multiplied by the Current Market Price of the Common
                Shares on
                such record date.

            

    

     

    Any
      Common Shares owned by or held for the account of the Corporation or any
      subsidiary or affiliate (as such terms are defined in the Securities
      Act
      (Ontario)) of the Corporation will be deemed not to be outstanding for the
      purpose of any such computation.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (4)

            	
              If
                and whenever at any time after the date hereof there is a Common
                Share
                Reorganization, a Rights Offering, a Special Distribution, a
                reclassification of the Common Shares outstanding at any time or
                change of
                the Common Shares into other shares or into other securities (other
                than a
                Common Share Reorganization), or a consolidation, amalgamation or
                merger
                of the Corporation with or into any other corporation or other entity
                (other than a consolidation, amalgamation or merger which does not
                result
                in any reclassification of the outstanding Common Shares or a change
                of
                the Common Shares into other shares), or a transfer of the undertaking
                or
                assets of the Corporation as an entirety or substantially as an entirety
                to another corporation or other entity (any of such events being
                called a
                "Capital
                Reorganization"),
                the Holder, upon exercising the Compensation Options represented
                by this
                Compensation Option Certificate after the effective date of such
                Capital
                Reorganization, will be entitled to receive in lieu of the number
                of
                Common Shares to
                which such Holder was theretofore entitled upon such exercise, the
                aggregate number of Common Shares, other securities or other property
                which such Holder would have been entitled to receive as a result
                of such
                Capital Reorganization if, on the effective date thereof, the Holder
                had
                been the registered holder of the number of Common Shares to which
                such
                Holder was therefore entitled upon exercise of the Compensation Options
                represented by this Compensation Option Certificate. If determined
                appropriate by action of the directors of the Corporation, appropriate
                adjustments will be made as a result of any such Capital Reorganization
                in
                the application of the provisions set forth in this Section 11(4)
                with
                respect to the rights and interests thereafter of the Holder to the
                end
                that the provisions set forth in this Section 11(4) will thereafter
                correspondingly be made applicable as nearly as may reasonably be
                in
                relation to any shares, other securities or other property thereafter
                deliverable upon the exercise hereof. Any such adjustment must be
                made by
                and set forth in an amendment to this Compensation Option Certificate
                approved by action by the directors of the Corporation and will for
                all
                purposes be conclusively deemed to be an appropriate
                adjustment.

            

    

     

    
      	 	
              (5)

            	
              If
                at any time after the date hereof and prior to the Expiry Time any
                adjustment in the Exercise Price shall occur as a result
                of:

            

    

     

    
      	 	
              (a)

            	
              an
                event referred to in subsection
                11(1);

            

    

     

    
      	 	
              (b)

            	
              the
                fixing by the Corporation of a record date for an event referred
                to in
                subsection 11(2); or

            

    

     

    
      	 	
              (c)

            	
              the
                fixing by the Corporation of a record date for an event referred
                to in
                subsection 11(3) if such event constitutes the issue or distribution
                to
                the holders of all or substantially all of its outstanding Common
                Shares
                of: (A) Equity Shares, or (B) securities exchangeable for or convertible
                into Equity Shares at an exchange or conversion price per Equity
                Share
                less than 95% of the Current Market Price on such record date, or
                (C)
                rights, options or warrants to acquire Equity Shares at an exercise,
                exchange or conversion price per Equity Share less than 95% of the
                Current
                Market Price on such record date,

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    then
      the
      number of Common
      Shares purchasable upon the subsequent exercise of the Compensation Options
      represented by this Compensation Option Certificate shall be simultaneously
      adjusted by multiplying the number of Common
      Shares purchasable upon the exercise of the Compensation Options represented
      by
      this Compensation Option Certificate immediately prior to such adjustment by
      a
      fraction which shall be the reciprocal of the fraction employed in the
      adjustment of the Exercise Price. To the extent any adjustment in subscription
      rights occurs pursuant to this subsection 11(5) as a result of a distribution
      of
      exchangeable or convertible securities other than Equity Shares referred to
      in
      subsection 11(1) or as a result of the fixing by the Corporation of a record
      date for the distribution of rights, options or warrants referred to in
      subsection 11(2), the number of Common Shares purchasable upon exercise of
      the Compensation Options represented by this Compensation Option Certificate
      shall be readjusted immediately after the expiration of any relevant exchange,
      conversion or exercise right to the number of Common Shares actually issued
      and
      remaining issuable immediately after such expiration and shall be further
      readjusted in such manner upon expiration of any further such right. To the
      extent that any adjustment in subscription rights occurs pursuant to this
      subsection 11(5) as a result of the fixing by the Corporation of a record date
      for the distribution of exchangeable or convertible securities other than Equity
      Shares or rights, options or warrants referred to in subsection 11(3), the
      number of Common Shares purchasable upon exercise of the Compensation Options
      represented by this Compensation Option Certificate shall be readjusted
      immediately after the expiration of any relevant exchange, conversion or
      exercise right to the number which would be purchasable pursuant to this
      subsection 11(5) if the fair market value of such securities or such rights,
      options or warrants had been determined for purposes of the adjustment pursuant
      to this subsection 11(5) on the basis of the number of Equity Shares issued
      and
      remaining issuable immediately after such expiration and shall be further
      readjusted in such manner upon expiration of any further such
      right.

     

    
      	 	
              (6)

            	
              If
                at any time any adjustment or readjustment in the Exercise Price
                shall
                occur pursuant to the provisions of this Section 11, then the number
                of
                Common Shares purchasable upon the subsequent exercise of the Compensation
                Options shall be simultaneously adjusted or readjusted, as the case
                may
                be, by multiplying the number of Common Shares purchasable upon the
                exercise of the Compensation Options immediately prior to such adjustment
                or readjustment by a fraction which shall be the reciprocal of the
                fraction used in the adjustment or readjustment of the Exercise
                Price.

            

    

     

    
      	
              12.

            	
              Rules
                Regarding Calculation of
                Adjustments

            

    

     

    The
      following rules and procedures shall be applicable to adjustments made pursuant
      to Section 11 herein:

     

    
      	 	
              (1)

            	
              The
                adjustments provided for in Section 11 are cumulative and will, in
                the
                case of adjustments to the Exercise Price, be computed to the nearest
                one-tenth of one cent and will be made successively whenever an event
                referred to therein occurs, subject to the following subsections
                of this
                Section 12.

            

    

     

    
      	 	
              (2)

            	
              No
                adjustment in the Exercise Price is required to be made unless such
                adjustment would result in a change of at least 1% in the prevailing
                Exercise Price; provided, however, that any adjustment which, except
                for
                the provisions of this subsection, would otherwise have been required
                to
                be made, will be carried forward and taken into account in any subsequent
                adjustments.

            

    

     

    
      	 	
              (3)

            	
              No
                adjustment in the Exercise Price will be made in respect of any event
                described in Section 11, other than the events referred to in clauses
                11(1)(c) and (d), if the Holder is entitled to participate in such
                event
                on the same terms, mutatis
                mutandis,
                as if the Holder had exercised the Compensation Options evidenced
                hereby
                prior to or on the effective date or record date of such event. Any
                participation by a Holder pursuant to this Section 12(3) is subject
                to the
                prior approval of the TSX (or such other stock exchange or quotation
                system on which the Common Shares are then listed and posted (or
                quoted)
                for trading, as applicable).

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (4)

            	
              No
                adjustment in the Exercise Price will be made under Section 11 in
                respect
                of the issue from time to time of Common Shares issuable from time
                to time
                as dividends paid in the ordinary course to holders of Common Shares
                who
                exercise an option or election to receive substantially equivalent
                dividends in Common Shares in lieu of receiving a cash dividend and
                any
                such issue will be deemed not to be a Common Share
                Reorganization.

            

    

     

    
      	 	
              (5)

            	
              If
                at any time a dispute arises with respect to adjustments provided
                for in
                Section 11, such dispute will be conclusively determined by the auditors
                of the Corporation or if they are unable or unwilling to act, by
                such
                other firm of independent chartered accountants as may be selected
                by the
                directors of the Corporation and approved by the Holder, acting
                reasonably, and any such determination, absent manifest error, will
                be
                binding upon the Corporation, the Holder and shareholders of the
                Corporation. The Corporation will provide such auditors or accountants
                with access to all necessary records of the
                Corporation.

            

    

     

    
      	 	
              (6)

            	
              In
                case the Corporation, after the date of issue of this Compensation
                Option
                Certificate, takes any action affecting the Common Shares, other
                than an
                action described in Section 11, which in the opinion of the directors
                of
                the Corporation would materially affect the rights of the Holder,
                the
                Exercise Price will be adjusted in such manner, if any, and at such
                time,
                by action by the directors of the Corporation but subject in all
                cases to
                any necessary regulatory approval, including approval of the TSX.
                Failure
                of the taking of action by the directors of the Corporation so as
                to
                provide for an adjustment on or prior to the effective date of any
                action
                by the Corporation affecting the Common Shares will be conclusive
                evidence
                that the board of directors of the Corporation has determined that
                it is
                equitable to make no adjustment in the
                circumstances.

            

    

     

    
      	 	
              (7)

            	
              If
                the Corporation sets a record date to determine the holders of the
                Common
                Shares for the purpose of entitling them to receive any dividend
                or
                distribution or sets a record date to take any other action and,
                thereafter and before the distribution to such shareholders of any
                such
                dividend or distribution or the taking of any other action, decides
                not to
                implement its plan or pay or deliver such dividend or distribution
                or take
                such other action, then no adjustment in the Exercise Price will
                be
                required by reason of the setting of such record
                date.

            

    

     

    
      	 	
              (8)

            	
              In
                the absence of a resolution of the directors of the Corporation fixing
                a
                record date for a Special Distribution or Rights Offering, the Corporation
                will be deemed to have fixed as the record date therefor the date
                on which
                the Special Distribution or Rights Offering is
                effected.

            

    

     

    
      	 	
              (9)

            	
              As
                a condition precedent to the taking of any action which would require
                any
                adjustment to the Options evidenced hereby, including the Exercise
                Price,
                the Corporation must take any corporate action which may be necessary
                in
                order that the Corporation shall have unissued and reserved in its
                authorized capital and may validly and legally issue as fully paid
                and
                non-assessable all of the shares or other securities which the Holder
                is
                entitled to receive on the full exercise thereof in accordance with
                the
                provisions hereof.

            

    

     

    
      	 	
              (10)

            	
              The
                Corporation will from time to time, within 10 Business Days after
                the
                occurrence of any event which requires an adjustment or readjustment
                as
                provided in Section 11, give notice to the Holder specifying the
                event
                requiring such adjustment or readjustment and the results thereof,
                including the resulting Exercise
                Price.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (11)

            	
              Any
                adjustment to the Exercise Price under the terms of this Compensation
                Option Certificate shall be subject to the prior approval of the
                TSX and
                such other stock exchange or quotation system on which the Common
                Shares
                are then listed and posted (or quoted) for trading, as
                applicable.

            

    

     

    
      	
              13.

            	
              Consolidation
                and Amalgamation

            

    

     

    
      	 	
              (1)

            	
              The
                Corporation shall not enter into any transaction whereby all or
                substantially all of its undertaking, property and assets would become
                the
                property of any other corporation or entity (herein called a "successor
                corporation")
                whether by way of reorganization, reconstruction, consolidation,
                amalgamation, merger, transfer, sale, disposition or otherwise, unless
                prior to or contemporaneously with the consummation of such transaction
                the Corporation and the successor corporation shall have executed
                such
                instruments and done such things as, in the opinion of counsel to
                the
                Corporation, are necessary or advisable to establish that upon the
                consummation of such transaction:

            

    

     

    
      	 	
              (i)

            	
              the
                successor corporation will have assumed all the covenants and obligations
                of the Corporation under this Compensation Option Certificate;
                and

            

    

     

    
      	 	
              (ii)

            	
              this
                Compensation Option Certificate will be a valid and binding obligation
                of
                the successor corporation entitling the Holder, as against the successor
                corporation, to all the rights of the Holder under this Compensation
                Option Certificate.

            

    

     

    
      	 	
              (2)

            	
              Whenever
                the conditions of subsection 13(1) shall have been duly observed
                and
                performed, the successor corporation shall possess and from time
                to time
                may exercise each and every right and power of the Corporation under
                this
                Compensation Option Certificate in the name of the Corporation or
                otherwise and any act or proceeding by any provision hereof required
                to be
                done or performed by any director or officer of the Corporation may
                be
                done and performed with like force and effect by the like directors
                or
                officers of the successor
                corporation.

            

    

     

    
      	
              14.

            	
              Representations
                and Warranties

            

    

     

    The
      Corporation hereby represents and warrants with and to the Holder that the
      Corporation is duly authorized and has the corporate and lawful power and
      authority to create and issue the Compensation Options evidenced hereby and
      the
      Common Shares issuable upon the exercise hereof, and to perform its obligations
      hereunder and that this Compensation Option Certificate represents a valid,
      legal and binding obligation of the Corporation enforceable in accordance with
      its terms subject to bankruptcy, insolvency and other laws of general
      application affecting the rights of creditors and equitable remedies being
      in
      the discretion of the court.

     

    
      	
              15.

            	
              Acquisition
                of the Securites

            

    

     

    The
      Holder hereby represents, warrants and certifies to the Corporation that the
      securities represented by this Compensation Option Certificate, and the Common
      Shares issuable upon exercise thereof, are being acquired solely for its own
      account and not as a nominee for any other party and not with a view toward
      the
      resale or distribution thereof and that it will not offer, sell or otherwise
      dispose of the Compensation Option Certificate or the Common Shares issuable
      upon exercise thereof except under circumstances which will not result in a
      violation of any applicable securities laws in Canada, the United States and
      other applicable securities laws or the rules of the TSX or AMEX. In addition,
      the Holder hereby represents, warrants and certifies to the Corporation that
      the
      Holder: (i) at the time of receipt of this Compensation Option Certificate
      is
      not in the United States; (ii) is not a U.S. Person and is not receiving this
      Compensation Option Certificate for the account or benefit of a U.S. Person;
      (iii) did not execute or deliver this Option Compensation Certificate while
      within the United States; (iv) has in all other respects complied with the
      terms
      of Regulation S of the United States Securities Act of 1933, as amended (the
      "U.S.
      Securities Act")
      or any
      successor rule or regulation of the United States Securities and Exchange
      Commission as presently in effect.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              16.

            	
              If
                Share Transfer Books
                Closed

            

    

     

    The
      Corporation shall not be required to deliver certificates for Common Shares
      while the share transfer books of the Corporation are properly closed prior
      to
      any meeting of shareholders, for the payment of dividends or for any other
      purpose and in the event of the surrender of any Compensation Option Certificate
      in accordance with the provisions hereof and the making of any subscription
      and
      payment for Common Shares called for thereby during any such period, delivery
      of
      certificates for Common Shares may be postponed for not more than five (5)
      Business Days after the date of the re-opening of said share transfer books.
      Any
      such postponement of delivery of certificates shall be without prejudice to
      the
      right of the Holder, if the Holder has surrendered the same and made payment
      during such period, to receive certificates for the Common Shares called for
      after the share transfer books have been re-opened.

     

    
      	
              17.

            	
              Stolen,
                Lost, Mutilated or Destroyed
                Certificate

            

    

     

    If
      this
      Compensation Option Certificate is stolen, lost, mutilated or destroyed, the
      Corporation shall, on such terms as it shall in its discretion impose, issue
      and
      countersign a new Compensation Option Certificate of like denomination, tenor
      and date as the certificate so stolen, lost, mutilated or
      destroyed.

     

    
      	
              18.

            	
              Governing
                Law

            

    

     

    This
      Compensation Option Certificate shall be governed by and construed in accordance
      with the laws of the Province of Ontario and the federal laws of Canada
      applicable therein, regardless of the laws that might otherwise govern under
      applicable principles of conflicts of laws thereof, except to the extent
      mandatorily governed by the law of another jurisdiction. Each of the Holder
      and
      the Corporation: (i) irrevocably consents to the exclusive jurisdiction and
      venue of the Courts of Ontario in connection with any matter or dispute based
      upon or arising out of this Compensation Option Certificate or the matters
      contemplated herein; (ii) agrees that process may be served upon them in any
      manner authorized by the laws of the Province of Ontario for such persons;
      and
      (iii) waives and covenants not to assert or plead any objection which they
      might
      otherwise have to such jurisdiction, venue and such process.

     

    
      	
              19.

            	
              Severability

            

    

     

    If
      any
      one or more of the provisions or parts thereof contained in this Compensation
      Option Certificate should be or become invalid, illegal or unenforceable in
      any
      respect in any jurisdiction, the remaining provisions or parts thereof contained
      herein shall be and shall be conclusively deemed to be, as to such jurisdiction,
      severable therefrom and:

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (a)

            	
              the
                validity, legality or enforceability of such remaining provisions
                or parts
                thereof shall not in any way be affected or impaired by the severance
                of
                the provisions or parts thereof severed;
                and

            

    

     

    
      	 	
              (b)

            	
              the
                invalidity, illegality or unenforceability of any provision or part
                thereof contained in this Compensation Option Certificate in any
                jurisdiction shall not affect or impair such provision or part thereof
                or
                any other provisions of this Compensation Option Certificate in any
                other
                jurisdiction.

            

    

     

    
      	
              20.

            	
              Headings

            

    

     

    The
      headings of the sections, subsections, clauses and subclauses of this
      Compensation Option Certificate have been inserted for convenience and reference
      only and do not define, limit, alter or enlarge the meaning of any provision
      of
      this Compensation Option Certificate.

     

    
      	
              21.

            	
              Compensation
                Options Rank Pari
                Passu

            

    

     

    All
      Options shall rank pari
      passu,
      whatever may be the actual date of issue of the same.

     

    
      	
              22.

            	
              Numbering
                of Articles, etc.

            

    

     

    Unless
      otherwise stated, a reference herein to a numbered or lettered section,
      subsection, clause, subclause or schedule refers to the section, subsection,
      clause, subclause or schedule bearing that number or letter in this Compensation
      Option Certificate.

     

    
      	
              23.

            	
              Number
                and Gender

            

    

     

    Whenever
      used in this Compensation Option Certificate, words importing the singular
      number only shall include the plural and vice
      versa
      and
      words importing gender shall include all genders.

     

    
      	
              24.

            	
              Day
                Not a Business Day

            

    

     

    In
      the
      event that any day on or before which any action is required to be taken
      hereunder is not a Business Day then such action shall be required to be taken
      on or before the requisite time on the next day that is a Business
      Day.

     

    
      	
              25.

            	
              TSX
                and AMEX Approvals

            

    

     

    Notwithstanding
      anything to the contrary in this Compensation Option Certificate, no supplement
      or amendment to the terms of this Compensation Option Certificate may be made
      without the prior written approval of the TSX and such other stock exchange
      or
      quotation system on which the Common Shares are then listed and posted (or
      quoted) for trading, as applicable.

     

    
      	
              26.

            	
              Binding
                Effect

            

    

     

    
      This
        Compensation Option Certificate and all of its provisions shall enure to
        the
        benefit of the Holder and its successors and shall be binding upon the
        Corporation and its successors.

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	
              27.

            	
              Legends

            

    

     

    
      	 	
              (a)

            	
              The
                Holder acknowledges that any certificate representing Common Shares
                issued
                upon the exercise of this Compensation Option Certificate prior to
                the
                date which is four months and one day after the date hereof will
                bear the
                following legend:

            

    

     

    "UNLESS
      PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
      TRADE THE SECURITY BEFORE DECEMBER 22, 2008."

     

    provided
      that at any time subsequent to the date which is four months and one day after
      the date hereof any certificate representing such Common Shares may be exchanged
      for a certificate bearing no such legends. The Corporation hereby covenants
      and
      agrees that it will use the best efforts thereof to deliver or to cause to
      be
      delivered a certificate or certificates representing such Common Shares bearing
      no such legends within three Business Days after receipt of the legended
      certificate.

     

    
      	 	
              (b)

            	
              The
                Holder acknowledges that the certificates representing the Common
                Shares
                and all certificates issued in exchange or substitution thereof,
                will bear
                a legend in substantially the following form as long as the legend
                referred to in subsection 27(a) remains on such
                certificate:

            

    

     

    "THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
      EXCHANGE; HOWEVER, THE SAID SECURITIES CAN NOT BE TRADED THROUGH THE FACILITIES
      OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
      CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT "GOOD DELIVERY" IN SETTLEMENT
      OF
      TRANSACTIONS ON THE TORONTO STOCK EXCHANGE."

     

    
      	 	
              (c)

            	
              The
                Holder further acknowledges that any certificate representing Common
                Shares issued upon the exercise of this Compensation Option Certificate
                and all certificates issued in exchange or substitution thereof will
                bear
                the following legend:

            

    

     

    "UNTIL
      THE SEPARATION TIME (AS DEFINED IN THE RIGHTS AGREEMENT REFERRED TO BELOW),
      THIS
      CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS
      AS
      SET FORTH IN A SHAREHOLDER RIGHTS PLAN AGREEMENT, DATED AS OF THE 17TH DAY
      OF
      JANUARY, 2007 (THE "RIGHTS AGREEMENT"), BETWEEN THE CORPORATION AND CIBC MELLON
      TRUST COMPANY, AS RIGHTS AGENT, THE TERMS OF WHICH ARE HEREBY INCORPORATED
      HEREIN BY REFERENCE AND A COPY OF WHICH MAY BE INSPECTED DURING NORMAL BUSINESS
      HOURS AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION. UNDER CERTAIN
      CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS MAY BE
      TERMINATED, MAY EXPIRE, MAY BECOME VOID (IF, IN CERTAIN CASES, THEY ARE
      "BENEFICIALLY OWNED" BY AN "ACQUIRING PERSON", AS SUCH TERMS ARE DEFINED IN
      THE
      RIGHTS AGREEMENT, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR
      ANY
      SUBSEQUENT HOLDER) OR MAY BE EVIDENCED BY SEPARATE CERTIFICATES AND MAY NO
      LONGER BE EVIDENCED BY THIS CERTIFICATE. THE CORPORATION WILL MAIL OR ARRANGE
      FOR THE MAILING OF A COPY OF THE RIGHTS AGREEMENT TO THE HOLDER OF THIS
      CERTIFICATE WITHOUT CHARGE AS SOON AS IS PRACTICABLE AFTER THE RECEIPT OF A
      WRITTEN REQUEST THEREFOR.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (d)

            	
              In
                addition, the Holder acknowledges that any certificate representing
                Common
                Shares issued upon the exercise of this Compensation Option Certificate
                will bear the following legend:

            

    

     

    "THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
      1933,
      AS AMENDED (THE ''SECURITIES ACT''), AND ACCORDINGLY, MAY NOT BE OFFERED OR
      SOLD
      EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
      HOLDER (1) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITY
      EVIDENCED HEREBY, EXCEPT (A) TO THE ISSUER; (B) TO PERSONS OTHER THAN U.S.
      PERSONS OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
      SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
      RULE
      144 ADOPTED UNDER THE SECURITIES ACT OR ANOTHER AVAILABLE EXEMPTION UNDER THE
      SECURITIES ACT (IF AVAILABLE); OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT, AND (2) AGREES THAT IT WILL, PRIOR TO ANY
      TRANSFER OF THIS SECURITY PURSUANT TO SUBPARAGRAPH (B) OR (C) ABOVE, FURNISH
      TO
      THE ISSUER OR ISSUER'S COUNSEL SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
      INFORMATION AS MAY BE REQUIRED BY THE ISSUER TO CONFIRM THAT SUCH TRANSFER
      IS
      BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
      THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
      ''UNITED STATES'' AND ''U.S. PERSON'' HAVE THE MEANING GIVEN TO THEM BY
      REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE, THE HOLDER HEREOF WILL
      NOT,
      DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS
      SECURITY, EXCEPT AS PERMITTED BY THE SECURITIES ACT."

     

    
      	
              28.

            	
              Currency

            

    

     

    All
      references herein to monetary amounts are references to lawful money of Canada,
      unless otherwise specified herein.

     

    
      	
              29.

            	
              Notice

            

    

     

    Any
      notice, document or other communication required or permitted by this
      Compensation Option Certificate to be given by the Holder or the Corporation
      shall be in writing and is sufficiently given if delivered personally, or if
      delivered or if transmitted by any form of recorded telecommunication tested
      prior to transmission, to such person addressed as follows:

     

    
      	 	
              (a)

            	
              if
                to the Holder:

            

    

     

    to
      the
      address on the face page hereof

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (b)

            	
              if
                to the Corporation:

            

    

     

    Apollo
      Gold Corporation

    5655
      S.
      Yosemite Street, Suite 200

    Greenwood
      Village, Colorado, 80111-3220

     

    
      	
            	Attention:	
              Chief
                Financial Officer

            

    

     

    
      	
            	Telephone
              No.:	
              (720)
                886-9656

            

    

     

    
      	
            	Facsimile
              No.:	
              (720)
                482-0957

            

    

     

    Notice
      so
      delivered shall be deemed to have been given on the Business Day that it is
      received. Notices transmitted by a form of recorded telecommunication shall
      be
      deemed given on the day of transmission. The Holder or the Corporation may
      from
      time to time notify the other in the manner provided herein of any change of
      address or facsimile number which thereafter, until changed by like notice,
      shall be the address or facsimile number of such person for all purposes
      hereof.

     

    
      	
              30.

            	
              Time
                of Essence

            

    

     

    Time
      shall be of the essence hereof.

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the
      Corporation has caused this Compensation Option Certificate to be signed by
      its
      duly authorized officer this
      21st
      day of
August,
      2008.

     

    
      	
              APOLLO
                GOLD CORPORATION

            
	 
	
              Per:

            	
              /s/
                Melvyn Williams

            
	 	
              Authorized
                Signatory

            

    

     

     

     

    18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}]]