Document:

Unassociated Document

    

      
        	
                Confidential

              	
                Page
                  1 

              	
                11/3/20065/19/2008

              
	 	 	
                

              

      

    

    

      Dr.
        Joseph Cummins DVM, Ph.D.

      Chief
        Executive Officer

      Amarillo
        Biosciences Inc.

      4134
        Business Park Drive

      Amarillo,
        TX 79110-4225 

      

      RE: Private
        Placement of Securities of
        Amarillo
        Biosciences, Inc. 

      (ENGAGEMENT
        LETTER)

      

      Dr.
        Cummins,

      

      This
        letter (the “Engagement Letter” or the “Agreement”) confirms our understanding
        that Amarillo
        Biosciences, Inc. (AMAR) (Together
        with its affiliates and subsidiaries, if any, "AMAR" or the "Company") has
        engaged MidSouth Capital, Inc. and or Growth Capital Partners, LLC (together
        the
“Agent”) to act, on a non-exclusive
        basis,
        as a
        placement agent ("Placement Agent") of the Company in connection with a best
        efforts private placement offering of the Company's Preferred or Common Stock
        (the "Placement" or “Offering”). This letter will confirm our acceptance and set
        forth the terms of the engagement agreed to between Agent and the Company.
        Agent
        represents and agrees that in presenting the Company to potential investors,
        Agent will use only the Information available from generally recognized public
        sources, and such other written documents or disclosures as may be re-approved
        by the Company in writing.

      

      1.
        Information. In connection with the Placement Agent’s activities hereunder, the
        Company will furnish Agent with all material and information regarding the
        business and financial condition of the Company (the "Information"). The
        Company
        represents and warrants that all Information, including but not limited to
        the
        Company’s financial statements, will be complete and correct in all material
        respects and will not contain any untrue statement of a material fact or
        omit to
        state a material fact necessary in order to make the statements therein not
        misleading. The Company recognizes and confirms that the Placement Agent:
        (i)
        will use and rely primarily on the Information and on information available
        from
        generally recognized public sources in performing the services contemplated
        by
        this letter without having independently verified the same; (ii) is authorized
        as the Company's financial advisor and placement agent to transmit to any
        prospective investor a copy or copies, forms of purchase agreements and any
        other legal documentation supplied to the Placement Agent for transmission
        to
        any prospective investor by or on behalf of the Company or by any of the
        Company's officers, representatives or agents, in connection with the
        performance of the Placement Agent’s services hereunder or any transaction
        contemplated hereby; (iii) does not assume responsibility for the accuracy
        or
        completeness of the Information and such other information; (iv) will not
        make
        an appraisal of any assets of the Company; and (v) retains the right to continue
        to perform due diligence during the course of the engagement. The Placement
        Agent agrees to keep the Information confidential and will not make use thereof,
        except in connection with services hereunder for the Company, unless; (i)
        disclosure is required by law or requested by any government, regulatory
        or
        self-regulatory agency or body in which event the Placement Agent will provide
        the Company with reasonable advance notice of such proposed disclosure; (ii)
        any
        Information is or becomes generally available to the public; or (iii) any
        Information was or becomes available to the Placement Agent on a
        non-confidential basis from a source other than the Company or any of its
        representatives.

      

      2.
        Fees
        and Compensation. As compensation for services rendered and to be rendered
        hereunder by Agent, the Company agrees to pay Agent as follows:

      

      An
        amount
        in cash equal to:

       

      a.)
        Seven
        percent (7%) of the principal amount sold to any investors identified or
        introduced by Placement Agent, with all such sums payable at the time of
        each
        closing of the Placement ("Placement Fee").

       

      
        
          

            1050
              Crown Pointe Parkway, Suite 200, Atlanta GA 30338

            Fax:
              770-804-0196 Phone: David Coherd at 770-804-3105 Robert Rosenstein
              at
              770-804-3104

          

        

        
          
          

          
            

          

        

        
          
          

        

        
          

            
              	
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      b.)
        The
        Company will issue to Agent a warrant (the “Warrant”) to purchase shares of the
        Company's Common Stock equal to Seven percent (7%) of the number of common
        shares ("Shares") to be issued on an as converted basis in the Placement.
        Such
        Warrant will be issued pursuant to a Warrant Agreement to be signed by Agent
        and
        the Company, which agreement shall provide, among other things, that the
        Warrant
        shall be exercisable at an exercise price equal to 110% of the price at which
        the Shares are sold to investors in the Placement or in the case of a
        convertible structure shall be determined by the closing price at the time
        of
        closing, to be defined as the 10 day VWAP for the company’s common stock on the
        day prior to closing, but in either case, no less than the price of the common
        stock on the day prior to closing date; shall expire five (5 ) years from
        the
        date of issuance, include registration rights at the time that all shares
        issued
        in this Placement are registered, and provisions for cashless exercise and
        such
        other terms as are normal and customary for warrants of this type. Should
        a
        registration statement covering the common shares underlying the Warrants
        described herein be effective at time of exercise, then Warrants shall be
        exercised according to the Cash provision contained in the Warrant.

      

      c.)
        N/A.

      

      d)
        Notwithstanding any termination of this Engagement Letter pursuant to the
        terms
        hereof or otherwise, the obligation to pay the Fees and Compensation described
        in Section 2, if any, shall survive any termination or expiration of the
        Agreement. It is expressly understood and agreed by the parties hereto that
        any
        private financing of equity or debt or other capital raising activity of
        the
        Company within Twenty Four (24) months of the termination or expiration of
        the
        Agreement, with any investors or lenders to whom the Company was introduced
        by
        the Agent or who was contacted by the Agent while the Agreement was in effect
        and disclosed to the Company in writing (such list to be communicated to
        the
        Company each time 15 new Investors have been contacted) shall result in such
        fees and compensation due and payable by the Company to Agent under the same
        terms of Section 2 above. Written Company approval is required for Agent
        to
        contact more than 45 investors and lenders. Any investors or lenders previously
        contacted by other Finders or Agents of the Company are excluded from the
        provisions of this agreement and the company shall provide a list of such
        investors or lenders upon execution of this document. Upon completion of
        the
        Offering, any future renegotiation, restructuring, revision or other amendment
        of such Offering by and between the Company and the investors in such Offering
        within Twenty Four (24) months which results in the receipt of any net new
        funds
        by the Company from such investor(s) shall be deemed to be a new financing
        and
        shall result in additional fees and compensation due and payable by the Company
        to Agent under the terms of Section 2 above

      

      3.
        Certain Placement Procedures. The Company and the Placement Agent each
        represents to the other that it has not taken, and the Company and the Placement
        Agent each agrees with the other that it will not take any action, directly
        or
        indirectly, so as to cause the Placement to fail to be entitled to rely upon
        the
        exemption from registration afforded by Section 4(2) of the Securities Act
        of
        1933, as amended (the "Act") or other appropriate exemption. In effecting
        the
        Placement, the Company and the Placement Agent each agrees to comply in all
        material respects with applicable provisions of the Act and any regulations
        there under and any applicable state laws and requirements. The Company agrees
        that any representations and warranties made by it to any investor in the
        Placement shall be deemed also to be made to the Placement Agent for its
        benefit. The Company agrees that it shall cause any opinion of its counsel
        delivered to any investors in the Placement also to be addressed and delivered
        to the Placement Agent, or to cause such counsel to deliver to the Placement
        Agent a letter authorizing it to rely upon such opinion. Upon completion
        of the
        Placement, all shares placed by the Placement Agent will be deposited into
        an
        Agent client account for the benefit of each investor.

      

      4.
        Indemnification. The Company agrees to indemnify Agent and related persons
        in
        accordance with the following: The provisions of which are incorporated herein
        in their entirety. In consideration of your agreement to act on our behalf
        in
        connection with such matters, we agree to indemnify and hold harmless you
        and
        your affiliates and you and their respective officers, directors, employees
        and
        agents and each other person, if any, controlling you or any of your affiliates
        (you and each such other person being an "Indemnified Person") from and against
        any losses, claims, damages or liabilities related to, arising out of or
        in
        connection with the engagement (the "Engagement") under the Engagement Letter,
        and will reimburse each Indemnified Person for all expenses (including
        reasonable fees and expenses of counsel) as they are incurred in connection
        with
        investigating, preparing, pursuing or defending any action, claim, suit,
        investigation or proceeding related to, arising out of or in connection with
        the
        Engagement, whether or not pending or threatened and whether or not any
        Indemnified Person is a party. We will not, however, be responsible for any
        losses, claims, damages or liabilities (or expenses relating thereto) that
        are
        finally judicially determined to have resulted from the bad faith or gross
        negligence of any Indemnified Person. We also agree that no Indemnified Person
        shall have any liability (whether direct or indirect, in contract or tort
        or
        otherwise) to us for or in connection with the Engagement except for any
        such
        liability for losses, claims, damages or liabilities incurred by us that
        are
        finally judicially determined to have resulted from the bad faith or gross
        negligence of such Indemnified Person.

      

      
        
          

            1050
              Crown Pointe Parkway, Suite 200, Atlanta GA 30338

            Fax:
              770-804-0196 Phone: David Coherd at 770-804-3105 Robert Rosenstein
              at
              770-804-3104

          

        

        
          
          

          
            

          

        

        
          
          

        

        
          

            
              	
                      Confidential

                    	
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      We
        will
        not, without your prior written consent, settle, compromise, consent to the
        entry of any judgment in or otherwise seek to terminate any action, claim,
        suit
        or proceeding in respect of which indemnification may be sought hereunder
        (whether or not any Indemnified Person is a party thereto) unless such
        settlement, compromise, consent or termination includes a release of each
        Indemnified Person from any liabilities without payment by such person arising
        out of such action, claim, suit or proceeding. No Indemnified Person seeking
        indemnification, reimbursement or contribution under this agreement will,
        without our prior written consent, settle, compromise, consent to the entry
        of
        any judgment in or otherwise seek to terminate any action, claim, suit,
        investigation or proceeding referred to in the preceding paragraph.

       

      If
        the
        indemnification provided for in the paragraph 4 of this Engagement Letter
        is
        judicially determined to be unavailable (other than in accordance with the
        third
        sentence of the first paragraph hereof of paragraph 4) to an Indemnified
        person
        in respect of any losses, claims, damages or liabilities referred to herein,
        then, in lieu of indemnifying such Indemnified Person hereunder, we shall
        contribute to the amount paid or payable by such Indemnified Person as a
        result
        of such losses, claims, damages or liabilities (and expense relating thereto)
        (i) in such proportion as is appropriate to reflect the relative benefits
        to
        you, on the one hand, and us, on the other hand, of the Engagement or (ii)
        if
        the allocation provided by clause (i) above is not available, in such proportion
        as is appropriate to reflect not only the relative benefits referred to in
        such
        clause (i) but also the relative fault of each of you and us, as well as
        any
        other relevant equitable considerations; provided, however, in no event shall
        your aggregate contribution to the amount paid or payable exceed the aggregate
        amount of fees actually received by you under the Engagement Letter. For
        the
        purposes of this agreement, the relative benefits to us and you of the
        Engagement shall be deemed to be in the same proportion as (a) the total
        value
        paid or contemplated to be paid or received or contemplated to be received
        by us
        or our shareholders, as the case may be, in the transaction or transactions
        that
        are the subject of, whether or not any such transaction is consummated, bears
        to
        (b) the fees paid to you in connection with the Placement.

      

      5.
        Termination; Survival of Provisions. This Agreement may be terminated by
        the
        Placement Agent or the Company at any time upon thirty (30) days prior written
        notice to the other party, provided, however, that: (a) any termination or
        completion of the Agents engagement hereunder shall not affect the Company's
        obligation to indemnify Agent as provided in the indemnification section
        referred to above and (b) any termination by the Company of Agent's engagement
        hereunder shall not affect the Company's obligation to pay fees to the extent
        provided for in Section 2 herein; and (c) any termination by Agent of Agents
        engagement hereunder shall not affect the Company's obligation to pay fees
        and
        reimburse the expenses accruing prior to such termination to the extent provided
        for herein. All such fees and reimbursements due the Placement Agent, shall
        be
        paid to the Placement Agent on or before the Termination Date (in the event
        such
        fees and reimbursements are earned or owed as of the Termination Date) or
        upon
        the closing of the Placement or any applicable portion thereof (in the event
        such fees are due pursuant to the terms of Section 2 hereof).

      

      6.
        Governing Law; Amendment; Headings. This Agreement and all controversies
        arising
        from and relating to performance under this agreement shall be governed by
        and
        construed in accordance with the laws of the State of Georgia, without giving
        effect to such state's rules concerning conflicts of laws. This Agreement
        may
        not be modified or amended except in writing duly executed by the parties
        hereto. The section headings in this Agreement have been inserted as a matter
        of
        convenience of reference and are not part of this Agreement.

      

      7.
        Nondisclosure of Confidential Information. Agent and the Company mutually
        agree
        that they will not disclose any confidential information received from the
        other
        party to others except with the written permission of the other party or
        as such
        disclosure may be required by law. Agent has been retained under this agreement
        as an independent contractor with duties owed solely to the Company. The
        advice,
        written or oral, rendered by Agent pursuant to this Agreement is intended
        solely
        for the benefit and use of the Company in considering the matters to which
        this
        agreement relates, and the Company agrees that such advice may not be relied
        upon by any other person, used for any other purpose, reproduced, disseminated,
        or referred to at any time, in any manner or for any purpose, nor shall any
        public references to Agent be made by the Company, without the prior written
        consent of Agent, which consent shall not be unreasonably withheld.

      

      
        
          

            1050
              Crown Pointe Parkway, Suite 200, Atlanta GA 30338

            Fax:
              770-804-0196 Phone: David Coherd at 770-804-3105 Robert Rosenstein
              at
              770-804-3104

          

        

        
          
          

          
            

          

        

        
          
          

        

        
          

            
              	
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      8.
        Successors and Assigns. The benefits of this Agreement shall inure to the
        parties hereto, their respective successors and assigns and to the indemnified
        parties hereunder and their respective successors and assigns, and the
        obligations and liabilities assumed in this Agreement shall be binding upon
        the
        parties hereto and their respective successors and assigns. Notwithstanding
        anything contained herein to the contrary, neither the Placement Agent nor
        the
        Company shall assign to an unaffiliated third party any of its obligations
        hereunder.

       

      9.
        Press
        Announcements. The Company agrees that the Agent shall, upon a successful
        transaction, have the right to advertisements in financial and other newspapers
        and journals at its own expense describing its services to the Company
        hereunder, provided that Agent shall submit a copy of any such advertisement
        to
        the Company for its approval by the CEO, such approval not to be unreasonably
        withheld.

      

       
        10. Counterparts.
        For the convenience of the parties, this Agreement may be executed in any
        number
        of counterparts, each of which shall be, and shall be deemed to be, an original
        instrument, but all of which taken together shall constitute one and the
        same
        Agreement.

      

      

      If
        the
        terms of our engagement as set forth in this letter are satisfactory to you,
        please sign and date the enclosed copy of this letter and send back to us.
        If
        this agreement is not executed by both parties within ten (10) days from
        its
        date, it shall cease to be a valid offer to assist and represent the
        Company.

      

      2.
        (d)
        AMAR Investor and Lender List

      

      Platinum
        Partners

      Chrisitis
        Healthcare

      Mountain
        Capital

      La
        Joya
        Cove

      Tejas
        Holdings

      CCCM
        Group

      Stone
        Investment Trust

      A
        Street
        Capital

      Fusion
        Capital

      Platinum
        Partners

      Trinity
        Financing Investments

      Richard
        Cohen

      Golden
        Gate Investors

      La
        Joya
        Cove Investors

      Dutchess
        Advisors

      Utek,
        Inc.

      Scarborough
        Capital

      Cornell
        Capital

      Century
        Management

      Amarillo
        Bioscience, Inc. shareholders of record

      

      
        
          

            1050
              Crown Pointe Parkway, Suite 200, Atlanta GA 30338

            Fax:
              770-804-0196 Phone: David Coherd at 770-804-3105 Robert Rosenstein
              at
              770-804-3104

          

        

        
          
          

          
            

          

        

        
          
          

          

            
              	
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      AMAR
        may
        add additional Investors or Lenders that have not been already contacted
        by the
        Agent to this list by written notification to Agent.

      
        	 	 	 
	 	 
	 	 
	 	Very
                truly
                yours,
	 	 
	 	MidSouth Capital, Inc.
	 
 	 
 	 
 
	 	By:  	/s/ Timothy
                Moody 
	 	
                

                Timothy
                  C. Moody

                Executive
                  Vice President

              
	 	 

      

       

      

      

        
          	
                  ACCEPTED
                    AND AGREED TO: 

                	
                   

                	
                  ACCEPTED
                    AND AGREED TO:

                
	
                  as
                    of the date hereof 

                	 	
                  as
                    of the date hereof

                
	 	 	 
	 	 	 
	 	 	 
	
                  Amarillo
                    Biosciences Inc.

                	 	
                  Growth
                    Capital Partners, LLC

                
	 	 	 
	 	 	 
	
                  By:
                    /s/
                    Joseph M. Cummins

                	 	
                  By:
                    /s/
                    H. David Coherd 

                
	
                  Dr.
                    Joseph Cummins

                	 	
                  H.
                    David Coherd or Robert L. Rosenstein

                
	
                  Chief
                    Executive Officer

                	
                   

                	
                  Managing
                    Director

                
	 	 	 
	
                  
                    
 

                	 	
                  

                
	 	 	 
	 	 	 
	
                  Dated:
                    3
                    Nov 06

                	 	
                  Dated:
                    3
                    Nov 06 

                

        

      

      

      
        
          

            1050
              Crown Pointe Parkway, Suite 200, Atlanta GA 30338

            Fax:
              770-804-0196 Phone: David Coherd at 770-804-3105 Robert Rosenstein
              at
              770-804-3104NOTE
      PURCHASE AGREEMENT

    

    BY
      AND AMONG

    

    SJ
      ELECTRONICS, INC.

    (F/K/A
      ACHERON, INC.)

    

    AND

    

    THE
      INVESTORS LISTED ON EXHIBIT A

    

    Dated
      as of May 15,
      2008

    

    _______________________

    

    15%
      SENIOR SECURED CONVERTIBLE NOTES DUE 2009

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      TABLE
        OF CONTENTS

    

     

    
      	 	 	 	
              Page

            
	
              1.

            	
              DEFINITIONS

            	
              1

            
	
              2.

            	
              PURCHASE
                AND SALE OF NOTE

            	
              8

            
	 	
              (a)

            	
              Purchase
                and Sale of Note

            	
              8

            
	 	
              (b)

            	
              Closing

            	
              9

            
	
              3.
                

            	
              REPRESENTATIONS
                AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES

            	
              9

            
	 	
              (a)

            	
              Organization
                and Standing

            	
              9

            
	 	
              (b)

            	
              Authorization
                of Transaction

            	
              9

            
	 	
              (c)

            	
              Noncontravention

            	
              10

            
	 	
              (d)

            	
              Concerning
                the Shares and the Common Stock. Capitalization

            	
              10

            
	 	
              (e)

            	
              Subsidiaries

            	
              10

            
	 	
              (f)

            	
              Disclosure
                Documents; Common Stock Trading

            	
              11

            
	 	
              (g)

            	
              No
                Undisclosed Liabilities; No Guaranties

            	
              12

            
	 	
              (h)

            	
              Absence
                of Litigation

            	
              12

            
	 	
              (i)

            	
              Title
                to Assets

            	
              12

            
	 	
              (j)

            	
              Legal
                Compliance

            	
              12

            
	 	
              (k)

            	
              Contracts

            	
              12

            
	 	
              (l)

            	
              Employees;
                Employee Benefits

            	
              12

            
	 	
              (m)

            	
              Intellectual
                Property

            	
              13

            
	 	
              (n)

            	
              Notes
                and Accounts Receivables

            	
              13

            
	 	
              (o)

            	
              Tax
                Matters

            	
              13

            
	 	
              (p)

            	
              Books
                and Records

            	
              13

            
	 	
              (r)

            	
              Certain
                Business Relationships

            	
              13

            
	 	
              (r)

            	
              Private
                Offering

            	
              14

            
	 	
              (s)

            	
              Use
                of Proceeds

            	
              14

            
	 	
              (t)

            	
              Brokers’
                Fees

            	
              14

            
	 	
              (u)

            	
              Environmental
                and Safety Laws

            	
              14

            
	 	
              (v)

            	
              Manufacturing
                and Marketing Rights

            	
              14

            

    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

     

    
      TABLE
        OF CONTENTS

      (continued)

    

    
      	 	 	 	
              Page

            
	 	 	 	 
	
              4.

            	REPRESENTATIONS
              AND WARRANTIES OF THE INVESTORS	
              15

            
	 	
              (a)

            	
              Organization
                and Standing. Authorization of Transaction

            	
              15

            
	 	
              (b)

            	
              Circumstances
                of Purchase

            	
              15

            
	 	
              (c)

            	
              Brokers’
                Fees

            	
              15

            
	 	
              (d)

            	
              No
                Registration

            	
              15

            
	 	
              (e)

            	
              Directing
                Selling Efforts

            	
              16

            
	 	
              (f)

            	
              Investor
                Status

            	
              16

            
	 	
              (g)

            	
              Accredited
                Investor Status

            	
              16

            
	 	
              (h)

            	
              Information
                Provided

            	
              16

            
	 	
              (i)

            	
              Investment
                Experience

            	
              17

            
	 	
              (j)

            	
              Short
                Sales and Confidentiality prior to the Date Hereof

            	
              18

            
	
              5.

            	REGISTRATION
              RIGHTS	
              18

            
	 	
              (a)

            	
              Mandatory
                Registration

            	
              18

            
	 	
              (b)

            	
              Obligations
                of the Company

            	
              19

            
	 	
              (c)

            	
              Obligations
                of the Investors

            	
              21

            
	
              6.

            	POST-CLOSING
              COVENANTS	
              22

            
	 	
              (a)

            	
              Transfer
                Restrictions

            	
              22

            
	 	
              (b)

            	
              Restrictive
                Legends

            	
              23

            
	 	
              (c)

            	
              Reporting
                Status

            	
              24

            
	 	
              (d)

            	
              Debt
                Obligation

            	
              24

            
	 	
              (e)

            	
              Press
                Releases

            	
              24

            
	 	
              (f)

            	
              Form
                8-K; Limitation on Information and Investor Obligations

            	
              24

            
	 	
              (g)

            	
              Security
                Agreement

            	
              24

            
	 	
              (h)

            	
              Short
                Sales and Confidentiality after the Date Hereof

            	
              24

            
	 	
              (i)

            	
              Performance
                Adjustment

            	
              25

            
	
              7.
                

            	CONDITIONS
              TO OBLIGATION TO CLOSE	
              25

            
	 	
              (a)

            	
              Conditions
                to Obligation of the Investors

            	
              25

            
	 	
              (b)

            	
              Conditions
                to Obligation of the Company and the Management

            	
              26

            
	
              8.
                

            	INDEMNIFICATION
              AND CONTRIBUTION	
              27

            
	 	
              (a)

            	
              Indemnification

            	
              27

            

    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

     

    
      TABLE
        OF CONTENTS

      (continued)

    

     

    
      
        	 	 	 	
                Page

              
	 	 	 	 
	 	
                (b)

              	
                Contribution

              	
                28

              
	 	
                (c)

              	
                Other
                  Rights

              	
                29

              
	
                9.
                  

              	
                MISCELLANEOUS

              	
                29

              
	 	
                (a)

              	
                No
                  Third Party Beneficiaries

              	
                29

              
	 	
                (b)

              	
                Entire
                  Agreement

              	
                29

              
	 	
                (c)

              	
                Succession
                  and Assignment

              	
                29

              
	 	
                (d)

              	
                Counterparts

              	
                29

              
	 	
                (e)

              	
                Headings

              	
                29

              
	 	
                (f)

              	
                Notices

              	
                29

              
	 	
                (g)

              	
                Controlling
                  Law; Venue

              	
                30

              
	 	
                (h)

              	
                Amendments
                  and Waivers

              	
                30

              
	 	
                (i)

              	
                Severability

              	
                30

              
	 	
                (j)

              	
                Expenses

              	
                30

              
	 	
                (k)

              	
                Construction

              	
                30

              
	 	
                (l)

              	
                Incorporation
                  of Exhibits and Schedules

              	
                31

              
	 	
                (m)

              	
                Termination

              	
                31

              
	
              	
                (n)

              	
                Investor
                  Status

              	
                31

              

      

    

     

    ANNEXES

    

    
      	
              Annex
                I

            	
              Form
                of 15% Senior Secured Convertible Note due 2009

            
	
              Annex
                II

            	
              Form
                of Pledge and Security Agreement

            
	
              Annex
                III

            	
              Form
                of Escrow Agreement

            
	
              Annex
                IV

            	
              Form
                of Legal Opinion of Company Counsel

            
	
              Annex
                V

            	
              Form
                of Guaranty by Agatha Shen

            
	
              Annex
                VI

            	
              Form
                of Lockbox Agreement

            
	
              Annex
                VII

            	
              Form
                of Collateral Agency Agreement

            

    

     

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

     

    NOTE
      PURCHASE AGREEMENT

    

    This
      Note
      Purchase Agreement (this “Agreement”)
      is
      entered into as of May 15, 2008, by and between SJ Electronics, Inc. (f/k/a
      Acheron, Inc.), a Nevada corporation (the “Company”),
      the
      persons listed on the signature pages hereto as the management of the Company
      (the “Management”)
      and
      the investors listed on Exhibit A hereto (each an “Investor” and collectively
      the “Investors”).
      The
      Investors and the Company are also referred to individually herein as a
“Party”
and
      collectively herein as the “Parties.”

    

    WITNESSETH:

    

    WHEREAS,
      upon
      the terms and subject to the conditions of this Agreement, the Investors wish
      to
      purchase from the Company and the Company wishes to sell to the Investors,
      the
      Notes (such capitalized term and all other capitalized terms used in this
      Agreement having the meanings provided in Section 1) of the Company to be issued
      by the Company in the principal amount set forth on the signature page of this
      Agreement, which Notes will be convertible into shares of Common Stock;

    

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

    

    AGREEMENT

    

    The
      Parties, intending to be legally bound, agree as follows:

    

    1. DEFINITIONS.

     

    The
      following terms used in this Agreement shall have the meanings set forth below,
      provided that these definitions do not include terms used in Section
      2(c)
      that
      are otherwise defined in that Section.

    

    “1933
      Act”
means
      the Securities Act of 1933, as amended.

    

    “Accounts
      Receivable” means all
      rights to payment for goods sold or leased or for services rendered, whether
      or
      not such rights have been earned by performance, except that all such rights
      to
      payment from Lite-On, Inc. are expressly excluded from Accounts
      Receivable.

    

    “Additional
      Closing”
has
      the
      meaning set forth in Section 2.

    

    “Additional
      Closing Date”
has
      the
      meaning set forth in Section 2.

    

    “Affiliate”
has
      the
      meaning set forth in Rule 12b-2 of the regulations promulgated under the
      Exchange Act.

    

    “Agreement”
means
      this Note Purchase Agreement.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    “Blackout
      Period”
means
      the period of up to twenty Trading Days (whether or not consecutive) during
      any
      period of 365 consecutive days after the date the Company notifies the Investors
      that they are required, pursuant to Section 5(c)(4), to suspend offers and
      sales
      of Registrable Securities as a result of an event or circumstance described
      in
      Section 5(b)(5)(A), during which period, by reason of Section 5(b)(5)(B), the
      Company is not required to amend a particular Registration Statement or
      supplement the related Prospectus.

    

    “Business”
means
      the business of the Company and its Subsidiaries.

    

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

     

    “Claims”
means
      any losses, claims, damages, liabilities or expenses, including, without
      limitation, reasonable fees and expenses of legal counsel (joint or several),
      incurred by a Person.

     

    “Closing”
has
      the
      meaning set forth in Section
      2(b).

    

    “Closing
      Date”
has
      the
      meaning set forth in Section
      2(b).

    

    “Code”
means
      the Internal Revenue Code of 1986, as amended.

    

    “Collateral”
shall
      have the meaning to be provided in this Agreement or in the Pledge and Security
      Agreement.

    

    “Collateral
      Agent”
shall
      have the meaning to be provided in this Agreement or in the Pledge and Security
      Agreement.

    

    “Collateral
      Agency Agreement”
means
      the Collateral Agency Agreement by and among the Collateral Agent and the
      parties therein in the form attached as Annex
      VII.

    

    “Common
      Stock”
means
      the Common Stock, par value $.001 per share, of the Company.

    

    “Company
      Intellectual Property”
means
      all intellectual property currently used by the Company and its Subsidiaries
      that is material to their business.

    

    “Company
      Disclosure Schedule”
has
      the
      meaning set forth in Section
      3.

    

    “Conversion
      Price”
shall
      have the meaning to be provided in this Agreement or in the Note.

    

    “Conversion
      Shares”
means
      the shares of Common Stock or other securities issuable upon conversion of
      the
      Note.

    

    “Disclosure
      Documents”
has
      the
      meaning set forth in Section
      3(f).

    

    “Encumbrance”
means
      any claim, mortgage, servitude, easement, encroachment, restrictive covenant,
      right of way, survey defect, equitable interest, lease or other possessory
      interest, lien, option, pledge, security interest, preference, priority, right
      of first refusal, environmental use restriction or similar restriction.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    “Entity”
means
      any corporation (including any non profit corporation), general partnership,
      limited partnership, limited liability partnership, joint venture, estate,
      trust, association, company (including any company limited by shares, limited
      liability company or joint stock company), firm, society or other enterprise,
      association, organization or entity.

    

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended.

    

    “Escrow
      Agent”
means
      Guzov Ofsink, LLC, as the Company’s escrow agent for the Purchase Price Escrow
      Agreement.

    

    “Event
      of Default”
shall
      have the meaning to be provided in this Agreement or in the Note.

    

    “Exchange
      Act”
means
      the U.S. Securities Exchange Act of 1934, as amended.

    

    “FINRA”
means
      the Financial Industry Regulatory Authority.

    

    “GAAP”
means
      United States generally accepted accounting principles as in effect as of the
      date of any document purported to be prepared in accordance with GAAP.

    

    “Governmental
      Body”
means
      any (i) nation, region, state, province, county, municipality, city, town,
      village, district or other jurisdiction, (ii) federal, state, provincial,
      local, municipal, foreign or other government, (iii) governmental or
      quasi-governmental authority of any nature (including any governmental agency,
      branch, department or other Entity and any court or other tribunal),
      (iv) multinational organization, (v) body exercising, or entitled to
      exercise, any administrative, executive, judicial, legislative, policy,
      regulatory or taxing authority or power of any nature or (vi) official of
      any of the foregoing.

    

    “Guaranty”
means
      the guaranty dated of even date herewith executed by Agatha Shen in favor of
      the
      Investors providing for the guaranty of the Company’s obligations under the
      Notes, in the form attached as Annex
      V.

    

    “Indebtedness”
shall
      have the meaning to be provided in this Agreement or in the Note.

    

    “Indemnified
      Party”
means
      the Company, each of its directors, each of its officers who signs the
      Registration Statement, each Person, if any, who controls the Company within
      the
      meaning of the 1933 Act or the Exchange Act, any underwriter and any other
      stockholder selling securities pursuant to the Registration Statement or any
      of
      its directors or officers or any Person who controls such stockholder or
      underwriter within the meaning of the 1933 Act or the Exchange Act.

    

    “Indemnified
      Person”
means
      the Investors, their respective investment advisers and investment managers,
      the
      directors, officers, employees and agents of the Investors, each Person, if
      any,
      who controls an Investor or any such investment adviser or investment manager
      within the meaning of the 1933 Act or the Exchange Act, any underwriter (as
      defined in the 1933 Act) acting on behalf of an Investor who participates in
      the
      offering of Registrable Securities by such Investor in accordance with the
      plan
      of distribution contained in the Prospectus, the directors, if any, of such
      underwriters and the officers, if any, of such underwriters, and each Person,
      if
      any, who controls any such underwriter within the meaning of the 1933 Act or
      the
      Exchange Act. 

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    “Initial
      Closing”
has
      the
      meaning set forth in Section 2.

    

    “Initial
      Closing Date”
means
      10:00 a.m., New York City time, on May 15, 2008, or such other mutually agreed
      to time.

    

    “Inspector”
means
      any attorney, accountant or other agent retained by an Investor for the purposes
      provided in Section 5(b)(7).

    

    “Insolvent”
means
      (i) the present fair saleable value of the Company's assets is less than the
      amount required to pay the Company's total indebtedness, contingent or
      otherwise, (ii) the Company is unable to pay its debts and liabilities,
      subordinated, contingent or otherwise, as such debts and liabilities become
      absolute and matured, (iii) the Company intends to incur debts beyond its
      ability to pay as such debts as they mature (taking into account the timing
      and
      amounts of cash to be payable on or in respect of its debt) or (iv) the Company
      has unreasonably small capital with which to conduct the business in which
      it is
      engaged for the current fiscal year as such business is now conducted and is
      proposed to be conducted.

    

    “Investors”
means
      the investors listed on Exhibit A.

    

    “IRS”
means
      the Internal Revenue Service or any successor agency and, to the extent
      relevant, the Department of Treasury.

    

    “Law”
means
      any foreign, federal, state and local statute, law, constitution, treaty, rule,
      regulation, by-law, ordinance, code, regulation, resolution, order,
      determination, writ, injunction, awards (including, without limitation, awards
      of any arbitrator), judgment, decree, binding case law, principle of common
      law
      or notice of any Governmental Body (for the avoidance of doubt, including,
      but
      not limited to, the Laws of the United States of America and the People’s
      Republic of China).

    

    “Liabilities”
      includes liabilities or obligations of any nature, whether known or unknown,
      whether absolute, accrued, contingent, choate, inchoate or otherwise, whether
      due or to become due, and whether or not required to be reflected on a balance
      sheet prepared in accordance with GAAP, including any Liability for
      Taxes.

    

    “Liens”
shall
      have the meaning to be provided in this Agreement or in the Note.

    

    “Lockbox
      Agreement”
means
      the Lockbox Agreement by and among the Company, the Collateral Agent and the
      Lockbox Agent in the form attached as Annex
      VI.

    

    “Management”
has
      the
      meaning set forth in the preface.

    

    “Material
      Adverse Effect”
means
      (i) a material adverse effect on (A) the business, properties, operations,
      condition (financial or other), results of operations or prospects of the
      Company and the Subsidiaries, taken as a whole; (B) the validity or
      enforceability of, or the ability of the Company to perform its obligations
      under, the Transaction Documents; (C) the existence, validity or priority of
      the
      Lien on and Security Interest in the Collateral granted pursuant to any Security
      Agreement; or (D) the rights and remedies of the Investors under or in
      connection with the Transaction Documents or (ii) any event or circumstance
      that
      would cause any Registration Statement or Prospectus to contain any untrue
      statement of a material fact or omit to state any material fact necessary to
      make the statements made not misleading except if such untrue statement of
      a
      material fact in such Registration Statement or Prospectus or omission to state
      a material fact required to be stated in such Registration Statement or
      Prospectus in order to make the statements therein not misleading, results
      from
      a misstatement or omission made by the Investors in written information they
      furnished to the Company specifically for inclusion in such Registration
      Statement or such Prospectus or in any amendment or supplement thereto, unless
      the Company shall have failed timely to amend or supplement such Registration
      Statement or Prospectus after such Investors shall have corrected such
      misstatement or omission.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    “Material
      Contracts”
has
      the
      meaning set forth in Section
      3(m).

    

    “Note”
means
      the 15% Senior Secured Convertible Note due 2009 of the Company in the form
      attached as Annex I.

    

    “Party”
and
      “Parties”
have
      the meanings set forth in the preface.

    

    “Payment
      Event”
means
      any of the following events:

    

    (i) the
      Company fails to file with the SEC any Registration Statement meeting the
      requirements of this Agreement on or before the date by which the Company is
      required to file such Registration Statement pursuant to Section
      5(a),

    

    (ii) the
      SEC Effectiveness Date of the Registration Statement required by Section 5(a)(1)
      covering Registrable Securities does not occur within 180 days following the
      Closing Date or the SEC Effectiveness Date of any Registration Statement
      required by Section 5(a)(2) covering Registrable Securities does not occur
      within 120 days following the date the Company shall become obligated to
      commence preparation of such Registration Statement,

    

    (iii) The
      Company fails to file with the SEC a request for acceleration of effectiveness
      of a Registration Statement within five Trading Days after the date the Company
      learns that no review of such Registration Statement will be made by the staff
      of the SEC or that the staff of the SEC has no further comments on such
      Registration Statement, as the case may be, or any such request for acceleration
      fails to request acceleration of such Registration Statement to a time and
      date
      not more than 48 hours after the submission of such request,

    

    (iv) after
      the SEC Effectiveness Date of any Registration Statement, sales cannot be made
      pursuant to such Registration Statement for any reason (including, without
      limitation, by reason of a stop order, any untrue statement of a material fact
      or omission of a material fact in such Registration Statement, or the Company’s
      failure to update such Registration Statement), except to the extent permitted
      pursuant to Section 5(b)(5), 

    

    (v) the
      Company fails, refuses or is otherwise unable timely to issue and deliver to
      or
      upon the order of the Person entitled thereto Conversion Shares upon conversion
      of the Note as and when required under the Transaction Documents, in any such
      case within five (5) Trading Days after the due date thereof in accordance
      with
      the Note, or the Company fails, refuses or is otherwise unable timely to
      transfer any Shares as and when required by the Transaction
      Documents.

    

    “Payment
      Period”
means
      any period following the Closing Date during which any Payment Event occurs
      and
      is continuing.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    “Person”
means
      an individual or an Entity, including a Governmental Body or any other body
      with
      legal personality separate from its equityholders or members, including if
      established by any Governmental Body.

    

    “Placement
      Agent”
means
      Primary Capital, LLC.

    

    “Plan”
has
      the
      meaning specified in ERISA Section 3(3).

    

    “Pledge
      and Security Agreement”
means
      the Pledge and Security Agreement of the Company and Agatha Shen in favor of
      the
      Collateral Agent in the form attached as Annex
      II.

    

    “Proceeding”
means
      any action, arbitration, audit, examination, investigation, claim, demand,
      inquiry, hearing, litigation, suit or appeal (whether civil, criminal,
      administrative, judicial or investigative, whether formal or informal, and
      whether public or private) commenced, brought, conducted, heard by or before
      or
      otherwise involving any Governmental Body or arbitrator.

    

    “Prospectus”
means
      the prospectus forming part of the Registration Statement at the time the
      Registration Statement is declared effective and any amendment or supplement
      thereto (including any information or documents incorporated therein by
      reference).

    

    “Purchase
      Price”
means
      the amount equal to the principal amount of the Note to be purchased by the
      Investor as set forth in Exhibit A.

    

    “Purchase
      Price Escrow Agreement”
has
      the
      meaning set forth in Section
      2(b).

    

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

    

    “Registrable
      Securities”
means
      (1) the Shares, (2) if the Common Stock is changed, converted or exchanged
      by
      the Company or its successor, as the case may be, into any other stock or other
      securities on or after the date hereof, such other stock or other securities
      which are issued or issuable in respect of or in lieu of the Shares and (3)
      if
      any other securities are issued to holders of Common Stock (or such other shares
      or other securities into which or for which the Common Stock is so changed,
      converted or exchanged as described in the immediately preceding clause (2))
      upon any reclassification, share combination, share subdivision, share dividend,
      merger, consolidation or similar transaction or event, such other securities
      which are issued or issuable in respect of or in lieu of the
      Shares.

    

    “Registration
      Statement”
means
      a
      registration statement on Form S-1 or such other form as may be available to
      the
      Company to be filed with the SEC under the 1933 Act relating to the Registrable
      Securities and which names any Investor as a selling stockholder.

    

    “Regulation
      D”
means
      Regulation D under the 1933 Act.

    

    “Regulation
      S”
means
      Regulation S under the 1933 Act.

    

    “Repurchase
      Event”
shall
      have the meaning to be provided in this Agreement or in the
      Note.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    “Rule
      144”
means
      Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
      of the SEC that may at any time provide a “safe harbor” exemption from
      registration under the 1933 Act so as to permit a holder to sell securities
      of
      the Company to the public without registration under the 1933 Act.

    

    “Rule
      144A”
means
      Rule 144A under the 1933 Act or any successor rule thereto.

    

    “Rule
      415”
means
      Rule 415 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.

     

    "Rule
      424"
      means
      Rule 424 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”
means
      the U.S. Securities and Exchange Commission.

    

    “SEC
      Comments”
means
      comments sent by the SEC to the Company in respect of a Registration
      Statement.

    

    “SEC
      Effectiveness Date”
means,
      with respect to any Registration Statement, the date such Registration Statement
      is first declared effective by the SEC.

    

    “SEC
      Filing Date”
means
      the date the Registration Statement is first filed with the SEC pursuant to
      Section 5 of this Agreement.

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

    

    “Securities”
means,
      collectively, the Note and the Conversion Shares.

    

    “Shares”
means
      the Conversion Shares.

    

    “Short
      Sales”
shall
      have the meaning provided in Regulation SHO under the Exchange Act as in effect
      on the date of this Agreement (but shall not be deemed to include the location
      and/or reservation of borrowable shares of Common Stock).

    

    “Subsidiary”
means
      any corporation or other entity of which a majority of the capital stock or
      other ownership interests having ordinary voting power to elect a majority
      of
      the board of directors or other persons performing similar functions are at
      the
      time directly or indirectly owned by the Company.

    

    “Tax”
means
      any federal, state, local, or foreign income, gross receipts, license, payroll,
      employment, excise, severance, stamp, occupation, premium, windfall profits,
      environmental, customs duties, capital stock, franchise, profits, withholding,
      social security (or similar), unemployment, disability, real property, personal
      property, sales, use, transfer, registration, value added, alternative or add-on
      minimum, estimated, or other tax of any kind whatsoever, including any interest,
      penalty, or addition thereto, whether disputed or not.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    “Tax
      Return”
means
      any return, declaration, report, claim for refund, or information return or
      statement required to be supplied to any governmental authority relating to
      Taxes, including any schedule or attachment thereto, and including any amendment
      thereof.

    

    “Transaction
      Documents”
means,
      collectively, this Agreement, the Note, the Pledge and Security Agreement,
      the
      Collateral Agency Agreement, the Lockbox Agreement, the Guaranty, the Purchase
      Price Escrow Agreement and the other agreements, instruments and documents
      contemplated hereby and thereby.

    

    “Violation”
      means:

    

    (i) any
      untrue statement or alleged untrue statement of a material fact contained in
      a
      Registration Statement or any post-effective amendment thereof or the omission
      or alleged omission to state therein a material fact required to be stated
      therein or necessary to make the statements therein not misleading,

    

    (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      Prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading, 

    

    (iii) any
      violation or alleged violation by the Company of the 1933 Act, the Exchange
      Act,
      any state securities law or any rule or regulation under the 1933 Act, the
      Exchange Act or any state securities law, or 

    

    (iv) any
      breach or alleged breach by the Company of any representation, warranty,
      covenant, agreement or other term of any of the Transaction Documents.

    

    2. PURCHASE
      AND SALE OF NOTES.

     

    (a) Purchase
      and Sale of Notes.
      (i) Upon
      the
      terms and subject to the conditions of this Agreement, the Investors hereby
      agree to purchase from the Company, and the Company hereby agrees to sell to
      the
      Investors, on the Closing Date, the Notes in the principal amounts set forth
      in
      Exhibit A and having the terms and conditions as set forth in the form of the
      Note attached hereto as Annex
      I
      for the
      Purchase Price. 

     

    (ii) The
      Notes
      will be secured by (i) a first-priority Lien on certain Accounts Receivable
      of
      the Company, and (ii) a perfected first-priority Lien on ten million
      (10,000,000) shares of Common Stock, owned by Agatha Shen, the Chairman of
      the
      Company, pursuant to the Pledge and Security Agreement to be dated as of the
      Closing Date between Tri-State Title & Escrow, LLC, as the collateral agent,
      the Company and Agatha Shen, a form of which is attached hereto as Annex
      II.
      

     

    (iii) The
      Notes
      will be offered and sold to the Investors pursuant to Regulation S and/or
      Regulation D under the 1933 Act. Upon original issuance of the Notes, and until
      such time as it is no longer required under the applicable requirements of
      the
      1933 Act, the Notes and the Conversion Shares shall bear the legends relating
      to
      the offer and the sale of the Notes and the Conversion Shares as required by
      (i)
      Regulation S under the 1933 Act or (ii) any other applicable laws or regulations
      relating to the issuance of the Notes.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (b) Closing.
      The
      issuance and sale of the Notes shall occur on the Closing Date at Guzov Ofsink,
      LLC, 14th
      Floor,
      600 Madison Avenue, New York, New York 10022 or at such other location and
      time
      as the parties may agree. At the closing, upon the terms and subject to the
      conditions of this Agreement, (1) the Company shall issue and deliver to the
      Investors the Notes against payment by the Investors to the Company of an amount
      equal to the Purchase Price, and (2) as payment in full for the Notes, and
      against delivery of the Notes, the Investors shall have delivered to the Escrow
      Agent the Purchase Price pursuant to that certain escrow agreement, and all
      amendments thereto, by and among the Escrow Agent and the Company, a copy of
      which is attached as Annex
      III
      (such
      agreement, the “Purchase
      Price Escrow Agreement”;
      such
      events, the “Closing”
or
      “Initial
      Closing”).
      The
      release to the Company of the Purchase Price less all applicable fees shall
      be
      effected in accordance with the terms of this Agreement and the Purchase Price
      Escrow Agreement. At the Closing, the Investors and the Company shall deliver
      to
      each other all of the various certificates, instruments, and documents referred
      to in Section 7. The Investors and the Company acknowledge and agree that the
      Company may consummate the sale of additional Notes to Investors or other
      investors, on the terms set forth in this Agreement and the other Transaction
      Documents as defined herein, at a closing or additional closings (each, an
      “Additional
      Closing”;
      the
      Initial Closing and any Additional Closing are also  sometimes referred to
      herein as a “Closing”),
      all
      of which Additional Closings shall occur not later than July 31, 2008 (the
      date
      of any Additional Closing is hereinafter referred to as an Additional
      Closing Date”
and
      the
      Initial Closing Date and any Additional Closing Date are also sometimes referred
      to herein as a “Closing
      Date”).

     

    3. REPRESENTATIONS
      AND WARRANTIES CONCERNING THE COMPANY AND ITS
      SUBSIDIARIES.

     

    The
      Company represents and warrants to the Investors that the statements contained
      in this Section
      3
      are
      correct and complete as of the date of this Agreement except as set forth in
      the
      disclosure schedule delivered by the Company to the Investor on the date hereof
      and initialed by the Parties (the “Company
      Disclosure Schedule”).
      The
      Company Disclosure Schedule will be arranged in paragraphs corresponding to
      the
      lettered and numbered paragraphs contained in this Section
      3. 

    

    (a) Organization
      and Standing. The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Nevada, with full and unrestricted corporate
      power and authority to own, operate and lease its assets, to carry on the
      Business (and any other business) as currently conducted (and proposed to be
      conducted), to execute and deliver this Agreement and the Transaction Documents
      and to carry out the transactions contemplated hereby and thereby. The Company
      is duly qualified to do business and is in good standing (to the extent such
      concept is applicable in the relevant jurisdiction) in all jurisdictions in
      which either the ownership or use of the properties owned or used by it, or
      the
      nature of the activities conducted by it, requires such qualification, except
      where the failure to so qualify will not have a material adverse effect on
      the
      Business or financial condition of the Company and its Subsidiaries, taken
      as a
      whole. 

     

    (b) Authorization
      of Transaction. The
      Company has full corporate power and authority to execute and deliver this
      Agreement, each of the Transaction Documents, and any applicable ancillary
      agreement and to perform its obligations hereunder and thereunder. The execution
      and delivery of this Agreement and any Transaction Documents by the Company
      and
      the consummation by the Company of the transactions contemplated hereby and
      thereby have been duly authorized by all necessary corporate action on the
      part
      of the Company. This Agreement constitutes the valid and legally binding
      obligation of the Company, enforceable in accordance with its terms and
      conditions, except to the extent that such enforcement may be limited by
      bankruptcy, reorganization, insolvency and other similar Laws and court
      decisions relating to or affecting the enforcement of creditors rights generally
      and by the application of general equitable principles.. 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (c) Noncontravention. The
      execution, delivery and performance by the Company of this Agreement and any
      Transaction Documents, the fulfillment of and compliance with the respective
      terms and provisions hereof and thereof, and the consummation by the Company
      and
      any of its Subsidiaries of the transactions contemplated hereby and thereby,
      do
      not and will not: (i) conflict with, or violate any provision of, any Law having
      applicability to the Company or its Subsidiaries, or any of their assets, or
      any
      provision of the charter or bylaws of the Company or any of its Subsidiaries
      ;
      (ii) conflict with, or result in any breach of, or constitute a default under
      any agreement,
      contract or other arrangement (whether written or oral) to
      which
      the Company or any Subsidiary is a party or by which the Company or its
      Subsidiaries or any of their assets may be bound; or (iii) result in or require
      the creation or imposition of or result in the acceleration of any indebtedness,
      or of any Encumbrance of any nature upon, or with respect to any of the assets
      (including the Shares) of the Company or any Subsidiary .

     

    (d) Concerning
      the Shares and the Common Stock. Capitalization.
      The
      Shares have been duly authorized and the Conversion Shares, when issued upon
      conversion of the Notes, will be duly and validly issued, fully paid and
      non-assessable and will not subject the holder thereof to personal liability
      by
      reason of being such holder. There are no unwaived preemptive or similar rights
      of any stockholder of the Company or any other Person to acquire any of the
      Securities issued or to be issued to the Investor. The Company has duly reserved
      5,400,000 shares of Common Stock exclusively for issuance upon conversion of
      the
      Notes, and such shares shall remain so reserved, and the Company shall from
      time
      to time reserve such additional shares of Common Stock as shall be required
      to
      be reserved pursuant to the Notes, so long as the Notes are outstanding. The
      Company acknowledges that the Securities may be pledged in connection with
      a
      bona fide margin account or other loan or financing arrangement secured by
      the
      Securities and such pledge of Securities shall not be deemed to be a transfer,
      sale or assignment of the Securities hereunder, and the Investor shall not
      be
      required to provide the Company with any notice thereof or otherwise make any
      delivery to the Company pursuant to this Agreement or any other Transaction
      Document; provided,
      however,
      that in
      order to make any sale, transfer or assignment of Securities in connection
      with
      a foreclosure or realization on such pledge, the Investor or its pledgee shall
      make such disposition in accordance with, or pursuant to an effective
      registration statement or an available exemption under, the 1933 Act. The
      authorized and outstanding capital stock of the Company as of the date of this
      Agreement and the Closing Date (not including the Securities) are set forth
      on
      Schedule 3(d). Except as set forth on Schedule 3(d), there are no options,
      warrants, or rights to subscribe to, securities, rights or obligations
      convertible into or exchangeable for or giving any right to subscribe for any
      shares of capital stock of the Company or any of its Subsidiaries. All of the
      outstanding shares of Common Stock of the Company have been duly and validly
      authorized and issued and are fully paid and nonassessable. 

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (e) Subsidiaries. All
      shares of capital stock of Subsidiaries directly or indirectly held by the
      Company have been duly authorized, are validly issued and fully paid and
      nonassessable. All of the issued and outstanding shares (or other securities)
      of
      each Subsidiary were issued in compliance with all applicable federal and state
      securities Laws and any other applicable Laws. The Company directly, or
      indirectly through wholly owned Subsidiaries, holds of record and beneficially
      owns all such shares of capital stock of the direct or indirect Subsidiaries
      free and clear of all Encumbrances. Each Subsidiary is an Entity duly organized,
      validly existing and in good standing (to the extent such concept is applicable
      in the relevant jurisdiction) under the Laws of its state or jurisdiction of
      incorporation (as listed in Section 3(e) of the Company Disclosure Schedule)
      and
      in all jurisdictions in which either the ownership or use of the properties
      owned or used by it, or the nature of the activities conducted by it, requires
      such qualification. Each Subsidiary has the full and unrestricted power and
      authority to own, operate and lease its assets and to carry on the Business
      (and any other business) as
      currently conducted (and proposed to be conducted). There are no outstanding
      or
      authorized options, warrants, purchase rights, subscription rights, conversion
      rights, exchange rights or other contracts or commitments that could require
      any
      Subsidiary to issue, sell or otherwise cause to become outstanding any of its
      capital stock. There are no outstanding or authorized stock appreciation,
      phantom stock, profit participation or similar rights with respect to any
      Subsidiary. There are no voting trusts, proxies, or other agreements or
      understandings with respect to the voting of the capital stock of any
      Subsidiary. Neither the Company nor any of its Subsidiaries controls directly
      or
      indirectly or has any direct or indirect equity participation in any
      corporation, partnership, trust, or other business association which is not
      a
      Subsidiary. 

     

    (f) Disclosure
      Documents; Common Stock Trading.

     

    (i) The
      Company has timely filed with, or furnished to, the SEC each form, proxy
      statement or report required to be filed with, or furnished to, the SEC by
      the
      Company pursuant to the Exchange Act since February 14, 2008 (collectively,
      the
“Disclosure
      Documents”).
      To
      the knowledge of the Company, the Disclosure Documents complied, as of the
      date
      of their filing with the SEC, in all respects with the requirements of the
      Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 and the
      rules and regulations promulgated thereunder. The information contained or
      incorporated by reference in the Disclosure Documents was true, complete and
      correct in all material respects as of the respective dates of the filing
      thereof with the SEC and, as of such respective dates, the Disclosure Documents
      did not contain any untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading, except to the extent updated or superseded by any Disclosure
      Document subsequently filed by the Company with the SEC prior to the date
      hereof. To the knowledge of the officers of the Company, there is no event,
      fact
      or circumstance that would cause any certification signed by any such officer
      in
      connection with any Disclosure Document pursuant to the requirements of the
      Sarbanes Oxley-Act of 2002 to be untrue, inaccurate or incorrect in any
      respect.

    

    (ii) The
      financial statements of the Company included in the Disclosure Documents have
      been prepared in accordance with the published rules and regulations of the
      SEC
      and in conformity with GAAP applied on a consistent basis throughout the periods
      indicated therein, except as may be indicated therein or in the notes thereto,
      and presented fairly, in all material respects, the consolidated financial
      position of the Company and its Subsidiaries as of the dates indicated, and
      the
      consolidated results of the operations and cash flows of the Company and its
      Subsidiaries for the periods therein specified (except in the case of quarterly
      financial statements for the absence of footnote disclosure and subject, in
      the
      case of interim periods, to normal year-end adjustments).

     

    (iii) The
      Common Stock is validly, properly and effectively registered under the Exchange
      Act in accordance with all applicable federal securities laws and is quoted
      on
      the OTC Bulletin Board. The Company is currently in compliance with all
      applicable FINRA and OTC Bulletin
      Board requirements and standards. There is no revocation order, suspension
      order, injunction or other Proceeding or Law (whether issued by the SEC, the
      FINRA or other Governmental Body) affecting the effectiveness of the Company’s
      Exchange Act registration or the trading of the Common Stock. The consummation
      of the transactions contemplated by this Agreement and the Transaction Documents
      do not conflict with, and will not result in any violation of, any FINRA or
      OTC
      Bulletin Board trading requirement or standard applicable to the Company or
      its
      Common Stock.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    (g) No
      Undisclosed Liabilities; No Guaranties.
      Except
      as
      set forth on Section 3(g) of the Company Disclosure Schedule, in the financial
      statements of the Company included in the Disclosure Documents, the Company
      and
      its Subsidiaries do not have any material Liabilities. Except as set forth
      on
      Section 3(g) of the Company Disclosure Schedule, none of the Company nor
any
      of
      its Subsidiaries is
      a
      guarantor or otherwise liable for any Liability (including indebtedness) of
      any
      other Person. Neither the Company nor any of its Subsidiaries is a party to,
      or
      has any commitment to become a party to, any agreement, contract or other
      arrangement associated with off balance sheet financing.

     

    (h) Absence
      of Litigation.
      Except
      as set forth in the Disclosure Documents and to the Company’s knowledge, there
      is no Proceeding pending or threatened by or before any Governmental Body
      against the Company or any of its Subsidiaries. As of the date hereof, to the
      Company’s knowledge, there is no Proceeding pending or, to the Company’s
      knowledge, threatened by or before any Governmental Body (i) seeking to prevent,
      hinder, modify or challenge any of the transactions contemplated by this
      Agreement or any of the Transaction Documents, or (ii) that would cause any
      of
      the transactions contemplated by this Agreement or any of the Transaction
      Documents to be illegal, invalid, voidable or otherwise rescinded.

     

    (i) Title
      to Assets.
      Except
      as
      set forth in Section 3(i) of the Company Disclosure Schedule, the Company or
      any
      of its Subsidiaries have good and marketable title to, or a valid leasehold
      interest in, free and clear of all Encumbrances, all properties and assets
      material to the Business. All facilities, machinery, equipment, fixtures,
      vehicles and other assets and properties owned, leased or used by the Company
      or
      any of its Subsidiaries are in good operating condition and repair (subject
      to
      ordinary wear and tear) and are reasonably fit and usable for the purposes
      for
      which they are being used.

     

    (j) Legal
      Compliance.
      Each of
      the Company and its Subsidiaries and their respective predecessors and
      Affiliates is currently in compliance and, except to the extent that
      noncompliance will not and could not reasonably be expected to have a material
      adverse effect upon the Business or the financial condition of the Company
      and
      any of its Subsidiaries as currently conducted or proposed to be conducted,
      has
      been in compliance with all applicable Laws, and no Proceeding has been filed
      or
      commenced against any of them alleging any failure so to comply.

     

    (k) Contracts.
      Section
      3(k) of the Company Disclosure Schedule lists all contracts and other agreements
      (whether written or oral) to which any of the Company or its Subsidiaries is
      a
      party pursuant to which the Company or any of its Subsidiaries is to receive,
      or
      is obligated to pay, more than $1,000,000 (“Material
      Contracts”),
      specifying for each the parties thereto, all of which are listed on Section
      3(k)
      of the Company Disclosure Schedule. 

     

    (l) Employees;
      Employee Benefits. 

     

    Except
      as
      set forth in Section 3(l) of the Company Disclosure Schedule,
      neither
      the Company nor any of its Subsidiaries maintain any Plans (as defined in ERISA
      Section 3(3)) or any obligation, arrangement or customary practice, whether
      or
      not legally enforceable, to provide benefits, other than salary, as compensation
      for services rendered, to present or former directors, officers, employees
      or
      agents. 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    (m) Intellectual
      Property. 

     

    The
      Company and its Subsidiaries own or have a right to use all Company Intellectual
      Property material to the Business, free and clear of any and all Encumbrances
      of
      any kind, except where the failure to own or have a right to use such property
      or such lien or encumbrance would not have a material adverse effect upon the
      Business or the financial condition of the Company and any of its Subsidiaries.
      The use of the Company Intellectual Property by the Company and its Subsidiaries
      does not conflict with, infringe upon, violate or interfere with or constitute
      an appropriation of any right, title, interest or goodwill, including, without
      limitation, any intellectual property right, trademark, trade name, domain
      name,
      patent, service mark, brand mark, brand name, database, industrial design,
      trade
      secrets, technology, software, customer lists, copyright or any pending
      application therefor of any other Person, and the Company and the directors
      and
      officers (and employees with responsibility for intellectual property matters)
      of the Company and its Subsidiaries do not have knowledge of any claims thereof.
      The use of all Company Intellectual Property will not be adversely affected
      by
      the transactions contemplated in this Agreement.

    

    (n) Notes
      and Accounts Receivable. All
      notes
      and accounts receivable of the Company and its Subsidiaries are reflected
      properly on the financial statements of the Company (“Financial Statements”) and
      are valid receivables subject to no setoffs or counterclaims, are current and
      collectible within 180 days after the Closing, subject only to the reserve
      for
      bad debts set forth on the face of the balance sheet included in the Financial
      Statements (rather than in any notes thereto) as adjusted for the passage of
      time through the Closing Date in accordance with the past custom and practice
      of
      the Company and its Subsidiaries.

     

    (o) Tax
      Matters. The
      Company and each of its Subsidiaries has made or filed all federal, state and
      foreign income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject (unless and only to the extent that
      the
      Company and each of its Subsidiaries has set aside on its books provisions
      reasonably adequate for the payment of all unpaid and unreported taxes) and
      has
      paid all taxes and other governmental assessments and charges that are material
      in amount, shown or determined to be due on such returns, reports and
      declarations, except those being contested in good faith and has set aside
      on
      its books provisions reasonably adequate for the payment of all taxes for
      periods subsequent to the periods to which such returns, reports or declarations
      apply. There are no unpaid taxes in any material amount claimed to be due by
      the
      taxing authority of any jurisdiction, and the officers of the Company know
      of no
      basis for any such claim. The Company has not executed a waiver with respect
      to
      the statute of limitations relating to the assessment or collection of any
      foreign, federal, statute or local tax. None of the Company’s tax returns is
      presently being audited by any taxing authority. 

     

    (p) Books
      and Records. The
      books
      of account, minute books, equity record books and other records of the Company
      and its Subsidiaries, all of which have been made available to the Investors
      prior to Closing, are accurate and complete in all material respects and have
      been maintained in accordance with sound business practices. 

     

    (q) Certain
      Business Relationships. Except
      as
      set forth in Section 3(q) of the Company Disclosure Schedule or the Disclosure
      Documents, none of the Company
      and its Subsidiaries nor any their respective employees, officers, directors,
      agents, representatives or Affiliates has
      been
      involved in any business arrangement or relationship with the Company and its
      Subsidiaries within the past 36 months, and none of the Company and its
      Subsidiaries nor any their respective employees, officers, directors, agents,
      representatives or Affiliates own any asset, tangible or intangible, which
      is
      used in, or required or necessary for the conduct of, the businesses of the
      Company and its Subsidiaries. There are no loan, guarantee, cross-guarantee,
      pledge, credit or other similar agreements, monies due, advances made or other
      funds transferred, between such persons and the Company or any of its
      Subsidiaries. 

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (r) Private
      Offering. Based
      on
      the representations provided by each Investor in Section
      4,
      the
      offer and sale of the Shares to each Investor is, and the offer and sale of
      the
      Securities to the Investors will be, exempt from the registration and prospectus
      delivery requirements of the Securities Act and any other securities Laws.
      Neither the Company nor any Person acting on its behalf has offered or sold
      or
      will offer or sell any securities, or has taken or will take any other action
      (including, without limitation, any offering of securities of the Company under
      circumstances that would require, under the Securities Act, the integration
      of
      such offering with the offer and sale of the Securities) which would subject
      the
      offer and sale of the Securities to the registration provisions of the
      Securities Act.

     

    (s) Use
      of Proceeds. The
      Company shall use the proceeds from the sale of the Securities for the
      purpose(s) set forth in the use of proceeds schedule 3(s) attached
      hereto. 

     

    (t) Brokers’
      Fees. Except
      as
      set forth in Section 3(t) of the Company Disclosure Schedule, neither
      the Company not any of its Subsidiaries, nor any of their shareholders,
      employees, officer or directors, has any Liability to pay any fees or
      commissions or other consideration to any broker, finder, or agent with respect
      to the transactions contemplated by this Agreement, including any Liability
      or
      obligations for which the Investors can become liable or obligated. Except
      as
      set forth in Section 3(t) of the Company Disclosure Schedule, any such Liability
      will be paid by the Company prior to the Closing. 

     

    (u) Environmental
      and Safety Laws. Since
      January 1, 2007, neither the Company nor its Subsidiaries have been in violation
      of any applicable Law relating to the environment or occupational health and
      safety, where such violation would have a material adverse effect on the
      Business or financial condition of any of the Company or any of its
      Subsidiaries. As used herein, “Environmental
      Laws”
means
      all applicable Laws governing, regulating or otherwise affecting the
      environment, health or safety. 

     

    (v) Manufacturing
      and Marketing Rights. Neither
      the Company nor any of its Subsidiaries has granted rights to manufacture,
      produce, assemble, license, market or sell its products or services to any
      other
      Person nor is bound by any agreement that affects their exclusive right to
      develop, manufacture, assemble, distribute, market or sell its products and
      services. There are no agreements, understandings, instruments, contracts,
      proposed transactions, judgments, orders, writs or decrees to which the Company
      or any of its Subsidiaries is a party or by which it or any its assets is bound
      that may involve (A) provisions restricting or affecting the development,
      manufacture or distribution of any of their products or services, or (B)
      agreements not to compete with any person or entity or not to engage in any
      particular line of business.

     

    4. REPRESENTATIONS
      AND WARRANTIES OF THE INVESTORS. 

     

    The
      Investors represent and warrant to the Company that the statements contained
      in
      this Section
      4
      are
      correct and complete as of the date of this Agreement.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (a) Organization
      and Standing. Authorization
      of Transaction. The
      Investors represent and warrant that they are Entities duly organized and
      validly existing under the laws of their jurisdiction of organization, holding
      power and authority to own, operate and lease their assets and to carry on
      their
      businesses as currently conducted, to execute and deliver this Agreement and
      the
      Transaction Documents and to carry out the transactions contemplated hereby
      and
      thereby. The
      Investors have full corporate or partnership power and authority, as applicable
      (or capacity, if an individual), to execute and deliver this Agreement, the
      Transaction Documents and any applicable ancillary agreement and to perform
      their obligations hereunder and thereunder. This Agreement constitutes the
      valid
      and legally binding obligation of the Investors, enforceable in accordance
      with
      its terms and conditions except to the extent that such enforcement may be
      limited by bankruptcy, reorganization, insolvency and other similar Laws and
      court decisions relating to or affecting the enforcement of creditors’ rights
      generally and by the application of general equitable principles. Except as
      otherwise required by applicable federal or state securities Laws, the Investor
      need not provide any notice to, make any filing with, or obtain any
      authorization, consent, or approval of, any Governmental Body of any other
      Person in order to consummate the transactions contemplated by this Agreement,
      any Transaction Document, or any ancillary agreement.

     

    (b)  Circumstances
      of Purchase. 
      The
      Investors are purchasing the Notes for their own account and not with a view
      towards the public sale or distribution thereof within the meaning of the 1933
      Act; and the Investors will acquire any Conversion Shares issued to the
      Investors prior to the SEC Effectiveness Date of a Registration Statement
      covering the resale of such Conversion Shares by the Investors for their own
      accounts and not with a view towards the public sale or distribution thereof,
      within the meaning of the 1933 Act, prior to such SEC Effectiveness Date; and
      the Investors have no intention of making any distribution, within the meaning
      of the 1933 Act, of the Conversion Shares except in compliance with the
      registration requirements of the 1933 Act or pursuant to an exemption therefrom.
      The Investors are acquiring the Securities hereunder in the ordinary course
      of
      their business.

     

    (c) Brokers’
      Fees.
      The
      Investors have no Liability to pay any fees or commissions or other
      consideration to any broker, finder, or agent with respect to the transactions
      contemplated by this Agreement for which the Company or any of its Subsidiaries
      could become liable or obligated.

     

    (d) No
      Registration. The
      Investors understand that (1) the Notes are being offered and sold to the
      Investors without registration and (2) until the earlier of the SEC
      Effectiveness Date or the date that is twelve (12) months after March 10, 2008,
      the Conversion Shares will be issued to the Investors upon such conversion,
      in
      each such case in reliance on one or more exemptions from the registration
      requirements of the 1933 Act, including, without limitation, Regulation S,
      and
      exemptions from state securities laws and that the Company is relying upon
      the
      truth and accuracy of, and the Investors’ compliance with, the representations,
      warranties, agreements, acknowledgments and understandings of the Investors
      set
      forth herein in order to determine the availability of such exemptions and
      the
      eligibility of the Investors to acquire or receive an offer to acquire the
      Securities. The
      Investors (A) agree that they will not offer, sell or otherwise transfer the
      Note or the Conversion Shares nor, unless in compliance with the 1933 Act,
      engage in hedging transactions involving such Securities, on or prior to (x)
      the
      date which is one year after the later of the date of the commencement of the
      offering and the date of original issuance (or of any predecessor of any
      Security proposed to be transferred by the Investor) and (y) such later date,
      if
      any, as may be required by applicable law, except (a) to the Company, (b)
      pursuant to a registration statement that has been declared effective under
      the
      1933 Act, (c) for so long as any Security is eligible for resale pursuant to
      Rule 144A under the 1933 Act, to a person it reasonably believes is a “qualified
      institutional buyer” as defined in Rule 144A that purchases for its own account
      or for the account of another qualified institutional buyer to whom notice
      is
      given that the transfer is being made in reliance on Rule 144A, (d) pursuant
      to
      offers and sales to Persons who are not “U.S. Persons” (within the meaning of
      Regulation S) that occur outside the United States within the meaning of
      Regulation S or (e) pursuant to any other available exemption from the
      registration requirements of the 1933 Act, and (B) agrees that it will give
      to
      each person to whom such Security is transferred a notice substantially to
      the
      effect of this paragraph. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (e) Directing
      Selling Efforts. No
      form
      of “directed selling efforts” (as defined in Rule 902 of Regulation S under the
      1933 Act), general solicitation or general advertising in violation of the
      1933
      Act has been or will be used nor will any offers by means of any directed
      selling efforts in the United States be made by the Investors or any of their
      representatives in connection with the offer and sale of the Notes.

     

    (f) Investor
      Status. INITIAL
      BELOW IF APPLICABLE. At
      the
      time each Investor was offered the Securities, it was not, and at the date
      hereof it is not, a “U.S. Person” (as defined in Rule 902 of Regulation S under
      the 1933 Act) and it understands that no action has been or will be taken in
      any
      jurisdiction by the Company that would permit a public offering of the Notes
      in
      any country or jurisdiction where action for that purpose is required. It is
      not
      acquiring the Notes for the account or benefit of any U.S. persons except in
      accordance with one or more available exemptions from the registration
      requirements of the 1933 Act or in a transaction not subject
      thereto.

     

    
      	
              ______________________

            
	
              Initial

            

    

     

    (g) Accredited
      Investor Status. Each
      Investor is an “accredited investor” as defined in Regulation D promulgated
      under the 1933 Act. Each Investor is not required to be registered as a
      broker-dealer under Section 15 of the Exchange Act and such Investor is not
      a
      broker-dealer, nor an affiliate of a broker-dealer.

     

    (h) Information
      Provided. The
      Investors and their advisors, if any, have requested, received and considered
      all information relating to the business, properties, operations, condition
      (financial or other), results of operations or prospects of the Company and
      information relating to the offer and sale of the Notes deemed relevant by
      them;
      each Investor and its advisors, if any, have been afforded the opportunity
      to
      ask questions of the Company concerning the terms of the offering of the
      Securities and the business, properties, operations, condition (financial or
      other), results of operations and prospects of the Company and the Subsidiaries.
      Without limiting the generality of the foregoing, the Investors have had the
      opportunity to obtain and to review the Disclosure Documents; in connection
      with
      its decision to purchase the Notes, each Investor has relied solely upon the
      Disclosure Documents, the representations, warranties, covenants and agreements
      of the Company set forth in this Agreement and to be contained in the
      Transaction Documents, as well as any investigation of the Company completed
      by
      the Investors or their advisors; each Investor understands that its investment
      in the Securities involves a high degree of risk; and the Investors understand
      that the offering of the Notes is being made to the Investors as part of an
      offering without any minimum amount of the offering but subject to a maximum
      amount of $7 million aggregate principal amount of the Notes (subject, however,
      to the right of the Company at any time prior to execution and delivery of
      this
      Agreement by the Company, in its sole discretion, to accept or reject an offer
      by the Investors to purchase the Notes).

    
      
        
        

      

      
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    (i) Investment
      Experience. The
      Investors understand the risks of investing in companies which have their
      business operations domiciled in the People’s Republic of China and that the
      purchase of the Notes involves substantial risk. The
      Investors, either alone or together with their representatives, have 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 have so evaluated the merits and risks of such
      investment. The Investors are able to bear the economic risk of an investment
      in
      the Securities and, at the present time, are able to afford a complete loss
      of
      such investment. The Investors have had the opportunity to ask questions of
      management of the Company.

     

    (j) Short
      Sales and Confidentiality prior to the Date Hereof. Other
      than the transaction contemplated hereunder, the Investors have not directly
      or
      indirectly, nor has any Person acting on behalf of or pursuant to any
      understanding with the Investors, executed any disposition, including Short
      Sales (but not including the location and/or reservation of borrowable shares
      of
      Common Stock), in the securities of the Company during the period
      commencing from the time that the Investors first received a term sheet from
      the
      Company or any other Person setting forth the material terms of the transactions
      contemplated hereunder until the date hereof (the “Discussion
      Time”).
      

      

    5. REGISTRATION
      RIGHTS. 

     

    (a) Mandatory
      Registration.  (1)
      (i)
      The Company shall prepare and, in no event later than the date which is 45
      days
      after the Closing Date, file with the SEC a Registration Statement which covers
      the resale by the Investor of a number of shares of Common Stock equal to the
      number of Conversion Shares issuable upon conversion of the Note based on the
      initial Conversion Price as set forth in the Note, as Registrable Securities,
      and which Registration Statement shall state that, in accordance with Rule
      416
      under the 1933 Act, such Registration Statement also covers such indeterminate
      number of additional shares of Common Stock as may become issuable upon
      conversion of the Note to prevent dilution resulting from stock splits, stock
      dividends or similar transactions; (ii) Notwithstanding anything to the contrary
      contained in this Section 5, if the Company receives SEC Comments, and following
      discussions with and responses to the SEC in which the Company uses its
      reasonable best efforts and time to cause as many Registrable Securities for
      as
      many Investors as possible to be included in the Registration Statement filed
      pursuant to Section 5(a) without characterizing any Investor as an underwriter
      (and in such regard uses its reasonable best efforts to cause the SEC to permit
      the affected Investors or their respective counsel to participate in SEC
      conversations on such issue together with counsel of the Company, and timely
      conveys relevant information concerning such issue with the affected Investors
      or their respective counsel), the Company is unable to cause the inclusion
      of
      all Registrable Securities in such Registration Statement, then the Company
      may,
      following not less than three (3) Trading Days prior written notice to the
      Investors, (x) remove from the Registration Statement such Registrable
      Securities (the “Cut
      Back Shares”)
      and/or
      (y) agree to such restrictions and limitations on the registration and resale
      of
      the Registrable Securities, in each case as the SEC may require in order for
      the
      SEC to allow such Registration Statement to become effective; provided,
      that in
      no event may the Company name any Investor as an underwriter without such
      Investor’s prior written consent (collectively, the “SEC
      Restrictions”).
      Unless the SEC Restrictions otherwise require, any cut-back imposed pursuant
      to
      this Section 5(a)(1)(ii) shall be allocated among the Registrable Securities
      of
      the Investors on a pro rata basis. No liquidated damages under Section 5(a)(2)
      shall accrue on or as to any Cut Back Shares, and the required SEC Effectiveness
      Date for such Registration Statement will be tolled, until such time as the
      Company is able to effect the registration of the Cut Back Shares in accordance
      with any SEC Restrictions (such date, the “Restriction
      Termination Date”).
      From
      and after the Restriction Termination Date, all provisions of this Section
      5
      (including, without limitation, the liquidated damages provisions, subject
      to
      tolling as provided above) shall again be applicable to the Cut Back Shares
      (which, for avoidance of doubt, retain their character as “Registrable
      Securities”) so that the Company will be required to file with and cause to be
      declared effective by the Commission such additional Registration Statements
      in
      the time frames set forth herein as necessary to ultimately cause to be covered
      by effective Registration Statements all Registrable Securities (if such
      Registrable Securities cannot at such time be resold by the Investors thereof
      pursuant to Rule 144).

    
      
        
        

      

      
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    (2) If
      at any
      time or from time to time after the Closing Date any Investor shall hold or
      be
      the beneficial owner of any Registrable Securities, other than those Registrable
      Securities included in the Registration Statement that the Company is required
      to file under Section 5(a)(1), which Registrable Securities are not covered
      by a
      Registration Statement, then promptly following the written demand of any
      Investor following the issuance of such additional Registrable Securities or
      the
      issuance of any securities convertible into, exchangeable for, or otherwise
      entitling an Investor to acquire, such additional Registrable Securities, and
      in
      any event within 45 days following such demand, the Company shall prepare and
      file with the SEC a new Registration Statement covering the resale by such
      Investor of such additional Registrable Securities; provided,
      however
      that the
      Company shall not be required to file a Registration Statement covering the
      resale of less than 50% of the then outstanding Registrable Securities at any
      time. Such Registration Statement also shall cover, to the extent permitted
      by
      the 1933 Act and the rules promulgated thereunder (including Rule 416), such
      indeterminate number of additional securities resulting from stock splits,
      stock
      dividends or similar transactions with respect to such additional Registrable
      Securities. Nothing herein shall limit the Company’s obligations or any
      Investor’s rights under Section 6.4 of the Note.

    

    (3) If
      a
      Payment Event occurs, then the Company will make payments to the Investor,
      in
      immediately available funds in lawful money of the United States, as partial
      liquidated damages for the minimum amount of damages to the Investor by reason
      thereof, and not as a penalty, which payments shall accrue at the rate of 1.0%
      per month of the principal amount of the Notes at the time outstanding during
      each Payment Period. Each such payment shall be due and payable within ten
      (10)
      Business Days after the end of each calendar month during which any Payment
      Period occurs until the termination of such Payment Period. Such payments shall
      constitute full payment to the Investor and shall constitute the Investor’s
      exclusive remedy for any Payment Event. A particular Payment Period shall
      terminate upon (u) the filing of the applicable Registration Statement, in
      the
      case of clause (i) of the definition of “Payment Event”; (v) the applicable SEC
      Effectiveness Date for the particular Registration Statement, in the case of
      clause (ii) or (iii) of the definition of “Payment Event”; (w) the ability of
      the Investor to effect sales pursuant to the applicable Registration Statement,
      in the case of clause (iv) of the definition of “Payment Event”; (x) the
      issuance and delivery of the Shares, in the case of clause (vi) of the
      definition of “Payment Event”; and (y) in the case of the events described in
      clauses (ii), (iii) and (iv) of the definition of “Payment Event”, the earlier
      termination of the Registration Period, and in each such case in the preceding
      clauses (u) thorough (y), any Payment Period that commenced by reason of the
      occurrence of any Payment Event shall terminate if at the time (1) no other
      Payment Event is continuing or (2) subject to the rights of any transferee
      under
      Section 9(c), the Investor no longer holds any portion of the Note or any
      Registrable Securities. Notwithstanding any other provision of this Section
      5(a)(3) to the contrary, the Company shall not be obligated to make any payments
      hereunder for Payment Periods in excess of an aggregate of 10% of the principal
      amount of the Notes at the time outstanding. If the Company fails to pay any
      liquidated damages pursuant to this Section in full within three days after
      the
      date payable, the Company will pay interest thereon at a rate of 10% per annum
      (or such lesser rate as is the highest rate permitted by applicable law) to
      the
      Investors, accruing daily from the date such liquidated damages are due until
      such amounts, plus all such interest thereon, are paid in full.

    
      
        
        

      

      
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    (b) Obligations
      of the Company.  In
      connection with the registration of the Registrable Securities, the Company
      shall:

     

    (1) use
      its
      commercially reasonable best efforts to cause each Registration Statement to
      become effective as promptly as possible after the filing thereof and
      to
      keep such Registration Statement effective at all times during the Registration
      Period. The Company shall submit to the SEC, within five (5) Business Days
      after
      the Company learns that no review of such Registration Statement will be made
      by
      the staff of the SEC or that the staff of the SEC has no further comments on
      such Registration Statement, as the case may be, a request for acceleration
      of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The Company represents and
      warrants to the Investors that (a) each Registration Statement (including any
      amendment or supplement thereto and prospectus contained therein), at the time
      it is first filed with the SEC, at the time it is ordered effective by the
      SEC
      and at all times during which it is required to be effective hereunder (and
      each
      such amendment and supplement at the time it is filed with the SEC and at all
      times during which it is available for use in connection with the offer and
      sale
      of the Registrable Securities) shall not contain any untrue statement of a
      material fact or omit to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading and (b) each Prospectus,
      at the time the related Registration Statement is declared effective by the
      SEC
      and at all times that such Prospectus is required by this Agreement to be
      available for use by any Investor and, in accordance with Section 5(c)(3),
      any
      Investor is entitled to sell Registrable Securities pursuant to such Prospectus,
      shall not contain any untrue statement of a material fact or omit to state
      a
      material fact required to be stated therein, or necessary to make the statements
      therein, in light of the circumstances in which they were made, not
      misleading;

    

    (2) subject
      to Section 5(b)(5), prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to each Registration Statement and
      Prospectus as may be necessary to keep such Registration Statement effective,
      and such Prospectus current, at all times during the Registration Period, and,
      during the Registration Period (other than during any Blackout Period during
      which the provisions of Section 5(b)(5)(B) are applicable), comply with the
      provisions of the 1933 Act applicable to the Company in order to permit the
      disposition by the Investors of all Registrable Securities covered by such
      Registration Statement;

    

    (3) furnish
      to Investors whose Registrable Securities are included in a particular
      Registration Statement and such Investors’ respective legal counsel, promptly
      after the same is prepared and publicly distributed, filed with the SEC or
      received by the Company, (1) one conformed copy of such Registration Statement
      and any amendment thereto and the related Prospectus and each amendment or
      supplement thereto and (2) such number of copies of such Prospectus and all
      amendments and supplements thereto and such other documents, as such Investor
      may reasonably request in order to facilitate the disposition of the Registrable
      Securities owned by such Investor; and notify the Investors and their legal
      counsel within three Business Days after the same is filed with the SEC, or
      received by the Company, of the filing or receipt of each letter written by
      or
      on behalf on the Company to the SEC or the staff of the SEC, to the extent
      it
      addresses or concerns such Investors, and each item of correspondence from
      the
      SEC or the staff of the SEC, in each case relating to such Registration
      Statement, to the extent pertaining to an Investor (other than any portion
      thereof which contains information for which the Company has sought confidential
      treatment), and permit counsel designated by the Investor to review such letters
      and items of correspondence upon the request of such counsel;

    
      
        
        

      

      
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    (4) subject
      to Section 5(b)(5), use its commercially reasonable best efforts (i) to register
      and qualify the Registrable Securities covered by each Registration Statement
      under the securities or blue sky laws of such jurisdictions as any Investor
      who
      owns or holds any Registrable Securities reasonably requests, (ii) to prepare
      and to file in those jurisdictions such amendments (including post-effective
      amendments) and supplements to such registrations and qualifications as may
      be
      necessary to maintain the effectiveness thereof at all times during the
      Registration Period and (iii) to take all other actions reasonably necessary
      or
      advisable to qualify the Registrable Securities for sale by the Investors in
      such jurisdictions; provided,
      however,
      that the
      Company shall not be required in connection therewith or as a condition thereto
      (I) to qualify to do business in any jurisdiction where it would not otherwise
      be required to qualify but for this Section 5(b)(4), (II) to subject itself
      to
      general taxation in any such jurisdiction, (III) to file a general consent
      to
      service of process in any such jurisdiction, (IV) to provide any undertakings
      that cause more than nominal expense or burden to the Company or (V) to make
      any
      change in its certificate or article of incorporation or by-laws which the
      Board
      of Directors of the Company determines to be contrary to the best interests
      of
      the Company and its stockholders;

    

     (5) (A)
      as
      promptly as practicable after becoming aware of such event or circumstance,
      notify each Investor of the occurrence of any event or circumstance of which
      the
      Company has knowledge (x) as a result of which any Prospectus, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading, (y) which requires the Company to amend or supplement any
      Registration Statement due to the receipt from an Investor or any other selling
      stockholder named in the Prospectus of new or additional information about
      such
      Investor or selling stockholder or its intended plan of distribution of its
      Registrable Securities or other securities covered by such Registration
      Statement, or (z) which requires the Company to amend or supplement any
      Registration Statement pursuant to the Company’s undertakings as set forth in
      the Registration Statement and in Item 512 of Regulation S-K under the 1933
      Act,
      and use its best efforts promptly to prepare a supplement or amendment to such
      Registration Statement and Prospectus to correct such untrue statement or
      omission or to add any new or additional information, and deliver a number
      of
      copies of such supplement or amendment to each Investor as such Investor may
      reasonably request;

    

    (B) notwithstanding
      Section 5(b)(5)(A) above, if at any time the Company notifies the Investors
      as
      contemplated by Section 5(b)(5)(A) with respect to a particular Registration
      Statement or Prospectus the Company also notifies the Investors that the event
      giving rise to such notice relates to a development involving the Company which
      occurred subsequent to the later of (x) the SEC Effectiveness Date of the
      applicable Registration Statement and (y) the latest date prior to such notice
      on which the Company has amended or supplemented such Registration Statement,
      then the Company shall not be required to use best efforts to make such
      amendment during a Blackout Period; provided,
      however,
      that in
      any period of 365 consecutive days the Company shall not be entitled to avail
      itself of its rights under this Section 5(b)(5)(B) with respect to more than
      two
      Blackout Periods; and provided
      further, however, that
      no
      Blackout Period may commence sooner than 90 days after the end of an earlier
      Blackout Period;

    

    (6) as
      promptly as practicable after becoming aware of such event, notify each Investor
      who holds Registrable Securities being offered or sold pursuant to a particular
      Registration Statement of the issuance by the SEC of any stop order or other
      suspension of effectiveness of such Registration Statement at the earliest
      possible time;

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    (7) permit
      the Investors who hold Registrable Securities being included in a particular
      Registration Statement (or their designee) and their counsel to review and
      have
      a reasonable opportunity to comment on such the selling stockholder section
      and
      beneficial ownership tables contained in such Registration Statement and any
      related Prospectus and all amendments and supplements thereto at least two
      Business Days prior to their filing with the SEC;

    

    (8) use
      its
      commercially reasonable best efforts to cause all the Registrable Securities
      covered by a particular Registration Statement as of the SEC Effectiveness
      Date
      of such Registration Statement to be listed, quoted or traded on the principal
      securities market on which securities of the same class or series issued by
      the
      Company are then listed, quoted or traded; and

    

    (9) provide
      a
      transfer agent and registrar, which may be a single entity, for the Registrable
      Securities at all times;

    

    (c) Obligations
      of the Investors. 
      In
      connection with the registration of the Registrable Securities, the Investor
      shall have the following obligations:

     

    (1) It
      shall
      be a condition precedent to the obligations of the Company to complete the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of a particular Investor that such Investor shall furnish to the
      Company completed Selling Securityholder Questionnaire in the form attached
      hereto as Exhibit
      B
      and
      shall execute such other documents in connection with such registration as
      the
      Company may reasonably request.

    

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

    

    (3) Each
      Investor agrees that it will not effect any disposition of the Registrable
      Securities except as contemplated in the applicable Registration Statement
      or
      Prospectus or as otherwise is in compliance with applicable securities laws
      and
      that it will promptly notify the Company of any material changes in the
      information set forth in the Registration Statement regarding such Investor
      or
      its plan of distribution before selling any Registrable Securities pursuant
      to
      such Registration Statement or Prospectus subsequent to such material change;
      each Investor agrees (a) to notify the Company in writing in the event that
      such
      Investor enters into any material agreement with a broker or a dealer for the
      sale pursuant to a Registration Statement of Registrable Securities through
      a
      block trade, special offering, exchange distribution or a purchase by a broker
      or dealer and (b) in connection with such agreement, to provide to the Company
      in writing the information necessary to prepare any supplemental Prospectus
      pursuant to Rule 424(c) under the 1933 Act which is required with respect to
      such transaction; and

    

    (4) Each
      Investor acknowledges that there may occasionally be times as specified in
      Section 5(b)(5) or 5(b)(6) when the Company must suspend the use of a Prospectus
      until such time as an amendment to the related Registration Statement has been
      filed by the Company and declared effective by the SEC, the Company has prepared
      a supplement to such Prospectus, or the Company has filed an appropriate report
      with the SEC pursuant to the Exchange Act. Each Investor hereby covenants that
      it will not sell any Registrable Securities pursuant to such Prospectus during
      the period commencing at the time at which the Company gives such Investor
      notice of the suspension of the use of such Prospectus in accordance with
      Section 5(b)(5) or 5(b)(6) and ending at the time the Company gives such
      Investor notice that such Investor may thereafter effect sales pursuant to
      the
      Prospectus, or until the Company delivers to such Investor or files with the
      SEC
      an amended or supplemented Prospectus.

    
      
        
        

      

      
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    6. POST-CLOSING
      COVENANTS.

     

    The
      Parties agree as follows with respect to the period following the
      Closing.

    

    (a) Transfer
      Restrictions. 
      The
      Investors acknowledge and agree that (1) the Notes have not been and are not
      being registered under the provisions of the 1933 Act or any state securities
      laws and, except as provided in Section 5, the Conversion Shares have not been
      and are not being registered under the 1933 Act or any state securities laws,
      and that the Notes may not be transferred unless an Investor shall have
      delivered to the Company an opinion of counsel, reasonably satisfactory in
      form,
      scope and substance to the Company, to the effect that the Note to be
      transferred may be transferred without such registration; (2) no sale,
      conveyance assignment or other transfer of the Notes or any interest therein
      may
      be made except in accordance with the terms hereof and thereof; (3) the
      Conversion Shares may not be resold by an Investor unless the resale has been
      registered under the 1933 Act or is made pursuant to an applicable exemption
      from such registration and the Company shall have received the opinion of
      counsel provided for in the third to last sentence of this Section 6(a); (4)
      any
      sale of Conversion Shares under a Registration Statement shall be made only
      in
      compliance with the terms of this Section 6(a) and Section 5 (including, without
      limitation, Section 5(c)(4)); (5) any sale of the Securities made in reliance
      on
      Rule 144 may be made only in accordance with the terms of Rule 144 and further,
      if the exemption provided by Rule 144 is not available, any resale of the
      Securities under circumstances in which the seller, or the Person through whom
      the sale is made, may be deemed to be an underwriter, as that term is used
      in
      the 1933 Act, may require compliance with some other exemption under the 1933
      Act or the rules and regulations of the SEC thereunder; and (6) the Company
      is
      under no obligation to register the Securities (other than registration of
      the
      resale of the Registrable Securities in accordance with Section 5) under the
      1933 Act or, except as provided in Section 6(d) and Section 5, to comply with
      the terms and conditions of any exemption thereunder. Prior to the time
      particular Conversion Shares are eligible for resale under Rule 144, the
      Investors may not sell the Conversion Shares in a transaction which does not
      constitute a sale thereof pursuant to the applicable Registration Statement
      in
      accordance with the plan of distribution set forth therein or in any supplement
      to the related Prospectus unless an Investor shall have delivered to the Company
      an opinion of counsel, reasonably satisfactory in form, scope and substance
      to
      the Company, that such Conversion Shares may be so sold without registration
      under the 1933 Act. Nothing in any of the Transaction Documents shall limit
      the
      right of a holder of the Securities to make a bona fide pledge thereof to an
      institutional lender and the Company agrees to cooperate with any Investor
      who
      seeks to effect any such pledge by providing such information and making such
      confirmations as reasonably requested. The Investors agree that any sale by
      an
      Investor of Shares pursuant to a particular Registration Statement shall be
      made
      in a manner described in the plan of distribution set forth in the related
      Prospectus. 

     

    (b) Restrictive
      Legends. 
      (1)
      The
      Investors acknowledge and agree that the Notes shall bear a restrictive legend
      in substantially the following form (and a stop-transfer order may be placed
      against transfer of the Notes):

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES WHICH MAY BE ISSUABLE PURSUANT HERETO HAVE BEEN REGISTERED UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE BEING OFFERED PURSUANT
      TO AN EXEMPTION FROM REGISTRATION UNDER [REGULATION S (“REGULATION S”)]
      [REGULATION D (“REGULATION D”)] PROMULGATED UNDER THE ACT. THE SECURITIES MAY
      NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
      (A)
      AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT, OR (B)
      AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, IN A GENERALLY
      ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR (II) UNLESS
      SOLD PURSUANT TO, AND IN ACCORDANCE WITH, RULE 144 OR RULE 144A UNDER THE ACT
      OR
      OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER
      THE
      ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS.
      NOTWITHSTANDING THE FOREGOING, SUBJECT TO COMPLIANCE WITH APPLICABLE SECURITIES
      LAWS, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
      SECURITIES.

     

    (2) The
      Investors further acknowledge and agree that until such time as the Shares
      have
      been registered for resale under the 1933 Act as contemplated by Section 5
      of
      this Agreement or are eligible for resale under Rule 144 under the 1933 Act,
      the
      certificates for the Shares may bear a restrictive legend in substantially
      the
      following form (and a stop-transfer order may be placed against transfer of
      the
      certificates for the Shares):

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). THE SECURITIES HAVE BEEN
      ACQUIRED FOR INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
      1933
      ACT OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
      ACT.

     

    (3) Certificates
      evidencing the Shares shall not contain any legend (including the legend set
      forth in Section 6(b)(2) hereof): (i) while a registration statement (including
      the Registration Statement) covering the resale of such Security is effective
      under the 1933 Act, or (ii) following any sale of such Shares pursuant to Rule
      144, or (iii) if such legend is not required under applicable requirements
      of
      the 1933 Act (including judicial interpretations and pronouncements issued
      by
      the SEC). The Company shall cause its counsel to issue a legal opinion to the
      Company’s transfer agent promptly after the SEC Effectiveness Date if required
      by the Company’s transfer agent to effect the removal of the legend hereunder.
      If all or any portion of the Securities are converted or exercised (as
      applicable) at a time when there is an effective registration statement to
      cover
      the resale of the Shares, or if such legend is not otherwise required under
      applicable requirements of the 1933 Act (including judicial interpretations
      thereof) then such Shares shall be issued free of all legends. The Company
      agrees that following the SEC Effectiveness Date or at such time as such legend
      is no longer required under this Section 6(b)(3), it will, no later than ten
      Trading Days following the delivery by an Investor to the Company or the
      Company’s transfer agent of a certificate representing Shares, as applicable,
      deliver or cause to be delivered to such Investor a certificate representing
      such Shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to any transfer agent
      of the Company that enlarge the restrictions on transfer set forth in this
      Section. 

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    (c) Reporting
      Status.  
      During the Registration Period, the Company shall timely file all reports
      required to be filed with the SEC pursuant to Section 13 or 15(d) of the
      Exchange Act, and the Company shall not terminate its status as an issuer
      required to file reports under the Exchange Act even if the Exchange Act or
      the
      rules and regulations thereunder would permit such termination. 

    

    (d) Debt
      Obligation. 
      So
      long
      as any portion of the Note is outstanding, the Company shall cause its books
      and
      records to reflect the Note as a debt of the Company in its unpaid principal
      amount, shall cause its financial statements to reflect the Note as a debt
      of
      the Company in such amount as shall be the greatest amount permitted in
      accordance with Generally Accepted Accounting Principles and, whenever
      appropriate, as a valid senior debt obligation of the Company for money
      borrowed.

    

    (e) Press
      Releases. Any
      press
      release or other publicity concerning this Agreement or the transactions
      contemplated by this Agreement shall be submitted to the Investors for comment
      at least one Business Day prior to issuance, unless the release is required
      to
      be issued within a shorter period of time pursuant to this Agreement or by
      law
      or pursuant to the rules of the securities exchange or market which at the
      time
      constitutes the principal market for the Common Stock.  The Company shall,
      contemporaneously with the closing on the Closing Date or as promptly as
      possible thereafter on the Closing Date, issue a press release concerning the
      transactions contemplated hereby. The Company's other press releases and other
      public information, to the extent concerning the Transaction Documents, shall
      contain such information as reasonably requested by the Investors and be
      reasonably approved by the Investors prior to issuance.

    

    (f) Form
      8-K; Limitation on Information and Investor Obligations. 
      Within
      four Business Days after the Closing Date, the Company will publicly report
      the
      issue and sale of the Notes entered into on or before the Closing Date by filing
      with the SEC a Current Report on Form 8-K under the Exchange Act, which report
      shall describe the material terms of the transactions contemplated hereby and
      thereby and include copies of the forms of the Transaction Documents as exhibits
      to such report.

     

    (g) Security
      Agreement. 
      The Company agrees to execute and deliver to the Collateral Agent at or before
      the closing on the Closing Date the Pledge and Security Agreement in the form
      attached hereto as Annex
      II.

    

    (h) Short
      Sales and Confidentiality after the Date Hereof.  The
      Investor covenants that neither it nor any affiliates acting on its behalf
      or
      pursuant to any understanding with it will execute any Short Sales during the
      period commencing from the time that the Investor first received a term sheet
      from the Company or any other Person setting forth the material terms of the
      transactions contemplated hereunder and ending on the earlier of (i) the date
      that the transactions contemplated by this Agreement are first publicly
      announced as described in Section 6(f) and (ii) the date, if applicable, that
      this Agreement is terminated pursuant to Section 9(m). The Investor covenants
      that until such time as the transactions contemplated by this Agreement are
      publicly disclosed by the Company as described in Section 6(f) or the earlier
      termination of this Agreement, the Investor will maintain the confidentiality
      of
      all disclosures made to it in connection with this transaction (including the
      existence and terms of this transaction). The Investor understands and
      acknowledges that the SEC currently takes the position that coverage of short
      sales of shares of the Common Stock “against the box” prior to the effective
      date of the Registration Statement with the Securities is a violation of Section
      5 of the 1933 Act, as set forth in Item 65, Section 5 under Section A, of the
      Manual of Publicly Available Telephone Interpretations, dated July 1997,
      compiled by the Office of Chief Counsel, Division of Corporation Finance.
      Notwithstanding the foregoing, the Investor does not make any representation,
      warranty or covenant hereby that it will not engage in Short Sales in the
      securities of the Company after the earlier of (i) the date that the
      transactions contemplated by this Agreement are first publicly announced as
      described in Section 6(f) and (ii) the date, if applicable, that this Agreement
      is terminated pursuant to Section 9(m). Notwithstanding the foregoing, in the
      case of an Investor that is a multi-managed investment vehicle whereby separate
      portfolio managers manage separate portions of such Investor's assets and the
      portfolio managers have no direct knowledge of the investment decisions made
      by
      the portfolio managers managing other portions of such Investor's assets, the
      covenant set forth above shall only apply with respect to the portion of assets
      managed by the portfolio manager that made the investment decision to purchase
      the Securities covered by this Agreement.

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    (i) Performance
      Adjustment. In
      the
      event that the Company’s pre-tax net income (the “Actual
      Income”)
      for
      the year ended December 31, 2008 (“Fiscal
      2008”),
      shall
      be less than $10,000,000 (the “2008
      Projected Income,”),
      the
      Conversion Price shall be determined thereafter according to the following
      formula:

    

    CP=CP(1)-CP(1)x(PI-AI)/PI

     

    where

     

    CP
      =
      Conversion Price after Performance Adjustment

     

    CP(1)
      =
      Conversion Price before Performance Adjustment

     

    PI
      = 2008
      Projected Income 

    

    AI
      =
      Actual Income

     

    Notwithstanding
      anything herein to the contrary, at no time shall the Conversion Price be lower
      than $0.65 per Share.

    

    7. CONDITIONS
      TO OBLIGATION TO CLOSE.

     

    (a) Conditions
      to Obligation of the Investors.
      The
      obligation of each of the Investors to consummate the transactions to be
      performed by it in connection with the Closing is subject to satisfaction of
      the
      following conditions:

     

    (i) No
      legal
      action, suit or proceeding shall be pending or threatened which seeks to
      restrain or prohibit the transactions contemplated by this
      Agreement;

    

    (ii) The
      representations and warranties of the Company contained in this Agreement shall
      have been true and correct on the date of this Agreement and shall be true
      and
      correct on the Closing Date as if given on and as of the Closing Date (except
      for representations given as of a specific date, which representations shall
      be
      true and correct as of such date), and on or before the Closing Date the Company
      shall have performed all covenants and agreements of the Company contained
      herein or in any of the other Transaction Documents required to be performed
      by
      the Company on or before the Closing Date;

    

    (iii) No
      event
      which, if the Notes were outstanding, (1) would constitute an Event of Default
      or which, with the giving of notice or the passage of time, or both, would
      constitute an Event of Default shall have occurred and be continuing or (2)
      would constitute a Repurchase Event or which, with the giving of notice or
      the
      passage of time, or both, would constitute a Repurchase Event shall have
      occurred and be continuing;

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

    (iv) The
      Company shall have delivered to the Investor a certificate, dated the Closing
      Date, duly executed by its Chief Executive Officer or Chief Financial Officer,
      to the effect set forth in subparagraphs (i), (ii) and (iii) of this Section
      7(a);

    

    (v) The
      Company shall have delivered to the Investors a certificate, dated the Closing
      Date, of the Secretary of the Company certifying (1) the Certificate of
      Incorporation and By-Laws of the Company as in effect on the Closing Date,
      (2)
      all resolutions of the Board of Directors (and committees thereof) of the
      Company relating to this Agreement and the other Transaction Documents and
      the
      transactions contemplated hereby and thereby and (3) such other matters as
      reasonably requested by the Investors;

    

    (vi) The
      Collateral Agent shall have executed and delivered to the Company the Pledge
      and
      Security Agreement and a copy thereof duly executed and delivered by the
      Company, shall have been furnished to the Investors; 

    

    (vii) The
      Collateral Agent shall have executed and delivered to the Investors the
      Collateral Agency Agreement;

    

    (viii) The
      Lockbox Agreement shall have been executed and delivered to the Company, the
      Collateral Agent and the Lockbox Agent and a copy thereof shall have been
      furnished by the Company to the Investors;

    

    (ix) The
      Guaranty shall have been executed by Agatha Shen and shall have been furnished
      by Agatha Shen to the Investors; and

    

    (x) On
      the
      Closing Date, the Investors shall have received an opinion of Guzov Ofsink,
      LLC,
      counsel for the Company, dated the Closing Date, addressed to the Investor,
      in
      the form attached as Annex
      IV
      and
      otherwise in form, scope and substance reasonably satisfactory to the
      Investors.

    

    The
      Investors may waive any condition specified in this Section
      7(a)
      if they
      execute a writing so stating at the Closing.

    

    (b) Conditions
      to Obligation of the Company.
      The
      obligation of the Company to consummate the transactions to be performed by
      them
      in connection with the Closing is subject to satisfaction of the following
      conditions:

     

    (i) On
      the
      Closing Date, no legal action, suit or proceeding shall be pending or threatened
      which seeks to restrain or prohibit the transactions contemplated by this
      Agreement; and

    

    (ii) The
      representations and warranties of the Investors contained in this Agreement
      shall have been true and correct on the date of this Agreement and on the
      Closing Date as if made on the Closing Date and on or before the Closing Date
      the Investors shall have performed all covenants and agreements of the Investors
      contained in this Agreement and required to be performed by the Investors on
      or
      before the Closing Date.

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    

    The
      Company may waive any condition specified in this Section
      7(b)
      if it
      executes a writing so stating at the Closing.

    

    8. INDEMNIFICATION
      AND CONTRIBUTION.

     

    (a)  Indemnification. 
      (1)
      To
      the extent not prohibited by applicable law, the Company will indemnify and
      hold
      harmless each Indemnified Person against any Claims to which any of them may
      become subject under the 1933 Act, the Exchange Act or otherwise, insofar as
      such Claims (or actions or proceedings, whether commenced or threatened, in
      respect thereof) arise out of or are based upon any Violation. Subject to the
      restrictions set forth in Section 8(a)(3) with respect to the number of legal
      counsel, the Company shall  reimburse the Investors
      and each such controlling Person, promptly as such expenses are incurred and
      are
      due and payable, for any documented reasonable legal fees or other documented
      and reasonable expenses incurred by them in connection with investigating or
      defending any such Claim. Notwithstanding anything to the contrary contained
      herein, the indemnification agreement contained in this Section 8(a)(1) shall
      not apply to: (I) a Claim arising out of or based upon a Violation which occurs
      in reliance upon and in conformity with information relating to an Indemnified
      Person furnished in writing to the Company by such Indemnified Person or an
      underwriter for such Indemnified Person expressly for use in connection with
      the
      preparation of any Registration Statement or any such amendment thereof or
      supplement thereto; (II) any Claim arising out of or based on any statement
      or
      omission in any Prospectus, which statement or omission was corrected in any
      subsequent Prospectus that was delivered to the Indemnified Person prior to
      the
      pertinent sale or sales of Registrable Securities by such Indemnified Person;
      and (III) amounts paid in settlement of any Claim if such settlement is effected
      without the prior written consent of the Company. Such indemnity shall remain
      in
      full force and effect regardless of any investigation made by or on behalf
      of
      the Indemnified Person and shall survive the transfer of the Registrable
      Securities by the Investors.

     

    (2) In
      connection with each Registration Statement, each Investor who is named as
      a
      selling stockholder in such Registration Statement agrees to indemnify and
      hold
      harmless, to the same extent and in the same manner set forth in Section
      8(a)(1), each Indemnified Party against any Claim to which any of them may
      become subject, under the 1933 Act, the Exchange Act or otherwise, insofar
      as
      such Claim arises out of or is based upon any Violation, in each case to the
      extent (and only to the extent) that such Violation occurs in reliance upon
      and
      in conformity with written information furnished to the Company by such Investor
      expressly for use in connection with such Registration Statement or any
      amendment thereof or supplement thereto; and such Investor will reimburse any
      legal or other expenses reasonably incurred by them in connection with
      investigating or defending any such Claim; provided,
      however,
      that
      the indemnity agreement contained in this Section 8(a)(2) shall not apply to
      amounts paid in settlement of any Claim if such settlement is effected without
      the prior written consent of such Investor; provided,
      further,
      however,
      that an
      Investor shall be liable under this Section 8(a)(2) for only that amount of
      all
      Claims in the aggregate as does not exceed the amount by which the proceeds
      to
      such Investor as a result of the sale of Registrable Securities pursuant to
      such
      Registration Statement exceeds the amount paid by such Investor for such
      Registrable Securities or for the Common Stock Equivalents pursuant to which
      such Registrable Securities were issued, as the case may be. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 8(a)(2) with respect to any preliminary prospectus shall not inure
      to
      the benefit of any Indemnified Party if the untrue statement or omission of
      material fact contained in such preliminary prospectus was corrected on a timely
      basis in the related Prospectus, as then amended or
      supplemented.

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    

    (3) Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      8(a) of notice of the commencement of any action (including any governmental
      action), such Indemnified Person or Indemnified Party shall, if a Claim in
      respect thereof is to be made against any indemnifying party under this Section
      8(a), deliver to the indemnifying party a notice of the commencement thereof
      and
      the indemnifying party shall have the right to participate in, and, to the
      extent the indemnifying party so desires, jointly with any other indemnifying
      party similarly noticed, to assume control of the defense thereof with counsel
      reasonably satisfactory to the Indemnified Person or the Indemnified Party,
      as
      the case may be; provided,
      however,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses to be paid by the indemnifying party, if,
      in
      the reasonable opinion of counsel retained by the indemnifying party, the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding, in which case the
      indemnifying party shall not be responsible for more than one such separate
      counsel, and one local counsel in each jurisdiction in which an action is
      pending, for all Indemnified Persons or Indemnified Parties, as the case may
      be.
      The failure to deliver notice to the indemnifying party within a reasonable
      time
      of the commencement of any such action shall not relieve such indemnifying
      party
      of any liability to the Indemnified Person or Indemnified Party under this
      Section 8(a), except to the extent that the indemnifying party is prejudiced
      in
      its ability to defend such action. The indemnification required by this Section
      8(a) shall be made by periodic payments of the amount thereof during the course
      of the investigation or defense, as such expense, loss, damage or liability
      is
      incurred and is due and payable. 

     

    (b) Contribution. To
      the
      extent any indemnification by an indemnifying party as set forth in Section
      9(a)
      above is applicable by its terms but is prohibited or limited by law, the
      indemnifying party agrees to make the maximum contribution with respect to
      any
      amounts for which it would otherwise be liable under Section 8(a) to the fullest
      extent permitted by law. In determining the amount of contribution to which
      the
      respective parties are entitled, there shall be considered the relative fault
      of
      each party, the parties’ relative knowledge of and access to information
      concerning the matter with respect to which the claim was asserted, the
      opportunity to correct and prevent any statement or omission and any other
      equitable considerations appropriate under the circumstances; provided,
      however,
      that
      (a) no contribution shall be made under circumstances where the maker would
      not
      have been liable for indemnification under the fault standards set forth in
      Section 8(a), (b) no Person guilty of fraudulent misrepresentation (within
      the
      meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
      from
      any other Person who was not guilty of such fraudulent misrepresentation and
      (c)
      the aggregate contribution by any seller of Registrable Securities shall be
      limited to the amount by which the proceeds received by such seller from the
      sale of such Registrable Securities exceeds the amount paid by such Investor
      for
      such Registrable Securities or for the Common Stock Equivalents pursuant to
      which such Registrable Securities were issued, as the case may be.

     

    (c) Other
      Rights. The
      indemnification and contribution provided in this Section shall be in addition
      to any other rights and remedies available at law or in equity.

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    

    9. MISCELLANEOUS.

     

    (a) No
      Third Party Beneficiaries.
      This
      Agreement shall not confer any rights or remedies upon any Person other than
      the
      Parties and their respective successors and permitted assigns.

     

    (b) Entire
      Agreement.
      This
      Agreement (including any Transaction Documents) constitutes the entire agreement
      among the Parties and supersedes any prior understandings, agreements, or
      representations by or among the Parties, written or oral, to the extent they
      related in any way to the subject matter hereof.

     

    (c) Succession
      and Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the Parties named
      herein and their respective successors and permitted assigns. No Party may
      assign either this Agreement or any of his or its rights, interests, or
      obligations hereunder without the prior written approval of the other Party;
      provided,
      however,
      that
      the Investor may (i) assign any or all of its rights and interests
      hereunder to one or more of its Affiliates and (ii) designate one or more
      of its Affiliates to perform its obligations hereunder (in any or all of which
      cases the Investors shall no longer remain responsible for the performance
      of
      all of its obligations hereunder).

     

    (d) Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original but all of which together will constitute one and the same
      instrument.

     

    (e) Headings.
      The
      section headings contained in this Agreement are inserted for convenience only
      and shall not affect in any way the meaning or interpretation of this
      Agreement.

     

    (f) Notices.
      All
      notices, consents, waivers and other communications under this Agreement must
      be
      in writing and will be deemed given to a Party when (a) delivered to the
      appropriate address by hand or by nationally recognized overnight courier
      service (costs prepaid), (b) sent by facsimile or e-mail with confirmation
      of transmission by the transmitting equipment, or (c) received or rejected
      by the addressee, if sent by certified mail, return receipt requested; in each
      case to the following addresses, facsimile numbers or e-mail addresses and
      marked to the attention of the individual (by name or title) designated below
      (or to such other address, facsimile number, e-mail address or individual as
      a
      party may designate by notice to the other parties):

     

    If
      to the
      Investors to the addresses set forth in Exhibit A

    

    If
      to the
      Company or Management:

    

    SJ
      Electronics, Inc.

    5F,
      No.166, Sinhu 2nd
      Road

    Neihu
      District, Taipei City

    Taiwan

    Attention:
      Agatha Shen

    Telephone
      No.: 011-8862-8791-8838

    Facsimile
      No.: 011-8862-8791-1368

    E-mail:
      Agatha@sjelect.com.tw

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

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

    

    Guzov
      Ofsink, LLC

    600
      Madison Avenue, 14th Floor

    New
      York,
      New York 10022

    Attention:
      Darren L. Ofsink

    Telephone
      No.: (212) 371-8008

    Facsimile
      No.: (212) 688-7273

    E-mail:
      dofsink@golawintl.com

    

    (g) Controlling
      Law; Venue.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to choice of law provisions, statutes,
      regulations or principles of this or any other jurisdiction. Each Party hereby
      irrevocably submits to the exclusive jurisdiction (including personal
      jurisdiction) of the state and federal courts of the State of New York for
      any
      action, suit or proceeding arising in connection with this Agreement, and agrees
      that any such action suit or proceeding shall be brought only in such court
      (and
      waives any objection based on forum non conveniens or any other jurisdiction
      to
      venue therein). Process
      in any Proceeding under this Agreement may be served on any Party anywhere
      in
      the world. 

     

    (h) Amendments
      and Waivers.
      No
      amendment of any provision of this Agreement shall be valid unless the same
      shall be in writing and signed by the Company and the Investors holding at
      least
      a majority of the principal amount of the Notes then outstanding. 

     

    (i) Severability.
      Any term
      or provision of this Agreement that is invalid or unenforceable in any situation
      in any jurisdiction shall not affect the validity or enforceability of the
      remaining terms and provisions hereof or the validity or enforceability of
      the
      offending term or provision in any other situation or in any other jurisdiction.
      Furthermore, in lieu of such invalid or unenforceable provision, there shall
      be
      added automatically as part of this Agreement a provision as similar in terms
      to
      such invalid or unenforceable provision as may be possible and be legal, valid
      and enforceable.

     

    (j) Expenses.
      Each
      of
      the Parties will bear his or its own costs and expenses (including legal fees
      and expenses) incurred in connection with this Agreement and the transactions
      contemplated hereby. 

     

    (k) Construction.
      The
      Parties have participated jointly in the negotiation and drafting of this
      Agreement. In the event an ambiguity or question of intent or interpretation
      arises, this Agreement shall be construed as if drafted jointly by the Parties
      and no presumption or burden of proof shall arise favoring or disfavoring any
      Party by virtue of the authorship of any of the provisions of this Agreement.
      Any reference to any federal, state, local, or foreign statute or law shall
      be
      deemed also to refer to all rules and regulations promulgated thereunder, unless
      the context requires otherwise. The word “including” shall mean including
      without limitation. The Parties intend that each representation, warranty,
      and
      covenant contained herein shall have independent significance. If any Party
      has
      breached any representation, warranty, or covenant contained herein in any
      respect, the fact that there exists another representation, warranty, or
      covenant relating to the same subject matter (regardless of the relative levels
      of specificity) which the Party has not breached shall not detract from or
      mitigate the fact that the Party is in breach of the first representation,
      warranty, or covenant.

     

    (l) Incorporation
      of Exhibits and Schedules.
      The
      Exhibits and Schedules identified in this Agreement are incorporated herein
      by
      reference and made a part hereof.

     

    (m) Termination. 
      (1)
      The
      Investors shall have the right to terminate this Agreement by giving notice
      to
      the Company at any time at or prior to the Closing Date if:

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (A) the
      Company shall have failed, refused, or been unable at or prior to the date
      of
      such termination of this Agreement to perform any of its obligations hereunder
      required to be performed prior to the time of such termination;

    

    (B) any
      condition to the Investors’ obligations hereunder is not fulfilled at or prior
      to the time such condition is required to be satisfied; or

    

    (C) all
      the
      Closings contemplated by this Agreement shall not have occurred on or before
      May
      30, 2008, other than solely by reason of a breach of this Agreement by the
      Investors, provided,
      that
      no
      Investor shall have the right to terminate this Agreement after delivering
      the
      Purchase Price to the Escrow Agent pursuant to Section 2(b) of this Agreement
      in
      a Closing on or before May 30, 2008.

     

    Any
      such
      termination shall be effective upon the giving of notice thereof by the
      Investors. Upon such termination, the Investor shall have no further obligation
      to the Company hereunder and the Company shall remain liable for any breach
      of
      this Agreement or the other documents contemplated hereby which occurred on
      or
      prior to the date of such termination. 

    

    (2) The
      Company shall have the right to terminate this Agreement by giving notice to
      the
      Investors at any times at or prior to the Closing Date if all the Closings
      contemplated by this Agreement shall not have occurred on or before May 30,
      2008, other than solely by reason of a breach of this Agreement by the Company,
      so long as the Company is not in breach of this Agreement at the time it gives
      such notice. Any such termination shall be effective upon the giving of notice
      thereof by the Company. Upon such termination, neither the Company nor the
      Investors shall have any further obligation to one another
      hereunder.

    

    (n) Investor
      Status. 
      The
      Investor is not acting as part of a “group” (as that term is used in Section
      13(d) of the Exchange Act) with any other Person who is or proposes to become
      a
      party to this Agreement, or who is acquiring or holds any Notes, in negotiating
      and entering into this Agreement or purchasing the Notes or acquiring, disposing
      of or voting any of the Shares. The Company hereby confirms that it understands
      and agrees that the Investors are not acting as part of any such
      group.

     

    [Remainder
      of page intentionally left blank

    Signature
      pages follow]

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    The
      Parties have executed and delivered this Agreement as of the date indicated
      in
      the first sentence of this Agreement.

    

    
      	
              SJ
                ELECTRONICS, INC.

            
	 	 
	
              By:___________________________________________________________

            
	 	
              Name: ____________________________________________________

            
	 	
              Title: _____________________________________________________

            

    

    

    [Remainder
      of page intentionally left blank

    Signature
      pages for Investors follow]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    The
      Parties have executed and delivered this Agreement as of the date indicated
      in
      the first sentence of this Agreement.

    

    
      	
              INVESTOR:

            
	 	 
	
              _____________________________________________________ 

            
	
              (Name
                of Investor)

            
	 	 
	
              By:___________________________________________________________

            
	 	
              Name: ____________________________________________________

            
	 	
              Title: _____________________________________________________

            
	 	 
	
              Principal Amount of the Note:$ _______________________________________

            
	 	 
	
              Tax ID No.:  _____________________________________________________

            

    

    

    
      	
              ADDRESS
                FOR NOTICE

            
	
              _____________________________________________________

            
	
              _____________________________________________________

            
	
              _____________________________________________________

            
	
              _____________________________________________________ 

            
	
              Attention: _______________________________________________________

            
	
              Tel: ___________________________________________________________

            
	
              Fax: ___________________________________________________________

            
	 
	
              DELIVERY
                INSTRUCTIONS

            
	
              (if
                different from above)

            
	 
	_____________________________________________________ 
	_____________________________________________________ 
	_____________________________________________________ 
	_____________________________________________________ 
	
              Attention: _______________________________________________________

            
	
              Tel: ___________________________________________________________

            
	
              Fax: ___________________________________________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}]]