SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934
 
Date of Report (date of earliest event reported): December 17, 2007
 
Achievers Magazine Inc.
(Exact name of Company as specified in charter)
 
Nevada
333-114564
98-0550699
(State or Other Jurisdiction
(Commission File
(I.R.S. Employer
of Incorporation)
Number)
Identification Number)
     
Achievers Magazine Inc.
c/o Xinghe Yongle Carbon Co., Ltd.
787 Xicheng Wai
Chengguantown
Xinghe County
Inner Mongolia, China
Telephone: (86) 474-7209723
(Address of principal executive offices)

Copies to:
Asher S. Levitsky PC
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 nd Floor
New York, New York 10006
Phone: (212) 981-6767
Fax: (212) 930 - 9725
E-mail: alevitsky@srff.com

Achievers Magazine Inc.
200 Cambie Street; Suite 400
Vancouver, B.C. V6B 2M9
(Former name and former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of Company under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o   Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
   
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
Item 1.01 Entry into a Material Definitive Agreement.
 
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
 
Item 3.02 Unregistered Sales of Equity Securities.
 
On December 17, 2007, Achievers Magazine Inc. completed the transactions pursuant to a share exchange agreement, dated as of December 14, 2007, with Sincere Investment (PTC), Ltd., a British Virgin Islands corporation, which is the sole stockholder of Talent International Investment Limited, a British Virgin Islands corporation, which is the sole stockholder of Xinghe Yongle Carbon Co., Ltd. (“Yongle”), a company organized under the laws of the Peoples’ Republic of China (the “PRC”). Pursuant to the share exchange agreement, Sincere transferred to us all of the capital stock of Talent in exchange for 9,388,172 shares of our common stock, which were issued to Sincere. As a result, Talent became our wholly-owned subsidiary and our business became the business of Sincere and its affiliated companies.
 
Talent owns 100% of the stock of Yongle, which is a wholly foreign-owned enterprise under the laws of the PRC. Yongle is a party to a series of contractual arrangements with Xinghe Xingyong Carbon Co., Ltd., a corporation organized under the laws of the People’s Republic of China (the “Xingyong”), and its two stockholders, Dengyong Jin and Benhua Du, which are described under “Contractual Agreements with Xingyong.” Throughout this Form 8-K, Talent, Yongle and Xingyong are sometimes collectively referred to as the “Xingyong Group.”
 
The transaction by which we acquired Talent is referred to as the reverse acquisition.
 
In describing our business, the terms “we,” “us,” and “our” and words of like import refer to the Xingyong Group unless the context indicates otherwise. References to Achievers relate to the business conducted by Achievers prior to the reverse acquisition.
 
Stock Distribution
 
On December 17, 2007, the board of directors approved a 1.6-for-one stock distribution pursuant to which each share of common stock became converted into 1.6 shares of common stock. This stock distribution will become effective on or about December 27, 2007. All references to shares and per share information, including the conversion ratios, in this Form 8-K give effect to the stock distribution.
 
Reverse Acquisition and Related Transactions
 
Pursuant to the exchange agreement, we issued 9,388,172 shares of common stock to Sincere in exchange for 100% of the common stock of Talent. As a result of this transaction and the other transactions described below, Sincere owned approximately 76.8% of the Company’s outstanding common stock.
 
In connection with the acquisition of Talent, on December 17, 2007:
 
(a)
We entered into a buy-back agreement dated December 14, 2007, with Arto Tavukciyan and Lyndon Grove pursuant to which we purchased 5,344,000 shares of common stock from them. Mr. Tavukciyan and Mr. Grove were, at the time of the agreement, the holders of 65.4% of our outstanding common stock. Pursuant to the buy-back agreement:
 
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l
We agreed to pay a purchase price of $700,000 for the shares, for which we issued our promissory note in the principal amount of $700,000, payable in installments of $350,000 on each of March 31, 2008 and June 30, 2008.
 
 
l
We agreed to pay a finders’ fee of $100,000 to Ventana Capital Partners, payable in installments of $50,000 on each of March 31, 2008 and June 30, 2008.
 
 
l
We placed 1,000,000 of the shares of common stock that we purchased in escrow, and the shares are subject to release from escrow under the following conditions:
 
 
l
If by March 31, 2008, we shall not have made both the first $350,000 payment due pursuant to the note and the first payment of $50,000 to Ventana, the escrow agent shall release 400,000 shares to the Sellers and 100,000 shares to Ventana.
 
 
l
If, by March 31, 2008, we shall have made both the first $350,000 payment due pursuant to the note and the first payment of $50,000 to Ventana, the escrow agent shall deliver 500,000 shares to us for cancellation.
 
 
l
If by June 30, 2008, we shall not have made both the second $350,000 payment due pursuant to the note and the second payment of $50,000 to Ventana, the escrow agent shall release 400,000 shares to the Sellers and 100,000 shares to Ventana.
 
 
l
If, by June 30, 2008, we shall have made both the second $350,000 payment due pursuant to the note and the second payment of $50,000 to Ventana, the escrow agent shall deliver 400,000 shares to us for cancellation.
 
 
l
If the escrow agent is required to deliver some or all of the shares from escrow to the sellers and Ventana and if the market price for our common stock during the ten trading days preceding March 31, 2008 or June 30, 2008, as the case may be, is less than $.80 per share, we are required to deliver additional shares. The number of additional shares shall be determined by multiplying the number of shares to be delivered on such date by $0.80 per share and dividing the result by the market price and subtracting from that number the shares held in escrow that are to be delivered at that time.
 
 
l
If, prior to June 30, 2008, we issue shares of common stock at a price which is less than $1.20 per share, we are required to deliver additional shares to the escrow agent. The number of additional shares as shall be determined by multiplying the number of shares of common stock then held in escrow by a fraction, the numerator of which is the number of shares sold by us at a price which is less than $1.20 per share and the denominator of which is 13,000,000. For example, if there are 1,000,000 shares in escrow and we sell 2,600,000 shares at a price which is less than $1.20, we would issue 200,000 shares of common stock to the escrow agent.
 
 
l
Achiever’s transferred all of the stock of its wholly-owned subsidiary, Achievers Publishing Inc., a British Columbia corporation, to Mr. Tavukciyan.
 
(b)
We entered into a securities purchase agreement dated December 14, 2007 with XingGuang Investment Corporation Limited (“XingGuang”) pursuant to which XingGuang purchased, for $1,200,000, our 3% promissory note in the principal amount of $1,200,000, which, upon the filing of a restated certificate of incorporation and a statement of designation for the series A preferred stock, as described below, becomes automatically converted into 1,200,499 shares of series A convertible preferred stock and warrants to purchase 3,000,000 shares of common stock at $1.20 per share and 3,000,000 shares of common stock at $2.00 per share. The purchase price of the note is payable in installments. At the closing, XingGuang paid $183,000 to cover closing costs at the closing and prior to the closing, XingGuang has paid at least $217,000 of expenses relating to the reverse acquisition on our behalf. XingGuang is to pay a total of $800,000 in two installments of $400,000 each, the first being due on March 31, 2008 and the second being due on June 30, 2008. Prior to filing the restated certificate of incorporation and a statement of designation, the note may be converted into 1,200,499 shares of common stock and warrants to purchase 3,000,000 shares of common stock at $1.20 per share and 3,000,000 shares of common stock at $2.00 per share.
 
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(c)
Arto Tavukciyan and Lyndon Grove resigned from all positions as officers and directors, and they elected Lizhong Gao as director.
 
The certificate of designation for the series A preferred stock is to provide that:
 
l
Each share of series A preferred stock is convertible into one share of common stock, at a conversion price of $1.00, subject to adjustment.
 
l
While the series A preferred stock is outstanding, if we issue common stock at a price or warrants or other convertible securities at a conversion or exercise price which is less then the conversion price then in effect, the conversion price shall be adjusted on a formula basis.
 
l
While the Series A Preferred Stock is outstanding, without the approval of the holders of 75% of the outstanding shares of Series A Preferred Stock, we may not pay cash dividends or other distributions of cash, property or evidences of indebtedness, and we shall not redeem any shares of Common Stock.
 
l
No dividends are payable with respect to the series A preferred stock.
 
l
Upon any voluntary or involuntary liquidation, dissolution or winding-up, the holders of the series A preferred stock are entitled to a preference of $1.00 per share before any distributions or payments may be made with respect to the common stock or any other class or series of capital stock which is junior to the series A preferred stock upon voluntary or involuntary liquidation, dissolution or winding-up. In the event that the XingGuang fails to make any of the payments due pursuant to the securities purchase agreement, the amount of the total liquidation payments shall be reduced by the amount of the shortfall.
 
l
The holders of the series A preferred stock have no voting rights. However, so long as any shares of series A preferred stock are outstanding, we shall not, without the affirmative approval of the holders of 75% of the outstanding shares of series A preferred stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the series A preferred stock or alter or amend the certificate of designation, (b) authorize or create any class of stock ranking as to dividends or distribution of assets upon liquidation senior to or otherwise pari passu with the series A preferred stock, or any of preferred stock possessing greater voting rights or the right to convert at a more favorable price than the series A preferred stock, (c) amend our articles of incorporation or other charter documents in breach of any of the provisions thereof, (d) increase the authorized number of shares of series A preferred stock, or (e) enter into any agreement with respect to the foregoing.
 
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The warrants have terms of five years, and expire December 3, 2012. The warrants provide a cashless exercise feature; however, the holders of the warrants may not make a cashless exercise prior to December 17, 2006 and thereafter the holders may make a cashless exercise only if the underlying shares are not covered by an effective registration statement.
 
Pursuant to the securities purchase agreement:
 
l
Our directors approved an restatement of our articles of incorporation which would change our corporate name to China Carbon Graphite Group, Inc., change our authorized capital stock to 120,000,000 shares of capital stock, of which 20,000,000 shares would be shares of preferred stock, par value $.001 per share, and 100,000,000 shares would be shares of common stock, par value $.001 per share, and include a statement of designations of the rights of the holders of the series A preferred stock.
 
l
The Company agreed that, within 90 days after the closing on December 17, 2007, it would have appointed such number of independent directors that would result in a majority of our directors being independent directors and we would have an audit committee composed solely of at least three independent directors and a compensation committee would have a majority of independent directors. The Company is required to pay liquidated damages (i) if the Company fails to have a majority of independent directors 90 days after the closing or (ii) thereafter, if the Company subsequently fails to meet these requirements for a period of 60 days for an excused reason, as defined in the purchase agreement, or 75 days for a reason which is not an excused reason. Liquidated damages are payable in cash or additional shares of series A preferred stock, with the series A preferred stock being valued at the market price of the shares of common stock issuable upon conversion of the series A preferred stock. The liquidated damages are computed in an amount equal to 12% per annum of the purchase price, with a maximum of $144,000.
 
l
The Company and XingGuang entered into a registration rights agreement pursuant to which we are required to have a registration statement filed with the SEC by March 16, 2008 and declared effective by the SEC not later than August 13, 2008. We are required to pay liquidated damages at the rate of 200 shares of series A preferred stock for each day after August 13, 2008 that the registration statement is not declared effective or for any period that we fail to keep the registration statement effective, up to a maximum of 100,000 shares. The number of shares of series A preferred stock issuable pursuant to the liquidated damages provision is subject to reduction based on the maximum number of shares that can be registered under the applicable SEC guidelines.
 
l
XingGuang has a right of refusal on future financings.
 
Contemporaneously with the transactions described above, seven investors purchased 1,751,900 shares of common stock from a group of our stockholders in a private purchase. This purchase, while separate from the reverse acquisition, was a condition to our consummation of the exchange agreement.
 
Item 2.01 Completion of Acquisition or Disposition of Assets.
 
Information in response to this Item 2.01 is keyed to the Item numbers of Form 10SB.
 
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Part I
 
Item 1. Description of Business
 
Summary
 
On December 17, 2007, we acquired the stock of Talent pursuant to the exchange agreement.
 
As a result of the reverse acquisition, our principal business became the business of Xingyong, which is the manufacture of products manufactured from graphite. Our main products are graphite electrodes, fine grain graphite and high purity graphite. Graphite electrode is a conducting material used for electric arc furnaces in the manufacture of steel and smelting alloy steel, brown alumina, yellow phosphorus, or other metals. Fine grain graphite is widely smelting for colored metals and rare-earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields.
 
Corporate History
 
We were incorporated in Nevada under the name Achievers Magazine Inc. on February 13, 2003.  By a share purchase agreement dated March 31, 2003, we acquired all of the stock of Achievers Publishing Inc. from Arto Tavukciyan and John Plaschinski by issuing 1,344,000 shares of common stock to Mr. Tavukciyan and 160,000 shares of its common stock to Mr. Plaschinski. On December 17, 2007, in connection with the reverse acquisition, we transferred all of the stock in Achievers Publishing to Mr. Tavukciyan. Achievers Publishing publishes the magazine “Achievers Magazine.” 
 
Xinghe Xingyong Carbon Co., Ltd. was organized under the laws of the PRC in December 2001. Xingyong’s business was formerly operated as a state-owned enterprise. The business was reorganized under the laws of the PRC as a limited liability company named Xinghe Xingzhi Carbon Co., Ltd. In December 2001, Mr. Jin and Mr. Du organized Xingyong to acquire the business of Xinghe Xingzhi Carbon Co., Ltd. by paying $7,510,000, which was funded by Mr. Jin, and assuming bank loans in the amount of $2,970,000.
 
Talent was incorporated under the laws of the British Virgin Islands on February 1. 2007, and Talent formed Yongle as a wholly foreign owned enterprise under the laws of the PRC on September 18, 2007.
 
Under the laws of the PRC, we cannot acquire Xingyong directly. As a result, Yongle entered into a series of agreements with Xingyong which we believe give us effective control over the business of Xingyong. Our relationships with Xingyong and its stockholders are governed by a series of contractual arrangements between Yongle and Xingyong , the operating company in the PRC. These agreements are described under “Contractual Agreements with Xingyong.”
 
Our executive offices are located c/o Xinghe Yongle Carbon Co., Ltd., 787 Xicheng Wai, Chengguantown, Xinghe County, Inner Mongolia, China, and our telephone number is (86) 474-7209723. Our website is www.xyts.com . Information on our website or any other website is not a part of this report.
 
RISK FACTORS
 
You should carefully consider the risks described below as well as other information provided to you in this document, including information in the section of this document entitled “Information Regarding Forward Looking Statements.” The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believes are immaterial may also impair our business operations. If any of the following risks actually occur, the Company’s businesses, financial condition or results of operations could be materially adversely affected, the value of the common stock could decline, and you may lose all or part of your investment.
 
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Risks Related to Our Business and Industry
 
Our new organizational structure makes it difficult for us to evaluate our future business prospects.
 
Prior to December 17, 2007, our business was operated by Xingyong. Under the present structure, although there is no change is personnel, we have agreements with Xingyong pursuant to which we manage and derive the profit from Xingyong’s business by providing the exclusive supporting services from Yongle to Xingyong. It is possible that the change in our business structure may impair our ability to operate our business.
 
Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us.

In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75. The policy announced in this notice required PRC residents to register with the local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (i) purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire “control” over domestic companies or assets, even in the absence of legal ownership; (ii) adding requirements relating to the source of the PRC resident’s funds used to establish or acquire the offshore entity; (iii) covering the use of existing offshore entities for offshore financings; (iv) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (v) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV’s affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.
 
We believe we comply with the applicable regulations. The owner of Xingyong, Dengyong Jin, was not a stockholder of Talent. Talent’s sole stockholder was not a resident of the PRC. We cannot assure you that, if challenged by government agencies, the structure of our organization has fully complied with all applicable registrations or approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.
 
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Since the revenue we generate from Xingyong is subject to annual negotiation, our profitability may be determined by our chief executive officer.
 
Pursuant to the business operations agreement between Yongle and Xingyong, Xingyong is to make 80%-100% revenue and profit payments to Yongle based upon annual negotiation. Dengyong Jin is our chief executive officer as well as the principal stockholder of Xingyong. As a result, Mr. Jin will have the power to determine the percentage of Xingyong’s revenue or profit that is payable to us.
 
Our principal stockholder has the power to control our business .
 
Our principal stockholder, Sincere, owns 71% of our common stock as of December 20, 2007. As a result, Sincere has the ability to elect all of our directors and to approve any action requiring stockholder action, without the vote of any other stockholders.
 
If our lenders demand payment when our notes are due, we may have difficulty in making payments, which could impair our ability to continue in business.
 
At September 30, 2007, we had outstanding bank loans of $5.4 million and other loans of $665,000, all of which are due in June 2008. In addition, we owed $4.5 million to our chief executive officer and principal stockholder of Xingyong, Dengyong Jin which is payable on demand. These loans exceed our working capital, which was $6.2 million at September 30, 2007. Further, our current assets are principally accounts receivable ($3.8 million) and inventory ($13.8 million). As a result, if the lenders demand payment when due, we may not be able to raise the necessary cash to enable us to pay the loans from working capital and we cannot assure you that we will be able to obtain financing from other sources. The bank loans are secured by a lien on our fixed assets and land use rights. If we were unable to pay the loans, either from our cash or from funds obtained from other sources, or if the bank foreclosed on the collateral, we would be unable to continue in business.
 
Because we may require additional financing to expand our operations, our failure to obtain necessary financing may impair our operations.
 
At September 30, 2007, we had working capital of approximately $6.2 million. Since we have no credit facilities, the only funding presently available to us is cash flow from operations. Our capital requirements in connection with the development of our business are significant. During the nine months ended September 30, 2007, we spent approximately $1.7 million for the purchase of fixed assets for our business, of which $1.35 million was used to purchase land use rights and $350,000 was used to purchase equipment. We will continue to require additional funds for working capital, to continue research, development and testing of our technologies and products, and to market our products and to make the payments totaling $800,000 in connection with the reverse acquisition. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. Our failure to obtain any required financing could impair our ability to both serve our existing clients base and develop new clients and could result in both a decrease in revenue and a loss.
 
To the extent that we require financing, the absence of an active public market for our common stock, the terms of our December 2007 private placement and the number of outstanding warrants and the exercise price and other terms on which we may issue common stock upon exercise of the warrants, it may be difficult for us to raise additional equity capital if required for our present business or for any planned expansion. We cannot assure you that we will be able to get additional financing on any terms, and, if we are able to raise funds, it may be necessary for us to sell our securities at a price which is at a significant discount from the market price and on other terms which may be disadvantageous to us. In connection with any such financing, we may be required to provide registration rights to the investors and pay damages to the investor in the event that the registration statement is not filed or declared effective by specified dates. The price and terms of any financing which would be available to us could result in both the issuance of a significant number of shares and significant downward pressure on our stock price and could result in a reduction of the conversion price of the series A preferred stock. Further, since this investor in our December 2007 private placement has a right of first refusal with respect to future financings, this right may affect our ability to obtain financing from other sources.
 
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Because our products are marketed both in the domestic and international markets, we are subject to both domestic and international competition.
 
We face competition from both Chinese companies and from international companies, many of which are better known and have greater financial resources than we have. Many of the international companies, in particular, have longer operating histories and have more established relationships with customers and end users. Three of our international competitors also may have a greater ability to attract and retain users than we do because they are engaged in major markets of general industrial products and cutting edge technology fields. If our competitors are successful in providing similar or better graphite products or make their services easier to access, we could experience a decline in demand for our products.
 
Because the end users of graphite products seek products that incorporate the latest technological development, including increased thickness and purity, our failure to offer such products could impair our ability to market our products.
 
Our products are either used in the manufacturing process for other products, particularly metals, or for incorporation in products or processes. The end users typically view factors as both the purity of the graphite and the thickness of graphite rods as key factors in making a decision as to which products to purchase. Accordingly, our failure or inability to offer products manufactured with the most current manufacturing technology could impair our ability to make sales.
 
Because we may not be able to obtain business insurance in the PRC, we may not be protected from risks that are customarily covered by insurance in the United States.
 
We do not maintain any business insurance, including insurance against property damage or general or product liability. To the extent that we suffer a loss of a type which would normally be covered by insurance in the United States, such as product liability and general liability insurance, we would incur significant expenses in both defending any action and in paying any claims that result from a settlement or judgment.
 
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
 
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
 
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We must effectively manage the growth of our operations, or our company will suffer.
 
Our ability to successfully implement our business plan requires an effective planning and management process.  If funding is available, we intend to increase the scope of our operations and acquire complimentary businesses.  Implementing our business plan will require significant additional funding and resources.  If we grow our operations, we will need to hire additional employees and make significant capital investments.  If we grow our operations, it will place a significant strain on our management and our resources.  If we grow, we will need to improve our financial and managerial controls and reporting systems and procedures, and we will need to expand, train and manage our workforce.  Any failure to manage any of the foregoing areas efficiently and effectively would cause our business to suffer.
 
An increase in the cost of raw materials will affect sales and revenues.
 
Any increase in the prices of raw materials will affect the price at which we can sell our product. We have no long term supply contracts, so the prices at which we purchase raw materials are based on the market price at the time. If we are not able to raise our prices to pass on increased costs, we would be unable to maintain our margins.
 
Our business and operations are experiencing rapid growth. If we fail to effectively manage our growth, our business and operating results could be harmed.
 
We have experienced, and continue to experience, rapid growth in our operations, which has placed, and will continue to place, significant demands on our management, operational and financial infrastructure. If we do not effectively manage our growth, the quality of our products and services could suffer, which could negatively affect our operating results. To effectively manage this growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. These systems enhancements and improvements may require significant capital expenditures and management resources. Failure to implement these improvements could hurt our ability to manage our growth and our financial position.
 
Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.
 
Our trademarks, trade secrets, copyrights and other intellectual property rights are important assets for us. Various events outside of our control pose a threat to our intellectual property rights as well as to our products and services. For example, effective intellectual property protection may not be available in China and other countries in which our products are sold. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results.
 
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We depend on third parties to market our products in the international market.
 
Although the market for graphite products is international, most of our products are sold to companies in the PRC. We do not have any offices outside of the PRC, and we depend on other companies to market our products in the international market. As a result, we are dependent upon third parties, over which we have no control, to develop and implement an international marketing effort. Any problems encountered by these third parties, including potential violations of laws of the PRC or other countries, may affect their ability to sell our products which would, in turn, affect our net sales.
 
Because our contracts are individual purchase orders and not long-term agreements, the results of our operations can vary significantly from quarter to quarter.
 
We sell our products pursuant to purchase orders and we do not have long-term contracts with any customers. As a result, we must continually seek new customers for our products and seek to obtain follow-up and increased orders from existing customers. As a result, we cannot assure you that we have a continuing stream of revenue from any contract. Our failure to generate new business on an ongoing basis would materially impair our ability to operate profitably.
 
We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.
 
Our performance largely depends on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Our continued ability to compete effectively depends on our ability to attract new technology developers and to retain and motivate our existing contractors.
 
We rely on energy and transportation services or others in providing products and services to our users, and any failure or interruption in the services and products provided by these third parties could harm our ability to operate our business and damage our reputation.
 
Our systems are also heavily reliant on the availability of electricity. If we were to experience a major power outage, we would have to rely on back-up generators. These back-up generators may not operate properly and their fuel supply could be inadequate during a major power outage. This could result in a disruption of our business.
 
If we fail to obtain all required licenses, permits, or approval, we may be unable to expand our operations.
 
Before we can develop certain products, we must obtain a variety of approvals from local and municipal governments. There no assurance that we will be able to obtain all required licenses, permits, or approvals from government authorities. If we fail to obtain all required licenses, permits or approvals, we may be unable to expand our operations.
 
If we make any acquisitions, they may disrupt or have a negative impact on our business.
 
Although we have no present plans for any acquisitions, in the event that we make acquisitions, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the affect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:
 
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l
the difficulty of integrating acquired products, services or operations;
 
 
l
the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
 
 
l
the difficulty of incorporating acquired rights or products into our existing business;
 
 
l
difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities;
 
 
l
difficulties in maintaining uniform standards, controls, procedures and policies;
 
 
l
the potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
 
 
l
the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;
 
 
l
the effect of any government regulations which relate to the business acquired;
 
 
l
potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether of not successful, resulting from actions of the acquired company prior to our acquisition.
 
Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
 
We may be required to pay liquidated damages if we do not register shares of common stock issuable upon conversion of series A preferred stock or warrants issued in the December 2007 private placement or if we do not have a board consisting of a majority of independent directors.
 
The registration rights agreement which we executed in connection with the December 2007 private placement requires us to file a registration statement with the SEC by March 16, 2008 and have the registration statement declared effective by the SEC not later than August 13, 2008. We are required to pay liquidated damages at the rate of 200 shares of series A preferred stock for each day after August 13, 2008 that the registration statement is not declared effective or for any period that we fail to keep the registration statement effective, up to a maximum of 100,000 shares.
 
The securities purchase agreement relating to the December 2007 private placement requires us to pay liquidated damages (i) if we fail to have a majority of independent directors 90 days after the closing or (ii) thereafter, if we subsequently fail to meet these requirements for a period of 60 days for an excused reason, as defined in the purchase agreement, or 75 days for a reason which is not an excused reason. Liquidated damages are payable in cash or additional shares of series A preferred stock.
 
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Because the holder of our warrants have cashless exercise rights, we may not receive proceeds from the exercise of the outstanding warrants if the underlying shares are not registered.
 
The holders of our warrants issued in our December 2007 private placement have cashless exercise rights, which provide them with the ability to receive common stock with a value equal to the appreciation in the stock price over the exercise price of the warrants being exercised. This right is not exercisable prior to December 17, 2008 and thereafter it is only exercisable if the underlying shares are not subject to an effective registration statement. To the extent that the holders exercise the cashless exercise rights, we will not receive any proceeds on exercise of warrants.
 
Risks Related to Doing Business in China
 
Adverse changes in political and economic policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our competitive position. 
 
Our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including:
 
l
the amount of government involvement;
 
l
the level of development;
 
l
the growth rate;
 
l
the control of foreign exchange; and
 
l
the allocation of resources. 
 
While the Chinese economy has grown significantly in the past 20 years, the growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.
 
The Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the Chinese government. The continued control of these assets and other aspects of the national economy by the Chinese government could materially and adversely affect our business. The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Efforts by the Chinese government to slow the pace of growth of the Chinese economy could result in decreased capital expenditure by solar energy users, which in turn could reduce demand for our products.
 
Any adverse change in the economic conditions or government policies in China could have a material adverse effect on the overall economic growth and the level of renewable energy investments and expenditures in China, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses.
 
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Fluctuation in the value of the Renminbi may have a material adverse effect on your investment.  
 
The change in value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an appreciation of Renminbi against U.S. dollar, which is continuing. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the Chinese government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S. dollar. As a portion of our costs and expenses is denominated in Renminbi, the revaluation in July 2005 and potential future revaluation has and could further increase our costs. In addition, as we rely entirely on dividends paid to us by our operating subsidiaries, any significant revaluation of the Renminbi may have a material adverse effect on our revenues and financial condition, and the value of, and any of our dividends payable on our ordinary shares in foreign currency terms. For example, to the extent that we need to convert U.S. dollars we receive from this offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.
 
Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.  
 
All of our revenues and most of our expenses are denominated in Renminbi. If our revenues denominated in Renminbi increase or expenses denominated in Renminbi decrease in the future, we may need to convert a portion of our revenues into other currencies to meet our foreign currency obligations, including, among others, payment of dividends declared, if any, in respect of our ordinary shares. Under China’s existing foreign exchange regulations, we are able to pay dividends in foreign currencies, without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, we cannot assure you that that the Chinese government will not take further measures in the future to restrict access to foreign currencies for current account transactions.
 
If our favorable tax treatment is overturned, we may be subject to significant penalties.
 
On March 16, 2007, the PRC’s National People’s Congress passed a new corporate income tax law, which will become effective on January 1, 2008. This new income tax unifies the corporate income tax rate of domestic enterprise and foreign investment enterprises to 25%. Preferential tax treatments will continue to be granted to entities that are classified as “high and new technology enterprises strongly supported by the State” or conduct business in sectors that are encouraged by the PRC’s National People’s Congress. This new tax law, however, does not clearly define the requirements or criteria for receiving these preferential tax treatments. Because clear implementation and requirement rules or guidelines for the new tax law have not yet been promulgated, we cannot assure you that our Wuhan, China subsidiary will maintain its preferential tax status.

For those enterprises which are enjoying tax holidays, such tax holidays may continue until their expiration in accordance with regulations to be issued by the State Council, but where the tax holiday has not yet started because of losses, such tax holiday shall be deemed to commence from the first effective year of the new tax law. While the new tax law equalizes the income tax rates for foreign companies and domestic companies, preferential tax treatment would continue to be given to companies in certain encouraged sectors and to entities classified as high-technology companies supported by the PRC government, whether foreign companies or domestic companies.
 
In addition, according to the Enterprise Income Tax Law and its implementation rules, effective January 1, 2008, any dividends payable to us by our Yongle will be subject to the PRC withholding tax at the rate of 10%. Currently, any such dividends are not subject to any PRC withholding tax. If Yongle pays any dividends to us in the future, our consolidated results of operations and the amount of dividends we pay to our stockholders may be adversely affected.
 
The new tax law provides only a framework of the enterprise tax provisions. Even with the promulgation of its implementation rules, the new tax law still leaves many details on the definitions of numerous terms as well as the interpretation and specific application of various provisions unclear and unspecified.
 
Capital outflow policies in the PRC may hamper our ability to remit income to the United States.
 
The People’s Republic of China has adopted currency and capital transfer regulations. These regulations may require that we comply with complex regulations for the movement of capital and as a result we may not be able to remit all income earned and proceeds received in connection with our operations or from the sale of our operating subsidiary to the U.S. or to our stockholders.
 
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Our operations and assets in the PRC are subject to significant political and economic uncertainties.
 
Government policies are subject to rapid change and the government of the China may adopt policies which have the effect of hindering private economic activity and greater economic decentralization. There is no assurance that the government of the China will not significantly alter its policies from time to time without notice in a manner with reduces or eliminates any benefits from its present policies of economic reform. In addition, a substantial portion of productive assets in China remains government-owned. For instance, all lands are state owned and leased to business entities or individuals through governmental granting of state-owned land use rights. The granting process is typically based on government policies at the time of granting, which could be lengthy and complex. This process may adversely affect our business. The government of China also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency and providing preferential treatment to particular industries or companies. Uncertainties may arise with changing of governmental policies and measures. In addition, changes in laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency, the nationalization or other expropriation of private enterprises, as well as adverse changes in the political, economic or social conditions in China, could have a material adverse effect on our business, results of operations and financial condition.
 
A downturn in the economy of China may slow our growth and profitability.
 
The growth of the Chinese economy has been uneven across geographic regions and economic sectors. There can be no assurance that growth of the Chinese economy will be steady or that any downturn will not have a negative effect on our business.  
 
Because Chinese law governs almost all of our material agreements, we may not be able to enforce our legal rights within China or elsewhere, which could result in a significant loss of business, business opportunities, or capital.  
 
Chinese law governs almost all of our material agreements. We cannot assure you that we will be able to enforce any of our material agreements or that remedies will be available outside of China. The system of laws and the enforcement of existing laws in China may not be as certain in implementation and interpretation as in the United States.  The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.
 
It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets based in China.  
 
Substantially all of our assets will be located in the PRC and our officers and our present directors reside outside of the United States.  As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Moreover, we have been advised that China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. Further, it is unclear if extradition treaties now in effect between the United States and China would permit effective enforcement of criminal penalties of the Federal securities laws.  
 
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We may have difficulty establishing adequate management, legal and financial controls in China, which could impair our planning processes and make it difficult to provide accurate reports of our operating results.   
 
China historically has not followed Western style management and financial reporting concepts and practices, and its access to modern banking, computer and other control systems has been limited.  Although we will be required to implement internal controls, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in China in these areas. As a result of these factors, we may experience difficulty in establishing the required controls and instituting business practices that meet Western standards, making it difficult for management to forecast its needs and to present the results of our operations accurately at all times. If we are unable to establish the required controls, market makers may be reluctant to make a market in our stock and investors may be reluctant to purchase our stock, which would make it difficult for you to sell any shares of common stock that you may own or acquire.
 
Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.
 
Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.
 
Imposition of trade barriers and taxes may reduce our ability to do business internationally, and the resulting loss of revenue could harm our profitability.    
 
We may experience barriers to conducting business and trade in our targeted emerging markets in the form of delayed customs clearances, customs duties and tariffs. In addition, we may be subject to repatriation taxes levied upon the exchange of income from local currency into foreign currency, substantial taxes of profits, revenues, assets and payroll, as well as value-added tax. The markets in which we plan to operate may impose onerous and unpredictable duties, tariffs and taxes on our business and products, and there can be no assurance that this will not reduce the level of sales that we achieve in such markets, which would reduce our revenues and profits.
 
Risks Related to Ownership of our Common Stock
 
The trading price for our common stock has been and may continue to be volatile
 
The market price of our common stock has experienced fluctuations and may continue to fluctuate significantly. The market price of our common shares may be adversely affected by various factors, including enforcement of existing laws, innovation and technological changes, the emergence of new competitors, the perception of desirability of investing in Chinese companies, quarterly variations in revenue and results of operations, speculation in the press or analyst community and general market conditions or market conditions specific to particular industries.
 
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There is a limited market for our common stock, which may make it difficult for you to sell your stock.
 
Our common stock trades on the OTCBB under the symbol “ACMZ.” There is a limited trading market for our common stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.
 
The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.
 
We are required to amend our articles of incorporation to provide for a class of preferred stock and to give our board of directors the right to create new series of preferred stock. As a result, the board of directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights that could adversely affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention to issue any additional shares of preferred stock or to create any new series of preferred stock and the certificate of designation relating to the series A preferred stock restricts our ability to issue additional series of preferred stock, we may issue such shares in the future. Without the consent of the holders of 75% of the outstanding shares of series A preferred stock, we may not alter or change adversely the rights of the holders of the series A preferred stock or increase the number of authorized shares of series A preferred stock, create a class of stock which is senior to or on a parity with the series A preferred stock, amend our certificate of incorporation in breach of these provisions or agree to any of the foregoing.
 
Because we may be subject to the “penny stock” rules, you may have difficulty in selling our common stock.

If our stock price is less than $5.00 per share, our stock may be subject to the SEC’s penny stock rules, which impose additional sales practice requirements and restrictions on broker-dealers that sell our stock to persons other than established customers and institutional accredited investors. The application of these rules may affect the ability of broker-dealers to sell our common stock and may affect your ability to sell any common stock you may own.

According to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

 
l
Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
 
l
Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
 
l
“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
 
l
Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
 
l
The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
 
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The issuance of shares through our stock compensation plans may dilute the value of existing stockholders and may affect the market price of our stock.
 
Although we do not have an option or other equity-based incentive plan at present, in the future we may use stock options, stock grants and other equity-based incentives, to provide motivation and compensation to our officers, employees and key independent consultants. The award of any such incentives will result in an immediate and potentially substantial dilution to our existing stockholders and could result in a decline in the value of our stock price. The exercise of these options and the sale of the underlying shares of common stock and the sale of stock issued pursuant to stock grants may have an adverse effect upon the price of our stock.
 
Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters.
 
The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than necessary, we have not yet adopted all of these measures. We are not in compliance with requirements relating to the distribution of annual and interim reports, the holding of stockholders meetings and solicitation of proxies for such meeting and requirements for stockholder approval for certain corporate actions, including the issuance of common stock. Thus, there is no restriction on our issuing common stock or preferred stock without the consent of the holders of our common stock. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
 
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and stockholders could lose confidence in our financial reporting.
 
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Under the current SEC regulations, we will be required to include a management report on internal controls over financial reporting in our Form 10-KSB annual report for our current fiscal year, and we will be required to include an auditor’s report on internal controls over financial reporting thereafter. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls, could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. We have not obtained an independent audit of our internal controls, and, as a result, we are not aware of any deficiencies which would result from such an audit. Further, in order for us to be in compliance at the end of the fiscal year, we may incur significant expenses in having our internal controls audited and in implementing any changes which are required.
 
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Because of our cash requirements and restrictions in our preferred stock purchase agreement, we may be unable to pay dividends.
 
In view of the cash requirements of our business, we expect to use any cash flow generated by our business to finance our operations and growth. Further, we are prohibited from paying dividends on our common stock while the series A preferred stock is outstanding.
 
Our stock price may be affected by our failure to meet projections and estimates of earnings developed either by us or by independent securities analysts.
 
Although we do not make projections relating to our future operating results, our operating results may fall below the expectations of securities analysts and investors. In this event, the market price of our common stock would likely be materially adversely affected.
 
The issuance and sale of the common stock issuable upon conversion of the series A preferred stock and exercise of the warrants could result in a change of control.
 
If we issue all of the shares of common stock issuable upon conversion of the series A preferred stock and exercise of the warrants, the 7,200,499 shares of common stock so issuable would constitute approximately 37% of our then outstanding common stock. The percentage would increase to the extent that we are required to issue any additional shares of common stock become upon conversion of the series A preferred stock pursuant to the anti-dilution and adjustment provisions and pursuant to the liquidated damages provision of the registration rights agreement. Any sale of all or a significant percentage of those shares to a person or group could result in a change of control.
 
FORWARD LOOKING STATEMENTS
 
Some of the statements contained in this Form 8-K that are not historical facts are “forward-looking statements” which can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements. Such statements, which are contained in this Form 8-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation our ability to obtain the necessary financing for our operations, our ability to market our products in new markets and to offer products at competitive pricing, our ability to attract and retain management, and to integrate and maintain technical information and develop products using technological advances, our compliance with laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors described under “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
All written and oral forward-looking statements made in connection with this Form 8-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
 
 
Our Business
 
We manufacture graphite products, principally graphite electrodes, fine grain graphite and high purity graphite. Graphite electrode is a conducting material used for electric arc furnaces in the manufacture of steel and smelting alloy steel, brown alumina, yellow phosphorus, or other metals. Fine grain graphite is widely smelting for colored metals and rare-earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. Graphite is an important material for the construction of both historical and modern nuclear reactor power plants as it is considered one of the purest materials manufactured at industrial scale and it retains its properties (including strength) at high temperatures. At present we have the technology to produce nuclear grade graphite and already successfully produce samples. The different products have different degrees of density, strength, purity and wear resistance.
 
Contractual Agreements with Xingyong Carbon
 
Prior to the reverse acquisition our business was conducted by Xingyong. Xingyong is a separate corporation organized under the laws of the PRC and is owned by Dengyong Jin. Under the laws of the PRC, we cannot acquire Xingyong directly. However, under PRC laws, either Yongle or Talent can directly acquire Xingyong as long as they have sufficient capital. As a result, Yongle entered into a series of agreements with Xingyong which we believe give us effective control over the business of Xingyong. The business described in this Form 8-K is the business that was conducted by Xingyong prior to the reverse merger.
 
Our relationships with Xingyong and its stockholders are governed by a series of contractual arrangements between Yongle and Xingyong , the operating company in the PRC. Under PRC laws, Xingyong is an independent legal person and is not exposed to liabilities incurred by the other parties. Each of the contractual arrangements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC. On December 14, 2007, we entered into the following contractual arrangements:

Operations Agreement
 
Pursuant to the business operations agreement, a business relationship has been established between Yongle and Xingyong by entering into an exclusive technical consulting and services agreement , under which Xingyong is to make 80%-100% revenue and profit payments to Yongle based upon annual negotiation , and subsequently the daily operation of Xingyong will have a material impact on its payment capacity to Yongle . In order to ensure Xingyong’s performance of the agreements between Yongle and Xingyong and all its obligations to Yongle , the shareholders of Xingyong jointly confirmed and agreed that Xingyong will not conduct any transaction which may materially affect its assets, obligations, rights or the company’s operation unless a prior written consent from Yongle or a third party appointed by Yongle has been obtained .
 
Option Agreement
 
Pursuant to the option agreement, Yongle was granted an exclusive option to purchase from Dengyong Jin and Benhua Du all of their equity interests in Xingyong at the lowest price permitted by PRC laws applicable at the time of exercise of such option right. Yongle was granted the option right immediately after the execution of the option agreement, and such option right cannot be revoked or amended during the term of the Agreement. Yongle may exercise part or full option anytime during the term of the option agreement. The option agreement has a term of 10 years.
 
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Share Pledge Agreement
 
Under the share pledge agreement, Dengyong Jin Benhua Du pledged 100% of their equity interest in Xingyong to Yongle to guarantee Xingyong’s performance of its obligations under all other related agreements by and between Yongle and Xingyong. Neither Dengyong Jin, Benhua Du or Xingyong may transfer any of the pledged shares without the permission of Yongle .
 
Exclusive Technical and Consulting Services Agreement
 
Under the exclusive technical and consulting services agreement between Yongle and Xingyong, Yongle agrees to provide relevant technical consulting and services to Xingyong and Xingyong shall not accept any other technical consulting and services from any third party without the consent of Yongle . In addition, Yongle shall be the sole and exclusive owner of all rights, title, interests and intellectual property rights arising from the performance of the exclusive technical and consulting services agreement. The parties to the agreement also agree to take reasonable measures to protect and maintain the confidentiality of any confidential data and information that may be disclosed to or acquired by them in connection to them in the exclusive consulting and services provided therein.
 
Industrial Uses of Graphite
 
Graphite is considered to be the purest form of carbon. We manufacture our graphite products by using a high temperature process whereby the heavy hydrocarbons are broken down into simpler molecules. The resulting product provides us with a pure grade of carbon which we use to make our products. Graphite is valued for its good conductivity of heat and electricity and high refractoriness. The utility of graphite is dependent largely upon its type.
 
There are three principal types of natural graphite, each occurring in different types of ore deposit:
 
l
Crystalline flake graphite (or flake graphite for short) occurs as isolated, flat, plate-like particles with hexagonal edges if unbroken and when broken the edges can be irregular or angular.
 
l
Amorphous graphite occurs as fine particles and is the result of thermal metamorphism of coal, the last stage of coalification, and is sometimes called meta-anthracite. Very fine flake graphite is sometimes called amorphous in the trade.
 
l
Lump graphite (also called vein graphite) occurs in fissure veins or fractures and appears as massive platy intergrowths of fibrous or acicular crystalline aggregates, and is probably hydrothermal in origin.
 
We use crystalline flake graphite and amorphous graphite, and we do not use lump graphite.
 
All grades of graphite, especially high grade amorphous and crystalline graphite having colloidal property ( i.e. , they remain in suspension in oil) are used as lubricants. Graphite has an extraordinarily low co-efficient of friction under most working conditions. This property is invaluable in lubricants. It diminishes friction and tends to keep the moving surface cool. Dry graphite as well as graphite mixed with grease and oil is utilized as a lubricant for heavy and light bearings. Graphite grease is used as a heavy-duty lubricant where high temperatures may tend to remove the grease.
 
The flake type graphite is found to possess extremely low resistivity to electrical conductance. The electrical resistivity decreases with the increase of flaky particles. The bulk density decreases progressively as the particles become the mixture has more flaky particles. Because of this property in flake graphite, it finds a large use in the manufacture of carbon electrodes, plates and brushes required in the electrical industry and dry cell batteries. In the manufacture of plates and brushes, however, flake graphite has been replaced to some extent by synthetic, amorphous, crystalline graphite and acetylene black. Graphite electrodes serve to give conductivity to the mass of manganese dioxide used in dry batteries.
 
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Graphite crucibles are manufactured by pressing a mixture of graphite, clay and sand and fixing the pressed article at a high temperature. They are used for melting non-ferrous metals, especially brass and aluminum. Coarse-grained flake graphite from Malagasy is regarded as standard for crucible manufacture.
 
Flake graphite containing 80-85% carbon is used for crucible manufacture; 93% carbon and above is preferred for the manufacture of lubricants, and graphite with 40 to 70% carbon is utilized for foundry facings. Natural graphite, refined or otherwise pure, having a carbon content not less than 95% is used in the manufacture of carbon rods for dry battery cells.
 
Currently, artificially prepared graphite has replaced natural graphite to a great extent. Artificial graphite is prepared by heating a mixture of anthracite, high grade coal or petroleum coke, quartz and saw-dust at a temperature of 3000ºC, out of contact with air. Graphite carbon is deposited as residue. Manufactured graphite is also used for making furnace electrodes and for modes in the manufacture of chlorine and caustic soda.
 
A considerable quantity of graphite is used in foundry-facing to prevent the molding sands from adhering to cast articles. Here too, flake graphite is preferred. Dust or powder of flake, crystalline-graphite are also used.
 
Graphite bricks of high purity are used as moderators in an atomic reactor. In the nuclear field graphite is a good and convenient material as a moderator but this is only true if the graphite is low in certain neutron absorbing elements notably boron and the rare earths and is of consistent quality particularly with regard to density and orientation.
 
Other uses of graphite are in the manufacture of paints and pencils. Finely powdered lump graphite of 70% purity is generally employed in paint manufacture. Graphite is a great water repellent and thus makes an ideal protective coating for wood.
 
Amorphous graphite is generally used in the manufacture of lead for pencils. The suitability of graphite for this purpose is judged by the dark streak it leaves on the paper. It is best done by amorphous graphite. The finer the powder the darker is the smear. The blackness of the smear decreases with increase in flakiness of the graphite. Synthetic graphite, though it has less ash content and a fine particle size, produces very little smears and so it is unsuitable for pencil manufacture.
 
Raw Materials
 
Our principal raw materials are coal asphalt, asphalt coke, metallurgy coke, needle coke, metalluar coke power, quartzose sand, coal, petroleum coke and calcined coke, all of which are carbon rich and used in manufacturing graphite with a high degree of density, strength and purity. We purchase most of our raw materials from domestic Chinese suppliers. Although we do not have any long-term contacts for raw materials, any increase in prices of raw material will affect the price at which we can sell our product. We believe that alternative suppliers are available on reasonable terms.
 
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Marketing and Sales
 
We have a marketing staff of ten persons, who market primarily to wholesale customers, and, to a lesser extent, end users in the PRC. Our marketing effort is oriented toward working with wholesale accounts, many of which market our products in the international market. We believes that we need to satisfy the different needs of our clients by expanding our line of products. Due to international demand, we are focused on expanding its existing graphite varieties.
 
We have no customer that accounted for 10% or more of our net sales for the nine months ended September 30, 2007 or 2006 or for the years ended December 31, 2006 or 2005. Our top ten domestic customers accounted for approximately 64% or our net sales for the nine months ended September 30, 2007.
 
We do not have any long-term contracts with any of our customers. We sell from inventory or manufacture pursuant to purchase order.
 
Research and Development
 
We have a technology cooperation agreement with Hunan University, which we believe is the only university in the PRC that offers a major in carbon studies. The agreement provides that the university provides the basic research and we perform the experiments. We also have an informal relationship with Qunghua University. We are engaged in research and development with respect to the development of high purity graphite with a diameter of 840 mm. The normal size is in the ranges of 400 mm, and we offer products with a diameter of 600 mm. A diameter of more than 840 mm and a purity of more than 99.9999% are threshold requirement for high purity graphite for use in nuclear power reactors. Our research and development expenses have not been significant to date.
 
Intellectual Property
 
We acquired the underlying intellectual property rights when we acquired the business of Xinghe Xingzhi Carbon Co., Ltd. in 2002.
 
We hold one Chinese patent, Patent No IL: 2004 1 0044348.7, for high-density, high strength and wear-resistant graphite material and the production of this material.
 
Competition
 
We compete with a number of domestic and international companies that manufacture graphite products. Because of the nature of the product that we sell, we believe that the reputation of the manufacturer and the quality of the product may be as important as price.
 
In addition to a number of domestic firms, there are three major international firms that offer competing products. They are SGL Group, Toyo Tanso and Poco Graphite. SGL Group is considered one of the world’s leading manufacturers of carbon-based products. In 1974, Toyo Tanso became the first company in Japan to develop isotropic graphite, significantly expanding the possibilities of carbon use. Its products are now widely used in a variety of cutting edge technology fields, including the semi-conductor and aerospace industries. Poco Graphite s products are produced for the semiconductor and general industrial products, biomedical, glass industry products and electrical discharge machining (EDM) markets.
 
We believe that we offer high quality fine grain and high purity graphite products, and the market demand for these products is greater than the supply. We believe that there is a market shortage of 50,000 tons for high power electrode and a shortage of 50,000 tons of ultra high power electrode. We believe that there is an increasing demand for high purity graphite with the diameter of more than 600 mm, which we offer.
 
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Employees
 
At November 30, 2007, we had 550 full time employees, of whom 466 were in manufacturing, 36 were technical employees, who were also engaged in research and development, 38 were executive and administrative and ten were sales and marketing.
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see   “Forward Looking Statements.”
 
Overview
 
Xinghe Xingyong Carbon Co., Ltd. was organized under the laws of the PRC in 2002. Xingyong’s business was formerly operated as a state-owned enterprise. The business was reorganized under the laws of the PRC as a limited liability company named Xinghe Xingzhi Carbon Co., Ltd. In December 2001, Mr. Jin organized Xingyong to acquire the business of Xinghe Xingzhi Carbon Co., Ltd. by paying RMB 55,600,000 (USD $7,513,531.51), which was funded by Mr. Jin, and assuming bank loans in the amount of RMB 21,950,000 ($2,966,216.22).
 
From December 2001 until the reverse acquisiti on on December 17, 2007, our business was conducted by Xingyong, and this discussion relates to the business, financial condition and results of operations of Xingyong. We develop, manufacture and market graphite products. Our main products include graphite electrode, fine grain graphite and high purity graphite. We produce all of our products in China. Our products are generally used either as a component in other products, as an element of a facility or in the manufacturing process of other products. We sell our products to distributors who sell to producers of in both the domestic Chinese market and the international market. We do not sell products directly to the end users.
 
Although our products are sold in the international market, substantially all of our sales are to Chinese firms that may, in turn, sell the products in the international market. We believe that our products are not subject to export restrictions.
 
In accordance with the relevant Chinese rules and regulations on management of foreign exchange, the foreign exchange currency generated from sales of our products outside of China are repatriated into China and sold to designated banks instead of being deposited out of China without authorization. In addition, we have to buy foreign exchanges from designated banks upon the strength of commercial bills when paying current expenditures with foreign exchanges. In addition, all of our transactions undertaken in China are denominated in RMB, which must be converted into other currencies before remittance out of China. Both the conversion of RMB into foreign currencies and the remittance of foreign currencies abroad require the approval of the Chinese government.
 
Our principal raw materials are coal aspalt, asphalt coke, melallurgy coke, needle coke, metalluar coke power, quartzose sand, coal, petroleum coke and calcined coke, all of which are carbon rich and used in manufacturing graphite with a high degree of purity. We purchase most of our raw materials from domestic Chinese suppliers. Although we do not have any long-term contacts for raw materials, any increase in prices of raw material will affect the price at which we can sell our product. If we are not able to raise our prices to pass on increased costs, we would be unable to maintain our margins. The laws of the PRC give the government broad power to fix and adjust prices. Although the government has not imposed price controls on our raw materials such as coal, gas, oil, electricity and/or water on our products, it is possible that such controls may be implemented in the future. Since most of our sales are made to domestic companies, our gross margins can be affected by any price controls imposed by the government of the PRC.
 
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Prior to December 17, 2007, we were a private company, and we did not have the expenses of a public company. As a result, we expect to incur significantly greater legal, accounting and other professional expenses relating to our status as a public company and compliance with SEC rules, including the development and implementation of internal controls.
 
For the five years from 2003 through 2007, we received a 100% tax holiday from the regional government for enterprise income tax. As a result, we paid no enterprise income tax for those years. Commencing in 2008, we will be required to pay enterprise income tax, which is assessed at the rate of 25% for Yongle for at least 5 years and a 50% tax holiday for Xingyong for another 5 years.
 
Our internal financial statements are maintained in RMB. The financial statements included in this Form 8-K are expressed in United States dollars. The translation adjustments in expressing the financial statements in United States dollars is shown on the statements of operation as a translation adjustment, and the cumulative translation adjustment is shown as an element of stockholders’ equity.
 
Variable Interest Entity
 
Commencing with the reverse acquisition on December 17, 2007, Yongle has an agreement with Xingyong pursuant to which it manages the business of Xingyong and the profit of Xingyong is paid to Yongle. Xingyong is owned by Mr. Jin, who is Yongle’s and our chief executive officer. On a going-forward basis, Xingyong will be treated as a variable interest entity and its financial statements will be included as part of our consolidated financial statements under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” referred to as FIN 46.
 
Significant Accounting Estimates and Policies
 
The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
Revenue Recognition - We recognize revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, which states that revenue should be recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the service has been rendered; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. Sales represent the invoiced value of goods, net of value added tax (“VAT”), if any, and are recognized upon delivery of goods and passage of title. Pursuant to China’s VAT rules and regulations, as an ordinary VAT taxpayer we are subject to a tax rate of 17% (“output VAT”). The output VAT is payable after offsetting VAT paid by us on purchases (“input VAT”). We have been granted an exemption from VAT by the Xinghe County People’s Government and Xinghe Tax Authority on some products for which an exchange agreement is in place for raw materials and fuel.
 
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Comprehensive Income - We have adopted Statements of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income,” which establishes standards for reporting and presentation of comprehensive income (loss) and its components in a full set of general-purpose financial statements. We have has chosen to report comprehensive income (loss) in the statements of operations and comprehensive income.
 
Income Taxes - We account for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the difference between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. With the approvals of the Xinghe County Government, we received a 100% tax holiday from enterprise income taxes from the 2003 through and including 2007.
 
On March 16, 2007, China’s parliament, the National People’s Congress, adopted the Enterprise Income Tax Law, which will take effect on January 1, 2008. The new income tax law sets unified income tax rate for domestic and foreign companies at 25 percent except a 15 percent corporate income tax rate for qualified high and new technology enterprises. In accordance with this new income tax law, low preferential tax rate in accordance with both the tax laws and administrative regulations prior to the promulgation of this Law shall gradually become subject to the new tax rate within five years after the implementation of this law.
 
Inventories - Inventories are stated at the lower of cost, determined on a weighted average basis, and net realizable value. Work in progress and finished goods are composed of direct material, direct labor and a portion of manufacturing overhead. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. Management believes that there was no obsolete inventory as of September 30, 2007 and December 31, 2006.
 
Property, Plant and Equipment   - Property, plant and equipment are stated at cost. Major expenditures for betterments and renewals are capitalized while ordinary repairs and maintenance costs are expensed as incurred. Depreciation and amortization is provided using the straight-line method over the estimated useful life of the assets after taking into account the estimated residual value.
 
There is no private ownership of land in China. All land ownership is held by the government of China, its agencies and collectives. Land use rights are obtained from government, and are typically renewable. Land use rights can be transferred upon approval by the land administrative authorities of China (State Land Administration Bureau) upon payment of the required transfer fee. We own the land use right for 2,356,209   square feet, of which 290,626 square is occupied by our facilities, for a term of 50 years, beginning from issuance date of the certificates granting the land use right. We record the property subject to land use rights as intangible property.
 
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Recent Accounting Pronouncements
 
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment . SFAS 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation , and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees . Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after January 1, 2006, are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of January 1, 2006 are recognized as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon The Company’s adoption of SFAS No. 123(R) as the Company had not outstanding share awards as of the date of adoption and has not issued any share-based awards during 2006.
 
In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109, Accounting for Income Taxes (“FIN 48”). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. FIN 48 is effective as of the beginning of fiscal years that start after December 15, 2006. The Company does not expect its implementation to be material to its financial statements.
 
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. The adoption of SAB 108 had no impact on the Company’s results from operations or financial position.
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of this statement are to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS 157 are effective for the fiscal years beginning after November 15, 2007. Therefore, we anticipate adopting this standard as of January 1, 2008. Management has not determined the effect, if any, the adoption of this statement will have on our financial condition or results of operations.
 
In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on December 31, 2006 and it is anticipated the adoption of SFAS No. 158 will not have a material impact to the Company’s financial position, results of operations, or cash flows. 
 
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In February 2007, the FASB issued Statement No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.
 
Results of Operations
 
The following table sets forth information from our statements of operations for the years ended December 31, 2006 and 2005 and the nine months ended September 30, 2007 and 2006, in dollars and as a percentage of sales (dollars in thousands):  
 
 
Nine Months Ended September 30,
Year Ended December 31,
 
2007
2006
2006
2005
Net sales
$18,800
100.0%
$9,877
100.0%
$17,199
100.0%
$16,520
100.0%
Cost of sales
15,068
80.1%
7,013
71.0%
13,234
76.9%
12,959
78.4%
Gross profit
3,732
19.9%
2,864
29.0%
3,965
23.1%
3,561
21.6%
Operating expenses
683
3.6%
584
5.9%
903
5.3%
665
4.0%
Operating income
3,049
16.2%
2,280
23.1%
3,062
17.8%
2,896
17.5%
Other income
287
1.5%
86
0.9%
87
0.5%
8
0.0%
Interest expense
394
2.1%
397
4.0%
422
2.5%
404
2.4%
Net income
$ 2,943
15.7%
$1,955
19.8%
$ 2,681
15.6%
$ 2,500
15.1%
Comprehensive income
$ 4,181
22.2%
$2,504
25.4%
$ 3,480
20.2%
$ 2,854
17.3%
 
Nine Months Ended September 30, 2007 and 2006
 
Net sales . During the nine months ended September 30, 2007 (the “September 2007 period”), we had net sales of $18.8 million as compared to net sales of $9.9 million during the nine months ended September 30, 2006 (the “September 2006 period”), an increase $8.9 million, or 90%. This increase is the result of increase in sales as well as price increases.
 
Cost of sales; gross margin . During the September 2007 period, our cost of sales was $15.1 million, as compared to cost of sales of $7.0 million during the September 2006 period, an increase of $8.1 million, or 115%. The increase in cost of sales was greater than the increase in sales. As a result, although our gross profit increased $868,000, or 30%, our gross margin decreased from 29.0% in the September 2006 period to 19.9% in the September 2007 period. The reduction in gross profit resulted from increases in the cost of raw material, which increases were not able to be passed on to customers during the period.
 
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Operating income and expenses. Operating expenses, which consist of selling, general and administrative expenses, and depreciation and amortization, totaled $6 8 3,000 during the September 2007 period as compared to $584,000 during the September 2006 period. Selling expenses decreased from $238,000 in the September 2006 period to $110,000 in the September 2007 period. General and administrative expense increased from $335,000 in the September 2006 period to $560,000 in the September 2007 period. Depreciation and amortization remained relatively constant, increasing from $11,000 to $13,000 due to clients recognizing the effects of inflation on the costs of raw materials and their orders are thus placed in advance. Consequently, selling expenses decreased while sale contracts increased. Increases of general and administrative expenses were due to the reverse merger. Operating income was $3.0 million during the September 2007 period, as compared to $2.1 million during the September 2006 period.
 
Other income . During the September 2007 period, we had other income of $287,000, as compared with $86,000 for the September 2006 period. Other income for these periods included Subsidy income for interest and Subsidy income for high-technology. Subsidy income for interest for September 2007 is $287,000. Subsidy income for high-technology for September 2006 is $86,000.  
 
Interest expense . Interest expense remained relatively constant, decreasing $3,000, from $397,000   in the September 2006 period to $394,000 period. During the September 2007 period, the average amount borrowed was $6016,000 and the average interest rate was 6.54 %. During the September 2006 period, the average amount borrowed was $7,114,000 and the average interest rate was 5.58%.
 
Net Income . As a result of the factors described above, we had net income of $2.9 million for the September 2007 period, as compared with $2.0 million for the September 2006 period.
 
Comprehensive Income . As a result of a currency translation adjustment, our comprehensive income was $ 4.2 million for the September 2007 period, as compared with $2.5 million for the September 2006 period.
 
Years Ended December 31, 2006 and 2005
 
Net sales . During the year ended December 31, 2006, we had net sales of $17.2 million, as compared with net sales of $16.5 million during the year ended December 31, 2005, an increase of approximately $700,000, or 4% due to expanding sales and markets.
 
Cost of sales; gross margin . During 2006, we had cost of sales of $13.2 million, as compared with cost of sales of $13.0 million, an increase of $275,000, or 2%, reflecting the increase in net sales. The gross profit rose to $4.0 million, or an 11% increase in 2006 compared with 2005. Our gross margin increased from 21.6% in 2005 to 23.1% in 2006. The improvement in margin resulted from improvements in management.
 
Operating Expenses . Our operating expenses were $903,000 for 2006, compared with $665,000 for 2005, an increase of $238,000, or approximately 36%. The increase in operating expenses was principally due to an increase in selling expenses and, to a lesser extend, general and administrative expenses. Selling expenses increased from $129,000 in 2005 to $331,000 in 2006, due to an increase of sales. General and administrative expenses increased modestly, from $519,000 in 2005 to $556,000, reflecting the increase in our business. Depreciation and amortization were virtually unchanged from 2005 to 2006. As a result, our operating income increased to $3.1 million in 2006 from $2.9 million in 2006.
 
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Other income . During 2006 period, we had other income of $87,000, as compared with $8,000 for 2005. Other income for these years included subsidy income for interest and subsidy income for high-technology. Subsidy income for high-technology for 2006 is $87,000. Subsidy income for high-technology for 2005 is $8,000.  
 
Interest Expense . Interest expense remained relatively constant, increasing $18,000 from $404,000 in 2005 to $422,000 in 2006. During 2006, the average amount borrowed was $7,562,000 and the average interest rate was 5.58%. During 2005, the average amount borrowed was $7 and the average interest rate was 5.58%.
 
Net Income . As a result of the factors described above, we had net income of $2.7 million for 2006 period, compared with $2.5 million for 2005.
 
Comprehensive Income . As a result of a currency translation adjustment, our comprehensive income was $3.5 million for 2006, compared with $2.9 million for 2005.
 
Liquidity and Capital Resources
 
At September 30, 2007, we had working capital of $6.2 million, as compared with $3.9 million at December 31, 2006. During the nine months we generated cash flow from operations of $2.0 million, and we expended $1.7 million for the purchase of fixed assets. The funds used to purchase fixed assets were used to purchase land ($1.35 million) and equipment ($350,000). As of September 30, 2007, we had no commitments for capital expenditures.
 
We have financed our operations principally through short term bank loans and, to a lesser extent, loans from Mr. Jin. At September 30, 2006, we had two bank loans outstanding, totaling $6.0 million, which mature in June 2008. A bank loan in the amount of $5.4 million is due June 10, 2008, bears interest at 8.541% per annum and is secured by a security interest on our fixed assets and land use rights. Another loan, in the amount of $665,000 is due June 20, 2008, and bears interest at 7.227% per annum and is guaranteed by Inner Mongolia Yuansheng Investment Guarantee Corporation. No payment has been made for the guarantee. Although we believe that we will be able to obtain extensions of these loans when they mature, we cannot assure you that such extensions will be granted.
 
At September 30, 2007, Mr. Jin has advances to us in the amount of $4.5 million. These advances did not bear interest and are due on demand.
 
In December 2007, in connection with the reverse acquisition, issues notes in the principal amount of $1,200,000 to the investor. Under the terms of the purchase agreement, the investors still owe $800,000 in two installments of $400,000, which are due on March 31, 2008 and June 30, 2008. In connection with the reverse acquisition, issued our promissory note for $700,000 and we owe a $100,000 finders’ fee in connection with the reverse acquisition. These payments are due in two installments totaling $400,000 each, which are due on March 31, 2008 and June 30, 2008. These payments are secured by 1,000,000 of the share of common stock that we purchased from the former principal stockholders of Achievers. These shares are held in escrow, and if we fail to make the required payments, the escrow agent will release the shares to the sellers and the finder.
 
We require funds for working capital for our operations, in addition to the payments due in connection with reverse acquisition as well as the purchase of additional equipment for our operations. We believe that our working capital, together with the cash flow from our ongoing business will be sufficient to enable us to meet our cash requirements for the next 12 months. Although we do not have any current plans to make any acquisitions, it is possible that we may seek to acquire one or more businesses in the education field, and we may require financing for that purpose. We cannot assure you that funding will be available if and when we require funding. Further, in the event that any of our lenders demand payment at the time the loans are due in June 2008, we would require additional financing in order to repay those loans, and we cannot assure you that we will be able to obtain the necessary funding either from another bank or from other sources.
 
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Item 3. Description of Property.
 
There is no private ownership of land in the PRC. The government grants transferable land use rights, which grant the right to use the land for a specified time period, generally 50 years, but sometimes for a different term. We have the land use rights to an area of 1,207,388 square feet in Xinghe County,
Inner Mongolia, China, on which we have a 263.501 square feet building that we use for manufacturing and office space. The land use right was granted in 2002 and has a term of 50 years from the date of grant.  
 
Item 4. Security Ownership of Certain Beneficial Owners and Management
 
The following table provides information at to shares of common stock beneficially owned as of December 20, 2007 by:
 
 
l
each director;
 
l
each officer named in the summary compensation table;
 
l
each person owning of record or known by us, based on information provided to us by the persons named below, to own beneficially at least 5% of our common stock; and
 
l
all directors and executive officers as a group.

 
Name
Shares of Common Stock Beneficially Owned
 
Percentage
Sincere Investment (PTC), Ltd.
Trinity Chambers, P.O. Box 4301, Road Town, Tortola,
British Virgin Islands
9,388,172
71.0%
Shulian Gao and Wenyi Li (both are
beneficiaries under the Trust)
9,388,172
71.0%
Dengyong Jin
0
0.0%
Lizhong Gao
0
0.0%
Donghai Yu
0
0.0%
Cheng Zhang
0
0.0%
All officers and directors as a group (one person owning stock)
9,388,172
71.0%
 
Lizhong Gao is the president and sole stockholder of Sincere and has the sole power to vote and dispose of the shares owned by Sincere.
 
Except as otherwise indicated each person has the sole power to vote and dispose of all shares of common stock listed opposite his name. Each person is deemed to own beneficially shares of common stock which are issuable upon exercise or warrants or options or upon conversion of convertible securities if they are exercisable or convertible within 60 days of December 20, 2007.
 
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Item 5. Directors and Executive Officers, Promoters and Control Persons.
 
Directors and Executive Officers

The following table sets forth certain information with respect to our directors and executive officers.
 
Name
Age
Position
Dengyong Jin
53
Chief executive officer
Lizhong Gao
43
President and director
Donghai Yu
42
Chief financial officer and director
Cheng Zhang
44
Chief operating officer and director
 
Dengyong Jin has been our chief executive officer since December 2007. He has been president and chief executive officer of Xingyong since 2001 and has more that 20 years of experience in the carbon industry. He received his degree in economics from Inner Mongolia Television University of China.
 
Lizhong Gao has been our president since December 2007. From September 2002 until November 2007, he was manager of Beijing Mingping Industry and Commercial Company. Since November 2007, he was been president of Sincere Investment PTC, our principal stockholder. He received his degree in economics from Inner Mongolia Television University of China.
 
Donghai Yu has been our chief financial officer since December 2007. Since November 2007 he has also been chief financial officer of Xingyong. From 2002 through 2007, Mr. Yu has been self-employed as a financial consultant for both personal and business finance. Mr. Yu received his MBA degree from Oklahoma City University.
 
Cheng Zhang has been our chief operating officer since December 2007. He was employed in various capacities with Xingyong since 2001, most recently vice director of the operations department.
 
We need five year employment history on everyone.
 
We have no audit, compensation or nominating committee. The functions of these committees are performed by the board of directors. None of our directors is an independent director.
 
Item 6. Executive Compensation.
 
Summary Compensation Table
 
Set forth below is information for Xingyong’s chief executive officer. No other officer received compensation in excess of $100,000 for 2006.
 
Name and Position
Year
Salary
Total Compensation
Dengyong Jin, chief executive officer
2006
$0
$0
 
2005
0
0
 
- 31 -

 
We did not make any distributions of any kind to Mr. Jin during the nine months ended September 30, 2007 or the years ended December 31, 2006 and 2005.
 
Employment Agreements
 
We have no employment agreements with any of our officers.
 
Item 7. Certain Relationships and Related Transactions.
 
Pursuant to the buy-back agreement, on December 17, 2007, we purchased 5,344,000 shares of common stock from Arto Tavukciyan and Lyndon Grove. Mr. Tavukciyan and Mr. Grove were, at the time of the agreement, the holders of 65.4% of our outstanding common stock. Pursuant to the buy-back agreement:
 
 
l
We agreed to pay a purchase price of $700,000 for the shares, for which we issued our promissory note in the principal amount of $700,000, payable in installments of $350,000 on each of March 31, 2008 and June 30, 2008.
 
 
l
We agreed to pay a finders’ fee of $100,000 to Ventana Capital Partners, payable in installments of $50,000 on each of March 31, 2008 and June 30, 2008.
 
 
l
We placed 1,000,000 of the shares of common stock that we purchased in escrow, and the shares are subject to release from escrow under the following conditions:
 
 
l
If by March 31, 2008, we shall not have made both the first $350,000 payment due pursuant to the note and the first payment of $50,000 to Ventana, the escrow agent shall release 400,000 shares to the Sellers and 100,000 shares to Ventana.
 
 
l
If, by March 31, 2008, we shall have made both the first $350,000 payment due pursuant to the note and the first payment of $50,000 to Ventana, the escrow agent shall deliver 500,000 shares to us for cancellation.
 
 
l
If by June 30, 2008, we shall not have made both the second $350,000 payment due pursuant to the note and the second payment of $50,000 to Ventana, the escrow agent shall release 400,000 shares to the Sellers and 100,000 shares to Ventana.
 
 
l
If, by June 30, 2008, we shall have made both the second $350,000 payment due pursuant to the note and the second payment of $50,000 to Ventana, the escrow agent shall deliver 400,000 shares to us for cancellation.
 
 
l
If the escrow agent is required to deliver some or all of the shares from escrow to the sellers and Ventana and if the market price for our common stock during the ten trading days preceding March 31, 2008 or June 30, 2008, as the case may be, is less than $.80 per share, we are required to deliver additional shares. The number of additional shares shall be determined by multiplying the number of shares to be delivered on such date by $0.80 per share and dividing the result by the market price and subtracting from that number the shares held in escrow that are to be delivered at that time.
 
 
l
If, prior to June 30, 2008, we issue shares of common stock at a price which is less than $1.20 per share, we are required to deliver additional shares to the escrow agent. The number of additional shares as shall be determined by multiplying the number of shares of common stock then held in escrow by a fraction, the numerator of which is the number of shares sold by us at a price which is less than $1.20 per share and the denominator of which is 13,000,000. For example, if there are 1,000,000 shares in escrow and we sell 2,600,000 shares at a price that is less than $1.20, we would issue 200,000 shares of common stock to the escrow agent.
 
- 32 -

 
 
l
We transferred all of the stock of our wholly-owned subsidiary, Achievers Publishing Inc., to Mr. Tavukciyan.
 
Since our organization, our chief executive officer, Dengyong Jin, has advanced us a total of approximately $4.5 million, of which approximately $4.5 million was outstanding at September 2007. This advance bears no interest and is payable on demand. During the nine months ended September 30, 2007, we paid $508,000 on account of these advances. During the year ended December 31, 2006, Mr. Jin’s net advances to us were $495,000.
 
Pursuant to the share exchange agreement, we issued 9,388,172 shares of common stock to Sincere in exchange for all of the outstanding capital stock of Talent. Lizhong Gao, who is our president and a director, is the sole stockholder and chief executive officer of Sinecere. Talent owns 100% of the stock of Yongle, which is a wholly foreign-owned enterprise under the laws of the PRC.
 
Yongle is a party to a series of contractual arrangements with Xingyong and its sole stockholders, Dengyong Jin and Benhua Du, which are described in Part I, Item 1 under “Contractual Agreements with Xingyong.” Pursuant to these agreements, Yongle manages the business of Xingyong, for which it receives an amount equal to Xingyong’s 80%-100% profit based on the annual negotiation. Dengyong Jin is our chief executive officer as well as the principal stockholder of Xingyong. As a result, Mr. Jin will have the power to determine the percentage of Xingyong’s revenue or profit that is payable to us. Yongle also has a right to purchase the stock or assets of Xingyong and a proxy to vote its stock.
 
Item 8. Description of Securities.
 
We are authorized to issue 75,000,000 shares of common stock, par value $.0001 per share

The following summary of certain provisions of our common stock, preferred stock, certificate of incorporation and by-laws is not intended to be complete. It is qualified by reference to the provisions of applicable law and to our certificate of incorporation and by-laws.

Common Stock

Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. Pursuant to the proposed certificate of designation relating to the series A preferred stock, we will be prohibited from paying dividends on our common stock while the preferred stock is outstanding. Upon our liquidation, dissolution or winding up, the holders of common stock are entitled to receive proportionately our net assets available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. Our outstanding shares of common stock are fully paid and non-assessable. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

- 33 -

 
Proposed Restated Articles of Incorporation
 
Pursuant to the securities purchase agreement relating to the December 2007 private placement, we are required to amend and restate our articles of incorporation to provide for a change in our corporate name to China Carbon Graphic Group, Inc. and authorized capitalization of 120,000,000 shares of capital stock, of which 20,000,000 will be shares of preferred stock, par value $.001 per share, and 100,000,000 will be shares of common stock, par value $.001 per share, and to adopt a certificate of designation which creates the right of the holders of a series of preferred stock to be designated as the series A convertible preferred stock.
 
Upon the filing of both the restated certificate of incorporation and the certificate of designation, the notes are automatically converted into 1,200,499 shares of series A preferred stock and warrants to purchase 3,000,000 shares at $1.20 per share and 3,000,000 shares at $2.00 per share.
 
Our board of directors has approved, subject to stockholder approval, the restated articles of incorporation.
 
The Nevada General Corporation Law
 
We are incorporated in Nevada and are subject to the provisions of the Nevada General Corporation Law. Under certain circumstances, the following selected provisions may delay or make more difficult acquisitions or changes of control. Our articles of incorporation and by-laws do not exclude us from such provisions. These provisions also may have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
 
Restrictions on Control Share Acquisitions
 
Sections 78.378 to 78.3793 of the Nevada General Corporation Law relate to acquisitions of control of an issuing corporation, which is defined as a Nevada corporation that has 200 or more stockholders, at least 100 of whom have addresses in Nevada appearing on our stock ledger. These provision will not apply unless we meet the definition of an issuing corporation.
 
Under these provisions, acquiring person who acquires a controlling interest in an issuing corporation and those acting in association with an acquiring person obtain only such voting rights in the control shares as are conferred upon them by a resolution of the stockholders of the corporation, approved by a majority of the voting power at a special or annual meeting of the stockholders, with the votes of interested stockholders not counted. The meeting of stockholders is held upon the request and at the expense of the acquiring person.
 
In the event that the control shares are accorded full voting rights and the acquiring person acquires control shares with a majority or more of all the voting power, any stockholder, other than the acquiring person, who does not vote in favor of authorizing voting rights for the control shares is entitled to demand payment for the fair value of his or her shares, and the corporation must comply with the demand. A controlling interest means the ownership of outstanding voting shares sufficient to enable the acquiring person, individually or in association with others, directly or indirectly, to exercise (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority and/or (iii) a majority or more of the voting power of the issuing corporation in the election of directors. Voting rights must be conferred by a majority of the disinterested stockholders as each threshold is reached and/or exceeded.
 
- 34 -

 
These provisions do not apply if the articles of incorporation or bylaws in effect on the 10th day following the acquisition of a controlling interest by an acquiring person provide that said provisions do not apply.
 
Restrictions on Certain Business Combinations
 
Sections 78.411 to 78.444 of the Nevada General Corporation Law restrict the ability of a resident domestic corporation to engage in any combination with an interested stockholder for three years after the interested stockholder’s acquisition of the shares that cause such stockholder to become an interested stockholder, unless the combination or the purchase of shares by the interested stockholder that cause such stockholder to become an interested stockholder is approved by our the company’s board of directors before that date. If the combination was not previously approved, the interested stockholder may effect a combination after the three-year period only if such stockholder receives approval from a majority of the disinterested shares or the offer meets certain fair price criteria.
 
For purposes of the above provisions, a resident domestic corporation is a Nevada public corporation that has 200 or more stockholders and an interested stockholder is any person, other than the company and its subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the company or (ii) an affiliate or associate of the company and, at any time within three years immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the company.
 
These restrictions do not apply to corporations that elect in a charter amendment approved by a majority of the disinterested shares to be excluded from these provisions. Such an amendment would not become effective for 18 months after its passage and would apply only to stock acquisitions occurring after its effective date. Our articles of incorporation and bylaws do not exclude us from the restrictions imposed by such provisions.
 
PART II
 
Item 1. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
 
Our common stock trades on the OTCBB under the symbol “ACMZ.” The stock has been quoted since February 2007. However, other than nominal reported sales of our common stock in February and March 2007, as of December 24, 2007, there have been no reported trades since March 2, 2007. The last reported bid price for the common stock was $0.95.
 
As of December 26, 2007, we had approximately 20 stockholders of record.
 
As of December 20, 2007, we had 7,200,499 shares of common stock reserved for issuance upon conversion of our 3% convertible note and the shares of series A preferred stock and warrants issued upon conversion of the note.
 
We have no equity compensation plans under which our securities may be issued.
 
- 35 -

 
Item 2. Legal Proceedings.  
 
There are no material legal proceedings pending or threatened against us.
 
Item 3. Changes in and Disagreements with Accountants.
 
NA
 
Item 4. Recent Issuances of Unregistered Securities.
 
See Item 3.02 of this Form 8-K for information relating to recent issuances of unregistered securities.
 
Item 5. Indemnification of Officers and Directors.
 
Our Article of Incorporation provides that we will indemnify and hold harmless, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, each person that such section grants us the power to indemnify.
 
Section 78.138 of the Nevada Revised Statutes (“NRS”) provides that, with certain specified exceptions, or unless the articles of incorporation or an amendment thereto, in each case filed on or after October 1, 2003, provide for greater individual liability, a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his capacity as a director or officer unless it is proven that his act or failure to act constituted a breach of his fiduciary duties as a director or officer; and his breach of those duties involved intentional misconduct, fraud or a knowing violation of law.

NRS Sections 78.7502, 78.751 and 78.752 provide broad indemnification for officers and directors, as follows:
 
Subsection 1 of NRS 78.7502 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (an “Indemnified Party”), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Indemnified Party in connection with such action, suit or proceeding if the Indemnified Party acted in good faith and in a manner the Indemnified Party reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceedings, had no reasonable cause to believe the Indemnified Party’s conduct was unlawful.
 
Subsection 2 of NRS 78.7502 of the Nevada Law empowers a corporation to indemnify any Indemnified Party who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in the capacity of an Indemnified Party against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by the Indemnified Party in connection with the defense or settlement of such action or suit if the Indemnified Party acted under standards similar to those set forth above, except that no indemnification may be made in respect of any claim, issue or matter as to which the Indemnified Party shall have been adjudged to be liable to the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such action or suit was brought determines upon application that in view of all the circumstances the Indemnified Party is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
 
- 36 -

 
NRS 78.7502 further provides that to the extent an Indemnified Party has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsection (1) or (2) described above or in the defense of any claim, issue or matter therein, the corporation shall indemnify the Indemnified Party against expenses (including attorneys’ fees) actually and reasonably incurred by the Indemnified Party in connection therewith.
 
Subsection 1 of NRS 78.751 provides that any discretionary indemnification under NRS 78.7502, unless ordered by a court or advanced pursuant to Subsection 2 of NRS 78.751, may be made by a corporation only as authorized in the specific case upon a determination that indemnification of the Indemnified Person is proper in the circumstances. Such determination must be made (a) by the stockholders, (b) by the board of directors of the corporation by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding, (c) if a majority vote of a quorum of such disinterested directors so orders, by independent legal counsel in a written opinion, or (d) by independent legal counsel in a written opinion if a quorum of such disinterested directors cannot be obtained. Subsection 2 of NRS 78.751 provides that a corporation’s articles of incorporation or bylaws or an agreement made by the corporation may require the corporation to pay as incurred and in advance of the final disposition of a criminal or civil action, suit or proceeding, the expenses of officers and directors in defending such action, suit or proceeding upon receipt by the corporation of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court that he is not entitled to be indemnified by the corporation. Said Subsection 2 further provides that the provisions of that Subsection 2 do not affect any rights to advancement of expenses to which corporate personnel other than officers and directors may be entitled under contract or otherwise by law. Subsection 3 of NRS 78.751 provides that indemnification and advancement of expenses authorized in or ordered by a court pursuant to NRS 78.751 does not exclude any other rights to which the Indemnified Party may be entitled under the articles of incorporation or any by-law, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or in another capacity while holding his office. However, indemnification, unless ordered by a court pursuant to NRS 78.7502 or for the advancement of expenses under Subsection 2 of NRS 78.751, may not be made to or on behalf of any director or officer of the corporation if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. Additionally, the scope of such indemnification and advancement of expenses shall continue as to an Indemnified Party who has ceased to hold one of the positions specified above, and shall inure to the benefit of his or her heirs, executors and administrators. NRS 78.752 empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf of an Indemnified Party for any liability asserted against such person and liabilities and expenses incurred by such person in his or her capacity as an Indemnified Party or arising out of such person’s status as an Indemnified Party whether or not the corporation has the authority to indemnify such person against such liability and expenses.
 
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 
- 37 -

 
PART F/S
 
Reference is made to the filings by Achievers on Form 10-KSB and Form 10-QSB for Achiever’s financial statements.
 
The financial statements of Xingyong begin on Page F-1.
 
The pro forma financial information is filed as Exhibit 99.9 to this Form 8-K.
 
PART III
 
The exhibits are listed and described in Item 9.01 of this Form 8-K.
 
Section 5.06 Change in Shell Company Status.
 
As a result of the reverse acquisition with Talent, we are no longer a shell company.
 
See “Item 1.01 Entry into a Material Definitive Agreement” for information relating to the agreements pursuant to which the reverse merger was consummated and financed and “Item 2.01 Completion of Acquisition or Disposition of Assets” for a description of our business following the completion of the reverse merger.
 
Item 9.01 Financial Statements and Exhibits.
 
 
(a)
Financial statements of Xingyong. See Page F-1.
 
 
(b)
Pro forma financial information. See Exhibit 99.9.
 
 
(c)
See (a) and (b) of this Item 9.01.
 
 
(d)
Exhibits
 
2.1
 
Exchange agreement dated as of December 14, 2007, among the Registrant and Sincere Investment (PTC), Ltd.
4.1
 
3% convertible promissory note payable to the order of XingGuang Investment Corporation Limited
4.2
 
Promissory note payable to Anna Krimshtein PLC, as escrow agent
99.1
 
Securities purchase agreement dated December 14, 2007, between the Registrant and XingGuang Investment Corporation Limited
99.2
 
Registration rights agreement dated June 14, 2007, between the Registrant and XingGuang Investment Corporation Limited
99.3
 
Buy back agreement among the Registrant and Arto Tavukciyan and Lyndon Grove
99.4
 
Escrow agreement among the Registrant, Arto Tavukciyan and Lyndon Grove and Anna Krimshtein PLC, as escrow agent
99.5
 
Business operations agreement between Xinghe Xingyong Carbon Co., Ltd. and Xinghe Yongle Carbon Co., Ltd. (English Translation)
99.6
 
Exclusive Technical and Consulting Services Agreement between Xinghe Xingyong Carbon Co., Ltd. and Xinghe Yongle Carbon Co., Ltd. (English Translation)
 
- 38 -

 
99.7
 
Option Agreement between Xinghe Xingyong Carbon Co., Ltd. and Xinghe Yongle Carbon Co., Ltd. (English Translation)
99.8
 
Share Pledge Agreement among Xinghe Xingyong Carbon Co., Ltd., Xinghe Yongle Carbon Co., Ltd. and Dengyong Jin (English Translation)
99.9
 
Pro forma financial information
99.10   Statement of Designations
99.11   Amended and Restated Articles of Incorporation of Achievers Magazine, Inc.
99.12   China Carbon Graphic Group, Inc. Common Stock Purchase Warrant A
99.13   China Carbon Graphic Group, Inc. Common Stock Purchase Warrant A

- 39 -

 
XINGHE XINGYONG CARBON CO., LTD.
 
Index to Financial Statements
 
 
Page
Report of independent registered accounting firm
F-2
Balance sheet at December 31, 2006
F-3
Statements of operations for the years ended December 31, 2006 and 2005
F-4
Statement of stockholders’ equity for the years ended December 31, 2006 and 2005
F-5
Statements of cash flows for the years ended December 31, 2006 and 2005
 F-6
Notes to financial statements
 F-7
Balance sheet at September 30, 2007 (unaudited)
 F-16
Statements of operations for the nine months ended September 30, 2007 and 2006 (unaudited)
 F-17
Statement of stockholders’ equity for the nine months ended September 30, 2007 (unaudited)
 F-18
Statements of cash flows for the nine months ended September 30, 2007 and 2006 (unaudited)
 F-19
Notes to financial statements
 F-20
 
F-1

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
TO THE BOARD OF DIRECTORS
 
XINGHE XINGYONG CARBON CO. LTD.
 
We have audited the accompanying balance sheets of XINGHE XINGYONG CARBON CO. LTD. (the “Company”) as of December 31, 2006 and the related statements of operations, stockholders’ equity and cash flows for the two years ended December 31, 2006.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required, nor have we been engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentations.  We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of XINGHE XINGYONG CARBON CO., LTD. as of December 31, 2006 and the results of its operations and cash flows for the two years ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ Murrell, Hall, McIntosh & Co. PLLP
 
Oklahoma City, Oklahoma
December 14, 2007  
 
F-2

 
Xinghe Xingyong Carbon Co., Ltd.
Balance Sheet
December 31, 2006

 
   
2006
 
ASSETS
     
 
     
Current Assets
     
Cash and cash equivalents
 
$
45,460
 
Trade accounts receivable
   
2,804,177
 
Notes receivable
   
19,391
 
Prepaid expenses
   
4,547
 
Advance to suppliers and other receivables
   
107,844
 
Inventories
   
13,018,877
 
Total current assets
   
16,000,296
 
 
     
Land use right, net
   
19,044,092
 
 
     
Intangible assets, net
   
774,825
 
 
     
 
 
$
35,819,213
 
 
     
LIABILITIES AND STOCKHOLDERS' EQUITY
     
 
     
Current Liabilities
     
Accounts payable and accrued expenses
 
$
1,093,003
 
Taxes payable
   
188,605
 
Notes payable
   
5,877,838
 
Loan from shareholder
   
4,985,529
 
Total current liabilities
   
12,144,975
 
 
     
Stockholders' Equity
     
 
     
Registered capital
   
6,650,544
 
Retained earnings
   
15,870,373
 
Accumulated other comprehensive income
   
1,153,321
 
Total stockholders' equity
   
23,674,238
 
 
     
 
 
$
35,819,213
 
 
The accompanying notes are an integral part of these financial statements.
 
F-3

 
Xinghe Xingyong Carbon Co., Ltd.
Statements of Operations
For the Years Ended December 31, 2006 and 2005

 
   
2006
 
2005
 
           
Sales
 
$
17,199,071
 
$
16,519,882
 
               
Cost of Goods Sold
   
13,234,378
   
12,959,150
 
               
Gross Profit
   
3,964,693
   
3,560,732
 
               
Operating Expenses
             
Selling expenses
   
330,586
   
128,853
 
General and administrative
   
555,629
   
519,385
 
Depreciation and amortization
   
16,949
   
16,520
 
Total operating expenses
   
903,164
   
664,758
 
               
Other Income (Expense)
             
Other income (expense) - net
   
86,850
   
7,769
 
Interest Income
   
223
   
270
 
Loss on disposal of assets
   
(45,323
)
 
-
 
Interest Expense
   
(421,981
)
 
(404,138
)
Total other income (expense)
   
(380,231
)
 
(396,099
)
               
Net Income Before Provision for Income Tax
   
2,681,298
   
2,499,875
 
               
Provision for Income Taxes
   
-
   
-
 
               
Net Income
 
$
2,681,298
 
$
2,499,875
 
               
The Components of Other Comprehensive Income
             
Net Income
 
$
2,681,298
 
$
2,499,875
 
Foreign currency translation adjustment
   
798,900
   
354,421
 
               
Comprehensive Income
 
$
3,480,198
 
$
2,854,296
 

The accompanying notes are an integral part of these financial statements.
 
F-4

 
Xinghe Xingyong Carbon Co., Ltd.
Statements of Stockholders' Equity
For the Years Ended December 31, 2006 and 2005
 
           
Accumulated
     
   
 
 
Retained
 
Other
 
Total
 
   
Register
 
Earnings
 
Comprehensive
 
Stockholders'
 
   
Capital
 
(Deficit)
 
Income
 
Equity
 
                   
Balance at December 31, 2004
 
$
6,650,544
 
$
10,689,200
 
$
-
 
$
17,339,744
 
                           
Foreign currency translation adjustment
   
-
   
-
   
354,421
   
354,421
 
                           
Net income for the year ended December 31, 2005
   
-
   
2,499,875
   
-
   
2,499,875
 
                           
Balance at December 31, 2005
   
6,650,544
   
13,189,075
   
354,421
   
20,194,040
 
                           
Foreign currency translation adjustment
   
-
   
-
   
798,900
   
798,900
 
                           
Net income for the year ended December 31, 2006
   
-
   
2,681,298
   
-
   
2,681,298
 
                           
Balance at December 31, 2005
 
$
6,650,544
 
$
15,870,373
 
$
1,153,321
 
$
23,674,238
 
 
The accompanying notes are an integral part of these financial statements.
 
F-5

 
Xinghe Xingyong Carbon Co., Ltd.
Statements of Cash Flows
For the Years Ended December 31, 2006 and 2005

 
   
2006
 
2005
 
Cash flows from operating activities
         
Net Income
 
$
2,681,298
 
$
2,499,875
 
Adjustments to reconcile net cash provided by operating activities
             
Depreciation and amortization
   
973,822
   
967,438
 
Net change in assets and liabilities
             
Accounts receivable
   
(812,334
)
 
(639,201
)
Notes receivable
   
167,836
   
(99,252
)
Prepaid expenses
   
1,669
   
(6,000
)
Other receivables
   
1,198,351
   
74,331
 
Inventory
   
(4,486,032
)
 
(1,554,984
)
Accounts payable and accrued liabilities
   
(402,727
)
 
1,062,011
 
Taxes payable
   
111,753
   
(110,163
)
               
Net cash provided by operating activities
   
(566,364
)
 
2,194,055
 
               
Cash flows from investing activities
             
Purchases of fixed assets
   
(193,980
)
 
(2,147,299
)
               
Net cash (used in) investing activities
   
(193,980
)
 
(2,147,299
)
               
Cash flows from financing activities
             
Advances from related parties
   
495,295
   
-
 
Repayment of advance from related parties
   
-
   
(82,262
)
Advances on notes payable
   
225,187
   
-
 
               
Net cash provided by financing activities
   
720,482
   
(82,262
)
               
Effect of exchange rate
   
72,380
   
3,319
 
               
Net increase in cash
   
32,518
   
(32,187
)
               
Cash and cash equivalents at beginning of year
   
12,942
   
45,129
 
               
Cash and cash equivalents at end of year
 
$
45,460
 
$
12,942
 
               
Supplemental disclosure of cash flow information
             
               
Interest paid
 
$
421,981
 
$
404,138
 
Enterprise incomes taxes paid
 
$
-
 
$
-
 

The accompanying notes are an integral part of these financial statements.
 
F-6

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
1.

Nature of organization – Xinghe Xingyong Carbon Co. Ltd.   (the “Company”), was formed in January 2002 and acquired Xinghe Carbon Factory, which was formed in 1986.   The Company is located in Xicheng Wai, Chengguan town, Xinghe County, Inner Mongolia, China

The Company manufactures graphite electrodes, high purity carbon electrodes and other carbon products.

The Company has registered and paid capital of 55,000,000 RMB.

2.
Basis of Preparation of Financial Statements

The Company maintains its books and accounting records in Renminbi (“RMB”).

The financial statements have been prepared in order to present the financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in terms of US dollars (see paragraph “Foreign Currency” below).
 
3.
Summary of Significant Accounting Policies

Use of estimates - The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods.

Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, slow moving, obsolete and/or damaged inventory and stock warrant valuation. Actual results may differ from these estimates.

Cash and cash equivalents - The   Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying balance sheet for cash and cash equivalents approximate their fair value. Substantially all of the Company’s cash is held in bank accounts in The Peoples Republic of China and is not protected by FDIC insurance or any other similar insurance.

Inventory –   Inventory is stated at the lower of cost or market. Cost is determined using the weighted average method. Market value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to complete the sale.

The cost of inventories comprises all costs of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of conversion of inventories include fixed and variable production overheads, taking into account the stage of completion.

Accounts receivable The Company uses the allowance method to account for uncollectible accounts receivable. As of December 31, 2006 and 2005 all accounts receivable were considered collectible and there was no allowance for bad debts.

Property and equipment - Property and equipment is stated at the historical cost, less accumulated depreciation. Land use rights are being amortized to expense on a straight line basis over the life of the rights. Depreciation on property, plant and equipment is provided using the straight-line method over the estimated useful lives for both financial and income tax reporting purposes as follows:

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
3.
Summary of Significant Accounting Policies (continued)
 
Land use rights
   
50 years
 
Buildings
   
25 - 40 years
 
Plant and machinery
   
10 - 20 years
 
Motor vehicles
   
5 years
 
 
Expenditures for renewals and betterments were capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the Statements of Operations.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there was no impairment at December 31, 2006

Land   Use Right - There is no private ownership of land in the PRC. The Company has acquired land use rights totaling to 1,207,388 square feet, on which a 263,501 square feet facility is located. The land use right has a term of 50 years, commencing year 2002. The Company evaluates the carrying value of intangible assets during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. There were no impairments recorded during the year ended December 31, 2006.

Foreign Currency – The Company’s principal country of operations is in The People’s Republic of China. The financial position and results of operations of the Company are determined using the local currency (“Renminbi” or “Yuan”) as the functional currency. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period.

Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the market rate of exchange ruling at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency (“US Dollars”) are dealt with as a separate component within shareholders’ equity. As of December 31, 2006 and 2005, the cumulative effects of these translation adjustments of $1,153,321 and 354,421 are reflected in accumulated other comprehensive income.

As of December 31, 2006 and 2005 the exchange rate was 7.8175 Yuan and 8.11 Yuan per U.S. Dollar.

Income recognition - Revenue is recognized in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, which states that revenue should be recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the service has been rendered; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. The Company believes that these criteria are satisfied when the goods are shipped pursuant to purchase order.

F-8

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
3.
Summary of Significant Accounting Policies (continued)

Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable

Taxation -   Taxation on profits earned in the PRC has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC in the Company operates after taking into effect the benefits from any special tax credits or “tax holidays” allowed in the country of operations.

The Company does not accrue United States income since it is organized and located in the PRC and does not conduct any business in the United States.

In 2006, the Financial Accounting Standards Board (FASB) issued FIN 48, which clarifies the application of SFAS 109 by defining a criterion that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and provides guidance on measurement, derecognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure and transition. In accordance with the transition provisions, the company adopted FIN 48 effective January 1, 2007.

The Company recognizes that virtually all tax positions in the PRC are not free of some degree of uncertainty due to tax law and policy changes by the state. However, the Company cannot reasonably quantify political risk factors and thus must depend on guidance issued by current state officials.

Based on all known facts and circumstances and current tax law, the company believes that the total amount of unrecognized tax benefits as of December 31, 2007, is not material to its results of operations, financial condition or cash flows. The company also believes that the total amount of unrecognized tax benefits as of December 31, 2007, if recognized, would not have a material effect on its effective tax rate. The Company further believes that there are no tax positions for which it is reasonably possible, based on current Chinese tax law and policy, that the unrecognized tax benefits will significantly increase or decrease over the next 12 months producing, individually or in the aggregate, a material effect on the company’s results of operations, financial condition or cash flows.

Enterprise income tax
 
Under the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council.
 
The Company has been granted a tax holiday from Enterprises Income Tax Policy by the Xinghe District Local Tax Authority for the five years 2003 through 2007. As a result, no taxes are accrued for these years.
 
Enterprise income tax (“EIT”) is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes.

3.
Summary of Significant Accounting Policies (continued)

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

F-9

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
Value added tax

The Provisional Regulations of The People’s Republic of China Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.

Value added tax payable in The People’s Republic of China is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of value added tax included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year.

The Company has been granted an exemption from VAT by the Xing He County People’s Government and Zing He Tax Authority on some products in which an exchange agreement is in place for raw materials and fuel.

Contingent liabilities and contingent assets   - A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognized but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognized as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Company.

Contingent assets are not recognized but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognized.

Related companies   - A related company is a company in which a director or an officer has beneficial interests in and in which the Company has significant influence.

F-10

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
3.
Summary of Significant Accounting Policies (continued)

Retirement benefit costs - According to The People’s Republic of China regulations on pensions, the Company contributes to a defined contribution retirement program organized by the municipal government in the province in which the Company was registered and all qualified employees are eligible to participate in the program. Contributions to the program are calculated at 23.5% of the employees’ salaries above a fixed threshold amount and the employees contribute 2% to 8% while the Company contributes the balance contribution of 21.5% to 15.5%. The Company has no other material obligation for the payment of retirement benefits beyond the annual contributions under this program.

Fair value of financial instruments - The carrying amounts of certain financial instruments, including cash, accounts receivable, commercial notes receivable, other receivables, accounts payable, commercial notes payable, accrued expenses, and other payables approximate their fair values as of December 31, 2006 because of the relatively short-term maturity of these instruments.

Recent accounting pronouncements -   In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment . SFAS 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation , and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees . Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after January 1, 2006, are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of January 1, 2006 are recognized as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon The Company’s adoption of SFAS No. 123(R) as the Company had not outstanding share awards as of the date of adoption and has not issued any share based awards during 2006.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109, Accounting for Income Taxes (“FIN 48”). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. FIN 48 is effective as of the beginning of fiscal years that start after December 15, 2006. The Company does not expect its implementation to be material to its financial statements.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. The adoption of SAB 108 had no impact on the Company’s results from operations or financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of this statement are to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS 157 are effective for the fiscal years beginning after November 15, 2007. Therefore, we anticipate adopting this standard as of January 1, 2008. Management has not determined the effect, if any, the adoption of this statement will have on our financial condition or results of operations.
 
F-11

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
3.
Summary of Significant Accounting Policies (continued)

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on December 31, 2006 and it is anticipated the adoption of SFAS No. 158 will not have a material impact to the Company’s financial position, results of operations, or cash flows. 

In February 2007, the FASB issued Statement No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.

4.
Concentrations of Business and Credit Risk

Substantially all of the Company’s bank accounts are in banks located in the PRC and are not covered by any type of protection similar to that provided by the FDIC on funds held in U.S banks.

The Company is operating in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between U.S. dollars and the Chinese currency RMB.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and trade receivables, the balances of which are stated on the balance sheet. The Company places its cash in high credit quality financial institutions. Concentration of credit risk with respect to trade receivables is limited due to the Company's large number of diverse customers in different locations in China. The Company does not require collateral or other security to support financial instruments subject to credit risk.

For the years ended December 31, 2006 and 2005, no single customer accounted for 10% or more of sales revenues.

As of December 31, 2006 the Company had no insurance coverage of any kind. Accrual for losses is not recognized until such time as an uninsured loss has occurred.

5.
Cash and Cash Equivalents

The Company maintains all bank accounts in banks in the People’s Republic of China, which are not protected by FDIC or any other insurance.

F-12

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
5.
Cash and Cash Equivalents (continued)
 
As of December 31, 2006, cash and cash equivalents consist of the following:

   
2006
 
Cash in banks
 
$
45,460
 

6.
Inventory

As of December 31, 2006, inventory consisted of the following:

   
2006
 
Raw materials
 
$
355,975
 
Work in process
   
10,503,765
 
Finished goods
   
2,123,496
 
Repair parts
   
35,641
 
   
$
13,018,877
 


7.
Property and Equipment; Land Use Rights

As of December 31, 2006, property and equipment consist of the following:

   
2006
 
Building
   
5,604,977
 
Plant and Machinery
   
16,997,059
 
Motor vehicles
   
35,817
 
 
   
22,637,852
 
Less: Accumulated depreciation
   
( 3,593,761
)
   
$
19,044,092
 

For the years ended December 31, 2006 and 2005 depreciation expenses totaled $956,873 and $950,918, respectively, all of which was included as a component of cost of goods sold.

As of December 31, 2006,land use rights consist of the following:

   
2006
 
Land Use Right
   
860,922
 
Less: Accumulated amortization
   
(86,097
)
   
$
774,825
 

For the years ended December 31, 2006 and 2005, amortization expenses totaled $16,949 and $16,520 respectively.

F-13

 
Xinghe Xingyong Carbon Co. Ltd.
Footnotes to Financial Statements
December 31, 2006 and 2005
 
8.
Notes Payable

  As of December 31, 2006, Notes Payable consisted of the following:  

   
December
31, 2006
 
Bank loans with maturities from March 25, 2006 through March 24, 2007, interest rate of 7.254%, secured by fixed assets and land use rights
 
$
5,877,838
 

9.
Income Taxes
 
Under the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council.
 
The Company has been granted a 100% tax holiday from preferential Enterprises Income Tax Policy by the Xing He District Local Tax Authority for the five years 2003 through 2007 where 100% of EIT can be refunded. This tax holiday could be challenged or overruled by the national taxing authorities in the PRC, which could result in taxes and penalties owed for those years. The tax at the statutory rates for 2006 and 2005 would have been $804,389 and $749,963, respectively.

The Company purchases certain raw materials and fuels from a various trading companies. The Company did not pay Valued Added Taxes (“VAT”) taxes on the purchases of certain raw materials and fuel oil purchases from various trading companies, nor did it charge VAT tax on sales of certain finished goods to trading companies. During the years ended December 31, 2006 and 2005, the Company had sales totaling RMB 67,067,851 and RMB 55,883,190 respectively, on which no VAT tax was collected. The Company has received a notification from the local taxing authorities indicating its agreement to this practice. However, the VAT tax is a national tax not controlled by the local taxing authorities. The Company’s local legal counsel has expressed its opinion that the national taxing authorities are legally obligated to honor the VAT tax exemptions made by the local taxing authorities. If the Company is required to collect and pay VAT tax on these unreported sales, it could have a material negative impact on the Company’s earnings and cash flows. Management and its local independent legal counsel believe it is unlikely that this treatment will be challenged and has not provided any loss accrual related to the potential VAT tax liability and related penalties should its position not be sustained. For the two years ended December 31, 2006 and 2005, the VAT tax on unreported sales would amount to RMB 11,401,534 (approximately $1,435,275) and RMB 9,500,142 (approximately $1,165,662) before the imposition of any penalties or interest. [I think we have similar disclosure in the nine-month numbers.]

A reconciliation of the provision for income taxes with amounts determined by the U.S. federal income tax rate to income before income taxes is as follows:
 
   
Year Ended December 31,
 
   
  2006
 
2005
 
Computed tax at the federal statutory rate of 34%
 
$
911,641
 
$
849,958
 
Less adjustment to EIT statutory rate of 33% (26,813)
   
(26,813
)
     
               
Benefit of tax holiday
   
(884,828
)
 
(849,958
)
               
Income tax expense per books
 
$
-
 
$
-
 
 
F-14

 
10.
Loans from Shareholder
 
On December 31, 2006, the Company had advances from shareholders of $4,985,529. The advances do not bear interest and are due on demand.

11.
Government Grants
 
The Company has received government grants to assist in the development of new product lines. During the years ended December 31, 2006 and 2005 these grants totaled $222,816 and $7,769, respectively. These grants were included in other income for financial reporting purposes.

12.
Commitments and Contingencies

The Company purchases certain raw materials and fuels from a various trading companies. The Company did not pay Valued Added Taxes (“VAT”) taxes on the purchases of certain raw materials and fuel oil purchases from various trading companies, nor did it charge VAT tax on sales of certain finished goods to trading companies. During the years ended December 31, 2006 and 2005, the Company had sales totaling RMB 67,067,851 and RMB 55,883,190 on which no VAT tax was collected. The Company has received a notification from the local taxing authorities indicating its agreement to this practice. However, the VAT tax is a national tax not controlled by the local taxing authorities. The Company’s local legal counsel has expressed its opinion that the national taxing authorities are legally obligated to honor the VAT tax exemptions made by the local taxing authorities. Should the Company be required to collect and pay VAT tax on these unreported sales, it could have a material negative impact on the Company’s earnings. Management and its local independent legal counsel believe it is unlikely that this treatment will be challenged and has not provided any loss accrual related to the potential VAT tax liability and related penalties should its position not be sustained. For the two years ended December 31, 2006 and 2005, the VAT tax on unreported sales would amount to RMB 11,401,534 ($1,435,275) and RMB 9,500,142 ($1,165,662) before the imposition of any penalties or interest.

The Company has been granted a preferential Enterprises Income (“EIT”) Tax Policy from the Xinghe District Local Tax Authority for the years 2003 through 2007 where 100% of EIT can be refunded. The EIT tax is a national tax not controlled by the local taxing authorities. The Company’s local legal counsel has expressed its opinion that the national taxing authorities are legally obligated to honor the EIT commitments made by the local taxing authorities. Management and its local independent legal counsel believe it is unlikely that this treatment will be challenged and has not provided any loss accrual related to any potential EIT tax liability and related penalties should its position not be sustained.

No government approvals are required to conduct the Company’s principal operations, and the Company is not aware of any probable governmental regulation of our business sectors in the near future. Although management believes that the Company is in material compliance with the statutes, laws, rules and regulations of every jurisdiction in which it operates, no assurance can be given that the Company’s compliance with the applicable statutes, laws, rules and regulations will not be challenged by governing authorities or private parties, or that such challenges will not lead to a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company and its subsidiaries are self-insured, and they do not carry any property insurance, general liability insurance, or any other insurance that covers the risks of their business operations. As a result any material loss or damage to its properties or other assets, or personal injuries arising from its business operations would have a material adverse affect on the Company’s financial condition and operations.

The Company is not involved in any legal matters arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
 
F-15


Xinghe Xingyong Carbon Co., Ltd
Balance Sheet (Unaudited)
September 30 2007

ASSETS

   
(US dollars)
 
Current Assets
       
Cash and cash equivalents
 
$
51,321
 
Trade accounts receivable
   
3,835,666
 
Notes receivable
   
160,277
 
Prepaid expenses
   
15,369
 
Advance to suppliers and other receivables
   
270,188
 
Inventories
   
13,764,441
 
Total current assets
   
18,097,262
 
         
Property and equipment, net
   
19,327,765
 
         
Land use rights, net of accumulated amortization of $86,097
   
2,121,558
 
         
   
$
39,546,585
 
         
LIABILITIES AND STOCKHOLDERS' EQUITY
         
Current Liabilities
       
Accounts payable and accrued expenses
 
$
1,009,913
 
Taxes payable
   
372,245
 
Notes payable
   
6,016,487
 
Loan from stockholder
   
4,542,306
 
Total current liabilities
   
11,940,951
 
         
Commitments and Contingencies
   
-
 
         
Stockholders' Equity
       
         
Registered capital
   
6,650,544
 
Accumulated other comprehensive income
   
2,141,725
 
Retained earnings
   
18,813,365
 
Total stockholders' equity
   
27,605,634
 
         
   
$
39,546,585
 

The accompanying notes are an integral part of these financial statements.

F-16


Xinghe Xingyong Carbon Co., Ltd
Statements of Operations (Unaudited)
For Nine Months Ended September 30, 2007 and 2006

   
(US dollars)
 
   
2007
 
2006
 
Sales
 
$
18,799,732s
 
$
9,876,844
 
               
Cost of Goods Sold
   
15,067,613
   
7,012,741
 
               
Gross Profit
   
3,732,119
   
2,864,103
 
               
Operating Expenses
             
Selling expenses
   
110,050
   
238,004
 
General and administrative
   
559,517
   
334,545
 
Depreciation and amortization
   
13,176
   
11,223
 
Total operating expenses
   
682,743
   
583,772
 
               
Other Income (Expense)
             
Other income
   
286,779
   
86,261
 
Interest Income
   
377
   
214
 
Loss on disposal of assets
   
-
   
(15,583
)
Interest expense
   
(393,540
)
 
(396,591
)
Total other income (expense)
   
(106,384
)
 
(325,699
)
               
Net Income Before Provision for Income Tax
   
2,942,992
   
1,954,632
 
               
Provision for Income Taxes
   
-
   
-
 
               
Net Income
 
$
2,942,992
 
$
1,954,632
 
               
               
The Components of Other Comprehensive Income
             
Net Income
 
$
2,942,992
 
$
1,954,632
 
Foreign currency translation adjustment
   
988,404
   
549,559
 
               
Comprehensive Income
 
$
3,931,396
 
$
2,504,191
 

 
The accompanying notes are an integral part of these financial statements.

F-17


Xinghe Xingyong Carbon Co., Ltd
Statements of Stockholders' Equity (Unaudited)
For Nine Months Ended September 30 2007

       
(US dollars)
 
   
Common Stock
         
Accumulated
     
   
Number
     
Additional
 
Retained
 
Other
 
Total
 
   
of
 
Par
 
Paid-In
 
Earnings
 
Comprehensive
 
Stockholders'
 
   
Shares
 
Value
 
Capital
 
(Deficit)
 
Income
 
Equity
 
                           
                           
Balance at December 31, 2006
       
$
6,650,544
       
$
15,870,373
 
$
1,153,321
 
$
23,674,238
 
                                       
Foreign currency translation adjustment
   
-
   
-
   
-
   
-
   
988,404
   
988,404
 
                                       
Net income for the year ended
                                     
  September 30 2007
   
-
   
-
   
-
   
2,942,992
   
-
   
2,942,992
 
                           
Balance at September 30 2007
   
-
 
$
6,650,544
 
$
-
 
$
18,813,365
 
$
2,141,725
 
$
27,605,634
 

The accompanying notes are an integral part of these financial statements.

F-18


Xinghe Xingyong Carbon Co., Ltd
Statements of Cash Flows (Unaudited)
For Nine Months Ended September 30, 2007 and 2006

   
2007
 
2006
 
Cash flows from operating activities
             
Net Income
 
$
2,942,992
 
$
1,954,632
 
Adjustments to reconcile net cash provided by
             
operating activities
             
Depreciation and amortization
   
817,621
   
703,366
 
Net change in assets and liabilities
             
Accounts receivable
   
(976,712
)
 
1,255,225
 
Notes receivable
   
(138,597
)
 
55,737
 
Prepaid expenses
   
(10,603
)
 
(14,539
)
Other receivables
   
(158,485
)
 
1,186,465
 
Inventory
   
(548,994
)
 
(4,298,062
)
Accounts payable and accrued liabilities
   
(97,513
)
 
(1,543,289
)
Taxes payable
   
178,324
   
(162,125
)
               
Net cash provided by operating activities
   
2,008,033
   
(862,591
)
               
Cash flows from investing activities
             
Purchases of fixed assets
   
(1,682,014
)
 
(196,286
)
               
Net cash (used in) investing activities
   
(1,682,014
)
 
(196,286
)
               
Cash flows from financing activities
             
Advances from related parties
   
(508,092
)
 
877,828
 
Repayment of advance from related parties
   
-
   
-
 
Advances on notes payable
   
52,728
   
303,551
 
               
Net cash provided by financing activities
   
(455,364
)
 
1,181,379
 
               
Effect of exchange rate
   
135,206
   
(128,416
)
               
Net increase in cash
   
5,861
   
(5,913
)
               
Cash and cash equivalents at beginning of year
   
45,460
   
12,942
 
               
Cash and cash equivalents at end of year
 
$
51,321
 
$
7,029
 
               
Supplemental disclosure of cash flow information
             
               
Interest paid
 
$
393,540
 
$
396,591
 
Enterprise incomes taxes paid
 
$
-
 
$
-
 

The accompanying notes are an integral part of these financial statements.
 
F-19

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007

1.
Description of Business

Nature of organization Xinghe Xingyong Carbon Co. Ltd. (the “Company”), was formed in January 2002 and acquired Xinghe Carbon Factory, which was formed in 1986. The  Company is located in Xicheng Wai, Chengguan town, Xinghe County, Inner Mongolia, China.

The Company manufactures graphite electrodes, high purity carbon electrodes and other carbon products.

The Company has registered and paid capital of $6,650,544.

2.
Basis of Preparation of Financial Statements

The Company maintains its books and accounting records in Renminbi (“RMB”).

The financial statements have been prepared in order to present the financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in terms of US dollars (see paragraph “Foreign Currency” below).

3.
Summary of Significant Accounting Policies

Use of estimates - The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods.

Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, slow moving, obsolete and/or damaged inventory and stock warrant valuation. Actual results may differ from these estimates.

Cash and cash equivalents - The Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying balance sheet for cash and cash equivalents approximate their fair value. Substantially all of the Company’s cash is held in bank accounts in The Peoples Republic of China and is not protected by FDIC insurance or any other similar insurance.

Inventory Inventory is stated at the lower of cost or market. Cost is determined using the weighted average method. Market value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to complete the sale.

The cost of inventories comprises all costs of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of conversion of inventories include fixed and variable production overheads, taking into account the stage of completion.

Accounts receivable – The Company uses the allowance method to account for uncollectible accounts receivable. As of September 30, 2007 all accounts receivable were considered collectible and there was no allowance for bad debts.
 
Property and equipment - Property and equipment is stated at the historical cost, less accumulated depreciation. Land use rights are being amortized to expense on a straight line basis over the life of the rights. Depreciation on property, plant and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:
 
F-20

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
 
Buildings
   
25 - 40 years
 
Plant and machinery
   
10 - 20 years
 
Motor vehicles
   
5 years
 

Expenditures for renewals and betterments were capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the Statements of Operations.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there was no impairment at September 30, 2007.

Land Use Rights There is no private ownership of land in the PRC. The Company has acquired land use rights totaling to 2,356,209 square feet, on which a 290,626 square feet facility is located. The land use right has a term of 50 years, commencing year 2002. The cost of the land use rights is amortized over the 50-year term of the land use. The Company evaluates the carrying value of intangible assets during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. There were no impairments recorded during the period ended September 30, 2007.

Foreign Currency – The Company’s principal country of operations is in The People’s Republic of China. The financial position and results of operations of the Company are determined using the local currency (“Renminbi” or “Yuan”) as the functional currency. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period.

Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the market rate of exchange ruling at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency (“US Dollars”) are dealt with as a separate component within shareholders’ equity.   Translation adjustments for the nine months ended September 30, 2007 and 2006 were $988,404 and $549,559, respectively.  

As of September 30 2006 and 2007 the exchange rate was 7.9 and 7.5 Yuan per U.S. Dollar.

Income recognition - Revenue is recognized in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, which states that revenue should be recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the service has been rendered; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. The Company believes that these criteria are satisfied when the goods are shipped pursuant to a purchase order.

Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable

Taxation - Taxation on profits earned in the PRC has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC in the Company operates after taking into effect the benefits from any special tax credits or “tax holidays” allowed in the country of operations.
 
F-21


Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
 
The Company does not accrue United States income tax since it is organized and located in the PRC and does not conduct any business in the United States.

In 2006, the Financial Accounting Standards Board (FASB) issued FIN 48, which clarifies the application of SFAS 109 by defining a criterion that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and provides guidance on measurement, derecognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure and transition. In accordance with the transition provisions, the company adopted FIN 48 effective January 1, 2007.

The Company recognizes that virtually all tax positions in the PRC are not free of some degree of uncertainty due to tax law and policy changes by the state. However, the Company cannot reasonably quantify political risk factors and thus must depend on guidance issued by current state officials.

Based on all known facts and circumstances and current tax law, the company believes that the total amount of unrecognized tax benefits as of December 31, 2007, is not material to its results of operations, financial condition or cash flows. The company also believes that the total amount of unrecognized tax benefits as of December 31, 2007, if recognized, would not have a material effect on its effective tax rate. The Company further believes that there are no tax positions for which it is reasonably possible, based on current Chinese tax law and policy, that the unrecognized tax benefits will significantly increase or decrease over the next 12 months producing, individually or in the aggregate, a material effect on the company’s results of operations, financial condition or cash flows.

Enterprise income tax

Under the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council.

The Company has been granted a tax holiday from 100% of the Enterprises Income Tax from the Xing He District Local Tax Authority for the five years 2003 through 2007 where 100%.

Enterprise income tax is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items that are not assessable or deductible for income tax purposes.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Value added tax

The Provisional Regulations of The People’s Republic of China Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.

F-22

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
 
Value added tax payable in The People’s Republic of China is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of value added tax included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year.

The Company has been granted an exemption from VAT by the Xing He County People’s Government and Xing He Tax Authority on some products in which an exchange agreement is in place for raw materials and fuel.

Contingent liabilities and contingent assets - A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognized but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognized as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Company.

Contingent assets are not recognized but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognized.

Related companies - A related company is a company in which a director or an officer has beneficial interests in and in which the Company has significant influence.

Retirement benefit costs - According to The People’s Republic of China regulations on pensions, the Company contributes to a defined contribution retirement program organized by the municipal government in the province in which the Company was registered and all qualified employees are eligible to participate in the program. Contributions to the program are calculated at 23.5% of the employees’ salaries above a fixed threshold amount and the employees contribute 2% to 8% while the Company contributes the balance contribution of 21.5% to 15.5%. The Company has no other material obligation for the payment of retirement benefits beyond the annual contributions under this program.

Fair value of financial instruments - The carrying amounts of certain financial instruments, including cash, accounts receivable, commercial notes receivable, other receivables, accounts payable, commercial notes payable, accrued expenses, and other payables approximate their fair values as of September 30, 2007 because of the relatively short-term maturity of these instruments.

Recent accounting pronouncements - In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment . SFAS 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation , and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees . Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after January 1, 2006, are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of January 1, 2006 are recognized as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon The Company’s adoption of SFAS No. 123(R) as the Company had not outstanding share awards as of the date of adoption and has not issued any share based awards during 2006.

F-23

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
 
In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109, Accounting for Income Taxes (“FIN 48”). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. FIN 48 is effective as of the beginning of fiscal years that start after December 15, 2006. The Company does not expect its implementation to be material to its financial statements.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. The adoption of SAB 108 had no impact on the Company’s results from operations or financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of this statement are to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS 157 are effective for the fiscal years beginning after November 15, 2007. Therefore, we anticipate adopting this standard as of January 1, 2008. Management has not determined the effect, if any, the adoption of this statement will have on our financial condition or results of operations.

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on December 31, 2006 and it is anticipated the adoption of SFAS No. 158 will not have a material impact to the Company’s financial position, results of operations, or cash flows.

In February 2007, the FASB issued Statement No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.

4.
Concentrations of Business and Credit Risk

Substantially all of the Company’s bank accounts are in banks located in the PRC and are not covered by any type of protection similar to that provided by the FDIC on funds held in U.S banks.

F-24

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
 
The Company is operating in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between U.S. dollars and the Chinese currency RMB.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and trade receivables, the balances of which are stated on the balance sheet. The Company places its cash in high credit quality financial institutions. Concentration of credit risk with respect to trade receivables is limited due to the Company's large number of diverse customers in different locations in China. The Company does not require collateral or other security to support financial instruments subject to credit risk.

For the nine months ended September 30, 2007 no single customer accounted for 10% or more of sales revenues.

As of September 30, 2007 the Company had no insurance coverage of any kind. Accrual for losses is not recognized until such time as an uninsured loss has occurred.

5.
Cash and Cash Equivalents

The Company maintains all bank accounts in banks in the People’s Republic of China, which are not protected by FDIC or any other insurance.

As of September 30, 2007 , cash and cash equivalents consist of the following:

   
2007
 
Cash in banks
 
$
51,321
 

6.
Inventory

As of September 30, 2007, inventory consisted of the following:

   
2007
 
Raw materials
 
$
2,337,397
 
Work in process
   
9,621,484
 
Finished goods
   
1,767,775
 
Repair parts
   
37,785
 
   
$
13,764,441
 
 
F-25

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
7.
Property and Equipment; Land Use Rights  
 
As of September 30, 2007 , property and equipment consist of the following:

   
2007
 
Building
 
$
6,146,548
 
Plant and Machinery
   
17,698,930
 
Motor vehicles
   
37,229
 
     
23,882,707
 
Less: Accumulated depreciation
   
( 4,554,942
)
   
$
19,327,765
 

For the nine months ended September 30, 2007 and 2006, depreciation expenses totaled $804,445 and $703,366, all of which was included as a component of cost of goods sold.

As of September 30, 2007, land use rights consist of the following:

 
2007
 
2006
 
Land Use Right
 
$
2,224,472
   
851,499
 
Less: Accumulated amortization
   
( 102,914
)
 
( 80,895
)
   
$
2,121,558
   
770,604
 

For the nine month ended September 30, 2007and 2006, amortization expenses totaled $13,176 and $11,223 respectively.

8.
Notes Payable

As of September 30, 2007, notes payable consist of the following:

   
2007
 
Bank loans dated June 12, 2007, due June 10, 2008 with a interest rate of 8.541%, interest to be paid monthly and secured by fixed assets and land use rights
 
$
5,351,682
 
Other loan dated June 22, 2007, due June 20, 2008 with a interest rate of 7.227%, interest to be paid quarterly.
   
664,805
 
   
$
6,016,487
 

9.
Income Taxes

Under the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council.

The Company has been granted a 100% tax holiday from Enterprises Income Tax Policy from the Xing He District Local Tax Authority for the five years 2003 through 2007. This tax holiday could be challenged by higher taxing authorities in the PRC, which could result in taxes and penalties owed for those years. For the nine month ended September 30, 2007 and 2006, the enterprise income tax at the statutory rates would have been approximately $971,187 and $ 645,029, respectively.

F-26

 
Xinghe Xingyong Carbon Co., Ltd
Footnotes to Financial Statements
September 30, 2007
 
A reconciliation of the provision for income taxes with amounts determined by the U.S. federal income tax rate to income before income taxes is as follows.

   
2007
 
Computed tax at the federal statutory rate of 34%
 
$
1,000,617
 
         
Less adjustment to EIT statutory rate of 33%
   
( 29,430
)
         
Benefit of tax holiday
   
( 971,187
)
         
Income tax expenses per books
 
$
-
 

10.
Loans from Shareholder

On September 30, 2007, the Company had advances from a shareholder of $4,542,306. The advances did not bear interest and are due on demand.

11.
Government Grants

The Company has received government grants to assist in the development of new product lines. During the nine months ended September 30, 2007 this grants totaled $242,142.

12.
Commitments and Contingencies

No government approvals are required to conduct the Company’s principal operations, and the Company is not aware of any probable governmental regulation of our business sectors in the near future. Although management believes that the Company is in material compliance with the statutes, laws, rules and regulations of every jurisdiction in which it operates, no assurance can be given that the Company’s compliance with the applicable statutes, laws, rules and regulations will not be challenged by governing authorities or private parties, or that such challenges will not lead to a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company and its subsidiaries are self-insured, and they do not carry any property insurance, general liability insurance, or any other insurance that covers the risks of their business operations. As a result any material loss or damage to its properties or other assets, or personal injuries arising from its business operations would have a material adverse affect on the Company’s financial condition and operations.

The Company is not involved in any legal matters arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

F-27

 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
         
 
 
 
 
ACHIEVERS MAGAZINE, INC.
 
 
 
 
                  (Registrant)
     
Date: December 27, 2007
 
 
 
/s/    Dengyong Jin      
 
 
 
 
Dengyong Jin, CEO
 
 
 
 
 
 

Exhibit
 
NEITHER THIS NOTE NOR THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK OR COMMON STOCK OR WARRANTS ISSUABLE UPON CONVERSION OF THIS NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR STATE LAW OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

$1,200,000
 
New York, New York
December 17, 2007    

ACHIEVERS MAGAZINE, INC.

3% CONVERTIBLE SUBORDINATED NOTE DUE DECEMBER 31, 2008

FOR VALUE RECEIVED, Achievers Magazine, Inc., a Nevada corporation (the “Company”), hereby promises to pay to the order of XingGuang Investment Corporation Limited or registered assigns (the “Holder”), the principal amount of $1,200,000 on December 31, 2008 (the “Maturity Date”). Interest on the outstanding principal balance shall be paid at the rate of three percent (3%) per annum, payable on the Maturity Date. Interest shall be computed on the basis of a 360-day year, using the number of days actually elapsed. This Note is issued pursuant to that certain Securities Purchase Agreement (the “Agreement”), dated December 17, 2007, by and among the Company and XingGuang Investment Corporation Limited. All terms defined in the Agreement and used in this Note shall have the same meaning in this Note as in the Agreement.

Article 1.
Events of Default; Acceleration

(a)   Events of Default Defined . The entire unpaid principal amount of this Note, together with interest thereon shall, on written notice to the Company given by the holders of this Note, forthwith become and be due and payable if any one or more the following events (“Events of Default”) shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or be affected or come about by operation of law pursuant to or in compliance with any judgment, decree, or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing. An Event of Default shall occur:
 
(i)   if failure shall be made in the payment of the principal or interest on the Note when and as the same shall become due and such failure shall continue for a period of five (5) business days after such payment is due; or
 
(ii)   if the Company shall violate or breach any of the representations, warranties and covenants contained in the Note or the Agreement and such violation or breach shall continue for thirty (30) days after written notice of such breach shall been received by the Company from the Holder; or
 

 
(iii)   if the Company or any Significant Subsidiary (which term shall mean any subsidiary of the Company which would be considered a significant subsidiary, as defined in Rule 1-02 of Regulation S-X of the SEC shall consent to the appointment of a receiver, trustee or liquidator of itself or of a substantial part of its property, or shall admit in writing its inability to pay its debts generally as they become due, or shall make a general assignment for the benefit of creditors, or shall file a voluntary petition in bankruptcy, or an answer seeking reorganization in a proceeding under any bankruptcy law (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Company or any Significant Subsidiary, in any such proceeding, or shall by voluntary petition, answer or consent, seek relief under the provisions of any other now existing or future bankruptcy or other similar law providing for the reorganization or winding up of corporations, or an arrangement, composition, extension or adjustment with its or their creditors, or shall, in a petition in bankruptcy filed against it or them be adjudicated a bankrupt, or the Company or any Significant Subsidiary or their directors or a majority of its stockholders shall vote to dissolve or liquidate the Company or any Significant Subsidiary other than a liquidation involving a transfer of assets from a Subsidiary to the Company or another Subsidiary; or
 
(iv)   if an involuntary petition shall be filed against the Company or any Significant Subsidiary seeking relief against the Company or any Significant Subsidiary under any now existing or future bankruptcy, insolvency or other similar law providing for the reorganization or winding up of corporations, or an arrangement, composition, extension or adjustment with its or their creditors, and such petition shall not be vacated or set aside within ninety (90) days from the filing thereof; or
 
(v)   if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without consent of the Company or any Significant Subsidiary, a receiver, trustee or liquidator of the Company or any Significant Subsidiary, or of all or any substantial part of the property of the Company or any Significant Subsidiary, or approving a petition filed against the Company or any Significant Subsidiary seeking a reorganization or arrangement of the Company or any Significant Subsidiary under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, or any substantial part of the property of the Company or any Significant Subsidiary shall be sequestered; and such order, judgment or decree shall not be vacated or set aside within ninety (90) days from the date of the entry thereof; or
 
(vi)   if, under the provisions of any law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Company or any Significant Subsidiary or of all or any substantial part of the property of the Company or any Significant Subsidiary and such custody or control shall not be terminated within ninety (90) days from the date of assumption of such custody or control.
 
(b)   Rights of Note Holder . Nothing in this Note shall be construed to modify, amend or limit in any way the right of the holder of this Note to bring an action against the Company.
 
Article 2.
Conversion

(a)   Automatic Conversion . Upon the filing of both the Restated Certificate and the Certificate of Designation, the principal and interest of this Note shall be automatically converted into such number of shares of Series A Preferred Stock and Warrants to purchase the number of shares of Common Stock as is set forth on Schedule A to this Agreement without any action on the part of the holder. Such shares of Series A Preferred Stock and Warrants are referred to as the Automatic Conversion Securities. Upon such conversion, this Note and the Company’s obligations under this Note (including the obligation to pay interest) shall terminate.
 
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(b)   Conversions at Option of Holder . This Note shall be initially convertible (subject to the 4.9% Limitations, as defined in Section 3(d) of this Note), in whole at any time or in part from time to time into such number of shares of Common Stock and Warrants to purchase such number of shares of Common Stock as is determined by multiplying each element of the Optional Conversion Securities by a fraction, the numerator of which is the principal amount being converted and the denominator of which is the initial principal amount of this Note. The Optional Conversion Securities are set forth on Schedule B to this Agreement. Holders shall effect conversions by providing the Company with the form of conversion notice attached hereto as Annex A (a “ Notice of Conversion ”) executed by the Holder, together with the delivery by the Holder to the Company of this Note, with this Note being duly endorsed in full for transfer to the Company or with an applicable stock power duly executed by the Holder in the manner and form as deemed reasonable by the transfer agent of the Common Stock; provided, however, that at the election of the Holder, the Holder may execute the Notice of Conversion and transmit the Notice of Conversion to the Company. Each Notice of Conversion shall specify the principal amount of this Note to be converted, the principal amount of this Note outstanding prior to the conversion at issue, the principal amount of this Note owned subsequent to the conversion at issue, and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Notice of Conversion and the Note to the Company by overnight delivery service or by telecopier or PDF (the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the Trading Day immediately following the date that such Notice of Conversion and applicable stock certificates are received by the Company. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. The principal amount of this Note being converted into Optional Conversion Securities in accordance with the terms of this Section 3(b) shall be canceled and may not be reissued.
 
(c)   Automatic Conversion Upon Change of Control . This Note shall be automatically converted into the Optional Conversion Securities upon the close of business on the business day immediately preceding the date fixed for consummation of any transaction resulting in a Change of Control of the Company (an “ Automatic Conversion Event ”). A “Change in Control” means a consolidation or merger of the Company with or into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company in a transaction or series of transactions. The Company shall not be obligated to issue certificates evidencing the Common Stock and Warrants or other consideration issuable upon such conversion unless this Note is either delivered to the Company or its transfer agent or the Holder notifies the Company or its transfer agent in writing that such certificates have been lost, stolen, or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. Upon the conversion of this Note pursuant to this Section 3(c), the Company shall promptly send written notice thereof, by hand delivery or by overnight delivery, to the Holder at its address then shown on the records of the Company, which notice shall state that this Note must be surrendered at the office of the Company (or of its transfer agent for the Common Stock, if applicable).
 
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(d)   Beneficial Ownership Limitation . Except as provided in Section 3(c) of this Note, which shall apply as stated therein if an Automatic Conversion Event shall occur, the Company shall not effect any conversion of this Note, and the Holder shall not have the right to convert any portion of this Note to the extent that after giving effect to such conversion, the Holder (together with the Holder’s Affiliates) would beneficially own in excess of 4.9% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of the Note and upon exercise of the Warrants issued upon conversion of this Note with respect to which the determination of beneficial ownership is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, non-converted portion of this Note beneficially owned by the Holder or any of its affiliates, and (B) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates, so long as such other securities of the Company are not exercisable nor convertible within sixty (60) days from the date of such determination.  For purposes of this Section 3(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the Company’s most recent quarterly reports, Form 10-Q, Form 10-QSB, Annual Reports, Form 10-K, or Form 10-KSB, as the case may be, as filed with the Commission under the Exchange Act (B) a more recent public announcement by the Company or (C) any other written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was publicly reported by the Company. Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. This Section 3(d) may be not be waived or amended. The limitation set forth in this Section 3(d) is referred to as the “ 4.9% Limitation .”
 
(i)   Reservation of Shares Issuable Upon Conversion . The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Note and upon conversion of the Series A Preferred Stock issuable upon conversion of this Note and upon exercise of the Warrants issuable upon conversion of this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable upon the conversion of this Note including shares of Common Stock issuable upon exercise of any Warrants issued or issuable upon conversion of this Note. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, non-assessable and, if the Conversion Shares Registration Statement is then effective under the 1933 Act, registered for public sale in accordance with such Conversion Shares Registration Statement.
 
(ii)   Fractional Shares . Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock. All fractional shares shall be carried forward and any fractional shares which remain after the Holder converts the full principal amount of this Note shall be dropped and eliminated.
 
(iii)   Transfer Taxes . The issuance of certificates for shares of the Common Stock and Warrants on conversion of this Note shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
 
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(iv)   Absolute Obligation . Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the liquidated damages (if any) on, this Note at the time, place, and rate, and in the coin or currency, herein prescribed.
 
(e)   Certain Adjustments .
 
(i)   Stock Dividends and Stock Splits . If the Company, at any time from and after the Closing Date, while this Note is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Note), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the number of shares of Common Stock in the Optional Conversion Securities shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding after such event and of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event. Any adjustment made pursuant to this Section 3(f)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
 
(ii)   Warrants and Series A Preferred Stock . The number of shares of Series A Preferred Stock and the number of shares of Common Stock issuable upon exercise of the Warrants shall be adjusted as provided in the Certificate of Designation and in the Warrants, respectively, with respect to any events of the type described in this Section 3(f) which occur subsequent to the Closing Date.
 
(f)   Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
 
(g)   Notice to Holders . If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock or any Fundamental Transaction, (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification or Fundamental Transaction; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
 
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(h)   Exempt Issuance . Notwithstanding the foregoing, no adjustment in the Conversion Price will be made in respect of an Exempt Issuance.
 
(i)   Fundamental Transaction . If, at any time while this Note is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall assume this Note.
 
Article 3.
Subordination
 
(a)   Agreement of Subordination . The Company, for itself, its successors and assigns, covenants and agrees, and the Holder of this Note by his or her acceptance of this Note likewise covenants and agrees, that the payment of the principal of and interest on this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment in full of all Senior Indebtedness, as hereinafter defined. The provisions of this Article 4 shall constitute a continuing offer to all persons who, in reliance upon such provision, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are hereby made obligees hereunder the same as if their names were written herein as such, and they and/or each of them may proceed to enforce such provisions.
 
(b)   Company Not to Make Payments with Respect to Note in Certain Circumstances .
 
(i)   Upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, all principal thereof and premium, if any, and interest thereon shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holder or holders of such Senior Indebtedness, before any payment is made by the Company (A) on account of the principal of or interest on this Note or (B) to acquire this Note.
 
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(ii)   Upon the happening of an event of default with respect to any Senior Indebtedness, as such event of default is defined therein or in the instrument under which it is outstanding, permitting the holders to accelerate the maturity thereof, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Company (A) on account of the principal of or interest on this Note or (B) to acquire this Note.
 
(iii)   Subject to Paragraphs 4(b)(i) and (ii), as long as any Senior Indebtedness shall be outstanding, (A) the Company shall not make any payment of principal on this Note except upon the Maturity Date, and (B) the Company may pay interest on this Note as long as the payment of such principal or interest will not result in an event of default under the terms of the instruments pursuant to which the Senior Indebtedness is issued.
 
(iv)   In the event that, notwithstanding the provision of this Paragraph 4(b), the Company shall make any payment to the Holder of this Note on account of the principal of or interest on this Note after the happening of a default in payment of the principal of or premium, if any, or interest on Senior Indebtedness or after receipt by the Company of written notice of an event of default with respect to any Senior Indebtedness, then unless and until such default or event of default shall have been cured or waived or shall have ceased to exist, such payment shall be held by the holder of this Note in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) or their representative or the trustee under the indenture or other agreement (if any) pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with the terms of such Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness.
 
(c)   Notes Subordinated to Prior Payment of all Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company . Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise):
 
(i)   The holders of all Senior Indebtedness shall first be entitled to receive payment in full of the principal thereof, premium, if any, and interest due thereon before the holder of this Note are entitled to receive any payment on account of the principal of or interest on this Note (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment which stock and securities are subordinated to the payment of all Senior Indebtedness and securities received in lieu thereof which may at the time be outstanding); and
 
(ii)   Any payment or distribution of assets of the Company of any kind or character whether in cash, property or securities (other than securities that are subordinated to the payment of all Senior Indebtedness and securities received in lieu thereof which may at the time be outstanding), to which the holder of this Note would be entitled except for the provisions of this Article 4, shall be paid by the liquidating trustee or agent or other person making such payment of distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or other trustee or agent, directly to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness.
 
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(iii)   In the event that, notwithstanding the foregoing provision of this Paragraph 4(c), any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than shares representing equity of the Company as reorganized or readjusted, or securities of the Company or any other entity provided for by a plan of reorganization or readjustment which stock and securities are subordinated to the payment of all Senior Indebtedness and securities received in lieu thereof which may at the time be outstanding), shall be received by the holder of this Note on account of principal of or interest on this Note before all Senior Indebtedness is paid in full, or effective provision made for its payment or distribution, such payment or distribution shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness remaining unpaid or unprovided for or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, for application to the payment of such Senior Indebtedness until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness.
 
(d)   Noteholder to be Subrogated to Right of Holders of Senior Indebtedness . Subject to the payment in full of all Senior Indebtedness, the holders of the Notes shall be subrogated, pro rata, to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until all amounts owing on the Notes shall be paid in full, and, for the purpose of such subrogation, no payments or distributions to the holders of the Senior Indebtedness by or on behalf of the Company or by or on behalf of the holder of this Notes by virtue of this Article 4 which otherwise would have been made to the holder of this Notes shall, as between the Company and the holder of this Note, be deemed to be payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions of this Article 4 are, and are intended solely, for the purpose of defining the relative rights of the holders of the Notes, on the one hand, and the holders of the Senior Indebtedness, on the other hand.
 
(e)   Obligation of the Company Unconditional . Nothing contained in this Article 4 or elsewhere in this Note is intended to or shall impair as between the Company and the holder of this Note, the obligation of the Company, which is absolute and unconditional, to pay to the holder of this Note the principal of and interest on this Note as and when the same shall become due and payable in accordance with its terms, or is intended to or shall affect the relative rights of the holder of this Note and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the holder of this Note of this Note from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this Article 4 of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy; provided, however, that the holder of this Note shall not exercise any remedies if the exercise of such remedies would result in an event of default under the terms of the Senior Indebtedness. Upon any distribution of assets of the Company referred to in this Article 4, the holders of this Note shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other person making any distribution to the holder of this Note for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 4. In no event shall any provision of this Article 4 be interpreted as limiting or abrogating the right of the holder of this Note to convert principal and interest thereon pursuant to Article 3 of this Note.
 
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(f)   Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Indebtedness . No right of any present or future holders of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Note, regardless of any knowledge thereof which any such holder may have or be otherwise charged with.
 
(g)   Definition of Senior Indebtedness . The term “Senior Indebtedness” is defined to mean the principal of and premium, if any, and interest on and any obligations of the Company with respect to the Company’s indebtedness to all indebtedness and obligations (other than the Notes) of the Company to banks, insurance companies and other institutional lenders.
 
(h)   Additional Agreement . The holder of this Note, by its acceptance of this Note, agrees to execute any formal instruments of subordination which may be reasonably requested by any holder of Senior Indebtedness.
 
Article 4.
Miscellaneous

(a)   Transferability . This Note shall not be transferred except in a transaction exempt from registration pursuant to the 1933 Act and applicable state securities law. The Company shall treat as the owner of this Note the person shown as the owner on its books and records.
 
(b)   Limited Right of Prepayment . The Company shall have no right to prepay this Note without the prior written consent of the Holder, which consent may be given or withheld by the Holder in its sole discretion. Any prepayment shall be accompanied by interest on this Note to the date of prepayment.
 
(c)   WAIVER OF TRIAL BY JURY . IN ANY LEGAL PROCEEDING TO ENFORCE PAYMENT OF THIS NOTE, THE COMPANY WAIVES TRIAL BY JURY.
 
(d)   WAIVER OF ANY RIGHT OF COUNTERCLAIM . EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT TO ASSERT ANY CLAIM IT MAY HAVE AGAINST THE HOLDER OF THIS NOTE BY WAY OF A COUNTERCLAIM (OTHER THAN A COMPULSORY COUNTERCLAIM) IN ANY ACTION ON THIS NOTE.
 
(e)   Usury Saving Provision . All payment obligations arising under this Note are subject to the express condition that at no time shall the Company be obligated or required to pay interest at a rate which could subject the holder of this Note to either civil or criminal liability as a result of being in excess of the maximum rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest at a rate in excess of such maximum rate, the applicable rate of interest shall be deemed to be immediately reduced to such maximum rate, and interest thus payable shall be computed at such maximum rate, and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of principal.
 
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(f)   Notice to Company . Notice to the Company shall be given to the Company at its principal executive offices, presently located at c/o Xinghe Xingyong Carbon Co., Ltd., 787 Xicheng Wai, Chengguantown, Xinghe County, Inner Mongolia, China, Attention: Dengyong Jin, CEO, with a copy to Asher S. Levitsky PC, Sichenzia Ross Friedman Ference LLP, 61 Broadway, 32 Floor, New York, NY 10006, or to such other address or person as the Company may, from time to time, advise the holder of this Note, or to the holder of this Note at the address set forth on the Company’s records. Notice shall be given by hand delivery, certified or registered mail, return receipt requested, overnight courier service which provides evidence of delivery, or by telecopier if confirmation of receipt is given or of confirmation of transmission is sent as herein provided.
 
(g)   Governing Law . This Note shall be governed by the laws of the State of New York applicable to agreements executed and to be performed wholly within such state. The Company hereby (i) consents to the exclusive jurisdiction of the United States District Court for the Southern District of New York and Supreme Court of the State of New York in the County of New York in any action relating to or arising out of this Note, (ii) agrees that any process in any such action may be served upon it either (x) by certified or registered mail, return receipt requested, or by an overnight courier service which obtains evidence of delivery, with the same full force and effect as if personally served upon him in New York City or (y) any other manner permitted by law, and (iii) waives any claim that the jurisdiction of any such tribunal is not a convenient forum for any such action and any defense of lack of in personam jurisdiction with respect thereto.
 
(h)   Expenses . In the event that the Holder commences a legal proceeding in order to enforce its rights under this Note, the Company shall pay all reasonable legal fees and expenses incurred by the holder with respect thereto.
 
IN WITNESS WHEREOF, the Company has executed this Note as of the date and year first aforesaid.

 
ACHIEVERS MAGAZINE, INC.
   
   
 
By: /s/ Dengyong Jin, CEO
 
 
Dengyong Jin, CEO
 
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NOTICE OF CONVERSION
 
[To be Signed Only Upon Conversion
of Part or All of Notes]

Achievers Magazine, Inc.

The undersigned, the holder of the foregoing Note, hereby surrenders such Note for conversion into shares of Common Stock of Achievers Magazine, Inc. to the extent of $       * unpaid principal amount of due on such Note, and requests that the certificates for such shares and Warrants be issued in the name of                                                                         , and delivered to                                                             , whose address is                                                                                             .

Dated:                                                    

   
(Signature)
 
 
(Signature must conform in all respects to name of holder as specified on the face of the Note.)
 
*   Insert here the unpaid principal amount of the Note (or, in the case of a partial conversion, the portion thereof as to which the Note is being converted). In the case of a partial conversion, a new Note will be issued and delivered, representing the unconverted portion of the unpaid principal amount of this Note, to or upon the order of the holder surrendering such Note.

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Schedule A – A utomatic Conversion Securities

The number determined by dividing the principal amount of this Note by $1,200,000 and multiplying the result by each of the following (i) 1,200,499   shares of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (“Series A Preferred Stock”), with each share of Series A Preferred Stock being initially convertible into one (1) share of the Company’s Common Stock, par value $.001 per share, subject to adjustment, (ii) Warrants to purchase 3,000,000 shares of Common Stock at $1.20 per share, and (iii) Warrants to purchase 3,000,000 shares of Common Stock at $1.20 per share. The number of shares of Common Stock and the number of shares of Common Stock issuable upon exercise of Warrants that were issued as Optional Conversion Securities shall reduce, on a share for share basis, the number of shares of Series A Preferred Stock and the number of shares issuable upon exercise of Warrants, respectively, issuable as Automatic Conversion Securities.

Schedule B – Optional Conversion Securities

The number determined by dividing the principal amount of this Note by $1,200,000 and multiplying the result by each of the following (i) 1,200,499   shares of the Common Stock, subject to adjustment, (ii) Warrants to purchase 3,000,000 shares of Common Stock at $1.20 per share, and (iii) Warrants to purchase 3,000,000 shares of Common Stock at $2.00 per share.

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Exhibit 4.3.1

Achievers Capitalization

       
1.6 for 1
     
% w/
 
% w/
 
   
Shares
 
distribution
 
Percent
 
Preferred
 
Pref and wts
 
Outstanding shares
   
5,108,900
                         
Purchase from controlling s/h
   
3,340,000
                         
Public float
   
1,768,900
   
2,830,240
   
23.2
%
 
21.1
%
 
14.6
%
Shares issued to Sincerely
   
5,867,608
   
9,388,172
   
76.8
%
 
70.0
%
 
48.3
%
Total
   
7,636,508
   
12,218,412
   
100.0
%
       
62.9
%
Investor Preferred
   
750,312
   
1,200,499
         
8.9
%
 
6.2
%
Total w/ Investor Preferred
   
8,386,820
   
13,418,911
         
100.0
%
 
69.1
%
Investor Warrants $1.20
         
3,000,000
               
15.4
%
Investor Warrants $2.00
         
3,000,000
               
15.4
%
Total w/ Investor Preferred and Wts 
         
19,418,911
               
100.0
%
outstanding shares + escrow shs
         
13,218,412
                   

Note: of the 3,340,000 shares purchased from the controlling s/h, 1,000,000 shares are held in escrow
These shares are not treated as outstanding for purposes of this table
 
 
 

 
SHARE EXCHANGE AGREEMENT

This Agreement dated as of the 14 th day of December, 2007, by and among Achievers Magazine Inc., a Nevada corporation, having its offices at 220   Cambie Street, Suite 400, Vancouver, British Columbia V6B 2MP (the “ Issuer ”), and Sincere Investment (PTC), Ltd., a British Virgin Islands corporation, having an office at  Trinity Chambers, P.O. Box 4301, Road Town, British Virgin Islands  (the “ Shareholder ”).

WITNESSETH:

WHEREAS , the Shareholder is the holder of all of the issued and outstanding capital stock (the “ Talent Shares ”) of Talent International Investment Limited, a British Virgin Islands corporation (“ Talent ”);

WHEREAS , the Talent is also the holder of all of the issued and outstanding capital stock of Xinghe Yongle Carbon Co., Ltd.;

WHEREAS , the Issuer is willing to issue shares of its common stock, par value $.0001 per share (“ Common Stock ”), to the Shareholder in consideration for the Talent Shares;
 
NOW, THEREFORE , for the mutual consideration set out herein, the parties agree as follows:
 
1. Exchange of Shares .
 
(a) Issuance of Shares by Issuer . On and subject to the conditions set forth in this Agreement, the Issuer will issue to the Shareholder, in exchange for all of the Talent Shares, which represents all of the issued and outstanding capital stock of Talent (the “ Shares ”), 5,867,608 shares of Common Stock, all of which will be issued in the name of the Shareholder.
 
(b) Transfer of Talent Shares by the Shareholder . On and subject to the conditions set forth in this Agreement, the Shareholder will transfer to the Issuer all of the Talent Shares, free and clear of any and all liens, claims, encumbrances, preemptive rights, right of first refusal and adverse interests of any kind, in exchange for the Shares to be issued to the Shareholder and the Designees.
 
(c) Closing . The issuance of the Shares to the Shareholder and the Designees and the transfer of the Talent Shares to the Issuer will take place at a closing (the “ Closing ”) to be held at the office of Sichenzia Ross Friedman Ference, LLP, 61 Broadway, 32 nd Floor, New York, New York 10006 as soon as possible after or contemporaneously with the satisfaction or waiver of all of the conditions to closing set forth in Section 4 of this Agreement.
 
2. Representations and Warranties of the Issuer . The Issuer hereby represents, warrants, covenants and agrees as follows:
 
(a) General .
 
(i) The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. The Issuer has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a material adverse effect on the Issuer. The Issuer is not in violation of any provisions of its certificate of incorporation or its bylaws. No consent, approval or agreement of any individual or entity is required to be obtained by the Issuer in connection with the execution and performance by the Issuer of this Agreement or the execution and performance by the Issuer of any agreements, instruments or other obligations entered into in connection with this Agreement. The Issuer does not have any equity investment or other interest, direct or indirect, in, or any outstanding loans, advances or guarantees to or on behalf of, any domestic or foreign corporation, limited liability company, association, partnership, joint venture or other entity.  


 
(ii) The Issuer provided to the Shareholder true, correct and complete copies of the Issuer’s articles of incorporation, including all amendments thereto, and the Issuer’s bylaws, including all amendments thereto, as such articles of incorporation and bylaws are in effect on the date hereof.
 
(iii) The Issuer has full power and authority to carry out the transactions provided for in this Agreement, and this Agreement constitutes the legal, valid and binding obligations of the Issuer, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditor’s rights and except that any remedies in the nature of equitable relief are in the discretion of the court. All necessary action required to be taken by the Issuer for the consummation of the transactions contemplated by this Agreement has been taken.
 
(iv) The Shares, when issued pursuant to this Agreement, will be duly and validly authorized and issued, fully paid and non-assessable. The issuance of the Shares to Shareholder and Designees is exempt from the registration requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), pursuant to an exemption provided by Regulation S promulgated by the Securities and Exchange Commission (“ SEC ”) thereunder (“ Regulation S ”).

(v)   The Issuer has authorized capital stock consisting of 75,000,000 shares of Issuer Common Stock, of which 5,108,900 shares of Common Stock are issued and outstanding on the date of this Agreement.

(vi) The Issuer is not party to any agreement or understanding pursuant to which any securities of any class of capital stock are to be issued or created or transferred. Except as contemplated in the securities purchase agreement dated the date of this Agreement between the Issuer and XingGuang Investment Corporation Limited (the “Purchase Agreement”), neither the Issuer nor any officer, director or 5% stockholder of the Issuer has any agreements, plans, understandings or proposals, whether formal or informal or whether oral or in writing, pursuant to which it or he granted or may have issued or granted any individual or entity any Convertible Security or any interest in the Issuer or the Issuer’s earnings or profits, however defined. As used in this Agreement, the term “Convertible Securities” shall mean any options, rights, warrants, convertible debt, equity securities or other instrument or agreement upon the exercise or conversion of which or upon the exchange of which or pursuant to the terms of which additional shares of any class of capital stock of the Issuer may be issued.
 
(vii) There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the Issuer’s Best Knowledge, threatened against the Issuer or any of its properties or any of its officers or directors (in their capacities as such). There is no judgment, decree or order against the Issuer that could prevent, enjoin, alter or delay any of the transactions contemplated by this Agreement. The term “Best Knowledge” of the Issuer shall mean and include (i) actual knowledge and (ii) that knowledge which a prudent businessperson would reasonably have obtained in the management of such Person’s business affairs after making due inquiry and exercising the due diligence which a prudent businessperson should have made or exercised, as applicable, with respect thereto.

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(viii)   There are no material claims, actions, suits, proceedings, inquiries, labor disputes or investigations (whether or not purportedly on behalf of the Issuer) pending or, to the Issuer’s Best Knowledge, threatened against the Issuer or any of its assets, at law or in equity or by or before any governmental entity or in arbitration or mediation. No bankruptcy, receivership or debtor relief proceedings are pending or, to the best of the Issuer’s knowledge, threatened against the Issuer.

(ix)   The Issuer has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state, local or foreign Law, judgment, decree, injunction or order, applicable to it, the conduct of its business, or the ownership or operation of its business. References in this Agreement to “Laws” shall refer to any laws, rules or regulations of any federal, state or local government or any governmental or quasi-governmental agency, bureau, commission, instrumentality or judicial body (including, without limitation, any federal or state securities law, regulation, rule or administrative order).

(x)   The Issuer has properly filed all tax returns required to be filed and has paid all taxes shown thereon to be due. All tax returns previously filed are true and correct in all material respects.

(xi) The Issuer has no outstanding liabilities or obligations to any party except as reflected on the Issuer’s Form 10-QSB for the quarter ended October 31, 2007, other than charges since such date similar to those incurred in past periods and consistent with past practice, all of which will be paid in full or otherwise satisfied on or prior to the Closing Date.

(xii) The Issuer’s Form 10-KSB for the year ended July 31, 2007, contains the audited financial statements of the Issuer, certified by Amisano Hanson, Chartered Accountants (“ Auditor ”), the Issuer’s independent registered accounting firm, and the Issuer’s Form 10-QSB for the quarter ended October 31, 2007 contains the unaudited financial statements of the Issuer which have been reviewed by Auditor. The balance sheets fairly present the financial position of the Issuer, as of their respective dates, and each of the consolidated statements of income, stockholders’ equity and cash flows (including any related notes and schedules thereto) fairly presents the results of operations, cash flows and changes in stockholders’ equity, as the case may be, of the Issuer for the periods to which they relate, in each case in accordance with generally accepted accounting principles (“ GAAP ”) consistently applied during the periods involved. Auditor is independent as to the Issuer in accordance with the rules and regulations of the SEC. The books and records of the Issuer have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transaction. The Issuer has not received any letters of comments from the SEC relating to any filing made by the Issuer with the SEC which has not been addressed by an amended filing, and each amended filing fully responds to the questions raised by the staff of the SEC. The Issuer maintains disclosure controls and procedures that are effective to ensure that information required to be disclosed by the Issuer in its annual and quarterly reports filed with the SEC is accumulated and communicated to the Issuer’s management, including its principal executive and financial officers as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in the Issuer’s internal controls or other factors that could significantly affect such controls subsequent to July 31, 2007. The Issuer has not received any advice from Auditor to the effect that there is any significant deficiency or material weakness in the Issuer’s controls or recommending any corrective action on the part of the Issuer or any subsidiary of the Issuer. The Issuer does not have any contingent liabilities. All of the Issuer’s operations are conducted by its wholly-owned subsidiary, Achievers Publishing Inc., a British Columbia corporation (the “Subsidiary”). As of the date of this Agreement, the Issuer has no assets and no liabilities other than the liabilities set forth on closing balance sheet of the Issuer as of the closing date, which is set forth on Schedule A to this Agreement. All liabilities of the Issuer will be paid or otherwise satisfied at the Closing, and the Issuer will provide Talent with evidence of such payment. The Issuer has no guarantee or other contingent obligations or liabilities relating to the operations, liabilities or commitments of the Subsidiary, whether contractually or as a matter of law.

- 3 -

 
(xiii)   The execution and delivery of this Agreement by the Issuer and the consummation of the transactions contemplated by this Agreement will not result in any material violation of the Issuer’s certificate of incorporation or by-laws, or any applicable Law.

(xiv)   The Issuer has provided the Shareholder with a currently dated lien search showing no liens on the business or assets of the Issuer.

(b)  SEC Documents . The Issuer’s Common Stock is registered pursuant to Section 12(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). The Issuer is current with its reporting obligations under the Exchange Act. The Common Stock is listed on the OTC Bulletin Board. The Issuer has received no notice, either oral or written, with respect to the continued listing of the Common Stock on the OTC Bulletin Board. The Issuer has not provided to any investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Issuer, but which has not been so disclosed. As of their respective dates, the Issuer’s filings made pursuant to the Exchange Act (the “ Issuer SEC Documents ”) complied in all material respects with the requirements of the Exchange Act, and rules and regulations of the SEC promulgated thereunder and the Issuer SEC 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 in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

3. Representations and Warranties of Shareholder . The Shareholder hereby represents, warrants, covenants and agrees as follows:
 
(a) The Shareholder understands that the offer and sale of the Shares is being made only by means of this Agreement and understands that the Issuer has not authorized the use of, and the Shareholder confirms that he or she is not relying upon, any other information, written or oral, other than material contained in this Agreement. The Shareholder is aware that the purchase of the Shares involves a high degree of risk and that the Shareholder may sustain, and has the financial ability to sustain, the loss of his entire investment, understands that no assurance can be given that the Issuer will be profitable in the future, that there is no public market for the Common Stock, and the Issuer can give no assurance that there will ever be a public market for the Common Stock. Furthermore, in subscribing for the Shares, the Shareholder acknowledges it is not relying upon any projections or any statements of any kind relating to future revenue, earnings, operations or cash flow in making an investment in the Shares.

(b) The Shareholder is not acquiring the Shares as a result of, and will not itself engage in, any "directed selling efforts" (as defined in Regulation S) in the United States in respect of the Shares which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Shares; provided, however, that the Shareholder may sell or otherwise dispose of the Shares pursuant to registration thereof under the Securities Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;

- 4 -

  
(c) The Shareholder acknowledges and agrees that none of the Shares have been registered under the Securities Act, or under any state securities or "blue sky" laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to U.S. Persons, as that term is defined in Regulation S, except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in each case in accordance with applicable state and provincial securities laws;
 
(d) The Shareholder acknowledges and agrees that the Issuer will refuse to register any transfer of the Shares not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act and in accordance with applicable state and provincial securities laws;
 
(e) The Shareholder represents and warrants that no broker or finder was involved directly or indirectly in connection with his or her purchase of the Shares pursuant to this Agreement. The Shareholder shall indemnify the Issuer and hold it harmless from and against any manner of loss, liability, damage or expense, including fees and expenses of counsel, resulting from a breach of the Shareholder’s warranty contained in this Paragraph 3(e).
 
(f) The Shareholder understands that he or she has no registration rights with respect to the Shares.

(g) The Shareholder is not a citizen or resident of the United States.

(h) The Shareholder is acquiring the Shares for investment only and not with a view to resale or distribution and, in particular, it has no intention to distribute either directly or indirectly any of the Shares in the United States or to U.S. Persons;

(i) The Shareholder is acquiring the Shares as principal for the Shareholder’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in such Shares;

(j) The Shareholder is not an underwriter of, or dealer in, the common stock of the Issuer, nor is the Shareholder participating, pursuant to a contractual agreement or otherwise, in the distribution of the Shares;

(l) The Shareholder is not aware of any advertisement of any of the Shares; and

(m) No person has made to the Shareholder any written or oral representations:
 
(i)   that any person will resell or repurchase any of the Shares;
(ii)   that any person will refund the purchase price of any of the Shares;
(iii)   as to the future price or value of any of the Shares; or

- 5 -


(iv)   that any of the Shares will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Shares of the Issuer on any stock exchange or automated dealer quotation system.
 
(n)   The Shareholder represents he has such knowledge and experience in financial and business matters as to enable the Shareholder to understand the nature and extent of the risks involved in purchasing the Shares. The Shareholder is fully aware that such investments can and sometimes do result in the loss of the entire investment. The Shareholder has engaged his or her own counsel and accountants to the extent that the Shareholder deems it necessary.
 
4. Conditions to the Obligation of Shareholder and the Issuer . The obligations of Shareholder and the Issuer under this Agreement are subject to the following conditions:
 
(a)   The completion of the sale of notes an investor group pursuant to an agreement between the Issuer and XingGuang Investment Corporation Limited contemporaneously with the exchange contemplated by this Agreement;

(b)   The completion of the purchase by the Issuer of 3,340,000 shares of Common Stock pursuant to a buy-back agreement dated the date of this Agreement among the Issuer, as purchaser, and Arto Tavukciyan and Lyndon Grove, as sellers, with 625,000 of the shares of Common Stock being held in escrow subject to the Issuer making payments required in the buy-back agreement.

(c)   The purchase by eight investors of the issuance of 1,751,900 shares of common stock from an investor group.

(d)   The delivery by the Issuer of a legal opinion from counsel to the Company in a form reasonably satisfactory to the Shareholder that:  (i) the Shares, when issued pursuant to this Agreement, will be duly and validly authorized and issued, fully paid and non-assessable and (ii) all of the outstanding shares of capital stock of the Issuer have been duly and validly authorized and issued, fully paid and non-assessable and were either (x) registered pursuant to the Securities Act of 1933, as amended, or (y) were issued in transactions exempt from the registration requirements of such Act pursuant to Section 4(2) and/or Rule 505 or 506 of the Securities and Exchange Commission under such Act.

(e)   The resignation of, and execution of a general release by, all officers and directors of the Issuer, and the election of Dengyong Jin as the sole director.

(f)   The stock of the Subsidiary, shall have been transferred or sold in a transaction whereby the Issue has no obligations or liabilities, direct or contingent, with respect to any current or future liabilities, obligations or contractual rights of the Subsidiary.

 5.  Miscellaneous .
 
(a) This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof, superseding any and all prior or contemporaneous oral and prior written agreements, understandings and letters of intent. This Agreement may not be modified or amended nor may any right be waived except by a writing that expressly refers to this Agreement, states that it is a modification, amendment or waiver and is signed by all parties with respect to a modification or amendment or the party granting the waiver with respect to a waiver. No course of conduct or dealing and no trade custom or usage shall modify any provisions of this Agreement.

- 6 -

 
(b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
 
(c)  This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
 
(d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document.

(e) The various representations, warranties, and covenants set forth in this Agreement or in any other writing delivered in connection therewith shall survive the issuance of the Shares.

[Signatures on following page.]

- 7 -


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

Achievers Magazine Inc.
 
By: /s/ Arto Tavukciyan                                           
Arto Tavukciyan, President and Chief Executive Officer
 
 
Sincere Investment (PTC), Ltd.
 
 
By: /s/Lizhong Gao                                           
   Name: Lizhong Gao
   Title:   President

- 8 -


Schedule A

Parent Only Balance Sheet (unaudited)

- 9 -

AGREEMENT

This Agreement is made as of the 14 th day of December, 2007, by and between Achievers Magazine Inc., a Nevada corporation (the “Issuer”), and Arto Tavukciyan, (“Arto”) and Lyndon Grove (“Lyndon” and, together with Arto, the “Sellers” and each, a “Seller”).

WITNESSETH:

WHEREAS, the Sellers are the owners of an aggregate of 3,340,000 shares (the “Shares”) of the Issuer’s common stock, par value $.0001 per share (“Common Stock”), in the respective amounts set forth on Schedule A hereto, and

WHEREAS, the Sellers desire to sell to the Issuer, and the Issuer desires to purchase the Shares from the Sellers, on and subject to the terms of this Agreement;

WHEREFORE, the parties hereto hereby agree as follows:

1.   Sale of the Shares . Subject to the terms and conditions of this Agreement, and in reliance upon the representations, warranties, covenants and agreements contained in this Agreement, the Sellers shall sell the Shares to the Issuer, and the Issuer shall purchase the Shares from the Sellers for a purchase price (the “Purchase Price”) equal to $700,000, allocated between the Sellers as set forth in Schedule A attached hereto. In addition, the Issuer will pay a finders’ fee of $100,000 to Ventana Capital Partners (“Ventana”), payable in installments of $50,000 on each of March 31, 2008 and June 30, 2008.
 
2.   Closing .
 
(a)   The purchase and sales of the Shares shall take place at a closing (the “Closing”), to occur immediately following execution and delivery of this Agreement.
 
(b)   At the Closing:
 
(i)   The Sellers shall deliver to the Issuer certificates for 2,715,000 of the Shares, duly endorsed in form for transfer to the Issuer.
 
(ii)   The Sellers shall deliver to the Escrow Agent certificates for 625,000 shares, duly endorsed in blank in form for transfer. Such shares shall be held by the Escrow Agent pursuant to the Escrow Agreement.
 
(iii)   The Issuer shall deliver to the Sellers its promissory note in the principal amount of $700,000 (the “Note”), which shall be payable to the Escrow Agent, as hereinafter defined.
 
(iv)   The Issuer shall deliver a certificate for 625,000 of the Shares, together with a stock power duly endorse in blank, to Anna Krimshtein PLC, as escrow agent, (the “Escrow Agent”) such shares to be held as security for the payment by the Issuer of its obligations under the Note and its obligations to Ventana in the amount of $100,000, which are payable in installments of $50,000 on each of March 31, 2008 and June 30, 2008.
 
 
 

 
 
(v)   The Issuer shall have executed the escrow agreement pursuant to which 625,000 shares shall be held in escrow under the following terms and conditions:
 
(A)   If by March 31, 2008, the Issuer shall not have made (x) the first payment due pursuant to the Note, which is in the amount of $350,000, and (y) the first payment of $50,000 to Ventana, both of which are due on March 31, 2008, the Escrow Agent shall release 250,000 shares to the Sellers and 62,500 shares to Ventana.
 
(B)   If, by March 31, 2008, the Issuer shall have made both (x) the first payment due pursuant to the Note, which is in the amount of $350,000 and (y) the first payment of $50,000 to Ventana, both of which are due on March 31, 2008, the Escrow Agent shall deliver 312,500 shares to the Issuer.
 
(C)   If, by June 30, 2008, the Issuer shall not have made (x) the second payment due pursuant to the Note, which is in the amount of $350,000, and (y) the second payment of $50,000 to Ventana, both of which are due on June 30, 2008, the Escrow Agent shall release 250,000 shares to the Sellers and 62,500 shares to Ventana.
 
(D)   If, by June 30, 2008, the Issuer shall have made both (x) the first payment due pursuant to the Note, which is in the amount of $350,000 and (y) the first payment of $50,000 to Ventana, both of which are due on June 30, the Escrow Agent shall deliver 312,500 shares to the Issuer.
 
(E)   The Issuer has approved a 1.6-for-1 share distribution pursuant to which each share of common stock becomes 1.6 shares, with the result that the Issuer will issue six-tenths (0.6) of a share of Common Stock for each share of Common Stock outstanding on the record date. As a result, the numbers in this Agreement will be increased by 60%. As a result, upon the effectiveness of the share distribution, the number of shares held in escrow will become 1,000,000 shares, and the amount of shares referred to in this Section 2(b)(v) shall be adjusted as follows: 312,500 shares shall become 500,000 shares, 250,000 shares shall become 400,000 shares, 62,500 shares shall become 100,000 shares.
 
(vi)   The Sellers shall deliver evidence that, as of Closing, that all liabilities and obligations of the Issuer, of any kind and description, whether immediate, direct, contingent or indirect, shall have been paid or cancelled, with the result that the Issuer has, as of the Closing, no liabilities or obligations of any kind.
 
(vii)   The Issuer shall have transferred all of the capital stock of Achievers Publishers, Inc., a British Columbia corporation and wholly-owned subsidiary of the Issuer to Arto, with the Issuer having no residual liabilities or obligations with respect thereto.
 
(viii)   The Issuer shall deliver or cause the Issuer’s transfer agent to deliver a certified copy of the stock ledger of the Issuer listing every stockholder of record as of the most recent practicable date.
 
(ix)   Counsel for the Issuer shall have given its opinion to the Issuer, which may be relied on by any subsequent purchasers of the Issuer’s capital stock and their counsel if such purchases take place as part of the next direct or indirect merger or similar transaction with an operating business that results in a change of control of the Issuer (“Reverse Merger Issuances”), to the effect that all of the issued and outstanding capital stock has been duly and validly authorized and issued and is fully paid and non-assessable and to such counsel’s knowledge not issued in violation of any preemptive right, right of first refusal or other right, and that the issuance of such capital stock was exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 or 506 of the Commission thereunder.
 
 
- 2 -

 
 
(x)   All officers and directors of the Issue shall have resigned from their positions, and they shall have elected Dengyong Jin as the sole director.
 
(xi)   The Issuer shall deliver a good standing certificate issued by the Secretary of State of the State of Nevada and a certified copy of the Issuer’s Articles of Incorporation, as currently in effect, certified by the Secretary of State of the State of Nevada.
 
(c)   The Sellers understand that following the Closing, the Issuer may engage a different accounting firm. At and at any time after the Closing, the parties shall duly execute, acknowledge and deliver all such further assignments, conveyances, instruments and documents, and shall take such other action consistent with the terms of this Agreement to carry out the transactions contemplated by this Agreement. Without limiting the foregoing, the Issuer and Sellers jointly and severally agree that they shall cause the Issuer’s current management to execute such certificates, auditor representation letters and other representations (“Certifications”) as the Issuer may reasonably request in order to enable the Issuer to prepare and file future reports with the Commission, including the Issuer’s Report on Form 8-K relating to this Agreement, and Sellers shall pay such fees and take such steps as may be necessary to facilitate the Issuer’s auditor’s preparation of the financial statements and its report for accounting periods and events prior to the Closing related thereto for the current fiscal year and provide such additional assistance as is required by the Issuer in order to file its financial statements in filings made subsequent to the Closing; provided, however, that Sellers shall have no obligation with respect to fees of any accountants engaged by the Issuer after the Closing. Such Certifications shall specifically include a representation letter for the benefit of the Issuer’s auditor in the form requested by its auditors. Any such Certifications shall treat only periods and events prior to Closing. Further, at the cost of Sellers, the Issuer will file its final federal and state returns and any SEC filings, including any amendment to any previously filed reports, relating to periods prior to the Closing Date.
 
3.   Certain Adjustments in the Shares held in Escrow .
 
(a)   In the event that the market price for the Issuer’s Common Stock is less than Minimum Price on March 31, 2008 or June 30, 2008, and the Escrow Agent is required to deliver some or all of the shares held in escrow, the Issuer shall deliver to the Escrow Agent such additional number of share as is determined by multiplying the number of shares to be delivered on such date by the Minimum Price and dividing the result by the market price and subtracting from that number the shares held in escrow that are to be delivered at that time. The Minimum Price shall be $0.80 per share. For example, if on March 31, 2008, the market price is $0.60 per share and the number of shares to be delivered from escrow is 312,500 shares, the number of additional shares of Common Stock to be delivered shall be determined as follows:
 
312,500 x $.80 = $250,000
 
$250,000/$.60 = 416,667
 
416,667 shares – 312,500 shares = 104,167 shares, being the number of additional shares to be issued.
 
(b)   The market price shall determined by taking the average of the high and low reported sales prices of the Common Stock on each day during the ten trading days preceding March 31, 2008 or June 30, 2008, as the case may be.
 
 
- 3 -

 
 
(c)   If, prior to June 30, 2008, the Issuer shall issue any shares of Common Stock at a price which is less than $1.20 per share (after giving effect to the 1.6-for-one share distribution), the Issuer shall issue to the Escrow Agent such number of additional shares as shall be determined by multiplying the number of shares of Common Stock then held in escrow, after giving effect to the share distribution, by a fraction, the numerator of which is the number of shares sold by the Issuer at a price which is less than $1.20 and the denominator of which is 13,000,000. For example, if, at a time when there are 1,000,000 shares in escrow, the Issuer sells 2,600,000 shares of Common Stock at a price which is less than $1.20, the number shares to be issued to the Escrow Agent shall be determined as follows:
 
Number of additional shares = 1,000,000 x 2,600,000/13,000,000 = 200,000 shares.
 
If the number of shares held by the escrow agent is 500,000 shares, the number of additional shares would be 100,000 shares.
 
(d)   All additional shares issuable to the Escrow Agent shall be issued in the name of the Escrow Agent, as escrow agent.
 
4.   Representations and Warranties of the Issuer and Sellers . The Issuer and Sellers hereby jointly and severally make the following representations and warranties to each other and to any persons who acquire the Issuer’s capital stock following the Closing in Reverse Merger Issuances, provided, that such representations and warranties shall survive the Closing for a period of one (1) year and provided further that each Seller makes no representations and warranties other than with respect to himself and the Shares to be sold hereunder:
 
(a)   The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. The Issuer has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a material adverse effect on the Issuer. The Issuer is not in violation of any of the provisions of its certificate of incorporation or by-laws. No consent, approval or agreement of any individual or entity is required to be obtained by the Issuer in connection with the execution and performance by the Issuer of this Agreement or the execution and performance by the Issuer of any agreements, instruments or other obligations entered into in connection with this Agreement. The Issuer has no active subsidiary, and, except for an inactive subsidiary which has no assets or liabilities, it does not have any equity investment or other interest, direct or indirect, in, or any outstanding loans, advances or guarantees to or on behalf of, any domestic or foreign individual or entity.
 
(b)   The Issuer has authorized capital stock consisting of 75,000,000 shares of Issuer Common Stock, par value $.000l per share, of which 5,108,900 shares of Common Stock, including the Shares, are presently issued and outstanding. Sellers own the Shares free and clear of any and all liens, claims, encumbrances, preemptive rights, right of first refusal and adverse interests of any kind.
 
(c)   Neither the Issuer nor Sellers are party to any agreement or understanding pursuant to which any securities of any class of capital stock are to be issued or created or transferred. The Issuer has not acquired any shares of Common Stock, and has no formal or informal agreements or understandings pursuant to which it can or will acquire any shares of Issuer Common Stock (other than this Agreement). Except as contemplated in the Securities Purchase Agreement (the “Purchase Agreement”), neither the Issuer nor Sellers nor any officer, director or 5% stockholder of the Issuer has any agreements, plans, understandings or proposals, whether formal or informal or whether oral or in writing, pursuant to which it or he granted or may have issued or granted any individual or entity any Convertible Security or any interest in the Issuer or the Issuer’s earnings or profits, however defined. As used in this Agreement, the term “Convertible Securities” shall mean any options, rights, warrants, convertible debt, equity securities or other instrument or agreement upon the exercise or conversion of which or upon the exchange of which or pursuant to the terms of which additional shares of any class of capital stock of the Issuer may be issued.
 
 
- 4 -

 
 
(d)   There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the Issuer’s Best Knowledge, threatened against the Issuer or any of its properties or any of its officers or directors (in their capacities as such). There is no judgment, decree or order against the Issuer that could prevent, enjoin, alter or delay any of the transactions contemplated by this Agreement. The term “Best Knowledge” of the Issuer shall mean and include (i) actual knowledge and (ii) that knowledge which a prudent businessperson would reasonably have obtained in the management of such Person’s business affairs after making due inquiry and exercising the due diligence which a prudent businessperson should have made or exercised, as applicable, with respect thereto.
 
(e)   There are no claims, actions, suits, proceedings, inquiries, labor disputes or investigations (whether or not purportedly on behalf of the Issuer) pending or, to the Issuer’s Best Knowledge, threatened against the Issuer or any of its assets, at law or in equity or by or before any governmental entity or in arbitration or mediation. No bankruptcy, receivership or debtor relief proceedings are pending or, to the best of the Issuer’s knowledge, threatened against the Issuer.
 
(f)   The Issuer is in compliance with, is not in violation of, and has not received any notices of violation with respect to, any federal, state, local or foreign Law, judgment, decree, injunction or order, applicable to it, the conduct of its business, or the ownership or operation of its business. References in this Agreement to “Laws” shall refer to any laws, rules or regulations of any federal, state or local government or any governmental or quasi-governmental agency, bureau, commission, instrumentality or judicial body (including, without limitation, any federal or state securities law, regulation, rule or administrative order).
 
(g)   The Issuer has properly filed all tax returns required to be filed and has paid all taxes shown thereon to be due. All tax returns previously filed are true and correct in all material respects.
 
(h)   The Issuer has no outstanding liabilities or obligations to any party except as reflected on the Issuer’s Form 10-KSB for the year ended July 31, 2007 and the Form 10-QSB for the quarter ended October 31, 2007, other than charges since such date similar to those incurred in past periods and consistent with past practice, all of which will be discharged prior to or at the Closing so that, at the Closing, the Issuer will have no direct, contingent or other obligations of any kind or any commitment or contractual obligations of any kind and description.
 
(i)   All of the business and financial transactions of the Issuer have been fully and properly reflected in the books and records of the Issuer in all material respects and in accordance with generally accepted accounting principles consistently applied.
 
 
- 5 -

 
 
(j)   The Issuer is current with its reporting obligations under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). None of the Issuer’s filings made pursuant to the Exchange Act (collectively, the “Issuer SEC Documents”) contain any misstatements of material fact or omit to state a material fact necessary to make the statements made therein not misleading. The Issuer SEC Documents, as of their respective dates, complied in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission there under, and are available on the Commission’s EDGAR system. The financial statements included in the Issuer SEC Documents present and reflect, in accordance with generally accepted accounting principles, consistently applied, the financial condition of the Issuer on the balance sheet dates and the results of its operations, cash flows and changes in stockholders’ equity for the periods then ended in accordance with generally accepted accounting principles, consistently applied. The accountants who audited the Issuer’s financial statements are independent, within the meaning of the Securities Act and are a member of the PCAOB. There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Issuer, from that set forth in the Issuer’s Form 10-KSB for the year ended July 31, 2007.
 
(k)   The execution and delivery of this Agreement by the Issuer and the consummation of the transactions contemplated by this Agreement will not result in any material violation of the Issuer’s certificate of incorporation or by-laws, or any applicable Law.
 
(l)   All representations, covenants and warranties of the Issuer and Sellers contained in this Agreement shall be true and correct on and as of the Closing Date with the same effect as though the same had been made on and as of such date.
 
5.   Release . Each Seller does hereby release and discharge the Issuer, its officers, directors and counsel their respective heirs, executors, administrators, successors and assigns from any and all actions, causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, damages, claims and demands whatsoever, in law, admiralty or equity which against them or any of them such Seller and his heirs, executors, administrators, successors and assigns ever had, now have or may in the future can, shall or may have, for, upon or by reason or any matter, cause or thing whatsoever from the beginning of the world to the date of this Agreement; provided, however, that nothing in this Section 5 shall be construed as a release of any of the rights or obligations which either Seller may have pursuant to this Agreement, the escrow agreement or the Note.
 
6.   Finder’s Fee . Sellers jointly and severally represent and warrant that, other than the fee payable to Ventana, no person is entitled to receive a finder’s, broker’s or similar fee from the Issuer in connection with this Agreement as a result of any action taken by the Issuer or Sellers pursuant to this Agreement, and agree jointly and severally to indemnify and hold harmless the Issuer, its officers, directors and affiliates, in the event of a breach of the representation and warranty set forth in this Section 6.
 
7.   Indemnification by Sellers . Sellers shall jointly and severally indemnify and hold harmless the Issuer, its officers and directors from and against any manner of loss, liability, damage or expense (including reasonable fees and expenses of counsel) which they may incur as a result of a breach of any of the representations and warranties contained in Section 4 of this Agreement.
 
8.   Termination by Mutual Agreement . This Agreement may be terminated at any time by mutual consent of the parties hereto, provided that such consent to terminate is in writing and is signed by each of the parties hereto.
 
 
- 6 -

 
 
9.   Miscellaneous .
 
(a)   Entire Agreement . This Agreement constitutes the entire agreement of the parties, superseding and terminating any and all prior or contemporaneous oral and written agreements, understandings or letters of intent between or among the parties with respect to the subject matter of this Agreement. No part of this Agreement may be modified or amended, nor may any right be waived, except by a written instrument which expressly refers to this Agreement, states that it is a modification or amendment of this Agreement and is signed by the parties to this Agreement, or, in the case of waiver, by the party granting the waiver. No course of conduct or dealing or trade usage or custom and no course of performance shall be relied on or referred to by any party to contradict, explain or supplement any provision of this Agreement, it being acknowledged by the parties to this Agreement that this Agreement is intended to be, and is, the complete and exclusive statement of the agreement with respect to its subject matter. Any waiver shall be limited to the express terms thereof and shall not be construed as a waiver of any other provisions or the same provisions at any other time or under any other circumstances.
 
(b)   Severability . If any section, term or provision of this Agreement shall to any extent be held or determined to be invalid or unenforceable, the remaining sections, terms and provisions shall nevertheless continue in full force and effect
 
(c)   Notices . All notices provided for in this Agreement shall be in writing signed by the party giving such notice, and delivered personally or sent by overnight courier, mail or messenger against receipt thereof or sent by registered or certified mail, return receipt requested, or by facsimile transmission or similar means of communication if receipt is confirmed or if transmission of such notice is confirmed by mall as provided in this Section 7(c). Notices shall be deemed to have been received on the date of personal delivery or telecopy or attempted delivery. Notice shall be delivered to the parties at the following addresses:
 
If to the Issuer:
Achievers Magazine Inc.
 
c/o Xinghe Xingyong Carbon Co., Ltd.
 
787 Xicheng Wai
 
Chengguantown
 
Xinghe County
 
Inner Mongolia, China
 
Attention: Denyong Jin, CEO
 
Fax: 86-0474-7209799
 
Attention of Mr. Dengyong Jin, CEO
   
 
With a copy to:
   
 
Sichenzia Ross Friedman Ference LLP
 
61 Broadway
 
New York, New York 10006
 
Attention: Asher S. Levitsky
 
E-mail: alevitsky@srff.com
 
Fax: (212) 930-9725
   
If to Arto:
Arto Tavukciyan
 
Achievers Publishing
 
Suite 400-220 Cambie Street
 
Vancouver, BC V6B 2M9
   
If to Lyndon:
Lyndon Grove
 
Achievers Publishing
 
400-220 Cambie Street
 
Vancouver, BC V6B 2M9
 
 
- 7 -

 
 
 
With a copy to
   
  
Ventana Capital Partners, Inc.
 
5782 Caminito Empresa
 
La Jolla, CA 92037

Any party may, by like notice, change the address, person or telecopier number to which notice shall be sent.
 
(d)   Governing Law . This Agreement shall be governed and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed wholly within such State, without regard to any principles of conflicts of law. Each of the parties hereby irrevocably consents and agrees that any legal or equitable action or proceeding arising under or in connection with this Agreement shall be brought in the federal or state courts located in the County of New York in the State of New York, by execution and delivery of this Agreement, irrevocably submits to and accepts the jurisdiction of said courts, (iii) waives any defense that such court is not a convenient forum, and (iv) consent to any service of process made either (x) in the manner set forth in Section 11(c) of this Agreement (other than by telecopier), or (y) any other method of service permitted by law.
 
(e)   Waiver of Jury Trial . EACH PARTY, TO THE EXTENT PERMITTED BY LAW, HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN THE EVENT OF ANY SUIT, ACTION OR PROCEEDING TO ENFORCE THIS AGREEMENT OR ANY OTHER ACTION OR PROCEEDING WHICH MAY ARISE OUT OF OR IN ANY WAY BE CONNECTED WITH THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS.
 
(f)   Expenses . Sellers shall be responsible and liable for their and the Issuer’s expenses incurred in connection with the preparation of this Agreement, the consummation of the transactions contemplated by this Agreement.
 
(g)   Successors . This Agreement shall be binding upon the parties and their respective heirs, executors, administrators, legal representatives, successors and assigns; provided, however, that the Issuer may not assign this Agreement or any of its rights under this Agreement without the prior written consent of the Sellers, and neither Seller may assign this Agreement or any of his rights under this Agreement without the prior written consent of the Issuer.
 
(h)   Further Assurances . Each party to this Agreement agrees, without cost or expense to any other party, to deliver or cause to be delivered such other documents and instruments as may be reasonably requested by any other party to this Agreement in order to carry out more fully the provisions of, and to consummate the transaction contemplated by, this Agreement.
 
(i)   Counterparts . This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
 
(j)   No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties with the advice of counsel to express their mutual intent, and no rules of strict construction will be applied against any party.
 
 
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(k)   Headings . The headings in the Sections of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 
ISSUER;
 
 
Achievers Magazine Inc.
 
       
       
 
By:
/s/ Dengyong Jin
 
   
Dengyong Jin, CEO
 
       
       
 
SELLERS:
 
     
     
 
/s/ Arto Tavukciyan
 
 
Arto Tavukciyan
 
     
     
 
/s/ Lyndon Grove
 
 
Lyndon Grove
 
 
 
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Schedule A

 
Number of Shares
 
Purchase Price
 
           
   
2,840,000
   
*
 
Lyndon Grove
   
500,000
   
*
 
 

*Total payments are $700,000, to be paid to the escrow agent.
 
 
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SECURITIES PURCHASE AGREEMENT
 
BETWEEN

ACHIEVERS MAGAZINE INC.

AND

XINGGUANG INVESTMENT CORPORATION LIMITED

DATED

December 14, 2007
 

 
SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into as of the 14 th day of December, 2007 between Achievers Magazine Inc. , a Nevada corporation (the “ Company ”), and XingGuang Investment Corporation Limited , a British Virgin Islands corporation (“ Investor ”).
 
RECITALS :
 
WHEREAS , the Investor wishes to purchase from the Company, upon the terms and subject to the conditions of this Agreement, for the Purchase Price, as hereinafter defined, one or more convertible notes (the “ Notes ”) in the aggregate principal amount of $1,200,000, which Notes are convertible into either:
 
(a) an aggregate of (i) 1,200,499 shares of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (“ Series A Preferred Stock ”), with each share of Series A Preferred Stock being initially convertible into one (1) share of the Company’s common stock, par value $.001 per share (“ Common Stock ”), subject to adjustment, and (ii) common stock purchase warrants (the “ Warrants ”) to purchase 3,000,000 shares of Common Stock at $1.20 per share, and 3,000,000 shares of Common Stock at $2.00 per share; or
 
(b) until the Restated Certificate, as hereinafter defined, is filed with the Secretary of State of Nevada, an aggregate of (i) 1,200,499 shares of the Common Stock, subject to adjustment, and (ii) Warrants to purchase 3,000,000 shares of Common Stock at $1.20 per share, and 3,000,000 shares of Common Stock at $2.00 per share.
 
WHEREAS , Investor is purchasing Notes in the principal amount set forth in Schedule A of this Agreement;
 
WHEREAS , upon conversion of the Note, the Common Stock and Warrants will be issued in the names set forth in Schedule A;
 
WHEREAS , contemporaneously with the Closing, the Company is acquiring all of the issued and outstanding capital stock of Talent Int’l Investment Limited, a British Virgin Islands corporation (“Talent”), which owns all of the capital stock of Xinghe Yongle Carbon Co., Ltd., a corporation organized under the laws of the People’s Republic of China as a wholly foreign owned enterprised (“Yongle”); and
 
WHEREAS , Yongle is a party to agreements with Xinghe Xingyong Carbon Co., Ltd., a corporation organized under the laws of the People’s Republic of China (the “PRC Company”), pursuant to which Yongle has the right to advise, consult, manage and operate the business and assets of the PRC Company and collect and own all of its net profits, and, has voting and other rights pursuant to a proxy and voting agreement and a voting trust and escrow agreement as a result of which Yongle has voting control over the PRC Company; and
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE  1
 

 
WHEREAS , the parties intend to memorialize the terms on which the Company will sell to the Investor and the Investor will purchase the Securities;

NOW, THEREFORE , in consideration of the mutual covenants and premises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby conclusively acknowledged, the parties hereto, intending to be legally bound, agree as follows:
 
Article 1
 
INCORPORATION BY REFERENCE AND DEFINITIONS
 
1.1   Incorporation by Reference . The foregoing recitals and the Exhibits and Schedules attached hereto and referred to herein, are hereby acknowledged to be true and accurate, and are incorporated herein by this reference.
 
1.2   Supersedes Other Agreements . This Agreement, to the extent that it is inconsistent with any other instrument or understanding among the parties, shall supersede such instrument or understanding to the fullest extent permitted by law. A copy of this Agreement shall be filed at the Company’s principal office.
 
1.3   Certain Definitions . For purposes of this Agreement, the following capitalized terms shall have the following meanings (all capitalized terms used in this Agreement that are not defined in this Article 1 shall have the meanings set forth elsewhere in this Agreement):
 
1.3.1   4.9% Limitation ” has the meaning set forth in Section 2.1.2 of this Agreement.
 
1.3.2   1933 Act ” means the Securities Act of 1933, as amended.
 
1.3.3   1934 Act ” means the Securities Exchange Act of 1934, as amended.
 
1.3.4   Affiliate ” means a Person or Persons directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Person(s) in question. The term “control,” as used in the immediately preceding sentence, means, with respect to a Person that is a corporation, the right to the exercise, directly or indirectly, of more than 50% of the voting rights attributable to the shares of such controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such controlled Person.
 
1.3.5   Articles ” means the articles of incorporation of the Company, as the same may be amended from time to time.  
 
1.3.6   Authorized Stock Proviso ” has the meaning set forth in Section 4.4.3 of this Agreement.
 
1.3.7   Bylaws ” means the bylaws of the Company, as the same may be amended from time to time.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE   2
 

 
1.3.8   Certificate of Designation ” means the certificate of the rights, preferences and privileges, subject to the limitations, with respect to the Series A Preferred Stock. The Certificate of Designation shall be in substantially the form of Exhibit A to this Agreement.
 
1.3.9   Closing   means the consummation of the transactions contemplated by this Agreement, all of which transactions shall be consummated contemporaneously with the Closing.
 
1.3.10   Closing Date ” means the date on which the Closing occurs.
 
1.3.11   Common Stock ” means the Company’s common stock, which is presently designated as the common stock, par value $.00002 per share. Pursuant to the Restated Certificate, the par value will be changed to $.001 per share.
 
1.3.12   Company’s Governing Documents ” means the Articles and Bylaws.
 
1.3.13   EBITDA ” means consolidated earnings before interest, taxes, depreciation and amortization, determined in accordance with GAAP.
 
1.3.14   Exempt Issuance means the issuance of (a) shares of Common Stock or options to employees, officers, directors of and consultants (other than consultants whose services relate to the raising of funds) of the Company pursuant to any stock or option plan that was or may be adopted by a majority of independent members of the Board of Directors of the Company or a majority of the members of a committee of independent directors established for such purpose, (b) securities upon the exercise of or conversion of any (i) securities issued hereunder and pursuant to the Registration Rights Agreement, the Notes, the Warrants and the Certificate of Designation, (ii) any other options, warrants or convertible securities which are outstanding on after completion of the Closing or (iii) securities issued pursuant to options and warrants issued under a plan adopted pursuant to (a) above, and (c) securities issued pursuant to acquisitions, licensing agreements, or other strategic transactions, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business which the Company’s board of directors believes is beneficial to the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
 
1.3.15   GAAP ” means United States generally accepted accounting principles consistently applied.
 
1.3.16   Material Adverse Effect ” means any adverse effect on the business, operations, properties or financial condition of the Company or any of its Subsidiaries that is material and adverse to the Company and its Subsidiaries taken as a whole and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company or any Subsidiary to perform any of its material obligations under this Agreement, the Registration Rights Agreement or the Warrants or to perform its obligations under any other material agreement.
 
1.3.17   Nevada Law ” shall mean the Nevada Corporation Law.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE   3
 

 
1.3.18   Note(s) ” shall have the meaning set forth in the introductory paragraph of this Agreement and shall be in substantially the form of Exhibit B to this Agreement.
 
1.3.19   Person ” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.
 
1.3.20   PRC Agreements ” shall mean the agreements between Yongle and the PRC Company.
 
1.3.21   PRC Company Stockholders ” shall mean the stockholders of the PRC Company, which, as of the date of this Agreement, are ____________________________.
 
1.3.22   Preferred Stock ” means the preferred stock, par value $.001 per share, as created by the Restated Certificate.
 
1.3.23   Proxy Statement ” means a proxy statement filed with the SEC pursuant to Section 14(a) of the 1934 Act which seeks stockholder approval of the Restated Certificate or an information statement pursuant to Section 14(c) of the 1934 Act advising stockholders that the holders of a majority of the shares of Common Stock have approved the Restated Certificate, whichever shall be appropriate.
 
1.3.24   Purchase Price ” means the $1,200,000 to be paid by the Investor to the Company for the Securities.
 
1.3.25   Registration Rights Agreement ” means the registration rights agreement between the Investor and the Company in substantially the form of Exhibit C to this Agreement.
 
1.3.26   Registration Statement ” means the registration statement under the 1933 Act to be filed with the SEC for the registration of the Shares pursuant to the Registration Rights Agreement.
 
1.3.27   Related Companies ” shall mean Sincere, Talent and the PRC Company, each of which is a “ Related Company .”
 
1.3.28   Restated Certificate ” means the restated certificate of incorporation which is in substantially the form of Exhibit D to this Agreement.
 
1.3.29   Securities ” means the Note, the shares of Series A Preferred Stock, the Warrants and the Shares.
 
1.3.30   SEC ” means the Securities and Exchange Commission.
 
1.3.31   SEC Documents ” means, at any given time, the Company’s latest Form 10-K or Form 10-KSB and all Forms 10-Q or 10-QSB and 8-K and all proxy statements or information statements filed between the date the most recent Form 10-K or Form 10-KSB was filed and the date as to which a determination is being made.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE   4
 

 
1.3.32   Series A Preferred Stock ” means the shares of Series A Preferred Stock having the rights, preferences and privileges and subject to the limitations set forth in the Certificate of Designation.
 
1.3.33   Shares ” means, collectively, the shares of Common Stock issued or issuable (i) upon conversion of the Notes or Series A Preferred Stock and (ii) upon exercise of the Warrants.
 
1.3.34   Subsidiary ” means an entity in which the Company and/or one or more other Subsidiaries directly or indirectly own either 50% of the voting rights or 50% of the equity interests.
 
1.3.35   Subsequent Financing ” means any offer and sale of shares of Preferred Stock or debt that is initially convertible into shares of Common Stock or otherwise senior or superior to the Series A Preferred Stock.
 
1.3.36   Total Shares ” means the number of shares of Common Stock as have been or would be issued upon conversion of the Notes and the Series A Preferred Stock and Warrants issuable upon conversion of the Notes. The number of Total Shares shall be adjusted to reflect any change in the conversion price of the Notes or Series A Preferred Stock and the expiration of any Warrants.
 
1.3.37   Transaction Documents ” means this Agreement, all Schedules and Exhibits attached hereto, the Notes, the Certificate of Designation, the Warrants, the Registration Rights Agreement, the Closing Escrow Agreement and all other documents and instruments to be executed and delivered by the parties in order to consummate the transactions contemplated hereby.
 
1.3.38   Unsold Shares ” means the difference between (a) the number of shares of Series A Preferred Stock which were initially issued upon conversion of the Notes and (b) the number of shares of Series A Preferred Stock, regardless of when such shares were issued, which have been converted into Common Stock with the Common Stock having been sold.
 
1.3.39   Warrants ” means the common stock purchase warrants in substantially the forms of Exhibits E-1 and E-2 to this Agreement.
 
1.4   References . All references in this Agreement to “herein” or words of like effect, when referring to preamble, recitals, article and section numbers, schedules and exhibits shall refer to this Agreement unless otherwise stated.
 
1.5   Value of Series A Preferred Stock . Wherever this Agreement provides for the delivery of shares of Series A Preferred Stock in satisfaction of an obligation under this Agreement, a share of Series A Preferred Stock shall have a value equal to the market price of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock
 
Article 2

SALE AND PURCHASE OF NOTES; PURCHASE PRICE
 
2.1   Sale of Notes.  
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE   5
 

 
Upon the terms and subject to the conditions set forth herein, and in accordance with applicable law, the Company agrees to sell to the Investor, and Investor agrees to purchase from the Company. The Purchaser Price shall be paid as follows: (a) at least $217,000 has been paid on behalf of the Company by the Investor, (b) $183,000 is payable at the closing, (c) $400,000 is payable on March 31, 2008 and (d) $400,000 is payable on June 30, 2008. At or prior to the Closing the Investor shall wire the that portion of the Purchase Price that is payable at closing to the Escrow Agent, who shall release the Purchase Price to the Company upon receipt of instructions from the Investor and the Company.
 
2.1.1   Except as expressly provided in the Certificate of Designation and the Warrants, an Investor shall not be entitled to convert the Notes or Series A Preferred Stock into shares of Common Stock or to exercise the Warrants to the extent that such conversion or exercise would result in beneficial ownership by the Investor and its Affiliates of more than 4.9% of the then outstanding number of shares of Common Stock on such date after giving effect to such conversion or exercise. For the purposes of this Agreement beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act, and Regulation 13d-3 thereunder. The limitation set forth in this Section 2.1.3 is referred to as the “ 4.9% Limitation .” As a result of the 4.9% Limitation, no Investor will have 5% of the voting power of the Company; provided, however, that this sentence shall not affect any of an Investor’s rights under the Certificate of Designation.
 
Article 3
 
CLOSING DATE AND DELIVERIES AT CLOSING
 
3.1   Closing Date . The Closing of the transactions contemplated by this Agreement, unless expressly determined herein, shall be held at the offices of the Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York, New York 10006, at 2:00 P.M. local time, on the Closing Date or on such other date and at such other place as may be mutually agreed by the parties, including closing by facsimile with originals to follow.
 
3.2   Deliveries by the Company . In addition to and without limiting any other provision of this Agreement, the Company agrees to deliver, or cause to be delivered, to the escrow agent under the Escrow Agreement, the following:
 
(a)   At or prior to Closing, an executed Agreement with all exhibits and schedules attached hereto;
 
(b)   At the Closing, Notes in the names of the Investor in the amounts set forth in Schedule A to this Agreement;
 
(c)   The executed Registration Rights Agreement;
 
(d)   Evidence that the Company has acquired all of the shares of Talent.
 
(e)   Executed disbursement instructions;
 
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(f)   Copies of all SEC correspondence since last Form 10-KSB and any correspondence which was issued prior to the last Form 10-KSB which has not been resolved to the satisfaction of the SEC.
 
(g)   Certifications in form and substance acceptable to the Company and the Investor from any and all brokers or agents involved in the transactions contemplated hereby as to the amount of commission or compensation payable to such broker or agent as a result of the consummation of the transactions contemplated hereby and from the Company or Investor, as appropriate, to the effect that reasonable reserves for any other commissions or compensation that may be claimed by any broker or agent have been set aside;
 
(h)   Management letter from the Company’s registered independent accounting firm or confirmation from such firm that no such letter were issued in connection with the Company’s most recent audit;
 
(i)   Evidence of approval of the Board of Directors of the Company of the Transaction Documents and the transactions contemplated hereby and thereby;
 
(j)   Evidence that the Restated Certificate has been approved by the directors, and that the board of directors has authorized the filing of the Proxy Statement with the SEC.
 
(k)   Good standing certificate from the Secretary of State of the State of Nevada;
 
(l)   Copy of the Company’s Articles, as currently in effect, certified by the Secretary of State of the State of Nevada;
 
(m)   An opinion from the Company’s PRC counsel that (i) each of the Related Companies is legally established and validly existing as an independent legal entity; (ii) each of the Related Companies is an independent legal person and none of them is exposed to liabilities incurred by the other party; (iii) the PRC Agreements constitute valid and binding obligations of the parties to such agreements, and (iv) each of the PRC Agreements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC;
 
(n)   Such other documents or certificates as shall be reasonably requested by Investor or their counsel; and
 
(o)   The Company must be current in its filings with the SEC, and the Company’s Common Stock must be trading on the OTC Bulletin Board.
 
3.3   Deliveries by Investor . In addition to and without limiting any other provision of this Agreement, the Investor agree to deliver, or cause to be delivered, to the Escrow Agent under the Escrow Agreement, the following:
 
(a)   A deposit from each Investor as to the Investor’s portion of the Purchase Price;
 
(b)   The executed Agreement with all Exhibits and Schedules attached hereto;
 
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(c)   The executed Registration Rights Agreement;
 
(d)   Executed disbursement instructions; and
 
(e)   Such other documents or certificates as shall be reasonably requested by the Company or its counsel.
 
3.4   Delivery of Original Documents . In the event any document provided to the other party in Paragraphs 3.2 and 3.3 herein are provided by facsimile, the party shall forward an original document to the other party within seven (7) business days.
 
3.5   Further Assurances . The Company and each Investor shall, upon request, on or after the Closing Date, cooperate with each other (specifically, the Company shall cooperate with the Investor, and each Investor shall cooperate with the Company) by furnishing any additional information, executing and delivering any additional documents and/or other instruments and doing any and all such things as may be reasonably required by the parties or their counsel to consummate or otherwise implement the transactions contemplated by this Agreement.
 
3.6   Waiver . An Investor may waive any of the requirements of Section 3.2 of this Agreement, and the Company may waive any of the provisions of Section 3.3 of this Agreement. The Investor may also waive any of the requirements of the Company under the Escrow Agreement.
 
Article 4
 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company represents and warrants to the Investor as of the date hereof and as of Closing Date (which warranties and representations shall survive the Closing regardless of any examinations, inspections, audits and other investigations the Investor have heretofore made or may hereinafter make with respect to such warranties and representations) as follows:
 
4.1   Organization and Qualification . Each of the Company, each Subsidiary and each of the Related Companies is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and is duly qualified to do business in any other jurisdiction by virtue of the nature of the businesses conducted by it or the ownership or leasing of its properties, except where the failure to be so qualified will not, when taken together with all other such failures, have a Material Adverse Effect on the business, operations, properties, assets, financial condition or results of operation of the Company, its Subsidiaries and the Related Companies taken as a whole.
 
4.2   Company’s Governing Documents . The complete and correct copies of the Company’s Governing Documents (a) have been provided to the Investor and (b) have been filed with the SEC in accordance with the regulations of the SEC and (c) will be in full force and effect on the Closing Date.
 
4.3   Capitalization .
 
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4.3.1   The authorized and outstanding capital stock of the Company as of the date of this Agreement and as adjusted to reflect the issuance and sale of the Securities pursuant to this Agreement is set forth in Schedule 4.3.l to this Agreement. Schedule 4.3.1 lists all shares and potentially dilutive events, including shares issuable pursuant to employment, consulting and other services agreements, acquisition agreements, options and equity-based incentive plans, debt securities, convertible securities, financing or business relationships as well as each agreement, plan, arrangement or understanding pursuant to which any shares of any class of capital stock may be issued, a copy of each of which has been provided to the Investor.
 
4.3.2   All shares of capital stock described above to be issued have been duly authorized and when issued, will be validly issued, fully paid and non-assessable and free of preemptive rights.
 
4.3.3   Except pursuant to this Agreement and as set forth in Schedule 4.3.1, there are no outstanding options, warrants, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock of the Company, or agreements, understandings or arrangements to which the Company is a party, or by which the Company is or may be bound, to issue additional shares of its capital stock or options, warrants, scrip or rights to subscribe for, calls or commitment of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of any class of its capital stock. The Company agrees to inform the Investor in writing of any additional warrants granted prior to the Closing Date.
 
4.3.4   Neither of the PRC Company, nor ____________ has any agreement or understanding, whether formal or informal, which could result in the issuance of any equity securities or right to purchase or otherwise acquire equity securities of such corporation.
 
4.4   Authority .
 
4.4.1   The Company has all requisite corporate power and authority to execute and deliver this Agreement, Notes and the Securities issuable upon conversion of the Notes, the Registration Rights Agreement, the Closing Escrow Agreement and any other Transaction Documents to which the Company is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement, the Notes and the Securities issuable upon conversion of the Notes, the Registration Rights Agreement, the Closing Escrow Agreement and any other Transaction Documents to which the Company is a party have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company is necessary to authorize this Agreement or to consummate the transactions contemplated hereby and thereby except as disclosed in this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditors’ rights and except that any the granting of equitable relief is in the discretion of the court.
 
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4.4.2   The Note, when issued pursuant to this Agreement, constitutes the valid, binding and obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditors’ rights and except that any the granting of equitable relief is in the discretion of the court. The Restated Certificate has been approved by the board of directors. Upon the filing of the Restated Certificate and the Certificate of Designation, the equity Securities issuable upon conversion of the Note, when so issued, will be duly and validly authorized and issued, fully paid and non-assessable and the Warrants will be the valid and binding obligations of the Company, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditors’ rights and except that any the granting of equitable relief is in the discretion of the court. All such Securities, when so issued, will be free and clear of all liens, charges, claims, options, pledges, restrictions, preemptive rights, rights of first refusal and encumbrances whatsoever (other than those incurred by the Investor).
 
4.4.3   Notwithstanding any contrary representations and warranties, no representation is made with respect to the ability of any Investor to convert the Note or, following the filing of the Restated Certificate and the Certificate of Designation, the Series A Preferred Stock or exercise any Warrant if and to the extent that the conversion price of the Note or the Series A Preferred Stock, as defined in the Note or the Certificate of Designation, or the number of Shares issuable upon exercise of the Warrants would result in the issuance of a number of shares of Common Stock which is greater than the amount by which the authorized Common Stock exceeds the sum of the outstanding Common Stock and the shares of Common Stock reserved for issuance pursuant to outstanding agreements and outstanding options, warrants, rights, convertible securities and other securities upon the exercise or conversion of which or pursuant to the terms of which additional shares of Common Stock may be issuable (the foregoing proviso being referred to as the “ Authorized Stock Proviso ”).
 
4.4.4   Each Related Company is legally established, and validly existing as an independent legal entities; (ii) each Related Company is an independent legal person and none of them is exposed to liabilities incurred by the other party; (iii) the PRC Agreements constitute valid and binding obligations of the parties to such agreements, and (iv) each of the PRC Agreements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC.
 
4.5   No Conflict; Required Filings and Consents . Neither the execution and delivery of this Agreement by the Company nor the issuance of the Notes and other Transaction Documents, and the performance by the Company of its obligations hereunder and thereunder will: (i) conflict with or violate the Company’s or any Subsidiary’s Governing Instruments; (ii) conflict with, breach or violate any federal, state, foreign or local law, statute, ordinance, rule, regulation, order, judgment or decree (collectively, “ Laws ”) in effect as of the date of this Agreement and applicable to the Company or any Subsidiary; or (iii) result in any breach of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to any other entity any right of termination, amendment, acceleration or cancellation of, require payment under, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties or assets is bound, other than such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens that would not, in the aggregate, have a Material Adverse Effect except to the extent that stockholder approval may be required as a result of the Authorized Stock Proviso, in which event, the Company will seek stockholder approval to an increase in the authorized Common Stock sufficient to enable the Company to be in compliance with this Section 4.5. Neither the execution of this Agreement nor the consummation of the terms contemplated by this Agreement will impair Investor’s rights under the PRC Agreements.
 
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4.6   Reports and Financial Statements .
 
4.6.1   The consolidated financial statements of the Related Companies for the years ended July 31, 2007 and 2006, including consolidated balance sheets, statements of operations, stockholders’ equity and cash flows, together with the notes thereon, certified by  Amisano Hanson, Chartered Accountants  (“Amisano ”), the Company’s independent registered accounting firm, together with the unaudited consolidated financial statements for the three months ended October 31, 2007 and 2006, which have been reviewed by Amisano have been delivered to the Investor. Each of the consolidated balance sheets fairly presents the financial position of the Related Companies, as of its date, and each of the consolidated statements of income, stockholders’ equity and cash flows (including any related notes and schedules thereto) fairly presents the results of operations, cash flows and changes in stockholders’ equity, as the case may be, of the Related Companies for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved. Amisano is independent as to the Company and each of the Related Companies in accordance with the rules and regulations of the SEC. The books and records of the Related Companies have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transaction. Neither the Company nor any of the Related Companies has received any advice from Amisano   to the effect that there is any significant deficiency or material weakness in the Company’s or any Related Party’s controls or recommending any corrective action on the part of the Company or any Related Party. Neither the Company nor any Related Party has any contingent liability which is not reflected in the financial statements. To the extent that the consolidated financial statements of Amisano do not include the financial condition or results of operations of the PRC Company, separate statements for the PRC Company, conforming to the delivery requirements of this Section 4.6.1, shall have been delivered.
 
4.6.2   The Company’s Form 10-KSB for the year ended July 31, 2007, contains the audited financial statements of the Company, certified by Amisano Hanson, Chartered Accountants , (“Amisano ”), the Company’s independent registered accounting firm, for the years ended July 31, 2007 and 2006. The balance sheets fairly present the financial position of the Company, as of their respective dates, and each of the consolidated statements of income, stockholders’ equity and cash flows (including any related notes and schedules thereto) fairly presents the results of operations, cash flows and changes in stockholders’ equity, as the case may be, of the Company for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved. Amisano is independent as to the Company in accordance with the rules and regulations of the SEC. The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transaction. The Company has not received any letters of comments from the SEC relating to any filing made by the Company with the SEC which has not been addressed by an amended filing, and each amended filing fully responds to the questions raised by the staff of the SEC. The Company maintains disclosure controls and procedures that are effective to ensure that information required to be disclosed by the Company in its annual and quarterly reports filed with the SEC is accumulated and communicated to the Company’s management, including its principal executive and financial officers as appropriate, to allow timely decisions regarding required disclosure. There were no significant changes in the Company’s internal controls or other factors that could significantly affect such controls subsequent to December 31, 2006. The Company has not received any advice from Amisano to the effect that there is any significant deficiency or material weakness in the Company’s controls or recommending any corrective action on the part of the Company or any Subsidiary. The Company does not have any contingent liabilities.
 
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4.7   Compliance with Applicable Laws . Neither the Company nor any Subsidiary nor any Related Party is in violation of, or, to the knowledge of the Company is under investigation with respect to or has been given notice or has been charged with the violation of, any Law of a governmental agency, except for violations which individually or in the aggregate do not have a Material Adverse Effect.
 
4.8   Brokers . Except as set forth on Schedule 4.8, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.
 
4.9   SEC Documents . The Investor acknowledge that the Company is a publicly held company and has made available to the Investor upon request true and complete copies of any requested SEC Documents. The Company has registered its Common Stock pursuant to Section 12(d) of the 1934 Act, and the Common Stock is quoted and traded on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. The Company has received no notice, either oral or written, with respect to the continued quotation or trading of the Common Stock on the OTC Bulletin Board. The Company has not provided to the Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act, and rules and regulations of the SEC promulgated thereunder and the SEC 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 in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
 
4.10   Litigation . To the knowledge of the Company, no litigation, claim, or other proceeding before any court or governmental agency is pending or to the knowledge of the Company, threatened against the Company, the prosecution or outcome of which may have a Material Adverse Effect.
 
4.11   Employment Agreements . Except as disclosed in the Company’s Form 10-KSB for the year ended July 31, 2006 or as otherwise disclosed pursuant to this Agreement, the Company does not have any agreement or understanding with any officer or director, and there has been no material change in the compensation of any officer and director from that shown in said Form 10-KSB.
 
4.12   Exemption from Registration . Subject to the accuracy of the Investor’ representations in Article V of this Agreement, except as required pursuant to the Registration Rights Agreement, the sale of the Note by the Company to the Investor or the issuance of Series A Preferred Stock or Common Stock and Warrants will not require registration under the 1933 Act. When issued upon conversion of the Notes or the Series A Preferred Stock, as the case may be, or upon exercise of the Warrants in accordance with their terms, the Shares underlying the Preferred Stock and the Warrants will be duly and validly authorized and issued, fully paid, and non-assessable. The Company is issuing Notes, and upon conversion of the Notes, the Preferred Stock and the Warrants in accordance with and in reliance upon the exemption from securities registration afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act, and/or Section 4(2) of the 1933 Act.
 
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4.13   No General Solicitation or Advertising in Regard to this Transaction . Neither the Company nor any of its Affiliates nor, to the knowledge of the Company, any Person acting on its or their behalf (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D as promulgated by the SEC under the 1933 Act) or general advertising with respect to the sale of the Preferred Stock or Warrants, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Notes, Series A Preferred Stock, Common Stock or Warrants, under the 1933 Act, except as required herein.
 
4.14   No Material Adverse Effect . Since July 31, 2007, no event or circumstance resulting in a Material Adverse Effect has occurred or exists with respect to the Company, any Subsidiary or any Related Party. No material supplier or customer has given notice, oral or written, that it intends to cease or reduce the volume of its business with the Company, any Subsidiary or any Related Party from historical levels. Since July 31, 2007, no event or circumstance has occurred or exists with respect to the Company, any Subsidiary or any Related Party, that, under any applicable law, rule or regulation, requires or would require, public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in writing to the Investor.
 
4.15   Material Non-Public Information . The Company has not disclosed to the Investor any material non-public information that (i) if disclosed, would reasonably be expected to have a material effect on the price of the Common Stock or (ii) according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed.
 
4.16   Internal Controls And Procedures . The Company and its Subsidiaries and each of the Related Parties maintain books and records and internal accounting controls which provide reasonable assurance that (i) all transactions to which the Company or any Subsidiary or any Related Party is a party or by which their respective properties are bound are executed with management’s authorization; (ii) the recorded accounting of the Company’s, any Subsidiary’s or any Related Party’s consolidated assets is compared with existing assets at regular intervals; (iii) access to the Company’s, any Subsidiary’s or any Related Party’s consolidated assets is permitted only in accordance with management’s authorization; and (iv) all transactions to which the Company or any Subsidiary or any Related Party is a party or by which any of their respective properties are bound are recorded as necessary to permit preparation of the financial statements of the Company and the Related Companies individually (unless the financial condition and results of operations and cash flows are consolidated with those of the Company under GAAP) in accordance with GAAP.
 
4.17   Full Disclosure . No representation or warranty made by the Company in this Agreement and no certificate or document furnished or to be furnished to the Investor pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.
 
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Article 5  
 
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
 
Each Investor severally and not jointly represents and warrants to the Company that:
 
5.1   Concerning the Investor . The state in which any offer to purchase shares hereunder was made or accepted by such Investor is the state shown as such Investor’s address. The Investor was not formed for the purpose of investing solely in the Securities.
 
5.2   Authorization and Power . The Investor has the requisite power and authority to enter into and perform this Agreement and to purchase the securities being sold to it hereunder. The execution, delivery and performance of this Agreement by the Investor and the consummation by the Investor of the transactions contemplated hereby have been duly authorized by all necessary partnership action where appropriate. This Agreement, the Registration Rights Agreement and the Closing Escrow Agreement have been duly executed and delivered by such Investor and at the Closing shall constitute valid and binding obligations of such Investor enforceable against the Investor in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
 
5.3   No Conflicts . The execution, delivery and performance of this Agreement and the consummation by such Investor of the transactions contemplated hereby or relating hereto do not and will not (i) result in a violation of such Investor’s charter documents or bylaws where appropriate or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument to which such Investor is a party, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Investor or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a Material Adverse Effect on such Investor). The Investor is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of such Investor’s obligations under this Agreement or to purchase the securities from the Company in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, the Investor is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.
 
5.4   Financial Risks . Such Investor acknowledges that such Investor is able to bear the financial risks associated with an investment in the securities being purchased by such Investor from the Company and that it has been given full access to such records of the Company and its Subsidiaries and to the officers of the Company and its Subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation. Such Investor is capable of evaluating the risks and merits of an investment in the securities being purchased by the Investor from the Company by virtue of its experience as an investor and its knowledge, experience, and sophistication in financial and business matters and the Investor is capable of bearing the entire loss of its investment in the securities being purchased by the Investor from the Company.
 
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5.5   Accredited Investor . The Investor is (i) an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and (6), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the securities being purchased by the Investor from the Company.
 
5.6   Brokers . No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or Commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Investor. Such Investor understands that any obligations under agreements or arrangements with brokers disclosed in Schedule 4.8 are obligations of the Company.
 
5.7   Knowledge of Company . Such Investor and such Investor’s advisors, if any, have been, upon request, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the securities being purchased by such Investor from the Company. Such Investor and such Investor’s advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries .
 
5.8   Risk Factors . Each Investor understands that such Investor’s investment in the securities being purchased by such Investor from the Company involves a high degree of risk. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the securities being purchased by the Investor from the Company. Such Investor warrants that such Investor is able to bear the complete loss of such Investor’s investment in the securities being purchased by the Investor from the Company.
 
5.9   Full Disclosure . No representation or warranty made by such Investor in this Agreement and no certificate or document furnished or to be furnished to the Company pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. Except as set forth or referred to in this Agreement, Investor does not have any agreement or understanding with any person relating to acquiring, holding, voting or disposing of any equity securities of the Company.
 
Article 6  
 
C OVENANTS OF THE COMPANY
 
6.1   Registration Rights . The Company shall cause the Registration Rights Agreement to remain in full force and effect according to the provisions of the Registration Rights Agreement and the Company shall comply in all material respects with the terms thereof. The Company does not have any agreement or obligation which would enable any Person to include securities in any registration statement required to be filed on behalf of the Investor pursuant to the Registration Rights Agreement and will not take any action which will give any Person any right to include securities in any such registration statement. Except as contemplated by the Registration Rights Agreement, no Person has any demand or piggyback registration right with respect to any securities of the Company.
 
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6.2   Reservation of Common Stock . As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, the maximum number of shares of Common Stock for the purpose of enabling the Company to issue the shares of Common Stock underlying the Notes, Series A Preferred Stock and Warrants.
 
6.3   Compliance with Laws . The Company hereby agrees to comply and to cause each Subsidiary and each Related Party to comply in all respects with the Company’s reporting, filing and other obligations under the Laws.
 
6.4   Exchange Act Registration . The Company will continue its obligation to report to the SEC under Section 12 of the 1934 Act and will use its best efforts to comply in all respects with its reporting and filing obligations under the 1934 Act, and will not take any action or file any document (whether or not permitted by the 1934 Act or the rules thereunder) to terminate or suspend any such registration or to terminate or suspend its reporting and filing obligations under the 1934 until the Investor have disposed of all of their Shares.
 
6.5   Corporate Existence; No Conflicting Agreements . The Company will take all steps necessary to preserve and continue the corporate existence of the Company. The Company shall not enter into any agreement, the terms of which agreement would restrict or impair the right or ability of the Company to perform any of its obligations under this Agreement or any of the other agreements attached as exhibits hereto.
 
6.6   Listing, Securities Exchange Act of 1934 and Rule 144 Requirements .
 
6.6.1   The Company shall not take any action which would cause its Common Stock not to be traded on the OTC Bulletin Board, except that the Company may list the Common Stock on the Nasdaq Stock Market or the American or New York Stock Exchange if it meets the applicable listing requirements. If, for any time after the Closing, the Company is no longer in compliance with this Section 6.6.1, then the Company shall pay to the Investor as liquidated damages and not as a penalty, an amount equal to twelve percent (12%) per annum, based on the lesser of (a) the Purchase Price or (b) that percentage of the Purchase Price which the Unsold Shares bears to the number of shares of Common Stock initially issuable upon conversion of the Series A Preferred Stock sold pursuant to this Agreement. The Unsold Shares shall mean shares of Series A Preferred Stock with respect to which both (i) the Series A Preferred Stock has not been converted and (ii) the underlying shares of Common Stock have not been sold or otherwise transferred pursuant to a registration statement or Rule 144. Such damages shall be payable quarterly on the tenth (10 th ) day of the following calendar quarter, and shall cease at the time the Company begins complying with the provisions of this Section 6.6.1.
 
6.6.2   Liquidated damages payable pursuant to Sections 6.6.1 shall be payable in shares of Series A Preferred Stock or cash, as the Investor may request. In no event shall the total liquidated damages payable pursuant to Sections 6.6.1, whether in cash or Series A Preferred Stock, exceed in the aggregate twelve percent (12%) of the Purchase Price of the Unsold Shares that are outstanding as of the date on which a computation is being made.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE   16
 


6.7   Independent Directors .
 
6.7.1   The Company shall have caused the appointment of the majority of the board of directors, which shall not consist of more than seven members, to be independent directors, as defined by the rules of the Nasdaq Stock Market, not later than the ninety (90) days after the Closing Date.
 
6.7.2   If, at any time subsequent to ninety (90) days after the Closing Date until the earlier of (a) three years from the Closing or (b) the Restriction Termination Date at 90%, the board of directors shall not be composed of a majority of independent directors:
 
6.7.2.1   for a reason other than for an Excused Reason, the Company shall have 60 days to take such steps as are necessary so that a majority of the Company’s directors are independent directors, and
 
6.7.2.2   for an Excused Reason, the Company shall have 75 days from the date that the Company becomes aware of the event (or the last event if there are more than one such event) giving rise to the Excused Reason, to take such steps as are necessary so that a majority of the Company’s directors are independent directors.
 
6.7.3   The term “Excused Reason” shall mean the death or resignation of an independent director or the occurrence of an event whereby an independent director ceases to be independent.
 
6.7.4   From and after the Closing Date, the Company shall have a chief financial officer who speaks and understands both English and Chinese and is familiar with GAAP (a “qualified CFO”), who may serve on a part time basis until three months after the Closing Date, by which time the Company shall have a full-time qualified CFO. In the event that at any time subsequent to the Closing Date the Company fails to have a qualified CFO, the Company shall, within 60 days from the date that the Company ceases to have a qualified CFO, hire a qualified CFO. If the Company shall not be able to hire a qualified CFO promptly upon the resignation or termination of employment of the former chief financial officer, the Company may engage an accountant or accounting firm to perform the duties of the chief financial officer until a qualified CFO can be hired. In no event shall the Company either (i) fail to file an annual, quarter or other report in a timely manner because of the absence of a qualified CFO, or (ii) not have a person who can make the statements and sign the certifications required to be filed in an annual or quarterly report under the 1933 Act.
 
6.8   Independent Directors; Committees.     No later than ninety (90) days after the Closing Date, the Company will have an audit committee comprised solely of not less than three independent directors and a compensation committee comprised of not less than three directors, a majority of whom are independent directors. Further, if the Company shall form an executive or nominating committee or any other committee, a majority of the members of such committee shall be independent directors. If at any time subsequent to the Closing Date during the period when the Company is required to have a majority of independent directors pursuant to Section 6.10 of this Agreement, independent directors do not comprise all of the members of the audit committee and a majority of the members of the compensation committee or any other committee within the grace periods provided in Section 6.10, the Company shall pay to the Investor, as liquidated damages and not as a penalty, an amount equal to twelve percent (12%) per annum of the Purchase Price of the then outstanding Series A Preferred Stock payable in the manner and at the time provided in Section 6.10, such payment shall be based on the number of days that such condition exists. The parties agree that the only damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages. Notwithstanding the foregoing, no liquidated damages shall be payable pursuant to this Section 6.11 during any period for which liquidated damages are payable pursuant to Section 6.10.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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6.9   Right of First Refusal .
 
6.9.1   Until the earlier of (i) three years from the date of this Agreement or (ii) such time as the Investor, as a group, cease to own at least five percent (5%) of the total number of shares of Common Stock that were issued or are issuable upon conversion of Series A Preferred Stock that were initially issued to the Investor, in the event that the Company seeks to raise additional funds through a private placement of its securities (a “ Proposed Financing ”), other than Exempt Issuances, each Investor shall have the right to participate in any subsequent funding by the Company of the offering price on a pro rata basis, based on the percentage that (a) the number of such Investor’s Percentage Shares, without regard to the 4.9% Limitation but excluding shares of Common Stock issuable upon exercise of Warrants, bears to (b) the total number of shares of Common Stock outstanding plus the number of Shares issuable upon conversion of the Series A Preferred Stock and any other series of convertible preferred stock or debt securities, without regard to the 4.9% Limitations any other limitations on exercise such other convertible preferred stock or debt securities. This Section 6.13 shall apply to each such offering based on the total purchase price of the securities being offered by the Company. This right is personal to the Investor and is not transferable, whether in connection with the sale of stock or otherwise.
 
6.9.2   The terms on which the Investor shall purchase securities pursuant to Proposed Financing shall be the same as such securities are purchased by other Investor. The Company shall give the Investor the opportunity to participate in the offering by giving the Investor not less than ten (10) days notice setting forth the terms of the Proposed Financing. In the event that the terms of the Proposed Financing are changed in a manner which is more favorable to the potential investor, the Company shall provide the Investor, at the same time as the notice is provided to the other potential Investor, with a new ten (10) day notice setting forth the revised terms that are provided to the other potential Investor.
 
6.9.3   In the event that the Investor does not exercise its right to participate in the Proposed Financing within the time limits set forth in Section 6.13.2 of this Agreement, the Company may sell the securities in the Proposed Financing at a price and on terms which are no more favorable to the Investor than the terms provided to the Investor. If the Company subsequently changes the price or terms so that the price is more favorable to the Investor or so the terms are more favorable to the Investor, the Company shall provide the Investor with the opportunity to purchase the securities on the revised terms in the manner set forth in Section 6.13.2 of this Agreement.
 
6.10   Price Adjustment . From the Closing Date until such time as the Restriction Termination Date, except for Exempt Issuances, as to which this Section 6.10 does not apply, if the Company closes on the sale or issuance of Common Stock at a price, or warrants, options, convertible debt or equity securities with a exercise price per share or exercise price per share which is less than the Conversion Price, as defined in the Note and the Certificate of Designation, then in effect (such lower sales price, conversion or exercise price, as the case may be, being referred to as the “Lower Price”), the Conversion Price in effect from and after the date of such transaction shall be reduced on a formula basis as follows: The Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to such issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate consideration received or receivable for the issuance of such additional shares would purchase at the Conversion Price then in effect, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares (including the exercise or conversion of all options, warrants and other convertible securities). For purpose of determining the exercise price of warrants issued by the Company, the price, if any, paid per share for the warrants shall be added to the exercise price of the warrants. A similar provision shall be included in the Warrants..
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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6.11   Restated Certificate.   The Company’s board of directors has approved the Restated Certificate. The Company shall promptly, but not later than thirty (30) days after the Closing Date, file the Proxy Statement with the SEC, and shall mail the Proxy Statement to stockholders within five (5) business days after the SEC has completed its review of the Proxy Statement, of, if the SEC does not review the Proxy Statement, within fifteen (15) business days after the Proxy Statement is filed with the SEC. The Company shall schedule an annual or special meeting of stockholders as soon as possible, but not later than twenty five (25) days after the Proxy Statement is mailed to stockholders. The Company shall file the Restated Certificate with the Secretary of State of the State of Nevada promptly, but not later than three (3) business days after the meeting of stockholders at which the Restated Certificate is approved. [names] each agree to vote in favor of the Restated Certificate.
 
6.12   No Outside Interests . Until the Restriction Termination Date, the Company’s chairman and chief executive officer will devote their full time and attention to the business of the Company and shall not have any business interests or activities other than as chairman or chief executive officer, as the case may be, except that he or she may devote time, which shall not be material and which shall not interfere with his or her duties as the Company’s chairman or chief executive officer, as the case may be, to personal passive investments and charitable and community activities. Furthermore, none of the PRC Company Stockholders shall have any interests or engage in any business which is directly or indirectly competitive with that of the Company or any Related Party.
 
Article 7  
 
COVENANTS OF THE INVESTOR
 
Each Investor, severally and not jointly, covenants and agrees with the Company as follows:
 
7.1   Compliance with Law . Each Investor’s trading activities with respect to shares of the Company’s Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and rules and regulations of any public market on which the Company’s Common Stock is listed.
 
7.2   Transfer Restrictions .   The Investor’s acknowledge that (a) the Preferred Stock, Warrants and Shares underlying the Preferred Stock and Warrants have not been registered under the provisions of the 1933 Act, and may not be transferred unless (i) subsequently registered thereunder or (ii) the 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 Preferred Stock, Warrants and Shares underlying the Notes and Warrants to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; and (b) any sale of the Shares underlying the Preferred Stock and Warrants made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such 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. Each Investor agrees that until the Restriction Termination Date it will not sell the Common Stock short or effect any sales based upon market-based metrics.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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7.3   Restrictive Legend .   Each Investor acknowledges and agrees that the Securities and the Shares shall bear a restrictive legend and a stop-transfer order may be placed against transfer of any such Securities except that the requirement for a restrictive legend shall not apply to Shares sold pursuant to a current and effective registration statement or a sale pursuant Rule 144 or any successor rule.
 
Article 8  
 
CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS
 
The obligation of the Company to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to Closing Date, of the following conditions:
 
8.1   No Termination . This Agreement shall not have been terminated pursuant to Article 10 hereof.
 
8.2   Representations True and Correct . The representations and warranties of the Investor contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on as of the Closing Date.
 
8.3   Compliance with Covenants . The Investor shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied by it prior to or at the Closing Date.
 
8.4   No Adverse Proceedings . On the Closing Date, no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.
 
Article 9  
 
CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS
 
The obligation of the Investor to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to Closing Date unless specified otherwise, of the following conditions:
 
9.1   No Termination . This Agreement shall not have been terminated pursuant to Article 10 hereof.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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9.2   Representations True and Correct . The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on as of the Closing Date.
 
9.3   Compliance with Covenants   . The Company shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied by it prior to or at the Closing Date.
 
9.4   No Adverse Proceedings . On the Closing Date, no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.
 
Article 10    
 
TERMINATION, AMENDMENT AND WAIVER
 
10.1   Termination . This Agreement may be terminated at any time prior to the Closing Date
 
10.1.1   by mutual written consent of the Investor and the Company;
 
10.1.2   by the Company upon a material breach of any representation, warranty, covenant or agreement on the part of any Investor set forth in this Agreement, or any Investor upon a material breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company or the Investor, respectively, shall have become untrue, in either case such that any of the conditions set forth in Article 8 or Article 9 hereof would not be satisfied (a “ Terminating Breach ”), and such breach shall, if capable of cure, not have been cured within five (5) business days after receipt by the party in breach of a notice from the non-breaching party setting forth in detail the nature of such breach.
 
10.2   Effect of Termination . Except as otherwise provided herein, in the event of the termination of this Agreement pursuant to Section 10.1 hereof, there shall be no liability on the part of the Company or any Investor or any of their respective officers, directors, agents or other representatives and all rights and obligations of any party hereto shall cease.
 
10.3   Amendment and Waiver .
 
10.3.1   This Agreement may be amended by the parties hereto any time prior to the Closing Date by an instrument in writing signed by the parties hereto, subject to the provisions of Section 10.3.3; provided, however that the 4.9% Limitation may not be amended or waived.
 
10.3.2   At any time prior to the Closing Date, the Company or the Investor, as appropriate, may: (a) extend the time for the performance of any of the obligations or other acts of other party or; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto which have been made to it or them; or (c) waive compliance with any of the agreements or conditions contained herein for its or their benefit other than the 4.9% Limitation which may not be waived. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby, subject to Section 10.3.3 of this Agreement.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE 2 1
 

 
10.3.3   Any amendment or waiver signed by the holders of 75% of the principal amount of the Note or, after the issuance of the Series A Preferred Stock, 75% of the holders of the then outstanding shares of Series A Preferred Stock, or, after the conversion of all shares of Series A Preferred Stock, the holders of Warrant to purchase a majority of the shares of Common Stock then issuable upon exercise of the Warrants, shall be deemed to be approval of the Investor; provided, that any amendment or waiver which changes the conversion rate or conversion price of the Notes or Series A Preferred Stock or the exercise price of the Warrants shall require the approval of all of the holders of the Warrants.
 
Article 11  
 
GENERAL PROVISIONS
 
11.1   Transaction Costs Except as otherwise provided herein, each of the parties shall pay all of his or its costs and expenses (including attorney fees and other legal costs and expenses and accountants’ fees and other accounting costs and expenses) incurred by that party in connection with this Agreement.
 
11.2   Indemnification . The Investor agrees to indemnify, defend and hold the Company (following the Closing Date) and its officers and directors harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out of or result from any breach of this Agreement by the Investor or failure by the Investor to perform with respect to the representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement. The Company agrees to indemnify, defend and hold the Investor (following the Closing Date) harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out of, result from or relate to any breach of this Agreement or failure by the Company to perform with respect to the representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement. In no event shall the Company or the Investor be entitled to recover consequential or punitive damages resulting from a breach or violation of this Agreement nor shall any party have any liability hereunder in the event of gross negligence or willful misconduct of the indemnified party. In the event of the failure of the Company to issue the Series A Preferred Stock and Warrants in violation of the provisions of this Agreement, the Investor, as their sole remedy, shall be entitled to pursue a remedy of specific performance upon tender into the Court an amount equal to the Purchase Price hereunder. The indemnification by the Investor shall be limited to $50,000.00. This Section 11.2 shall not relate to indemnification under the Registration Rights Agreement.
 
11.3   Headings. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
 
11.4   Entire Agreement. This Agreement (together with the Schedule, Exhibits, Warrants and documents referred to herein) constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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11.5   Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:
 
If to the Company :
 
Achievers Magazine Inc.
c/o Xinghe Xingyong Carbon Co., Ltd.
787 Xicheng Wai
Chengguantown
Xinghe County
Inner Mongolia, China      
Attention: Dengyong Jin, CEO  
Fax: 86-0474-7209799      
 
With a copy to :
 
Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006
Attention: Asher S. Levitsky PC
E-mail: alevitsky@srff.com
Fax: (212) 930-9725
 
If to Investor :
 
XingGuang Investment Corporation Limited
#413 2731 Long Hunan Road
Shanghai 201315
E-mail: xingguangcn@gmail.com
Fax: 86-21-6819-7920  
 
11.6   Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any such term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
 
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ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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11.7   Binding Effect. All the terms and provisions of this Agreement whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective administrators, executors, legal representatives, heirs, successors and assignees.
 
11.8   Preparation of Agreement. This Agreement shall not be construed more strongly against any party regardless of who is responsible for its preparation. The parties acknowledge each contributed and is equally responsible for its preparation.   In resolving any dispute regarding, or construing any provision in, this Agreement, there shall be no presumption made or inference drawn because of the drafting history of the Agreement, or because of the inclusion of a provision not contained in a prior draft or the deletion or modification of a provision contained in a prior draft.
 
11.9   Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to applicable principles of conflicts of law.
 
11.10   Jurisdiction; Waiver of Jury Trial . If any action is brought among the parties with respect to this Agreement or otherwise, by way of a claim or counterclaim, the parties agree that in any such action, and on all issues, the parties irrevocably waive their right to a trial by jury. Exclusive jurisdiction and venue for any such action shall be the federal and state courts situated in the City, County and State of New York. In the event suit or action is brought by any party under this Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed that the prevailing party shall be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or appellate court if such party prevails on substantially all issues in dispute.
 
11.11 Preparation and Filing of Securities and Exchange Commission filings . The Investor shall reasonably assist and cooperate with the Company in the preparation of all filings with the SEC after the Closing Date due after the Closing Date.
 
11.12   Further Assurances, Cooperation . Each party shall, upon reasonable request by the other party, execute and deliver any additional documents necessary or desirable to complete the transactions herein pursuant to and in the manner contemplated by this Agreement. The parties hereto agree to cooperate and use their respective best efforts to consummate the transactions contemplated by this Agreement.
 
11.13   Survival . The representations, warranties, covenants and agreements made herein shall survive the Closing of the transaction contemplated hereby.
 
11.14   Third Parties . Except as disclosed in this Agreement, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective administrators, executors, legal representatives, heirs, successors and assignees. Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement.
 
11.15   Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall nay single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
 
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ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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11.16   Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.  
 
[SIGNATURES ON FOLLOWING PAGE]
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
PAGE 25


 
IN WITNESS WHEREOF , the Investor and the Company have as of the date first written above executed this Agreement.
 
THE COMPANY:
 
ACHIEVERS MAGAZINE INC.
 
 
/s/  Dengyong Jin
      Dengyong Jin, CEO    
 
INVESTOR:
 
XINGGUANG INVESTMENT CORPORATION LIMITED
 
 
By: /s/ Xiangxin Sun                    
Name: Xiangxin Sun
Title: President
 
SECURITIES PURCHASE AGREEMENT BETWEEN
ACHIEVERS MAGAZINE INC. AND XINGGUANG INVESTMENT CORPORATION LIMITED
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Schedule A



Schedule 4.3.1
[Note to Vintage: Insert Excell spreadsheet here]
 
 
 

 
 
Exhibit A

[See Exhibit 99.11]

Exhibit B

[See Exhibit 4.1]

Exhibit C

[See Exhibit 99.2]

Exhibit D

[See Exhibit 99.12]

Exhibit E-1

[See Exhibit 99.13]

Exhibit E-2

[See Exhibit 99.14]
 

 
Exhibit C
 
REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (the “ Agreement ”) is made and entered into as of the 14 th day of December, 2007, by and among Achievers Magazine Inc., a Nevada corporation (the “ Company ”), and Achievers Magazine Inc., a Nevada corporation, and XingGuang Investment Corporation Limited , a British Virgin Islands corporation (the “ Investor ”). Unless defined otherwise, capitalized terms herein shall have the identical meaning as in the Securities Purchase Agreement of even date herewith (the “ Purchase Agreement ”), by and among the Company and the Investor.
 
PRELIMINARY STATEMENT

WHEREAS , pursuant to the Purchase Agreement, the Investor is purchasing a Notes in the principal amount of $1,200,000, which is convertible into shares of Series A Convertible Preferred Stock and Warrants or shares of Common Stock and Warrants, all as set forth in the Notes, which entitle the Investor to receive shares of Common Stock upon conversion or exercise thereof, such shares being referred to as the “ Shares ”; and

WHEREAS , the ability of the Investors to sell their Shares is subject to certain restrictions under the 1933 Act; and

WHEREAS , as a condition to purchase of the Series A Preferred Stock and Warrants pursuant to the Purchase Agreement, the Company has agreed to provide the Investors with a mechanism that will permit the Investors to sell the Shares in the future.

NOW, THEREFORE , in consideration of the premises and of the mutual covenants and agreements, and subject to the terms and conditions herein contained, the parties hereto hereby agree as follows:
 
ARTICLE I
 
INCORPORATION BY REFERENCE
 
1.1.   Definitions . All terms defined in the Purchase Agreement and used in this Agreement shall have the same meanings in this Agreement as in the Purchase Agreement. As used in this Agreement the following terms shall have the meanings hereinafter set forth.
 
(a) “ Excusable Reason ” shall have the meaning set forth in Section 2.6 of this Agreement.
 
(b) “ Filing Date ” shall mean, with respect to the Initial Registration Statement, the 90 th calendar day following the date hereof and, with respect to any Subsequent Registration Statements, the later of (a) ninety (90) days after the Company receives a demand for registration of additional Registrable Securities or (b) the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities. If any Filing Date or Required Effectiveness Date occurs on a date which is either (x) a Saturday, Sunday or day on which banks in the State or New York are authorized or required to be closed on all or part of the normal business day or (y) the SEC is closed for all or a portion of the business day, the Filing Date or Required Effective Date, as the case may be, shall the next day which is not a day described in clauses (x) or (y).
 

 
(c) “ Initial Registration Statement ” shall mean the Registration Statement filed pursuant to Section 2.2 of this Agreement.
 
(d) “ Subsequent Registration Statements ” shall mean one or more Registration Statements filed pursuant to Section 2.3 of this Agreement.
 
(e) “ Registrable Securities ” shall mean and include the Shares issuable upon conversion of the Notes or the Series A Preferred Stock and upon exercise or conversion the Warrants issued pursuant to the Purchase Agreement or the Notes. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when (a) they have been effectively registered under the 1933 Act and disposed of in accordance with the registration statement covering them, (b) they are or may be freely traded without registration pursuant to Rule 144, or (c) they have been otherwise transferred and new certificates for them not bearing a restrictive legend have been issued by the Company and the Company shall not have “stop transfer” instructions against them..
 
(f) “ Registration Expenses ” shall mean all expenses incident to the Company’s performance of or compliance with its obligations under this Agreement, including, without limitation, all registration, filing, listing, stock exchange and NASD fees, all fees and expenses of complying with state securities or blue sky laws (including fees, disbursements and other charges of counsel for the underwriters only in connection with blue sky filings), all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees, disbursements and other charges of counsel for the Company and of its independent public accountants, including the expenses incurred in connection with “cold comfort” letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by the issuer of securities, but excluding from the definition of Expenses underwriting and discounts and brokerage commissions and applicable transfer taxes, if any, or legal and other expenses incurred by any sellers, which discounts, commissions, transfer taxes and legal and other expenses shall be borne by the seller or sellers of Registrable Securities in all cases.
 
(g) “ Registration Statement ” shall mean the registration statement required to be filed pursuant to Section 2.2 of this Agreement hereunder and any additional registration statements contemplated by Section 2.3, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.
 
(h) “ Required Effective Date ” shall mean the first to occur of (i) 150 days following the Filing Date with respect to the Registration Statement, (ii) ten (10) days following the receipt of a “No Review” or similar letter from the SEC or (iii) the third (3rd) business day following the day the Company receives notice from the SEC that the SEC has determined that the Registration Statement eligible to be declared effective without further comments by the SEC; provided, however, that in no event shall the Required Effective Date of a Subsequent Registration Statement be earlier than the earliest date on which, based on SEC Guidance, the SEC will declare effective such Additional Registration Statement.
 
(i) “ Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
 
(j) “ Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
 
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(k) “ Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
 
(l) “ SEC Guidance ” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff and (ii) the Securities Act.
 
1.2.   References . All references in this Agreement to “herein” or words of like effect, when referring to preamble, recitals, article and section numbers, schedules and exhibits shall refer to this Agreement unless otherwise stated.
 
ARTICLE II
 
REQUIRED REGISTRATION OF REGISTRABLE SECURITIES
 
2.1.   Registrable Securities . The Company shall file one or more Registration Statements covering the Registrable Securities as provided in Sections 2.2 and 2.3 of this Agreement.
 
2.2.   Registration of Registrable Securities . The Company shall prepare and file the Initial Registration Statement covering the sale of such number of shares of the Registrable Securities as the Investors shall elect by written notice to the Company, and absent such election, covering the sale of all of the Registrable Securities. The Company shall use its best efforts to cause the Registration Statement to be declared effective by the SEC on the Required Effective Date. Subject to SEC Guidance on the number of Shares which may be registered pursuant to Rule 415, nothing contained in this Agreement shall be deemed to limit the number of Registrable Securities to be registered by the Company hereunder. As a result, should the Registration Statement not relate to the maximum number of Registrable Securities acquired by (or potentially acquirable by) the holders of the Shares of the Company issued to the Investor pursuant to the Purchase Agreement and the Warrants, other than as a result of the election by the holder thereof not to have Shares included in the Registration Statement (unless such election was made with a view to meeting the SEC Guidance relating to Rule 415), the Company shall be required to promptly file a separate registration statement (utilizing Rule 462 promulgated under the 1933 Act, if applicable, to the extent that it may do so) relating to such Registrable Securities which then remain unregistered, subject to the SEC Guidance on the earliest day on which such Registration Statement may be filed. The provisions of this Agreement shall relate to any such separate registration statement as if it were an amendment to the Registration Statement. No shares of Common Stock or other securities shall be included in the Initial or any Subsequent Registration Statement other than Shares issued or issuable to the Investors and their transferees who hold Registrable Securities; it being understood that the Initial and Subsequent Registration Statements shall relate solely to Registrable Securities, and the Company shall not file any registration statement with respect to other securities if the effect thereof would be to impair the ability of the Investors to have registered the maximum number of Registrable Securities which are permitted based on SEC Guidance. The Investors have advised the Company that, to the extent that all of the Registrable Securities cannot be registered based on SEC Guidance relating to Rule 415, as long as the Investors shall be able so sell the shares of Common Stock issuable upon conversion of the Series A Preferred Stock pursuant to Rule 144(k), or subsequent similar rule, six months after the Closing Date, the registration statement filed pursuant to this Section 2.1 shall only include Registrable Securities issuable upon exercise of the Warrants.
 
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2.3.   Subsequent Registration . Subject to the limitations of Section 2.2, at any time and from time to time, the Investors may request the registration under the 1933 Act on a Subsequent Registration Statement of all or part of the Registrable Securities nor previously sold or subject to an effective registration statement. Subject to the conditions of Section 2.6 of this Agreement, the Company shall use its commercially reasonable best efforts to file such registration statement under the 1933 Act by the Filing Date and have the Subsequent Registration Statement declared effective by the Required Effective Date. The Company shall notify the Investor promptly when any such Registration Statement has been declared effective. The parties intend that all Registrable Securities are to be registered pursuant to this Section 2.2, and that this Section 2.3 is intended to provide the Investors with registration rights in the event that all of the Registrable Securities are not included in the Registration Statement required by Section 2.2, either because the number of Registrable Securities had to be reduced in order for the offering to be deemed a secondary offering under Rule 415 based on SEC Guidance or because the Investors believed that the SEC Guidance would not permit the registration of all of the Registrable Securities. If more than eighty percent (80%) of the Shares have been registered and sold (either pursuant to the Registration Statement or Rule 144, the Company’s obligations under this Article II shall terminate.
 
2.4.   Registration Statement Form . Registrations under Section 2.2 and Section 2.3 shall be on the appropriate registration form of the SEC as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in the Registration Statement; provided, however, such intended method of disposition shall not include an underwritten offering of the Registrable Securities.
 
2.5.   Expenses . The Company will pay all Registration Expenses in connection with any Initial or Subsequent Registration Statement or any registration statement in which Registrable Securities are included pursuant to Article III of this Agreement.
 
2.6.   Effective Registration Statement . An Initial or Subsequent Registration Statement shall not be deemed to have been effected, other than for an Excusable Reason, as hereinafter defined, (i) unless a registration statement with respect thereto has become effective, provided that a registration which does not become effective after the Company filed a registration statement with respect thereto solely by reason of the refusal to proceed of any holder of Registrable Securities (other than a refusal to proceed based upon the advice of counsel in the form of a letter signed by such counsel and provided to the Company relating to a disclosure matter unrelated to such holder) shall be deemed to have been effected by the Company, (ii) if, after it has become effective, such registration statement becomes subject to any stop order, injunction or other order or extraordinary requirement of the SEC or other governmental agency or court for any reason and such stop order or other action continues in effect for five trading days or (iii) if, after it has become effective, such registration ceases to be effective other than for an Excusable Reason. An “ Excusable Reason ” means the occurrence of negotiations with respect to a material agreement prior to either the announcement of the execution of the agreement or the termination of the negotiations with respect to such proposed agreement and other similar material corporate events to which the Company is a party or expects to be a party if, in the reasonable judgment of the Company, disclosure of the negotiations or other event would be adverse to the best interests of the Company provided that the Company is continuing to treat such negotiations as confidential and provided further that the period during which the Company is precluded from filing the registration statement (or suspended the use of an effective registration statement) as a result thereof has not exceeded twenty (20) trading days in the aggregate, and provided further that the Company shall not be permitted to avoid filing a registration statement (or to suspend the use of an effective registration statement) for an Excusable Reason more than twice in any one-year period. An Excusable Reason shall also include acts of God and closure of the SEC.
 
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2.7.   Plan o f Distribution . The Company hereby agrees that the Registration Statement shall include a plan of distribution section reasonably acceptable to the Investors; provided, however, such plan of distribution section shall be modified by the Company so as to not provide for the disposition of the Registrable Securities on the basis of an underwritten offering.
 
2.8.   Liquidated Damages .
 
(i)   In the event (a) the Registration Statement is not declared effective by the Required Effectiveness Date, or (b) if the Registrable Securities are registered pursuant to an effective Registration Statement and such Registration Statement or other Registration Statement(s) demanded by Investor including the Registrable Securities is not effective in the period from the Required Effective Date through two years following the date hereof other than for an Excusable Reason, the Company shall, for each such day (x) after the Required Effectiveness Date that the Registration Statement shall not have been declared effective, or (y) during which the Registration Statement is not effective as required by clause (b) of this Section 2.8(i), issue to the Investor, as liquidated damages and not as a penalty, 200 shares of Series A Preferred Stock for any such day (based on a 365 day working calendar year), such issuance shall be made no later than the tenth business day of the calendar month next succeeding the month in which such day occurs; provided, however, that if the Registration Statement does not cover, or registration has not been requested for, whether as a result of SEC Guidance with respect to Rule 415 or otherwise, the Registrable Securities issuable upon conversion of all of the shares of Series A Preferred Stock that were issued by the Company, the liquidated damages per day shall be the percentage of 200 shares that the number of Registrable Securities then subject to, or proposed to be include in, the Registration Statement bears to the total number Registrable Securities issued or issuable upon exercise of all of the Warrants that were initially issued to the Investors. However, in no event shall the Company be required to pay any liquidated damages under this Section 2.8 in an amount exceeding 100,000 shares of Series A Preferred Stock in the aggregate (as adjusted pursuant to the terms of the Certificate of Designation). Any Registrable Securities which have been sold pursuant to a Registration Statement shall not be deemed to be Shares covered by the Registration Statement.
 
(ii)   Notwithstanding the provisions of Section 2.8(i), no fractional shares shall be issued. Any fractional shares which would otherwise be issued on any date on which Preferred Stock is to be issued pursuant to Section 2.8(i) of this Agreement, shall be carried forward; provided, however, that if, at the expiration of the period during which liquidated damages is payable there remains a fractional shall which has not been applied to liquidated damages, the Company shall have no further obligation to issue such fractional share.
 
(iii)   In no event shall the Company be required to pay any liquidated damages in the event that the failure of the registration statement to be declared effective on the Required Effective Date results in whole or in part from either (a) the failure of any Investor to provide information relating to the Investor and its proposed method of sale or any other information concerning the Investor that is required to be included in the registration statement or (b) any delays resulting from questions raised by the SEC or any other regulatory agency, market or exchange concerning any Investor or the affiliates of any Investor, it being understood that SEC comments relating to compliance with Rule 415 shall not be deemed a delay covered by this clause (b).
 
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(iv)   The parties hereto agree that the liquidated damages provided for in this Section 2.8 constitute a reasonable estimate of the damages that may be incurred by the Investor by reason of the failure of the Registration Statement(s) to be filed or declared effective in accordance with the provisions hereof.
 
(v)   The obligation of the Company terminates when the Investor no longer holds more than ten percent (10%) of the Registrable Securities, based on the number of Registrable Securities initially issuable pursuant to the Purchase Agreement and any shares issued due to adjustments in these transaction documents and the Warrants.
 
ARTICLE III
 
INCIDENTAL REGISTRATION RIGHTS
 
3.1.   Right To Include (“Piggy-Back”) Registrable Securities . Provided that the Registrable Securities have not been registered, if at any time after the date hereof but before the second anniversary of the date hereof, the Company proposes to register any of its securities under the 1933 Act (other than by a registration in connection with an acquisition in a manner which would not permit registration of Registrable Securities for sale to the public, on Form S-8, or any successor form thereto, on Form S-4, or any successor form thereto and other than pursuant to Section 2), on an underwritten basis (either best-efforts or firm-commitment), then, the Company will each such time give prompt written notice to all holders of Registrable Securities of its intention to do so and of such holders of Registrable Securities’ rights under this Section 3.1. Upon the written request of any such holders of Registrable Securities made within ten (10) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holders of Registrable Securities and the intended method of disposition thereof), the Company will, subject to the terms of this Agreement, use its commercially reasonable best efforts to effect the registration under the 1933 Act of the Registrable Securities, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of such Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which the Company proposes to register, provided that if, at any time after written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holders of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of this obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to request that such registration be effected as a registration under Section 2, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this Section 3.1 shall relieve the Company of its obligation under Section 2 of this Agreement other than with respect to Registrable Securities registered and sold pursuant to such registration statement. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 3.1.
 
3.2.   Priority In Incidental Registrations . If the managing underwriter of the underwritten offering contemplated by this Section 3 shall inform the Company and holders of the Registrable Securities requesting such registration by letter of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in such offering, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first securities proposed by the Company to be sold for its own account, and (ii) second to holders of securities having demand registration rights and exercising such rights in connection with such registration statement, (iii) third Registrable Securities, and for (iv) fourth to securities of other selling security holders (including officers, directors and 5% stockholders, subject to any lock-up agreements with such persons) who requested to be included in such registration.
 
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ARTICLE IV
 
REGISTRATION PROCEDURES
 
4.1.   Registration Procedures . If and whenever the Company is required to effect the registration of any Registrable Securities under the 1933 Act as provided in Section 2.2 and, as applicable, 2.3, the Company shall, as expeditiously as possible:
 
(i)   prepare and file with the SEC the Registration Statement, or amendments thereto, to effect such registration (including such audited financial statements as may be required by the 1933 Act or the rules and regulations promulgated thereunder) and thereafter use its commercially reasonable best efforts to cause such registration statement to be declared effective by the SEC, as soon as practicable, but in any event no later than the Required Effectiveness Date (with respect to a registration pursuant to Section 2.2); provided, however, that before filing such registration statement or any amendments thereto, the Company will furnish to the counsel selected by the holders of Registrable Securities which are to be included in such registration, copies of all such documents proposed to be filed;
 
(ii)   with respect to any Initial or Subsequent Registration Statement, prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities covered by such registration statement until the earlier to occur of thirty six (36) months after the date of this Agreement (subject to the right of the Company to suspend the effectiveness thereof for an Excusable Reason (each a “ Black-Out Period ”)) or such time as all of the securities which are the subject of such registration statement cease to be Registrable Securities (such period, in each case, the “ Registration Maintenance Period ”). The Company shall notify the Investors within twenty four (24) hours prior to any Black-Out Period;
 
(iii)   furnish to each holder of Registrable Securities covered by such registration statement such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the 1933 Act, in conformity with the requirements of the 1933 Act, and such other documents, as such holder of Registrable Securities and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such holder of Registrable Securities;
 
(iv)   use its commercially reasonable best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under such other U.S. federal or state securities laws or U.S. state blue sky laws as any U.S. holder of Registrable Securities thereof shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary to enable such holder of Registrable Securities to consummate the disposition in such jurisdictions of the securities owned by such holder of Registrable Securities, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified or to consent to general service of process in any such jurisdiction;
 
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(v)   use its commercially reasonable best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the U.S. holder of Registrable Securities thereof to consummate the disposition of such Registrable Securities;
 
(vi)   furnish to each holder of Registrable Securities who requests, a signed counterpart, addressed to such holder of Registrable Securities, and the underwriters, if any, of an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), such opinion to be in the form filed as Exhibit 5 to the registration statement, and
 
(vii)   notify the Investors and their counsel promptly and confirm such advice in writing promptly after the Company has knowledge thereof:
 
(a) when the Registration Statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed, and, with respect to the Registration Statement or any post-effective amendment thereto, when the same has become effective;
 
(b) of any request by the SEC for amendments or supplements to the Registration Statement or the prospectus or for additional information;
 
(c) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings by any Person for that purpose; and
 
(d) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose;
 
(viii)   notify each holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material facts required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such holder of Registrable Securities promptly prepare and furnish to such holder of Registrable Securities a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an 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 in the light of the circumstances then existing;
 
(ix)   use its commercially reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment;
 
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(x)   otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
 
(xi)   enter into such agreements and take such other actions as the Investors shall reasonably request in writing (at the expense of the requesting or benefiting Investors) in order to expedite or facilitate the disposition of such Registrable Securities; and
 
(xii)   use its commercially reasonable best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the Registrable Securities are then listed.
 
(xiii)   The Company may require each holder of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such holder of Registrable Securities and the distribution of such securities as the Company may from time to time reasonably request in writing. In this connection, the Investors shall:
 
(a) furnish the information as to any shares of Common Stock or other securities of the Company owned by the holder, the holder’s proposed plan of distribution, any relationship between the holder and the Company and any other information which the Company reasonably requests in connection with the preparation of the registration statement and update such information immediately upon the occurrence of any events or condition which make the information concerning the Seller inaccurate in any material respect;
 
(b) not sell any Registrable Securities pursuant to the registration statement except in the manner set forth in the Registration Statement;
 
(c) comply with the prospectus delivery requirements and the provisions of Regulation M of the SEC pursuant to the 1933 Act to the extent that such regulation is applicable to the holder;
 
(d) not sell or otherwise transfer or distribute any Registrable Securities if the holder possesses any material nonpublic information concerning the Company.
 
4.2.   The Company will not file any registration statement pursuant to Section 2.2 or Section 2.3, or amendment thereto or any prospectus or any supplement thereto to which the Investors shall reasonably object, provided that the Company may file such documents in a form required by law or upon the advice of its counsel.
 
4.3.   The Company represents and warrants to each holder of Registrable Securities that it has obtained all necessary waivers, consents and authorizations necessary to execute this Agreement and consummate the transactions contemplated hereby other than such waivers, consents and/or authorizations specifically contemplated by the Purchase Agreement.
 
4.4.   Each holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in subdivision (viii) of Section 4.1, such Holder will forthwith discontinue such holder of Registrable Securities’ disposition of Registrable Securities pursuant to the Registration Statement relating to such Registrable Securities until such holder of Registrable Securities’ receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (viii) of Section 4.1 and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such Holder’s possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.
 
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ARTICLE V
 
UNDERWRITTEN OFFERINGS
 
5.1.   Incidental Underwritten Offerings . If the Company at any time proposes to register any of its securities under the 1933 Act as contemplated by Section 3.1 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities as provided in Section 3.1 and subject to the provisions of Section 3.2, use its commercially reasonable best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters. In no event shall any Investors be deemed an underwriter for purposes of this Agreement. This Article V shall not apply to any Registrable Securities theretofore registered pursuant to Article II of this Agreement.
 
5.2.   Participation In Underwritten Offerings . No holder of Registrable Securities may participate in any underwritten offering under Section 3.1 unless such holder of Registrable Securities (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of Registrable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registrable Securities to make a representation or warranty to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder of Registrable Securities expressly for use in the related registration statement or representations, warranties or agreements regarding such holder of Registrable Securities, such holder’s Registrable Securities and such holder’s intended method of distribution and any other representation required by law.
 
5.3.   Preparation; Reasonable Investigation . In connection with the preparation and filing of each registration statement under the 1933 Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration statement, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of such holders’ and such underwriters’ respective counsel, to conduct a reasonable investigation within the meaning of the 1933 Act.
 
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ARTICLE VI
 
INDEMNIFICATION
 
6.1.   Indemnification by the Company . In the event of any registration of any securities of the Company under the 1933 Act, the Company will, and hereby does agree to indemnify and hold harmless the holder of any Registrable Securities covered by such registration statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such holder or any such underwriter within the meaning of the 1933 Act against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the 1933 Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such holder and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, provided that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability, (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such holder or underwriter stating that it is for use in the preparation thereof and, provided further that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or to any other Person, if any, who controls such underwriter within the meaning of the 1933 Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person’s failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, within the time required by the 1933 Act to the Person asserting the existence of an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus or an amendment or supplement thereto. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder.
 
6.2.   Indemnification by the Investor . The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to this Agreement, that the Company shall have received an undertaking satisfactory to it from the prospective holder of such Registrable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 6.1) the Company, each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the 1933 Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such holder of Registrable Securities specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by the Investor. The indemnification by the Investor shall be limited to Fifty Thousand ($50,000) Dollars.
 
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6.3.   Notices Of Claims, Etc . Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Sections 6.1 and Section 6.2, such indemnified party will, if claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Sections 6.1 and Section 6.2, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such reasonable judgment of counsel to the indemnified party, a conflict of interest , as hereinafter defined, between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability, or a covenant not to sue, in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any such action the defense of which has been assumed by an indemnifying party without the consent of such indemnifying party . If the defendants in any action covered by this Section 6.3 include both the indemnified party and the indemnifying party and counsel for the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party (collectively, a “conflict of interest”), the indemnified parties, as a group, shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party. Such counsel shall be selected by the holders of a majority of the shares of Common Stock having an indemnity claim against the Company, whether pursuant to this Agreement or any other agreements which provide such or similar indemnity.
 
6.4.   Other Indemnification . Indemnification similar to that specified in Sections 6.1 and Section 6.2 (with appropriate modifications) shall be given by the Company and each holder of Registrable Securities (but only if and to the extent required pursuant to the terms herein) with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the 1933 Act.
 
6.5.   Indemnification Payments . The indemnification required by Sections 6.1 and Section 6.2 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.
 
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6.6.   Contribution .
 
(i)   If the indemnification provided for in Sections 6.1 and Section 6.2 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the holder of Registrable Securities or underwriter, as the case may be, on the other from the distribution of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the holder of Registrable Securities or underwriter, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the holder of Registrable Securities or underwriter, as the case may be, on the other in connection with the distribution of the Registrable Securities shall be deemed to be in the same proportion as the total net proceeds received by the Company from the initial sale of the Registrable Securities by the Company to the purchasers bear to the gain, if any, realized by all selling holders participating in such offering or the underwriting discounts and commissions received by the underwriter, as the case may be. The relative fault of the Company on the one hand and of the holder of Registrable Securities or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder of Registrable Securities or by the underwriter and the parties’ relative intent, knowledge, access to information supplied by the Company, by the holder of Registrable Securities or by the underwriter and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, provided that the foregoing contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the provisions contained herein, and in no event shall the obligation of any indemnifying party to contribute under this Section 6.6 exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for hereunder had been available under the circumstances.
 
(ii)   The Company and the holders of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 6.6 were determined by pro rata allocation (even if the holders of Registrable Securities and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth herein, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.
 
(iii)   Notwithstanding the provisions of this Section 6.6, no holder of Registrable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net proceeds received by such holder from the sale of Registrable Securities in the applicable Registration Statement or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
 
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ARTICLE VII
 
RULE 144

7.1.   Rule 144 . The Company shall use its commercially reasonable efforts to file in a timely manner the reports required to be filed by the Company under the 1933 Act and the 1934 Act (including but not limited to the reports under Sections 13 and 15(d) of the 1934 Act referred to in subparagraph (c) of Rule 144) and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, will, upon the request of any holder of Registrable Securities, make publicly available other information) and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (a) Rule 144, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with the requirements of this Section 7.1.
 
ARTICLE VIII
 
MISCELLANEOUS

8.1.   Amendments And Waivers . This Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holder or holders of fifty-one percent (51%) or more of the sum of the Shares issued at such time, plus Shares issuable upon conversion of the Series A Preferred Stock or exercise of the Warrants (if such Securities were not fully exercised or converted in full as of the date such consent if sought without regard to the 4.9% Limitation, as defined in the Purchase Agreement). Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this Section 8.1, whether or not such Registrable Securities shall have been marked to indicate such consent.
 
8.2.   Nominees For Beneficial Owners . In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof shall be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number of percentage of shares of Registrable Securities held by a holder or holders of Registrable Securities contemplated by this Agreement. The Company may require assurances reasonably satisfactory to it of such owner’s beneficial ownership or such Registrable Securities.
 
- 14 -

 
8.3.   Notices . Except as otherwise provided in this Agreement, all notices, requests and other communications to any Person provided for hereunder shall be in writing and shall be given to such Person (a) in the case of a party hereto other than the Company, addressed to such party in the manner set forth in the Purchase Agreement or at such other address as such party shall have furnished to the Company in writing, or (b) in the case of any other holder of Registrable Securities, at the address that such holder shall have furnished to the Company in writing, or, until any such other holder so furnishes to the Company an address, then to and at the address of the last holder of such Registrable Securities who has furnished an address to the Company, or (c) in the case of the Company, at the address set forth on the signature page hereto, to the attention of its President, or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding. Each such notice, request or other communication shall be effective (i) upon receipt after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid or (ii) if given by any other means (including, without limitation, by fax or air courier), when delivered at the address specified above, provided that any such notice, request or communication shall not be effective until received, and provided, further, that notice by fax shall not be deemed received unless receipt is acknowledged.
 
8.4.   Assignment . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent holder of any Registrable Securities. Each of the Holders of the Registrable Securities agrees, by accepting any portion of the Registrable Securities after the date hereof, to the provisions of this Agreement including, without limitation, appointment of a representative (the “Investor’s Representative”) to act on behalf of such Holder pursuant to the terms hereof which such actions shall be made in the good faith discretion of the Investor’s Representative and be binding on all persons for all purposes.
 
8.5.   Descriptive Headings . The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof.
 
8.6.   Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to applicable principles of conflicts of law.
 
8.7.   Jurisdiction . If any action is brought among the parties with respect to this Agreement or otherwise, by way of a claim or counterclaim, the parties agree that in any such action, and on all issues, the parties irrevocably waive their right to a trial by jury. Exclusive jurisdiction and venue for any such action shall be the State or Federal Courts serving the City, County and State of New York. In the event suit or action is brought by any party under this Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed that the prevailing party shall be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or appellate court if such party prevails on substantially all disputed matters.
 
8.8.   Entire Agreement . This Agreement, together with the Purchase Agreement, embodies the entire agreement and understanding between the Company and each other party hereto relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.
 
8.9.   Severability . If any provision of this Agreement, or the application of such provisions to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby.
 
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8.10.   Binding Effect . All the terms and provisions of this Agreement whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective administrators, executors, legal representatives, heirs, successors and assignees.
 
8.11.   Preparation of Agreement . This Agreement shall not be construed more strongly against any party regardless of who is responsible for its preparation. The parties acknowledge each contributed and is equally responsible for its preparation.
 
8.12.   Failure or Indulgence Not Waiver; Remedies Cumulative . No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall nay single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
 
8.13.   Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.
 
[SIGNATURES ON FOLLOWING PAGE]
 
- 16 -

 
IN WITNESS WHEREOF , the Investor and the Company have as of the date first written above executed this Agreement.
 
ACHIEVERS MAGAZINE INC.
   
By:
/s/ Dengyong Jin
  Dengyong Jin
 
Chief Executive Officer
 
XingGuang Investment Corporation Limited
   
   
By:
/s/ Xiangxin Sun
  Xiangxin Sun
  President
 
- 17 -

 

Business Operations Agreement
 

This Business Operations Agreement (this “Agreement”) is entered into as of December 7, 2007, in Xinghe County, Inner Mongolia, People’s Republic of China (“PRC”) by and among the following parties:

Party A:
Xinghe Yongle Carbon Co., Ltd.   ( 兴和县永乐碳素有榰狝任公司 )
 
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu,
Inner Mongolia , PRC  
Legal Representative:
Mr. Wei Aihu

Party B:
Xinghe Xingyong Carbon Co., Ltd.   ( 兴和兴永碳素有榰公司)
 
Address:
Xicheng Wai, Chengguan town, Xinghe County, Inner Mongolia, P.R. Chin
Legal Representative:
Mr. Jin Dengyong

Party C:  
 
Mr. Jin Dengyong ( 梍登永 )
 
ID No.
152627550418003:
Address:  
No. 76, Xingxin Street, Houhe, Chengguan town, Xinghe County, Inner Mongolia, PRC

Mr. Du Benhua ( 杜本华)
 
ID No.
152627195301180018
Address:
No. 49, Limin alley, Chengguan town, Xinghe County, Wulanchabu, Inner Mongolia, PRC

WHEREAS:

1.
Party A is a wholly foreign-owned enterprise duly incorporated and existing in the PRC;

2.
Party B is a limited liability company duly incorporated and registered in the PRC;

3.
A business relationship has been established between Party A and Party B by entering into Exclusive Technical Consulting and Services Agreement, under which Party B shall make various payments to Party A, and subsequently the daily operation of Party B will have a material impact on its payment capacity to Party A.; and

4.
Members of Party C, are shareholders of Party B (the “Shareholders of Party B”), among which Jin Dengyong owns 98% equity interest, and Du Benhua owns2% equity interest in Party B.
 
1

 
All Parties through friendly negotiation in the principle of equality and mutual benefits, hereby jointly agree the following:

1.
Non-action Obligation

In order to ensure Party B’s performance of the agreements between Party A and Party B and all its obligations to Party A, Party C hereby jointly confirm and agree that Party B will not conduct any transaction which may materially affect its assets, business, employment, obligations, rights or the company’s operation unless a prior written consent from Party A or a third party appointed by Party A, including but not limited to the following contents, has been obtained:
 
1.1
To conduct any business which is beyond the normal business scope of Party B or conduct business in a way which is inconsistent with the past practices or in an abnormal way;

1.2
To borrow money or incur any debt from any third party;

1.3
To change or dismiss any directors or to dismiss and replace any senior management officers;

1.4
To sell to or acquire from any third party or dispose of in any other way any assets or rights having a value in excess of RMB200,000 Yuan, including but not limited to any intellectual property rights;

1.5
To provide guarantee of the obligations of any third party with its assets or intellectual property rights or to provide any other guarantee or to place its assets under any other encumbrance;

1.6
To amend the Articles of Association of the company or to change its scope of business;

1.7
To change the normal business process or modify any material bylaws;

1.8
To assign rights and obligations under this Agreement to any third party;

1.9
To materially adjust the business operation model, marketing strategy, operation guidance or client relationship;

1.10
To distribute any dividend in any form;
 
1.11
To increase compensation payable to any executive officers or senior management; and
 
1.12
To engage in any activity not permitted by the laws of the PRC.
 
2

 
2.
Management of Operation and Arrangements of Personnel

2.1
Party B together with Party C hereby jointly agree to accept and strictly enforce the proposals in respect of the employment and dismissal of its employees, the daily business management and financial management, etc., provided by Party A from time to time.

2.2
Party B together with Party C hereby jointly agree that the Shareholders of Party B shall only appoint candidates designated by Party A as the directors of Party B in accordance with the procedures regulated by laws and regulations and the Article of Association of the company, and cause the chosen directors to elect Party A’s president candidate as President of the company, and Party B shall engage Party A s nominees as Party B s General Manager, Chief Financial Officer, and other senior officers.

2.3
In case of departure of any of the above officers from Party A by reason of quitting or being dismissed, such officer will lose the qualification to undertake any positions in Party B and therefore the Shareholders of Party B shall dismiss such officer and appoint other nominees of Party A to assume such positions.

2.4
For the purpose of Article 2.3, the Shareholders of Party B shall take all necessary inside and outside procedures to accomplish the above dismissal and engagement.

2.5
The Shareholders of Party B hereby agree, simultaneously with the execution of this Agreement, to sign Power of Attorney, according to which the Shareholders of Party B will irrevocably authorize personnel designated by Party A to exercise their shareholders’ rights and their full voting rights as shareholders at Party B’s shareholders’ meetings. The Shareholders of Party B further agree to replace the authorized persons appointed in the above mentioned Power of Attorney at any time at the request of Party A. The power of attorney is irrevocable.

3.
Other Agreements

3.1
In the event that any of the agreements between Party A and Party B terminates or expires, Party A is entitled to terminate all agreements between Party A and Party B including but not limited to the Exclusive Technical Consulting and Services Agreement.

3.2
Whereas the business relationship between Party A and Party B has been established through the Exclusive Technical Consulting and Services Agreement and other agreements and the daily business operations of Party B shall bear a material impact on its capacity to make the payments due to Party A, the Shareholders of Party B jointly agree that they will immediately and unconditionally pay or transfer to Party A any bonus, dividends or any other incomes or benefits (regardless of the forms) obtained from Party B as the shareholders of Party B at the time when such payables occur and provide all necessary documents or take all necessary actions required by Party A to realize such payment or transfer .

3


4.
Entire Agreement and Amendments

4.1
This Agreement together with all the other agreements and/or documents mentioned or explicitly included in this Agreement dated the date of this Agreement will be part of the whole agreement concluded in respect of the matters in this Agreement and shall replace all other prior oral and written agreements, contracts, understandings and communications among all the parties in relation to this matters.

4.2
Any amendment and supplement to this Agreement shall take effect only after it is executed by all Parties. The amendment and supplement duly executed shall be part of this Agreement and shall have the same legal effect as this Agreement.

5.
Governing Law

The execution, validity, performance and interpretation and the resolution of disputes of this Agreement shall be governed by and construed in accordance with the PRC laws.

6.
Dispute Resolution

6.1
The parties shall strive to settle any dispute arising from the interpretation or performance through negotiation in good faith. In case no settlement can be reached through consultation, each party can submit such dispute to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration in accordance with the current rules of CIETAC. The arbitration proceedings shall take place in Beijing and shall be conducted in Chinese. The arbitration award shall be final and binding upon all parties.

6.2
Each Party shall continue to perform its obligations in good faith according to the provisions of this Agreement except for the matters in dispute.

7.
Notice

7.1
Notices for the purpose of exercising the rights and performing the obligations hereunder shall be in writing and be delivered by personal delivery, registered or mail or postage prepaid mail, recognized express service or by facsimile transmission to the address of the relevant party or parties set forth below.

 
Party A:
Xinghe Yongle Carbon Co., Ltd.

 
Party A:
Xinghe Yongle Carbon Co., Ltd.
 
Address:
No. 19, Limin alley, Chengguan Town, Xinghe County, Wulanchabu, Inner Mongolia, PRC
 
Fax:
0474-7205048
 
Tel:
0474-7203867
 
Attention:
Mr. Wei Aihu
 
4


 
Party B:
Xinghe Xingyong Carbon Co., Ltd.  

 
Address:
Xicheng Wai, Chengguan town, Xinghe County, Inner Mongolia, P.R. China
 
Fax:
0474-7209799
 
Tel:
0474-7208488
 
Attention:
Mr. Jin Dengyong

 
Party C:
 

Mr. Jin Dengyong
 
Address:
No. 76, Xingxin Street, Houhe, Chengguan town, Xinghe County, Inner Mongolia, PRC
 
Fax:
0474-7209799
 
Tel:
13704746822
 
Mr. Du Benhua
 
Address:
No. 49, Limin alley, Chengguan town, Xinghe County, Wulanchabu, Inner Mongolia, PRC
 
Fax:
0474-7209799
 
Tel:
15848041646

Any notice by facsimile transmission or e-mail shall be effective only if the recipient acknowledges receipt.

8.
Effect, Term and Other About This Agreement

8.1
Any written consent, suggestion, appointment or other decisions which have material effects on Party B’s daily business operations involved in this Agreement shall adopted by the board of directors of Party A.

8.2
This Agreement will take effect upon execution by duly authorized representatives of all parties and the term of this Agreement will last until Party A is dissolved according to the PRC laws, unless Party A terminates this Agreement pursuant to Article 8.3.
 
8.3
Party B and the Shareholders of Party B shall not terminate this Agreement within the term of this Agreement while Party A is entitled to terminate this Agreement any time by issuing a written notice to Party B and the Shareholders of Party B 30 days prior to the termination.
 
5

 
8.4
In case any term or provision in this Agreement is regarded as illegal or can not be enforced in accordance with the applicable law, it shall be deemed to be deleted from this Agreement and be null and void, and this Agreement shall be treated as without it from the very beginning. However, the rest of the provisions will remain effective. The parties shall replace the deleted provisions with lawful, effective and mutually acceptable ones through negotiations.

8.5
Any non-exercise of any rights, powers or privileges hereunder shall not be deemed as a waiver thereof. Any single or partial exercise of such rights, powers or privileges shall not exclude one party from exercising any other rights, powers or privileges.
 
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed on their behalf by duly authorized representatives as of the Effective Date first written above.
 
6

 
(No text on this page, Signature page to Business Operations Agreement)

Party A: Xinghe Yongle Carbon Co., Ltd.
(Stamp)

/s/ Wei Aihu  
Authorized Representative:   Mr. Wei Aihu


Party B: Xinghe Xingyong Carbon Co., Ltd.  
(Stamp)

/s/ Jin Dengyong
Authorized Representative:   Mr. Jin Dengyong


Party C:

Mr. Jin Dengyong


Signature: /s/ Jin Dengyong


Mr. Du Benhua


Signature: /s/ Du Benhua  

7

 

EXCLUSIVE TECHNICAL CONSULTING AND SERVICES AGREEMENT


This Exclusive Technical Consulting and Services Agreement (the Agreement ) is entered into in Xinghe County, Inner Mongolia, People’s Republic of China(“PRC”) as of December 7, 2007, between the following two parties (the “Parties).

Party A:
Xinghe Yongle Carbon Co., Ltd.  ( 兴和县永乐碳素有榰狝任公司)
 
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu, Inner Mongolia, PRC
Legal Representative:
Mr. Wei Aihu
 
Party B:
Xinghe Xingyong Carbon Co., Ltd. ( 兴和兴永碳素有榰公司)
 
Address:
Xicheng Wai, Chengguan town, Xinghe County, Inner Mongolia, PRC
Legal Representative:
Mr. Jin Dengyong

WHEREAS,

1.
Party A is a wholly foreign-owned enterprise incorporated and existing in the PRC, Whose main business is to conduct the manufacture of the carbon products, transfer the related technology, and provide consulting services;
2.
Party B is a limited liability company incorporated and registered in the PRC; and
3.
Party A agrees to provide technical consulting and relevant services to Party B and Party B agrees to accept such technical consulting and services.

THEREFORE, Party A and Party B, through friendly negotiation and based on equality and mutual benefit, enter into the Agreement as follows:

1.
Technical Consulting and Services; Ownership and Exclusive Interests

1.1
During the term of this Agreement, Party A agrees to provide relevant technical consulting and services to Party B (the content is specified in Appendix 1) in accordance with terms and conditions under the Agreement.
 
1


1.2
Party B hereby agrees to accept such technical consulting and services. In consideration of the value of technical consulting and services and the good cooperation relationship, Party B further agrees that, during the term of this Agreement, it shall not accept technical consulting and services for above-mentioned business provided by any third party without the prior written consent of Party A.

1.3
Party A shall be the sole and exclusive owner of all rights, title, interests and intellectual property rights arising from the performance of this Agreement (including but not limited to, any copyrights, patent, know-how, commercial secrets and otherwise), regardless developed independently by Party A or by Party B based on Party A’s intellectual property or by Party A based on Party B’s intellectual property. Party B shall not claim against Party A on any rights, ownership, interests or intellectual property.

If such development is conducted on the basis of Party B’s intellectual property, Party B shall ensure that such intellectual property is clear and free from any lien or encumbrance or license, or Party B shall indemnify Party A any and all damages incurred thereby. In case Party A shall be liable to any third party by reason thereof, Party A shall be compensated in full by Party B as long as Party A has compensated the third party.

1.4
Party B promises that under the same conditions, Party A has the priority on cooperation with party B in respect of any business. Subject to Party A’s written consent, Party B can cooperate with other enterprises under the same conditions.

2.
Calculation and Payment of the Fee for Technical Consulting and Services (the “Service Fees”)

2.1
The parties agree that the Fees under this Agreement shall be determined according to Appendix 2.

2


2.2
In the event Party B fails to make payment for the Service Fees and other fees, Party B shall pay to Party A 0.05% of the delayed payment per day as liquidated damages.

2.3
Party A has the right to appoint its employee or an accountant registered in PRC or any other country (“Party A’s Authorized Representative”), at its own expenses, to inspect and audit the accounting books of Party B for the purpose of determining the amount or calculation method of services. Party B shall provide Party A with documents, accounting books, recordation and data required by Party A in order to enable Party A’s Authorized Representative to audit the accounting books and determine the amount of Service Fee. Unless an error of more than 5% shall occur in the income of Party B, the amount determined by Party A’s Authorized Representative shall be the amount of the Service Fee.

2.4
Unless otherwise agreed upon by the Parties, the Service Fee paid by Party B in accordance with this Agreement shall not subject to any deduction or offset (e.g. bank service charge).

2.5
In addition to the Service Fee, Party B shall pay Party A any and all actual expenses incurred by Party A arising out of provision of the technical consulting and services under this agreement, including but not limited to expenses relating to travel, traffic, printing and postage and other out-of-pocket expenses incurred by Party A.

2.6
Both Parties agree that any losses incurred during the performance of this Agreement shall be jointly burden by both Parties.

3.
Representations and Warranties

3.1
Party A hereby represents and warrants as follows:

 
3.1.1
Party A is a company duly registered and validly existing under PRC laws.

 
3.1.2
Party A shall perform this Agreement within its corporation powers and scope of business with necessary corporation authorizations, and has gained all consents and approvals of any other third parties and government authorities. The performance of this Agreement shall not be in violation of any binding or effective laws or contracts.
 
3

 
 
3.1.3
Once the Agreement has been duly executed by both parties, it will constitute a legitimate, valid legal document binding upon and enforceable against Party A in accordance with its terms upon its execution .

3.2
Party B hereby represents and warrants as follows:

 
3.2.1
Party B is a company duly registered and validly existing under PRC laws.

 
3.2.2
Party B shall perform this Agreement within its corporation powers and scope of business with necessary corporation authorization, and has gained all consents and approvals of any other third parties and government authorities. The performance of this Agreement shall not be in violation of any effective laws or contracts binding upon Party B.

 
3.2.3
Once the Agreement has been duly executed by both parties, it will constitute a legitimate, valid legal document binding upon and enforceable against Party B in accordance with its terms upon its execution .

4.
Confidentiality

4.1
The Parties agree to take various reasonable measures to protect and maintain the confidentiality of the confidential data and information (the Confidential Information , the disclosing party shall explicitly inform the receiving party of the confidentiality of the disclosed documents and information in writing) disclosed to or acquired by them in the exclusive consulting and services, and shall not disclose, give or transfer any Confidential Information (including but not limited to the receiving party being merged or acquired or controlled directly or indirectly by any third party) to any third party without prior written consent of the disclosing party. Upon termination or expiration of this Agreement, the Parties shall, at the request of either Party, return any documents, information or software containing any of such Confidential Information to the owner or disclosing party, or destroy such Confidential Information with the consent of the owner or disclosing party, including deleting any such Confidential Information from any memory devices, and ceasing to use such confidential Information. The Parties shall take necessary measures to disclose the Confidential Information to the employees, agents or professional consultants of Party B who need to know such information and cause them to observe the confidential obligations hereunder. Party B, Party B’s employees, agents or professional consultants shall enter into confidential agreement with Party A for the purpose of protecting confidential information.
 
4

 
4.2
The restrictions stipulated in Article 4.1 shall not apply to:

 
4.2.1
the materials available to the public at the time of disclosure;

 
4.2.2
the materials that become available to the public after the disclosure not due to the fault of either Party;

 
4.2.3
the materials Party A or Party B proves to have got the control neither directly nor indirectly from any other party before the disclosure; and

 
4.2.4
each Party is required by law to disclose to relevant government authorities, stock exchange institute, or necessarily discloses the above confidential information directly to the legal counsel and financial consultant in order to keep its usual business.

4.3
Both Parties agree that this article shall survive the modification, recession or termination of this Agreement.

5.
Indemnity

5.1
Unless otherwise provided in this agreement, if Party B fails or pauses to perform its obligation under this Agreement, and fails to correct the same within thirty (30) days after receiving the other party’s notification, which shall set forth in reasonable detail the basis for the claim of breach, or if any representation or warranty is found to be inaccurate and not cured within thirty (30) days, then Party B breaches its obligation under this agreement.
 
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5.2
If either party to this Agreement breaches this Agreement or any representations and warranties made in this Agreement, the other party may notify in writing the breaching party requesting it to correct its breaching acts, take relevant measures to effectively and promptly avoid the occurrence of any damages, and to resume the performance of this Agreement 30 days after receipt of the notice. The breaching party shall compensate any losses caused to the non-breaching party in order to make the non-breaching party obtain any and all the rights and interests it should have acquired if the contract had been soundly performed.

5.3
In the event that either party’s breach of this agreement results in any fee, liability or loss (including but not limited to loss of profits) incurred by the other, the breaching party shall indemnify the non-breaching party any of the aforesaid fee, liability or loss( including but not limited to any interest and attorney fee paid or incurred due to the breach). The total compensation paid by the breaching party to the non-breaching party shall be equal to the losses caused by the breach of this Agreement, which shall include the receivable interests by the non-breaching party for the performance of this Agreement, but shall not exceed the reasonable expectations of the Parties.

5.4
If Party B fails to follow Party A’s instruction, or misuses the intellectual property or conducts improper technical operations, and any third party claims damages due to Party B’s aforesaid activities, Party B shall assume all the liabilities arising out thereof. If Party B finds out that any third party uses Party A’s intellectual property without legal authorization, Party B shall notify Party A immediately and assist Party A to take any actions.

5.5
In the event both Parties breach this Agreement, they shall determine the compensation payable according to the extent of their breach respectively.

6.
Effective Date and Term

6.1
This Agreement shall be executed as of the date indicated at the head of this Agreement, and shall take effect simultaneously.
 
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6.2
The term of this Agreement is ten (10) years commencing upon its execution, unless earlier terminated by Party A. Prior to the expiration of this Agreement, if Party A intends to extend the term of this Agreement, the parties shall extend the term of this Agreement as per the requirement of Party A, and the parties shall enter into exclusive technical consulting and service agreement separately or continue to perform this Agreement as required by Party A.

7.
Termination

7.1
During the term of this Agreement, if Party B terminates this Agreement in advance without any due cause, Party B shall indemnify Party A all losses caused thereby to Party A, and pay the relevant fees for the services already provided.

7.2
This Agreement can be terminated by mutual consent of the parties.

7.3
The rights and obligations of both Parties under Article 4 and 5 shall survive the termination of this Agreement.

8.
Disputes Resolution

8.1
The parties shall strive to settle any dispute arising from the interpretation or performance in connection with this Agreement through friendly consultation. In case no settlement can be reached through consultation, each party may submit such dispute to China International Economic and Trade Arbitration Commission (the CIETAC ). The arbitration shall follow the current rules of CIETAC, and the arbitration proceedings shall be conducted in Chinese and shall take place in Beijing. The arbitration award shall be final and binding upon both Parties. This article shall survive the termination or recession of this Agreement.

8.2
Each Party shall continue to perform its obligations in good faith according to the provisions of this Agreement except for the matters in dispute.
 
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9.
Force Majeure
 
9.1
Force Majeure, means any event that is beyond the party s reasonable control and cannot be prevented with reasonable care, including but not limited to acts of governments, including changes in government laws and policies, acts of nature, fire, explosion, typhoon, flood, earthquake, tide, lightning, war, shortages in raw materials, insurrection, or labor disputes to which the delayed Party is not a party. However, any shortage of credit, capital or finance shall not be regarded as an event of Force Majeure. The affected party who is claiming to be not liable to its failure of fulfilling this Agreement by Force Majeure shall inform the other party, without delay, of the steps of the performance of this Agreement by the affected party.

9.2
In the event that the affected party is delayed in or prevented from performing its obligations under this Agreement by Force Majeure, within the scope of such delay or prevention, the affected party will not be responsible for any damage by reason of such a failure or delay of performance. The affected party shall take appropriate means to mitigate or eliminate the effects of Force Majeure and try to resume performance of the obligations delayed or prevented by the event of Force Majeure. After the event of Force Majeure is eliminated, both parties agree to resume performance of this Agreement with their best efforts.

10.
Notices

Notices or other communications required to be given by any party pursuant to this Agreement shall be in writing and be delivered by personal delivery, registered mail or postage prepaid mail, recognized express service or by facsimile transmission to the address of the relevant party or parties set forth below.

 
Party A:
Xinghe Yongle Carbon Co., Ltd.
 
 
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu, Inner Mongolia, PRC
 
Fax:
0474-7205048
 
Tel:
0474-7203867
 
Attention:
Mr. Wei Aihu
 
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Party B:
Xinghe Xingyong Carbon Co., Ltd.  
 
 
Address:
Cheng Guan Zhe Xi Cheng Wai, Xing He county, Nei Meng Gu, P. R. China
 
Fax:
0474-7209799
 
Telephone:
0474-7208488  
 
Attention:
Mr. Jin Dengyong
 
Any notice by facsimile transmission or e-mail shall be effective only if the recipient acknowledges receipt.

11.
Assignment

Party B shall not assign its rights or obligations under this Agreement to any third party without the prior written consent of Party A. Party A may assign its rights or obligations under this Agreement to any third party without the consent of Party B, but shall inform Party B of the above assignment.

12.
Severability

All parties confirm that this Agreement is fair and reasonable on the basis of equality and mutual benefits. Any provision of this Agreement that is invalid or unenforceable because of any inconsistency with relevant law shall be ineffective or unenforceable within such jurisdiction where the relevant law governs, without affecting in any way the remaining provisions hereof.

13.
Amendment and Supplement

Any amendment to and supplement of this Agreement shall come into force only after a written agreement with respect thereto is signed by both parties. The amendment and supplement duly executed by both parties shall be part of this Agreement and shall have the same legal effect as this Agreement.

14.
Governing Law

The execution, validity, performance and interpretation of this Agreement and dispute resolution shall be governed by and construed in accordance with the PRC laws.
 
9


IN WITNESS THEREOF the parties hereto have caused this Agreement to be duly executed on their behalf by duly authorized representatives as of the date first set forth above.

Party A:   : Xinghe Yongle Carbon Co., Ltd.
(Stamp)

/s/ Wei Aihu      
Authorized Representative: Mr. Wei Aihu


Party B:   Xinghe Xingyong Carbon Co., Ltd.
(Stamp)

/s/ Jin Dengyong          
Authorized Representative: Mr. Jin Dengyong

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Appendix 1: The list of Technical Consulting and Services
 
Party A shall provide technical and consulting services as follows:
 
 
1.
Providing the development and research on the technologies of carbon production;
 
 
2.
Providing the training services to the staff;
 
 
3.
Providing the services on the development and transfer of the related technologies;
 
 
4.
Providing the market investigation, research and consulting services;
 
 
5.
Providing the middle and long term market development strategy, and market plan services;
 
 
6.
Providing carbon related technologies services;
 
 
7.
Providing the related technologies consultation;
 
 
8.
Providing the services on the sale of self-manufactured products.
 
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Appendix 2: Calculation and Payment of the Service Fee for Technical Consulting and Services

I.
The Service Fee hereunder shall be calculated by 80% to 100% of the total business income of Party B, the specific percentage of the Service Fee (with limitation to the scope from 80 % to 100% ) shall be determined by both parties on the basis of actual situation of provision of services, and the Service Fee shall be calculated and paid on a quarterly basis.

II.
The amount of the Service Fee shall be determined by both parties on the basis of the following factors:

 
1.
the technical difficulty and complexity of technical consulting and services;
 
2.
the time taken by Party ’s employees for the technical consulting and services;
 
3.
the specific content and commercial value of the technical consulting and services;
 
4.
the market reference price of technical consulting and services of the same category.

III.
Party A shall collect the Service Fee on a quarterly basis, and shall issue to Party B the bill for the previous quarter within thirty (30) days upon the commencement of a quarter, and shall notify Party B thereof. Party B shall pay the Service Fee into the bank account designated by Party A within ten (10) working days after receiving the notification from Party A, and Party B shall fax or post the copy of the payment certificate to Party A within ten (10) working days after accomplishment of the payment.

IV.
If Party A regards the Service Fee pricing mechanism agreed upon hereunder as not applicable due to certain reasons, Party B shall actively negotiate with Party A in good faith within ten (10) working days after receiving the written request of Party A with a view to reach a new pricing mechanism. If Party B has no response after receiving the notification with respect to adjustment of pricing mechanism, Party B shall be deemed to have accepted the proposed adjustment of pricing mechanism. In response to Party B’s request, Party A shall enter into negotiation with Party B for the adjustment of pricing mechanism.

12

 

Option Agreement
 
THIS OPTION AGREEMENT   (this “Agreement”) is entered into by and among the following parties (the “Parties”) in Xinghe County, Inner Mongolia, People’s Republic of China (“PRC”) on December 7, 2007.

Party A:
Xinghe Yongle Carbon Co., Ltd. (兴和县永乐碳素有榰狝任公司)
 
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu, Inner Mongolia, PRC
Legal Representative:
Mr. Wei Aihu
 
Party B:
 
 
Mr. Jin Dengyong
(梍登永) ID No: 152627550418003
 
Address:
No. 76, Xingxin Street, Houhe, Chengguan town, Xinghe County, Inner Mongolia, PRC

Mr. Du Benhua
(杜本华) ID No: 152627195301180018
 
Address:
No. 49, Limin alley, Chengguan town, Xinghe County, Wulanchabu, Inner Mongolia , PRC

Party C:
Xinghe Xingyong Carbon Co., Ltd.  ( 兴和兴永碳素有榰公司)
 
Address:
Xicheng Wai, Chengguan town, Xinghe County, Inner Mongolia, P.R. China
Legal Representative:
Mr. Jin Dengyong
 
WHEREAS

1.
Party A is a wholly foreign-owned enterprise duly registered and validly existing in the PRC;

2.
Party C is a limited liability company duly registered in the PRC;

3.
The members of Party B are the shareholders of Party C (the “Authorizing Parties” or the “Shareholders of Party C”), among which, Mr. Jin Dengyong owns 98% equity interest in Party C, and Mr. Du Benhua owns 2%; and
 
 
 

 
 
4.
Party A and Party B have entered into Share Pledge Agreement, under which Party B provides warranty to Party A with respect to Party C’s performance of obligations under the Exclusive Technical Consulting and Service Agreement entered into by and between Party A and Party C. For purpose of ensuring the security of the pledge, and in consideration of the technical support provided by Party A to Party C and the good cooperation relationship between the Parties, the Parties hereby enter into the following agreement.
 
THE PARTIES THEREFORE AGREE AS FOLLOWS:

1.
GRANT OF THE OPTION

1.1
Grant

All the Parties to this Agreement agree that, upon the effectiveness of this Agreement, unless otherwise disclosed to and approved by Party A, Party A is granted an exclusive option to purchase or designate a third party to purchase from Party B all their respective equity interests in Party C at any time in accordance with provisions of this agreement at the lowest price permitted by PRC laws applicable at the time of exercise of such option right. Party A will be granted the option right immediately after the execution of this Agreement, and such option right cannot be revoked or amended during the term of this Agreement (including the extension period under Article 1.2).

1.2
Term

This Agreement shall be executed and take effect as of the date first indicated in this Agreement and shall remain in full force and effect for ten (10) years. Prior to the expiration of this Agreement, if requested by Party A, the parties hereto shall extend the term of this Agreement as the request of Party A, and enter into a new option agreement or continue to perform this Agreement.
 
 
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2.
exercise of the option and its closing

2.1
Timing of Exercise

 
2.1.1
The Authorizing Parties agree unanimously that with the permission of PRC laws and regulations, Party A may exercise part or full option anytime during the term of this Agreement.

 
2.1.2
The Authorizing Parties agree unanimously that there is no limitation on the times for Party A to exercise its option, unless Party A has purchased all of the equity interests in Party C.

 
2.1.3
The Authorizing Parties agree unanimously that Party A may designate in its sole discretion any third party to exercise the options on its behalf, in which case Party A shall provide a prior written notice to the Authorizing Parties.

2.2
Presentation of the amount for the options

The Authorizing Parties agree unanimously that all the consideration they received from Party A for Party A or its designated third party’s exercising the options will be transferred to Party C free of charge, or in any other way approved by Party A in writing.

2.3
Transfer

The Authorizing Parties agree unanimously that the options of Party A under this Agreement may be transferred to a third party, which shall be deemed as a party to this Agreement and is entitled to exercise the options under terms of this Agreement, to enjoy the rights and assume the obligations of Party A under this Agreement.
 
2.4
Notice Requirement
 
 
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To exercise an option, Party A shall send a written notice to the Authorizing Parties 10 days prior to the closing date (as defined below), specifying the following:

 
2.4.1
the date of the effective closing of share purchase (the “Closing Date”);

 
2.4.2
the name of the person in which the Equity Interests shall be registered after the exercise of the option;

 
2.4.3
the amount of Equity Interests to be purchased from such Authorizing Parties;

 
2.4.4
price and method of payment; and

 
2.4.5
a power of attorney (applicable if a third party has been designated to exercise the Option)

All Parties agree unanimously that Party A is entitled to exercise the Options and elect to register the Equity Interests in the name of a third party as it may designates from time to time.
 
2.5
Equity Transfer

Each time when Party A exercises the option, within ten business days after receiving the option notice issued by Party pursuant to Article 2.4:

 
2.5.1
T he Authorizing Parties shall hold a shareholders’ meeting which shall approve the Authorizing Parties transfer its equity interests to Party A or any third party designated by Party A.

 
2.5.2
The Authorizing Parties shall enter into an equity transfer agreement whose substantial content is consistent with the equity transfer agreement listed in Annex 1 of this Agreement with Party A ( if applicable, with any third party designated by Party A).

 
2.5.3
The members of Party B shall execute all other necessary contracts, agreements or documents, obtain all necessary governmental approvals and consents, and take all necessary actions to transfer the valid ownership of the purchased shares to Party A or any third party designate by Party A subject to no security interests, and cause Party A or any third party designated by Party A to be owner of the purchased shares registered with administrative authorities, and shall deliver to Party A or any third party designated by Party A the latest business license, articles of association, approving certificate (if applicable) and other documents issued by or filed with relevant PRC authorities, and the aforesaid documents shall reflect the changes of the shares, directors and legal representative of Party C.
 
 
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3.
REPRESENTATIONS AND WARRANTIES

3.1
The Authorizing Parties hereby present and warrant as follows:

 
3.1.1
They have the full power and authority to enter into and perform this Agreement;

 
3.1.2
The fulfilling of the obligations hereunder does not violate any applicable laws, regulations and contracts, or require any government authorization or approval;

 
3.1.3
There is no lawsuit, arbitration or other legal or administrative procedures pending which, based on its knowledge, will possibly have material and adverse affects on the performance of this Agreement;

 
3.1.4
They have disclosed to Party A any and all the situations which may adversely affect the performance of this Agreement.

 
3.1.5
They have not been declared bankruptcy, and are in good financial status.

 
3.1.6
There is no any pledge, debt or other third party right on the equity interests in Party C held by the Authorizing Parties, and all such equity interests are free from any recourse of any third party.
 
 
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3.1.7
The Authorizing Parties will not sell, pledge, encumber, lien or grant any other third party any rights on the equity interests in Party C and will not dispose the same to any third party by transferring, presenting, pledging or any other means.

 
3.1.8
The options granted to Party A are exclusive, and the Authorizing Parties shall not grant options or any right in the equity interests to other parties in any ways.

 
3.1.9
During the term of this agreement, Party C’s business will comply with laws and regulations, rules and other administrative provisions or guidance issued by governmental authorities, and there exists no breach of the aforesaid stipulations which may adversely affect the business or assets of the company.

 
3.1.10
The Authorizing Parties shall maintain the existence of Party C in accordance with good financial and business standards and practices, run the business and handle related affairs with care and efficiency, and make any and all efforts to maintain the business license, certificate and approving document which are necessary for the continuance of its business, and shall ensure the same will not be revoked, withdrew or declared void.

 
3.1.11
As requested by Party A, The Authorizing Parities shall provide all the operational and financial documents with respect to Party C.

 
3.1.12
Prior to Party A ( or any third party designate by Party A) exercising its option right and purchasing all the equity interests of Party C, unless otherwise approved by Party A ( or any third party designated by Party A) in writing, Party C shall not:
 
 
3.1.12.1
sell, transfer, pledge or otherwise dispose any assets, business or income, or permit to set any security interests thereon (except those arising out of normal or daily business or disclosed to and approved by Party A in writing);

 
3.1.12.2
enter into transactions which will substantially and adversely affect its assets, liabilities, operations, equity interests and other legitimate interests (except those arising out of normal or daily business or disclosed to and approved by Party A in writing);
 
 
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3.1.12.3
distribute any dividend or bonus to shareholders;

 
3.1.12.4
incur, inherit, warrant or permit any debt, except for: (i) those arising out of normal or daily business and not through loan; (ii) or disclosed to and approved by Party A in writing;

 
3.1.12.5
enter into any material contract other than contracts executed in the normal business (for purpose of this article, a contract whose value excesses 1,000,000RMB shall be deemed as a material contract );

 
3.1.12.6
increase or decrease the registered capital of Party C, or alter the structure of the registered capital;

 
3.1.12.7
supplement, alter or amend the articles of association of Party C.

 
3.1.12.8
merge into or associate with any third party, or acquire or invest in any third party.

 
3.1.13
Before Party A ( or any third party designated by Party A) acquires all the shares or assets of Party C, without explicit written consent of Party A ( or any third party designated by Party A), Party B can not conduct the following jointly or separately:

 
3.1.13.1
Supplement , modify, or amend the constitutional documents of Party C, and such supplement, modification and amendment will materially and adversely affect Party C’s assets, liabilities, operation, equity interests and other legitimate rights (except for increasing the capital proportionally in order to satisfy the requirement of law), or adversely affect the performance of this Agreement and other agreements entered into by and among Party A, Party B and Party C.
 
 
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3.1.13.2
Cause Party C to enter into transactions which will substantially and adversely affect its assets, liabilities, operations, equity interests and other legitimate interests (except those arising out of normal or daily business or disclosed to and approved by Party A in writing in advance);

 
3.1.13.3
Cause the shareholders’ meeting of Party C to adopt any resolution on approving distribution of dividend or bonus ;

 
3.1.13.4
At any time after this Agreement become effective, sell, transfer, pledge or otherwise dispose the legitimate and beneficial rights of the equity interests of Party C , or permit to set any security interests thereon ;

 
3.1.13.5
Cause the shareholders’ meeting of Party C to approve to sell, transfer, pledge or otherwise dispose the legitimate and beneficial rights of the equity interests of Party C , or permit to set any security interests thereon;

 
3.1.13.6
Cause the shareholders’ meeting of Party C to approve Party C’s merge or association with any third party, or to approve Party C to acquire any third party or invest in any third party, or to approve any reorganization in other form.

 
3.1.13.7
Close down, liquidate or wind up Party C.

 
3.1.14
Before Party A (or any third party designated by Party A ) acquires all the equity or assets of Party C through exercising the option right, each member of Party B warrants:

 
3.1.14.1
P romptly notify Party A in writing of any pending or possible arbitration, litigation, or administrative procedures related to the shares owned by him, or of any situation which may adversely affect such shares.
 
 
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3.1.14.2
Cause the shareholders’ meeting of Party C to approve the transfer of the purchased shares, and cause Party C to amend its articles of association to reflect the share transfer from Party B to Party A and other changed items mentioned in this agreement, and shall apply to relevant PRC authorities for approval (if required by laws), registration, and cause shareholders’ meeting to appoint the persons nominated by Party A or any third party designated by Party A to be new directors or new legal representative.

 
3.1.14.3
In order to maintain the legitimate and valid ownership over the equity interests, execute all necessary and proper documents, take all necessary and proper actions, and raise all necessary or proper claims, and make all necessary or proper defenses against all claims.

 
3.1.14.4
Upon the request of Party A, shall promptly transfer the equity interests to any third party designated by Party A without any condition at any time, and waive the preemptive right to purchase the equity interests when another shareholder transfers its equity interests in Party C.

 
3.1.14.5
Shall strictly comply with this Agreement and other agreements entered into by and between Party A and Party B, and perform all the obligations under such agreements, and shall not have any action or ommision which suffices to adversely affect the validity or enforceability of such agreements.

3.2
Undertaking

The Authorizing Parties hereby undertake to Party A that it will bear all costs arising from executing each Assignment, process all formalities needed for Party A or its designated third party to be the shareholders of Party C. Such formalities include, but are not limited to, assisting Party A with the obtaining of necessary approvals of the equity transfer from relevant government authorities (if any), the submission of the Assignment and shareholders’ meeting resolution to the relevant administrative department of industry and commerce for the purpose of amending the Articles of Association, changing the list of shareholders and other constitutional documents of company.
 
 
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3.3
On the date of the conclusion of this Agreement and each Closing day, Members of Party B hereby jointly and individually undertake:

 
3.3.1
shall have the right and capability to execute, deliver and perform this Agreement and any share transfer agreement entered into in accordance with this Agreement for each assignment of the purchased equity interests ( “ Transfer Agreement”). Once executed, this Agreement and any Transfer Agreement to which the Authorizing party is a contractual party, constitute legal, valid and binding obligations to the Authorizing Parties, and can be enforced in accordance with provisions therein.

 
3.3.2
the execution, delivery or performance of this Agreement or any Transfer Agreement shall not: (i) violate any PRC laws and regulations; (ii) contradict with its articles of association or any other constitutional documents; (iii) result in violation or breach of any contract or document binding upon him; (iv) result in violation of any condition for the issuance or valid existence of any approval or authorization; (v) result in suspend or withdrawal of any permission and approval or any additional requirements.

 
3.3.3
Party B has sound and good, transferable ownership over the equity interests in Party C. And Party B has never established any security interest on the aforesaid equity interests.

 
3.3.4
Party C has no outstanding debt, except (i) those incurred in the normal business; and (ii) those disclosed to and approved by Party A in writing.

 
3.3.5
Party C will comply with any and all laws and regulations applicable to the acquisition of equity interests and assets.

 
3.3.6
there exists no processing, pending, possible litigation, arbitration or administrative procedures related to Party C and/ or the equity interests or assets of Party C.
 
 
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4.
TAXES

Taxes arising from the performance of this Agreement will be borne and paid by each party respectively.

5.
BREACH OF AGREEMENT

5.1
If Party B or Party C violates this Agreement of its representations and warranties in this Agreement, the Party A may notify the default party in writing requesting it to correct its wrongdoings within 10 days of receiving the notice, take corresponding measures to effectively and timely avoid the damages and to resume performing this Agreement. If there are damages, the default party shall compensate Party A, causing Party A to obtain all receivable rights and interests from the performance of the Agreement.

5.3
If Party B fails to correct its wrongdoings within ten (10) working days upon receipt of notice under Article 5.1, Party A has the right to require the defaulting party to compensate him with respect to expenses, liabilities or losses (including but not limited to the interests lost or paid due to the breach and attorney fees). Meanwhile, Party A has the right to execute the attached share transfer agreement to transfer the equity interests held by Party B to Party A and (or) any third party designated by Party A.

6.
GOVERNING LAW AND DISPUTE SETTLEMENT

6.1
Governing Laws
This Agreement shall be governed by the laws of the PRC, including but not limited to the execution, performance, effect and interpretation of this Agreement.

6.2
Friendly Consultation

The Parties shall settle the dispute regarding the interpretation or performance of this Agreement through friendly consultation or mediation by a third party. Any dispute failing to be resolved through such consultation or mediation shall be submitted to the arbitration authority for arbitration within 30 days after the commencement of such discussions.
 
 
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6.3
Arbitration

Any dispute arising from or in connection with this Agreement shall be submitted to China International Trade Arbitration Committee for arbitration in accordance with its arbitration rules. The arbitration site shall be Beijing. The arbitration award shall be final and binding on all Parties to this Agreement.

7
CONFIDENTIALITY

7.1
Confidential Information

The contents of this Agreement and the Annexes hereof shall be kept confidential. No Party shall disclose any such information to any third party (except for the part agreed upon by the Parties with a prior written agreement). Each Party’s obligations under this clause shall survive the termination of this Agreement. Notwithstanding the foregoing, disclosure shall be permitted to the auditors and counsel for the Parties and in any required filings with the United States Securities and Exchange Commission.

7.2
Exceptions

If a disclosure is explicitly required by law, any courts, arbitration tribunals, or administrative authorities, such a disclosure by any Party shall not be deemed a violation of Article 7.1 above.

8.
MISCELLANEOUS

8.1
Entire agreement

All the parties hereby acknowledge that this Agreement is a fair and reasonable agreement entered into by and among the parties on the basis of equality and mutual benefits. This Agreement constitutes the entire agreement and understanding among the Parties in respect of the subject matter hereof and supersedes all prior discussions, negotiations and agreements among them. This Agreement shall only be amended by a written instrument signed by all the Parties. The Annexes attached hereto shall constitute an integral part of this Agreement and shall have the same legal effect as this Agreement.
 
 
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8.2
Notices

 
8.2.1
Any notices or other correspondences among the Parties in connection with the Performance of this Agreement shall be in writing and be delivered in person, by registered mail, postage prepaid mail, recognized express mail or facsimile to the following correspondence addresses:

 
Party A:
Xinghe Yongle Carbon Co., Ltd.
 
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu, Inner Mongolia, PRC
 
Fax:
0474-7205048
 
Tel:
0474-7203867
 
Attention:
Wei Aihu
 
 
Party B:
 

Mr. Jin Dengyong
 
Address:
No. 76, Xingxin Street, Houhe, Chengguan town, Xinghe County, Inner Mongolia, PRC  
 
Fax:
0474-7209799
 
Tel:
13704746822

Mr. Du Benhua
 
Address:
No. 49, Limin alley, Chengguan town, Xinghe County, Wulanchabu, Inner Mongolia , PRC
 
Fax:
0474-7209799
 
Tel:
15848041646
 
 
12

 
 
 
Party C:
Xinghe Xingyong Carbon Co., Ltd.
 
 
Address:
Cheng Guan Zhe Xi Cheng Wai, Xing He county, Nei Meng Gu, P. R. China
 
Fax:
0474-7209799
 
Telephone:
0474-7208488
 
Attention:
Mr. Jin Dengyong
 
Any notice by facsimile transmission or e-mail shall be effective only if the recipient acknowledges receipt.

8.3
Binding Force
This Agreement shall be binding on the Parties.

8.4
Language and Counterparts
This Agreement shall be executed in two originals in Chinese, with each party holding one copy.

8.5
Days and Business Day
A reference to a day herein is to a calendar day. A reference to a business day herein is to any day from Monday through Friday in a week.

8.6
Headings
The headings contained herein are inserted for reference purposes only and shall not affect the meaning or interpretation of any part of this Agreement.
 
8.7
Supplementary Articles
The Authorizing Parties shall bear joint and several liabilities to Party A with respect to the obligations, warranties, and liabilities under this Agreement. As far as Party A is concerned, if any member of the Authorizing Parties breaches this Agreement, such breach shall be deemed as the breach of this Agreement by all the Authorizing Parties.

8.8
Unspecified Matters
Any matter not specified in this Agreement shall be handled through discussions among the Parties and resolved in accordance with PRC laws.
 
 
13

 
 
(No text on this page Signature Page to Option Agreement)

Party A: Xinghe Yongle Carbon Co., Ltd.
(Stamp)
 
Signature: /s/ Wei Ai Hu
Authorized Representative:   Wei Ai Hu


Party B:

Mr. Jin Dengyong

/s/ Jin Dengyong  

Mr. Du Benhua

/s/ Du Benhua  

Party C: Xinghe Xingyong Carbon Co., Ltd.
(Stamp)

Signature: /s/ Jin Dengyong    
Authorized Representative:   Jin DengYong

 
14

 

EQUITY PLEDGE A GREEMENT

This Equity Pledge Agreement (this “Agreement”) is entered into at Xinghe County, Inner Mongolia, People’s Republic of China (“PRC”) on December 7, 2007 by and among the following parties:

Pledgee:
Xinghe Yongle Carbon Co., Ltd. ( 兴和县永乐碳素有榰狝任公司 )
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu, Inner Mongolia , PRC
Legal Representative: Mr. Wei Aihu
 
Pledgors:
Mr. Jin Dengyong ( 梍登永)
ID No. 152627550418003
Address: No. 76, Xingxin Street, Houhe, Chengguan town, Xinghe County, Inner Mongolia, PRC


Mr. Du Benhua  ( 杜本华)
ID No. 152627195301180018
Address: No. 49, Limin alley, Chengguan town, Xinghe County, Wulanchabu, Inner Mongolia , PRC  

WHEREAS,

1.
Pledgee is a wholly foreign owned company duly registered and validly existing in the PRC;

2.
Xinghe Xingyong Carbon Co. Ltd. (“Xingyong”) is a limited liability company duly registered and validly existing in PRC;

3.
Pledgors are the shareholders of Xingyong, and among which Jin Dengyong owns 98% equity interest, and Du Benhua owns 2% equity interest; and

4.
Pledgee, Pledgors and the Xingyong have severally signed Exclusive Technical Consultation and Service Agreement, Business Operation Agreement, Option Agreement, and Assets Transfer Agreement on December 7, 2007.
 
 
1

 
 
5.
In order to guarantee that Pledgee collects normally technical service fees under the Exclusive Technical Consulting and Services Agreement, and to ensure the performance of the Exclusive Technical Consulting and Services Agreement, Business Operation Agreement, Option Agreement, and Assets Transfer Agreement, the Pledgors are willing to severally and jointly pledge all their equity interest in Xingyong to the Pledgee as a security for the performance of the obligations of Xingyong under the aforesaid agreements, with Pledgee as the Pledgee.

Therefore, through friendly negotiations and in the principles of equality and mutual benefit, the parties hereby enter into an agreement as follows.

1.
Definitions

Unless otherwise provided in this Agreement, the following terms shall have the following meanings:

1.1
Pledge means the full content of Article 2 hereunder.

1.2
Equity Interest means 100% equity interests in Xingyong legally held by the Pledgors and all the present and future rights and benefits based on such equity interest.

1.3
Various Agreements mean Exclusive Technical Consultation and Service Agreement, Option Agreement, Business Operation Agreement, and Assets Transfer Agreement signed by some or all of the parties respectively on [ ] [ ], 2007.
 
1.4
Event of Default means any event defined in Article 7 hereunder.

1.5
Notice of Default means the notice of default issued by Pledgee in accordance with this Agreement.
 
 
2

 
 
2.
Pledge

2.1
The Pledgors agree to pledge all the equity interest in Xingyong to Pledgee as the security for Pledgee’s rights and interest under the Various Agreements.

2.2
The Pledge under this Agreement includes the rights owned by the Pledgee to collect the fees (including legal fees), expenses, interests, losses, liquidated damages and compensations that Xingyong shall pay under the Various Agreements, and civil liabilities that Xingyong or Pledgors shall bear in case the   Various Agreements wholly or partially become null and void due to any reason.

2.3
The Pledge under this Agreement refers to the priority right owned by Pledgee to the money gained from the conversion, auction, or sale of the equity interests pledged by the Pledgors to Pledgee.

2.4
Unless consent in writing by Pledgee, after the execution of this Agreement, the pledge under this Agreement will be discharged only when Xingyong and Pledgors have performed all the obligations and liabilities under the Various Agreements and Pledgee confirms in writing. If Xingyong or Pledgors have not fully performed all or part of its or their obligations or liabilities under the Various Agreements at the expiration of such agreements, Pledgee will maintain the pledge hereunder up to the date when all such obligations and liabilities are fully performed.

3.
Effect

3.1
This Agreement shall be excuted by all parties and take effect as of the date when the equities pledged are recorded in the Register of Shareholder of Xingyong

3.2
Pledgee is entitled to dispose the pledged equity hereunder if Xingyong fails to pay the fees in accordance with the Technical Consulting and Service Agreement or fail to perform the Business Operation Agreement, Assets Transfer Agreement and the Option Agreement or otherwise fails to comply with its obligations under the Various Agreements as required thereunder.
 
 
3

 
 
4.
Physical Possession Of Documents

4.1
The Pledgors shall deliver the physical possession of the Certificate of Distribution (original) of Xingyong to Pledgee, provide the proper record of such pledge on the shareholders’ register of Xingyong to Pledgee , and handle various approval and examination, registration and filling procedures required by PRC laws and regulations within ten (10) working days as of the date of conclusion of this Agreement or an earlier time agreed upon by the parties.

4.2
If items of the Pledge change, and such changes need to be registered or filed, Pledgee and Pledgors shall register or file such changes within five (5) working days as of the day of change, and shall deliver relevant change registration or filling documents.

4.3
During the term of the equity pledge, the Pledgors shall instruct Xingyong not to distribute any dividend, or adopt any profits distribution plan; if the Pledgors shall be entitled to collect any economic interests other than dividend and profits distribution plan, the Pledgors shall instruct Xingyong to transfer such economic interests into cash and pay the same into the bank account designated by Pledgee in accordance with Pledgee’s requirements, and the Pledgors shall not use money deposited into the bank account without the prior written consent of Pledgee.

4.4
During the term of Equity pledge, if one Pledgor subscribes new capital contribution or accepts an equity transfer from another Pledgor ( “Newly-added Equities”), the Newly-added Equities shall be automatically become pledged equities of this Agreement, and such Pledgor shall accomplish all the procedures with respect to the pledge of the Newly-added Equities within ten (10) working days after acquiring the Newly-added Equities. If ts Pledgor fails to accomplish the relevant procedures as specified in this article, the Pledgee shall have the right to exercise the pledge right as specified in Article 8 of this Agreement.

5.
Warranties and Representation of the Pledgors

The Pledgors hereby make the following representation and warranties to the Pledgee and confirm that Pledgee executes this Agreement in reliance of such representation and warranties:
 
 
4

 
 
5.1
The Pledgors lawfully own the equity interests hereunder and are entitled to create pledge on such the equity interests;

5.2
During the term of equity pledge according to Article 2.4 of this Agreement, Pledgee shall not be interfered by any other parties once Pledgee exercises the rights of the Pledge in accordance with this Agreement.

5.3
Pledgee is entitled to exercise the rights of the Pledge in accordance with relevant laws and this Agreement.

5.4
The execution and performance of this Agreement of the Pledgors has gained all necessary corporate and government authorization and shall not violate any applicable laws and regulations. The representative who signs this Agreement is lawfully and effectively authorized to execute this Agreement.

5.5
Except for the pledge under this Agreement, there is no other encumbrance or any security interests for the benefit of any third party on the equity interests pledged by the Pledgors (including but not limited to pledge).

5.6
There is no pending or possible civil, administrative or criminal litigation or administrative punishment or arbitration relating to the equity interests hereunder on the date of execution of this Agreement.

5.7
There are no outstanding taxes, fees or undecided legal procedures related with the equity interests hereunder on the date of execution of this Agreement.

5.8
Each provision hereunder is the expression of each Party’s true meaning and shall be binding upon all the Parties.

6.
Covenant Of The Pledgors

6.1
During the term of this Agreement, the Pledgors covenant to Pledgee that the Pledgors will:
 
 
5

 
 
 
6.1.1
not transfer or assign the equity interests, create or permit to create any pledges or security interests for the benefit of any third party without prior written consent from the Pledgee except transfer to the Pledgee or the person designated by the Pledgee as required by the Pledgee;

 
6.1.2
comply with and implement laws and regulations with respect to the pledge of rights, present to Pledgee the notices, orders or suggestions with respect to the Pledge issued or made by the competent authority within five (5) working days upon receiving such notices, orders or suggestions and take actions in accordance with the reasonable instruction of Pledgee;

 
6.1.3
timely notify Pledgee of any events or any received notices which may affect the Pledgors’ equity interest or any part of its right, and any events or any received notices which may change the Pledgors’ any covenant and obligation under this Agreement or which may affect the Pledgors’ performance of its obligations under this Agreement, and take actions in accordance with the instructions of Pledgee;

6.2
The Pledgors agree that Pledgee’s right of exercising the Pledge pursuant to this Agreement shall not be suspended or hampered by the Pledgors or any successors or transferees of the Pledgors or any other persons.

6.3
The Pledgors warrant to Pledgee that in order to protect or perfect the security over the obligations of Pledgors and/or Xingyong under Various Agreements, the Pledgors shall make any necessary amendment (if applicable), execute in good faith and cause other parties who have interests in the pledge to execute all the title certificates, contracts, and /or perform and cause other parties who have interests to take action as required by the Pledgee and make access to exercise the rights and authorization vested in the Pledgee under this Agreement, and execute all the documents with respect to the changes of certificate of equity interests with the Pledgee or another party designated by the Pledgee, and provides the Pledgee with all the documents regarded as necessary to the Pledgee within the reasonable time.
 
 
6

 
 
6.4
The Pledgors warrant to Pledgee that the Pledgors will comply with and perform all the guarantees, covenants, agreements, representations and conditions for the benefits of the Pledgee. The Pledgors shall compensate for all the losses suffered by Pledgee for the reasons that the Pledgors do not perform or fully perform their guarantees, covenants, agreements, representations and conditions.

7.
Event Of Default

7.1
The following events shall be regarded as an event of default:

 
7.1.1
Xingyong or its successors or transferees fail to make full payment of service fees under the Service Agreement on time, or the Pledgors or its successors or transferees fail to perform the Business Operation Agreement, Assets Transfer Agreement, Option Agreement, and Exclusive Technical Consulting and Service Agreement or Xingyong or Pledgors otherwise fail to comply with their obligations under the Various Agreements.;

 
7.1.2
The Pledgors make any material misleading or fraudulent representations or warranties under Article 5 and 6 herein, and/or the Pledgors are in violation of any representations or warranties under Article 5 and 6 herein;

 
7.1.3
The Pledgors violate any provisions of this Agreement in any material respect;

 
7.1.4
The Pledgors waive the pledged equity interests or transfers the pledged equity interests without prior written consent from the Pledgee except otherwise agreed under Article 6.1.1 herein;

 
7.1.5
The Pledgors are incapable of repaying the general debt or other debt;

 
7.1.6
This Agreement is illegal for the reason of the promulgation of any related laws or the Pledgor's incapability of continuing to perform the obligations herein;
 
 
7

 
 
 
7.1.7
Any approval, permits, licenses or authorization from the competent authority of the government needed to perform this Agreement or validate this Agreement are withdrawn, suspended, invalidated or materially amended;

 
7.1.8
The property of the Pledgors is adversely changed and causes Pledgee to deem that the capability of the Pledgors to perform the obligations herein is affected;

 
7.1.9
Other circumstances whereby the Pledgee is incapable of exercising the right to dispose the Pledge in accordance with relevant laws.

7.2
The Pledgors shall immediately give a written notice to Pledgee if the Pledgors are aware of or find that any event under Article 7.1 herein or any events that may result in the foregoing events have happened or are going on.

7.3
Unless the event of default under Article 7.1 herein has been solved to Pledgee's satisfaction, Pledgee, at any time when the event of default happens or thereafter, may give a written notice of default to the Pledgors and require the Pledgors to immediately make full payment of the outstanding fees under the Various Agreements, and other payables or timely perform the Business Operation Agreement, the Option Agreement, the Asset Transfer Agreement. If the Pledgors fail to timely correct or cure its breach within ten (10) days upon such written notice, Pledgee shall be entitled to exercise the rights of Pledge in accordance with Article 8 herein.

8.
Exercise Of The Right Of The Pledge

8.1
The Pledgors shall not transfer the pledged equities without prior written approval from Pledgee prior to the full repayment of the fees and the full performance of the obligations under Various Agreements.

8.2
Pledgee shall give a notice of default to the Pledgors in accordance with Article 7.3 when it exercises the right of pledge.

8.3
Subject to Article 7.3, the Pledgee may exercise the right of the Pledge at any time when Pledgee gives a notice of default in accordance with Article 7.3 or thereafter.
 
 
8

 
 
8.4
Pledgee is entitled to have priority in receiving payment by the evaluation or proceeds from the auction or sale of whole or part of the equity pledged herein in accordance with legal procedure until the outstanding fees under Various Agreements and all other payables thereunder are repaid, and the full performance of the Business Operation Agreement, the Option Agreement, and the Assets Transfer Agreement.

8.5
The Pledgors shall not hinder the Pledgee from disposing the Pledge in accordance with this Agreement and shall give necessary assistance so that the Pledgee could realize his Pledge.

9.
Transfer

9.1
The Pledgors shall not transfer the rights and obligations to any third party herein without prior written consent from the Pledgee.

9.2
This Agreement shall be binding upon the Pledgors and their successors and be effective to Pledgee and its successors and assignees.

9.3
Pledgee may transfer all or any rights and obligations under the Various Agreement to any third Pledgeet any time. In this case, the assignee shall enjoy and undertake the same rights and obligations herein of Pledgee as if the assignee is a party hereto. When Pledgee transfers the rights and obligations under the Various Agreement, at the request of Pledgee, the Pledgors shall execute relevant agreements and/or documents with respect to such transfer.

9.4
After the change of Pledgee resulting from the transfer, the new parties to the pledge shall execute a new pledge agreement and the Pledgors shall be responsible for all the registration procedures.

10.
Fees And Other Charges

10.1
Pledgee and Pledgors shall be equally responsible for all the fees and actual expenditures in relation to this Agreement including but not limited to legal fees, cost of production, stamp tax and any other taxes and charges.
 
 
9

 
 
11.
Force Majeure

11.1
If this Agreement is delayed in or prevented from performing in the Event of Force Majeure (“Event of Force Majeure”), only to the extent of such delay or prevention, the affected party is absolved from any liability under this Agreement. Force Majeure, which includes acts of governments, including changes in government laws and policies, acts of nature, fire, explosion, geographic change, flood, earthquake, tide, lightning, war, shortages in raw materials, insurrection, or labor disputes to which the delayed Party is not a party, means any unforeseen events beyond the prevented party’s reasonable control and cannot be prevented with reasonable care. However, any shortage of credit, capital or finance shall not be regarded as an event   beyond a Party’s reasonable control. The Pledgeeffected by Force Majeure who claims for exemption from performing any obligations under this Agreement or under any Article herein shall notify the other party of such exemption promptly and advise him of the steps to be taken for completion of the performance.

11.2
The Pledgeeffected by Force Majeure shall not assume any liability under this Agreement. However, subject to the Pledgeeffected by Force Majeure having taken its reasonable and practicable efforts to perform this Agreement, the Party claiming for exemption of the liabilities may be exempted from performing such liability as delayed or prevented by Force Majeure. Once causes for such exemption of liabilities are rectified and remedied, both parties agree to resume performance of this Agreement with their best efforts.

12.
Applicable Law and Dispute Resolution

12.1
The execution, validity, performance and interpretation of this Agreement and dispute resolution shall be governed by and construed in accordance with the PRC law.

12.2
The parties shall strive to settle any dispute arising from the interpretation or performance through friendly consultation. In case no settlement can be reached through consultation, each party can submit such matter to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration. The arbitration shall follow the current rules of CIETAC, and the arbitration proceedings shall be conducted in Chinese and shall take place in Beijing. The arbitration award shall be final and binding upon the parties.
 
 
10

 
 
12.3
Each Party shall continue performance of this Agreement in good faith according to the stipulations herein except the matters in dispute.

13.
Notice

Any notice or correspondence given by the Pledgees stipulated hereunder, shall be in writing and shall be delivered in person or by registered or postage prepaid mail or recognized express service, or by facsimile transmission to the following addresses:

 
Pledgee:
Xinghe Yongle Carbon Co., Ltd.
 
Address:
No. 19, Xingxin Street, Houhe, Xinghe County, Wulanchabu, Inner Mongolia, PRC
 
Fax:
0474-7205048
 
Tel:
0474-7203867
Attention: Mr. Wei Aihu
 
 
Pledgors:
 

Mr. Jin Dengyong
 
Address:
No. 76, Xingxin Street, Houhe, Chengguan town, Xinghe County, Inner Mongolia, PRC
 
Fax:
0474-7209799
 
Tel:
13704746822

Mr. Du Benhua
 
Address:
No. 49, Limin alley, Chengguan town, Xinghe County, Wulanchabu, Inner Mongolia, PRC  
 
Fax:
0474-7209799
 
Tel:
15848041646
 
 
11

 
 
Any notice by facsimile transmission or e-mail shall be effective only if the recipient acknowledges receipt.

14.
Appendices

The appendices to this Agreement are entire and integral part of this Agreement.

15.
Waiver

The Pledgee’s non-exercise or delay in exercise of any rights, remedies, power or privileges hereunder shall not be deemed as the waiver of such rights, remedies, power or privileges. Any single or partial exercise of the rights, remedies, power and privileges shall not exclude the Pledgee from exercising any other rights, remedies, power and privileges. The rights, remedies, power and privileges hereunder are accumulative and shall not exclude the application of any other rights, remedies, power and privileges stipulated by laws.
 
16.
Miscellaneous

16.1
Any amendments, modifications or supplements to this Agreement shall be in writing and take effect upon being signed and sealed by the parties hereto.

16.2
All parties confirm that this Agreement is fair and reasonable on the basis of equality and mutual benefits. In case any provision in this Agreement is determined to be illegal or unenforceable in accordance with the applicable laws, it shall be null and void within competent jurisdiction and all other provisions of this Agreement will remain effective.

16.3
This Agreement is written in Chinese and has 3 counterparts.

 
12

 

(No text on this page, Signature Page to Equity Pledge Agreement)

Pledgee : Xinghe Yongle Carbon Co., Ltd.  
(Stamp)

Authorized Representative:   /s/ Wu Aihu  


Pledgors :

Mr. Jin Dengyong

Signature: /s/ Jin Dengyong  


Mr. Du Benhua

Signature: /s/ Du Benhua  
 

 
 
13

 

Appendices

1.
Name list of Xinghe Xingyong Carbon Co., Ltd’s shareholder

Jin DengYong
98 %

Du Benhua
  2 %

 
14

 
 

Unaudited Condensed Consolidated Pro Forma Balance Sheet
And Statements of Operations
For the Nine months ended September 30, 2007 and the year ended
December 31, 2006
 
On December 17, 2007, Achievers Magazine Inc. (the “Company”) acquired all of the issued and outstanding capital stock of Talent International Investment Limited from its sole stockholder, Sincere Investment (PTC), Ltd. Talent is the sole stockholder of Xinghe Yongle Carbon Co., Ltd., which has a contractual operation to manage the business of Xinghe Xingyong Carbon Co., Ltd. As a result of these agreements, on an ongoing basis, the financial statements of the Company will include the financial statements of Xingyong, which is the operating entity. Pursuant to the share exchange agreement, the Company issued all shares of the Common Stock of the Company to Sincere 9,388,172 shares of the common stock (reflecting a 1.6 for one share distribution pursuant to which each share of common stock becomes converted into 1.6 shares), representing 71.0% of shares outstanding after the issuance of the shares and the purchase by the Company of 3,340,000 shares. The shares acquired by the Company have been cancelled, except for 1,000,000 shares which remain outstanding and are being held in escrow pending payment of the $700,000 balance of the purchase price and a $100,000 fee payable in connection with the transaction.

The accompanying unaudited condensed pro forma consolidated balance sheet represents the consolidated financial position of Company and Xingyong as though the reorganization of the Company and the acquisition of Xingyong had occurred on September 30, 2007. The accompanying unaudited condensed pro forma consolidated statements of operations for the nine months ended on September 30, 2007 and for the year ended December 31, 2006 present the operations of the combined entities as though the reorganization and acquisition had occurred at the beginning of each of those periods.

The unaudited condensed pro forma consolidated financial information is for illustrative purposes and is not necessarily the financial position and results of operations that would have occurred had the reorganization and acquisition actually occurred on those days or for any other period.

All references in these unaudited condensed pro forma consolidated statements to the number of shares outstanding per share amounts of parent and the Company’s common stock have been restated to reflect the effect of the 1.6 for one share distribution described above.
 

Achievers Magazine Inc
Unaudited Condensed Consolidated Pro Forma Balance Sheet
As of September 30, 2007

   
Xinghe Xingyong Carbon Co., Ltd
   
Achievers Magazine Inc
   
Adjustment
   
Pro Forma Results
 
ASSETS
                         
                           
Current Assets
                         
Cash and cash equivalents
 
$
51,321
 
$
-
 
$
-
 
$
51,321
 
Trade accounts receivable
   
3,835,666
   
0
   
0
   
3,835,666
 
Notes receivable
   
160,277
   
0
   
0
   
160,277
 
Prepaid expenses
   
15,369
   
0
   
0
   
15,369
 
Advance to suppliers and other receivables
   
270,188
   
0
   
0
   
270,188
 
Inventories
   
13,764,441
   
0
   
0
   
13,764,441
 
Total current assets
   
18,097,262
   
-
   
-
   
18,097,262
 
                           
Property and equipment, net
   
19,327,765
   
0
   
0
   
19,327,765
 
                           
Land use rights, net of accumulated amortization of 86,097 and 66,432, respectively
   
2,121,558
   
0
   
0
   
2,121,558
 
                           
   
$
39,546,585
 
$
-
 
$
-
 
$
39,546,585
 
                           
LIABILITIES AND STOCKHOLDERS' EQUITY
                         
                           
Current Liabilities
                         
Accounts payable and accrued expenses
 
$
1,009,913
 
$
418,000
 
$
(418,000
)
$
1,009,913
 
Taxes payable
   
372,245
   
0
   
0
   
372,245
 
Notes payable
   
6,016,487
   
28,000
   
(28,000
)
 
6,016,487
 
Loan from shareholder
   
4,542,306
   
0
   
0
   
4,542,306
 
Total current liabilities
   
11,940,951
   
445,000
   
(445,000
)
 
11,940,951
 
                           
Stockholders' Equity
                         
                           
Registered capital
   
6,650,544
   
6,000
   
(6,000
)
 
6,650,544
 
Accumulated other comprehensive income
   
2,141,725
   
0
   
0
   
2,141,725
 
Retained earnings
   
18,813,365
   
(451,000
)
 
451,000
   
18,813,365
 
Total stockholders' equity
   
27,605,634
   
(445,000
)
 
445,000
   
27,605,634
 
                           
   
$
39,546,585
 
$
(445,000
)
$
445,000
 
$
39,546,585
 



Achievers Magazine Inc
Unaudited Condensed Consolidated Pro Forma of Operations and comprenesive Income
For Nine Months Ended September 30, 2007

   
Xinghe Xingyong Carbon Co., Ltd
  
Achievers Magazine Inc
  
Pro Forma Results
 
               
Sales
 
$
18,799,732
 
$
-
 
$
18,799,732
 
                     
Cost of Goods Sold
   
15,067,613
         
15,067,613
 
                     
Gross Profit
   
3,732,119
   
40,000
   
3,772,119
 
                     
Operating Expenses
                   
Selling expenses
   
110,050
   
0
   
110,050
 
General and administrative
   
559,517
   
108,000
   
667,517
 
Depreciation and amortization
   
13,176
   
0
   
13,176
 
Total operating expenses
   
682,743
   
108,000
   
790,743
 
                     
Other Income (Expense)
                   
Other income
   
286,779
   
0
   
286,779
 
Interest Income
   
377
   
0
   
377
 
Loss on disposal of assets
   
0
   
0
   
0
 
Interest Expense
   
(393,540
)
 
-
   
(393,540
)
Total other income (expense)
   
(106,384
)
 
-
   
(106,384
)
                     
Net Income Before Provision for Income Tax
   
2,942,992
   
0
   
2,942,992
 
                     
Provision for Income Taxes
   
0
   
0
   
0
 
                     
Net Income
 
$
2,942,992
 
$
(108,000
)
$
2,834,992
 
                     
The Components of Other Comprehensive Income
                   
Net Income
 
$
2,942,992
 
$
(108,000
)
$
2,834,992
 
Foreign currency translation adjustment
   
1,237,745
   
-
   
1,237,745
 
                     
Comprehensive Income
 
$
4,180,737
 
$
(108,000
)
$
4,072,737
 
                     
Basic and Diluted Earnings Per Share
             
$
0.33
 
                     
Basic and Diluted Weighted Average Shares Outstanding
               
12,224,182
 



Achievers Magazine Inc
Unaudited Condensed Consolidated Pro Forma of Operations and comprenesive Income
For the Year Ended December 31, 2006

   
Xinghe Xingyong Carbon Co., Ltd
  
Achievers Magazine Inc
  
Pro Forma Results
 
               
Sales
 
$
17,199,071
 
$
-
 
$
17,199,071
 
                     
Cost of Goods Sold
   
13,234,378
   
0
   
13,234,378
 
                     
Gross Profit
   
3,964,693
   
0
   
3,964,693
 
                     
Operating Expenses
                   
Selling expenses
   
330,586
   
0
   
330,586
 
General and administrative
   
555,629
   
102,000
   
657,629
 
Depreciation and amortization
   
16,949
   
0
   
16,949
 
Total operating expenses
   
903,164
   
102,000
   
1,005,164
 
                     
Other Income (Expense)
                   
Other income
   
86,850
   
0
   
86,850
 
Interest Income
   
223
   
0
   
223
 
Loss on disposal of assets
   
(45,323
)
 
0
   
(45,323
)
Interest Expense
   
(421,981
)
 
-
   
(421,981
)
Total other income (expense)
   
(380,231
)
 
-
   
(380,231
)
                     
Net Income Before Provision for Income Tax
   
2,681,298
   
(102,000
)
 
2,579,298
 
                     
Provision for Income Taxes
                   
Current
   
-
   
-
   
-
 
Deferred
   
-
   
-
   
-
 
 
    -    
-
   
-
 
                     
Net Income
 
$
2,681,298
 
$
(102,000
)
$
2,579,298
 
                     
The Components of Other Comprehensive Income
                   
Net Income
 
$
2,681,298
 
$
(102,000
)
$
2,579,298
 
Foreign currency translation adjustment
   
798,900
   
-
   
798,900
 
                     
Comprehensive Income
 
$
3,480,198
 
$
(102,000
)
$
3,378,198
 
                     
Basic and Diluted Earnings Per Share
   
  
   
 
 
$
0.28
 
                     
Basic and Diluted Weighted Average Shares Outstanding
   
 
   
  
   
12,224,182
 


 
 

Exhibit A
 
STATEMENT OF DESIGNATIONS
 
Section 1 . Definitions . Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement (as defined below) shall have the meanings given such terms in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings:
 
Bankruptcy Event ” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not stayed or dismissed within 90 days after commencement; (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 90 days; (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
 
Closing Date ” means the Closing Date, as defined in the Purchase Agreement.
 
Commission ” means the Securities and Exchange Commission.
 
Common Stock ” means the Company’s common stock, par value $.001 per share, and stock of any other class into which such shares may hereafter have been reclassified or changed.
 
Common Stock Equivalents ” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
 
Conversion Date ” shall have the meaning set forth in Section 6(a).
 
Conversion Ratio ” shall have the meaning set forth in Section 6(a).
 
 
1

 
 
Conversion Price ” shall mean the $1.00, adjusted as provided in this Statemetn of Designation.
 
Conversion Shares ” means, collectively, the shares of Common Stock into which the shares of Series A Preferred Stock are convertible in accordance with the terms hereof.
 
Conversion Shares Registration Statement ” means a registration statement that meets the requirements of the Registration Rights Agreement and registers the resale of all Conversion Shares by the Holder, who shall be named as a “selling stockholder” thereunder, all as provided in the Registration Rights Agreement.
 
Dilutive Issuance ” shall have the meaning set forth in Section 7(b) hereof.
 
Effective Date ” means the date that the Conversion Shares Registration Statement is declared effective by the Commission.
 
EBITDA ” shall have the meaning set forth in the Purchase Agreement.
 
Exchange Act ” means the Securities Exchange Act of 1934, as amended.
 
Exempt Issuance ” shall have the meaning set forth in Section 1.3.10 of the Purchase Agreement.
 
Fundamental Transaction ” shall have the meaning set forth in Section 7(f)(iv) hereof.
 
Holder ” shall have the meaning given such term in Section 2 hereof.
 
Junior Securities ” means the Common Stock and all other equity or equity equivalent securities of the Company other than those securities that are explicitly senior in rights or liquidation preference to the Series A Preferred Stock.
 
Original Issue Date ” shall mean the date of the first issuance of any shares of the Series A Preferred Stock regardless of the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series A Preferred Stock.
 
Person ” means a corporation, an association, a partnership, a limited liability company, a business association, an individual, a trust, a government or political subdivision thereof or a governmental agency.
 
Purchase Agreement ” means the Preferred Stock Purchase Agreement, dated as of December 14, 2007, to which the Company and the original Holders are parties, as amended, modified or supplemented from time to time in accordance with its terms, a copy of which is on file at the principal offices of the Company.
 
 
2

 
 
Registration Rights Agreement ” means the Registration Rights Agreement, dated as of the Closing Date, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.
 
Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
Series A Preferred Stock ” shall have the meaning set forth in Section 2.
 
Subscription Amount ” shall mean the one million two hundred thousand ($1,200,000) paid or to be paid for the Series A Preferred Stock purchased pursuant to the Purchase Agreement, in United States dollars and in immediately available funds or as otherwise provided in the Purchase Agreement.
 
Subsidiary ” shall mean a corporation, limited liability company, partnership, joint venture or other business entity of which the Company owns beneficially or of record more than a majority of the equity interest.
 
Trading Day ” means a day on which the Common Stock is traded on a Trading Market.
 
Trading Market ” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.
 
Transaction Documents ” shall have the meaning set forth in the Purchase Agreement.
 
VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in good faith by Purchasers holding a majority of the principal amount of Series A Preferred Stock then outstanding.
 
“Warrants” shall have the meaning set forth in the Purchase Agreement.
 
 
3

 
 
Section 2 . Designation, Amount and Par Value . The series of preferred stock, par value $.001 per share (“Preferred Stock”) consisting of ten million (10,000,000) shares shall be designated as the Company’s Series A Convertible Preferred Stock (the “ Series A Preferred Stock ”) and the number of shares so designated shall be (which shall not be subject to increase without the consent of all of the holders of 75% of the then outstanding shares of Series A Preferred Stock (each a “ Holder ” and collectively, the “ Holders ”)). In the event of the conversion of shares of Series A Preferred Stock into this Company’s Common Stock, pursuant to Section 6 hereof, or in the event that the Company shall otherwise acquire and cancel any shares of Series A Preferred Stock, the shares of Series A Preferred Stock so converted or otherwise acquired and canceled shall have the status of authorized but unissued shares of preferred stock, without designation as to series until such stock is once more designated as part of a particular Series by the Company’s Board of Directors. In addition, if the Company shall not issue the maximum number of shares of Series A Preferred Stock, the Company may, from time to time, by resolution of the Board of Directors and the approval of the holders of a majority of the outstanding shares of Series A Preferred Stock, reduce the number of shares of Series A Preferred Stock authorized, provided, that no such reduction shall reduce the number of authorized shares to a number which is less than the number of shares of Series A Preferred Stock then issued or reserved for issuance. The number of shares by which the Series A Preferred Stock is reduced shall have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such stock is once more designated as part of a particular Series by the Company’s Board of Directors. The Board of Directors shall cause to be filed with the Secretary of State of the State of Nevada such certificate as shall be necessary to reflect any reduction in the number of shares constituting the Series A Preferred Stock.
 
Section 3 . Dividends and Other Distributions . No dividends shall be payable with respect to the Series A Preferred Stock. While the Series A Preferred Stock is outstanding, without the approval of the holders of 75% of the outstanding shares of Series A Preferred Stock, (a) the Corporation may not pay cash dividends or other distributions of cash, property or evidences of indebtedness, and (b) the Corporation shall not redeem any shares of Common Stock. Nothing in this Section 3 shall be construed to prohibit the Corporation from honoring its agreements pursuant to a certain buy-back agreement dated as of December 14, 2007, by and among the Corporation and the stockholders named therein. A share distribution, dividend or split is not a dividend or distribution within the meaning of this Section 3.
 
Section 4 . Voting Rights . The Series A Preferred Stock shall have no voting rights. However, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the affirmative approval of the Holders of 75% of the shares of the Series A Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 5) senior to or otherwise pari passu with the Series A Preferred Stock, or any of preferred stock possessing greater voting rights or the right to convert at a more favorable price than the Series A Preferred Stock, (c) amend its certificate or articles of incorporation or other charter documents in breach of any of the provisions hereof, (d) increase the authorized number of shares of Series A Preferred Stock, or (e) enter into any agreement with respect to the foregoing. The holders of the Series A Preferred Stock will not be entitled to vote as a class with respect to the increase or decrease in the number of authorized shares of preferred stock; provided, however, that the provisions of Section 6(c) of this Certificate of Designation may not be amended or waived.
 
 
4

 
 
Section 5 . Liquidation . Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series A Preferred Stock an amount equal to $1.00 (the “ Liquidation Value ”) before any distribution or payment shall be made to the holders of any Junior Securities and after any distributions or payments made to holders of any class or series of securities which are senior to the Series A Preferred Stock upon voluntary or involuntary liquidation, dissolution or winding up, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full; provided, however, that, if the initial purchasers of the Series A Preferred Stock shall not have paid the full amount of the Purchase Price as required by the Purchase Agreement, there shall be deducted from the total Liquidation Value payable to the holders of the Series A Preferred Stock, on a pro rata basis, the amount of the Purchase Price which remains unpaid. In the event the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock upon dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section 5, no such distribution shall be made on account of any shares of any other class or series of capital stock of the Company ranking on a parity with the shares of Series A Preferred Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of Series A Preferred Stock, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. At the election of a Holder made by written notice delivered to the Company at least two (2) business days prior to the effective date of the subject transaction, as to the shares of Series A Preferred Stock held by such Holder, a Fundamental Transaction (excluding for purposes of this Section 5 any Fundamental Transaction described in Section 7(f)(iv)(A) or 7(f)(iv)(B)) or Change of Control shall be treated as a Liquidation as to such Holder.
 
Section 6. Conversion .
 
a)    Conversions at Option of Holder . Each share of Series A Preferred Stock shall be initially convertible (subject to the limitations set forth in Section 6(c)), into one (1) share of Common Stock (as adjusted as provided below, the “ Conversion Ratio ”) at the option of the Holders, at any time and from time to time from and after the Original Issue Date. The Conversion Ratio reflects a 1.6-for-one stock distribution approved by the directors of the Corporation on December 14, 2007, whereby each share of common stock became converted into 1.6 shares of Common Stock (the “Stock Distribution”). Holders shall effect conversions by providing the Company with the form of conversion notice attached hereto as Annex A (a “ Notice of Conversion ”) as fully and originally executed by the Holder, together with the delivery by the Holder to the Company of the stock certificate(s) representing the number of shares of Series A Preferred Stock so converted, with such stock certificates being duly endorsed in full for transfer to the Company or with an applicable stock power duly executed by the Holder in the manner and form as deemed reasonable by the transfer agent of the Common Stock. Each Notice of Conversion shall specify the number of shares of Series A Preferred Stock to be converted, the number of shares of Series A Preferred Stock owned prior to the conversion at issue, the number of shares of Series A Preferred Stock owned subsequent to the conversion at issue, the stock certificate number and the shares of Series A Preferred Stock represented thereby which are accompanying the Notice of Conversion, and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Notice of Conversion and the applicable stock certificates to the Company by overnight delivery service (the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the Trading Day immediately following the date that such Notice of Conversion and applicable stock certificates are received by the Company. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. Shares of Series A Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and may not be reissued. The initial Conversion Price of the Series A Preferred Stock shall be equal to $1.00 per share. If the initial Conversion Price is adjusted pursuant to Section 7 or as otherwise provided herein, the Conversion Ratio shall likewise be adjusted and the new Conversion Ratio shall equal the Liquidation Value divided by the new Conversion Price. Thereafter, subject to any further adjustments in the Conversion Price, each share of Series A Preferred Stock shall be initially convertible into that number of shares of Common Stock equal to the new Conversion Ratio.
 
 
5

 
 
b)    Automatic Conversion Upon Change of Control . Subject to Section 5, all of the outstanding shares of Series A Preferred Stock shall be automatically converted into the Conversion Shares upon the close of business on the business day immediately preceding the date fixed for consummation of any transaction resulting in a Change of Control of the Company (an “Automatic Conversion Event”). A “Change in Control” means a consolidation or merger of the Company with or into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company in a transaction or series of transactions. The Company shall not be obligated to issue certificates evidencing the Conversion Shares unless certificates evidencing the shares of Series A Preferred Stock so converted are either delivered to the Company or its transfer agent or the holder notifies the Company or its transfer agent in writing that such certificates have been lost, stolen, or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. Upon the conversion of the Series A Preferred Stock pursuant to this Section 6(b), the Company shall promptly send written notice thereof, by hand delivery or by overnight delivery, to the holder of record of all of the Series A Preferred Stock at its address then shown on the records of the Company, which notice shall state that certificates evidencing shares of Series A Preferred Stock must be surrendered at the office of the Company (or of its transfer agent for the Common Stock, if applicable).
 
 
6

 
 
c)    Beneficial Ownership Limitation . Except as provided in Section 6(b) of this Statement of Designation, which shall apply as stated therein if an Automatic Conversion Event shall occur, the Company shall not effect any conversion of the Series A Preferred Stock, and the Holder shall not have the right to convert any portion of the Series A Preferred Stock to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.9% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted shares of Series A Preferred Stock beneficially owned by the Holder or any of its affiliates, so long as such shares of Series A Preferred Stock are not convertible within sixty (60) days from the date of such determination, and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including the Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates, so long as such other securities of the Company are not exercisable nor convertible within sixty (60) days from the date of such determination.  For purposes of this Section 6(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the Company’s most recent quarterly reports, Form 10-Q, Form 10-QSB, Annual Reports, Form 10-K, or Form 10-KSB, as the case may be, as filed with the Commission under the Exchange Act (B) a more recent public announcement by the Company or (C) any other written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Series A Preferred Stock, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was publicly reported by the Company. This Section 6(c) may not be waived or amended. For purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.
 
d)    Mechanics of Conversion
 
i.    Delivery of Certificate Upon Conversion . Except as otherwise set forth herein, not later than three Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Company shall deliver to the Holder (A) a certificate or certificates which, after the Effective Date, shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Series A Preferred Stock, and (B) a bank check in the amount of accrued and unpaid dividends (if the Company has elected or is required to pay accrued dividends in cash). After the Effective Date, the Company shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Company or another established clearing Company performing similar functions if the Company’s transfer agent has the ability to deliver shares of Common Stock in such manner. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Series A Preferred Stock tendered for conversion.
 
 
7

 
 
ii.    Reservation of Shares Issuable Upon Conversion . The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Series A Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of all outstanding shares of Series A Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Conversion Shares Registration Statement is then effective under the Securities Act, registered for public sale in accordance with such Conversion Shares Registration Statement.
 
iii.    Fractional Shares . Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock. All fractional shares shall be carried forward and any fractional shares which remain after a Holder converts all of his or her Series A Preferred Stock shall be dropped and eliminated.
 
iv.    Transfer Taxes . The issuance of certificates for shares of the Common Stock on conversion of the Series A Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Series A Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
 
v.    Absolute Obligation . Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the liquidated damages (if any) on, the shares of Series A Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
 
 
8

 
 
Section 7 .   Certain Adjustments .
 
a)    Stock Dividends and Stock Splits . If the Company, at any time while the Series A Preferred Stock is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Series A Preferred Stock), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. This Section 7(a) shall not relate to the Stock Distribution.
 
b)    Pro Rata Distributions . If the Company, at any time while Series A Preferred Stock is outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price shall be determined by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
 
c)    Sale at Lower Price . From the Closing Date until such time as the Restriction Termination Date, as defined in the Purchase Agreement, except for Exempt Issuances, as to which this Section 7(c) does not apply, if the Corporation closes on the sale or issuance of Common Stock at a price, or warrants, options, convertible debt or equity securities with a exercise price per share or exercise price per share which is less than the Conversion Price then in effect (such lower sales price, conversion or exercise price, as the case may be, being referred to as the “Lower Price”), the Conversion Price in effect from and after the date of such transaction shall be reduced on a formula basis as follows: The Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to such issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate consideration received or receivable for the issuance of such additional shares would purchase at the Conversion Price then in effect, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares (including the exercise or conversion of all options, warrants and other convertible securities). For purpose of determining the exercise price of warrants issued by the Company, the price, if any, paid per share for the warrants shall be added to the exercise price of the warrants.
 
 
9

 
 
d)    Calculations . All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) actually issued and outstanding.
 
e)    Notice to Holders .
 
i.    Adjustment to Conversion Price . Whenever the Conversion Price is adjusted pursuant to any of this Section 7, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement).
 
ii.    Notices of Other Events . If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock or any Fundamental Transaction, (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series A Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification or Fundamental Transaction; provided , that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
 
 
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iii.    Exempt Issuance . Notwithstanding the foregoing, no adjustment will be made under this Section 7 in respect of an Exempt Issuance.
 
iv.    Fundamental Transaction . If, at any time while this Series A Preferred Stock is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “ Fundamental Transaction ”), then upon any subsequent conversion of this Series A Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “ Alternate Consideration ”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series A Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holder new preferred stock consistent with the foregoing provisions and evidencing the Holder’s right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (f)(iv) and insuring that this Series A Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding the foregoing or any other provisions of this Certificate of Designation, in the event that the agreement relating to a Fundamental Transaction provides for the conversion or exchange of the Series A Preferred Stock into equity or debt securities, cash or other consideration and the agreement is approved by the holders of a majority of the. then-outstanding shares of Series A Preferred Stock, then the holders of the Series A Preferred Stock shall have only the rights set forth in such agreement.
 
 
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Section 8 .   Miscellaneous .
 
a)    Notices . Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed to the Company, at its principal address as reflected in its most recent filing with the Commission. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given when received, and any notice by telecopier shall be effective if confirmation of receipt is given by the party to whom the notice is transmitted.  
 
b)    Lost or Mutilated Preferred Stock Certificate . If a Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof, and indemnity, if requested, all reasonably satisfactory to the Company.
 
c)    Next Business Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
 
 
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d)    Headings . The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
 
e)    Rank of Series . For purposes of this Certificate of Designation, any stock of any series or class of the Company shall be deemed to rank

     (i) prior to the shares of Series A Preferred Stock, as to dividends or upon liquidation, dissolution or winding up, as the case may be, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of Series A Preferred Stock;

     (ii) on a parity with shares of Series A Preferred Stock, as to dividends or upon liquidation, dissolution or winding up, as the case may be, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of Series A Preferred Stock, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of Series A Preferred Stock; and

     (iii) junior to shares of Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up, as the case may be, if such class shall be Common Stock or if the holders of shares of Series A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of such class or classes.

f)    Amendment . This Certificate of Designation may be amended with the approval of the Company’s board of directors and the consent of the holders of seventy-five percent (75%) of the outstanding shares of Series A Preferred Stock, except that any amendment to the conversion limitation set forth in Section 6.2(b) shall also require the consent of the holders of a majority of the Company’s Common Stock.

 
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ANNEX A
 
NOTICE OF CONVERSION
 
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES A PREFERRED STOCK)
 
The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock indicated below, into shares of common stock, par value $0.001 per share (the “ Common Stock ”), of China Carbon Graphic Group, Inc., a Nevada Company (the “ Company ”), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.
 
Conversion calculations:
 
Date to Effect Conversion: _____________________________________________
Number of shares of Common Stock owned prior to Conversion: _______________
Number of shares of Series A Preferred Stock to be Converted: _________________
Value of shares of Series A Preferred Stock to be Converted: ____________________
Number of shares of Common Stock to be Issued: ___________________________
Certificate Number of Series A Preferred Stock attached hereto:_________________
Number of Shares of Series A Preferred Stock represented by attached certificate:__________
 
 
Number of shares of Series A Preferred Stock subsequent to Conversion: ________________
[HOLDER]
 
By:___________________________________
 
  Name:                                           
 
  Title:                                    

 
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AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

ACHIEVERS MAGAZINE INC.

Pursuant to NRS 78.403

Achievers Magazine Inc., a corporation organized and existing under the Laws of the State of Nevada, (the “Corporation”), pursuant to NRS 78.403, does hereby adopt the following as its Articles of Incorporation, replacing in their entirety, the Corporation’s present Articles of Incorporation.
 
1.    The Corporation’s Articles of Incorporation of the Corporation are hereby amended and restated in its entirety to read as follows:
 
FIRST: The name of the Corporation is China Carbon Graphic Group, Inc. (the “Corporation”).
 
SECOND: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the general corporation law of the State of Nevada.
 
THIRD:       (a)   The total number of shares of capital stock which this Corporation is authorized to issue is one hundred ten million (120,000,000) shares, of which:

(i)   twenty million (20,000,000) shares shall be designated as Preferred Stock, and shall have a par value of $.001 per share; and

(ii)   one hundred million (100,000,000) shares shall be designated as Common Stock, and shall have a par value of $.001 per share.
 
  (b)   The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, with such voting powers, full or limited, or without voting powers and with such designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors and as are not stated and expressed in these Articles of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) the following:

(i)   the designation of such series;

(ii)   the dividend rate of such series, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any other class or classes or of any other series of capital stock, whether such dividends shall be cumulative or noncumulative, and whether such dividends may be paid in shares of any class or series of capital stock or other securities of the Corporation;

(iii)   whether the shares of such series shall be subject to redemption by the Corporation, and, if made subject to such redemption, the times, prices and other terms and conditions of such redemption;
 
 
 

 
 
(iv)   the terms and amount of any sinking fund provided for the purchase or redemption of the shares of such series;

(v)   whether or not the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or series of capital stock or other securities of the Corporation, and, if provision be made for conversion or exchange, the times, prices, rates, adjustment and other terms and conditions of such conversion or exchange;

(vi)   the extent, if any, to which the holders of the shares of such series shall be entitled to vote, as a class or otherwise, with respect to the election of the directors or otherwise, and the number of votes to which the holder of each share of such series shall be entitled;

(vii)   the restrictions, if any, on the issue or reissue of any additional shares or series of Preferred Stock; and

(viii)   the rights of the holders of the shares of such series upon the dissolution of, or upon the distribution of assets of, the Corporation.
 
  (c)   No holder of any stock of the Corporation of any class or series now or hereafter authorized, shall, as such holder, be entitled as of right to purchase or subscribe for any shares of stock of the Corporation of any class or any series now or hereafter authorized, or any securities convertible into or exchangeable for any such shares, or any warrants, options, rights or other instruments evidencing rights to subscribe for, or purchase, any such shares, whether such shares, securities, warrants, options, rights or other instruments be unissued or issued and thereafter acquired by the Corporation.

FOURTH: The terms and conditions of any rights, options and warrants approved by the Board of Directors may provide that any or all of such terms and conditions may not be waived or amended or may be waived or amended only with the consent of the holders of a designated percentage of a designated class or classes of capital stock of the Corporation (or a designated group or groups of holders within such class or classes, including but not limited to disinterested holders), and the applicable terms and conditions of any such rights, options or warrants so conditioned may not be waived or amended or may not be waived or amended absent such consent.

FIFTH: The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under Nevada law.

SIXTH:       (a)   Right to Indemnification . Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Chapter 78 of the Nevada Revised Statutes, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article SIXTH shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if Chapter 78 of the Nevada Revised Statutes requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director of officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article SIXTH or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
 
 
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  (b)   Non-Exclusivity of Rights . The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article SIXTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.
 
  (c)   Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Chapter 78 of the Nevada Revised Statutes.

SEVENTH: In furtherance and not in limitation of the powers conferred upon the Board of Directors by law, the Board of Directors shall have power to make, adopt, alter, amend or repeal from time to time By-laws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to alter and repeal By-laws made by the Board of Directors and subject to the provisions of any By-law limiting the right of the Board of Directors to make certain modifications to the By-laws.

2.    Set forth as Exhibit A to this Restated Certificate of Incorporation is the State of Designations of the rights, preferences, privilege and limitations.
 
3.    This Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of NRS 78.390 and 78.403.
 
4.    The capital of the Corporation will not be reduced under or by reason of any amendment herein certified.
 
IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated Articles of Incorporation to be signed by its chief executive officer this th day of December, 2008.
 
 
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 Dengjong Jin, Chief Executive Officer
 
 
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Exhibit E-1
 
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES OF COMMON STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 1933 ACT ), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT , OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO SUCH EXEMPTION .

IN ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF DECEMBER 14, 2007, (THE “PURCHASE AGREEMENT”), A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS WARRANT.

---------------------------------------

CHINA CARBON GRAPHIC GROUP, INC.

COMMON STOCK PURCHASE WARRANT “A”

Number of Shares: [                   ]       Holder: [                                    ]
Original Issue Date: December 17, 2007            
 
Expiration Date: December 17, 2012    
Exercise Price per Share: $1.20   

China Carbon Graphic Group, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for value received, [                                                                  ], or registered assigns (the “ Warrant Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company up to 3,000,000 shares (as adjusted from time to time as provided in Section 7 of this Warrant, the “ Warrant Shares ”) of common stock, $.001 par value (the “ Common Stock ”), of the Company at a price of one dollar and twenty cents ($1.20) per Warrant Share (as adjusted from time to time as provided in Section 7, the “ Exercise Price ”), at any time and from time to time from and after the date thereof and through and including 5:00 p.m. New York City time on December 17, 2012 (the “Expiration Date”), and subject to the following terms and conditions:
 
1.   Registration of Warrant . The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Warrant Holder hereof from time to time. The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.
 

 
2.   Investment Representation . The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate that is an accredited investor which has been identified to and approved by (such approval not to be unreasonably withheld or delayed) for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. The Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the 1933 Act , and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws. If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof. Person means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.
 
3.   Validity of Warrant and Issue of Shares . The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof other than those incurred by the Holder . The Company further warrants and agrees that during the Exercise Period , the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.
 
4.   Registration of Transfers and Exchange of Warrants .
 
a.   Subject to compliance with the federal and state securities laws , the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 12. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.
 
b.   This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 9 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange.
 
5. Exercise of Warrants .
 
a.   Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 13, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, by wire transfer or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act. Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.
 
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b.   A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.
 
c.   This Warrant shall be exercisable at any time and from time to time during the Exercise Period for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.
 
d.   (i)   Notwithstanding anything contained herein to the contrary , but subject to Section 5(e) and Section 6, the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “ Net Number ” of shares of Common Stock determined according to the following formula (a “ Cashless Exercise ”):
 
Net Number = (A x (B - C))/B
 
(ii)   For purposes of the foregoing formula:
 
A= the total number shares with respect to which this Warrant is then being exercised.
 
B= the last reported sale price (as reported by Bloomberg) of the Common Stock on the trading day immediately preceding the date of the Exercise Notice.
 
C= the Warrant Exercise Price then in effect at the time of such exercise.
 
e.   The holder of this Warrant may not make a Cashless Exercise (i) during the twelve (12) months following the Original Issue Date and (ii) thereafter if the sale by the Holder of the Warrant Shares is covered by an effective registration statement .
 
6.   Maximum Exercise . The Warrant Holder shall not be entitled to exercise this   Warrant on a Date of Exercise in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Warrant Holder and its affiliates on the Date of Exercise , and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an Date of Exercise , which would result in beneficial ownership by the Warrant Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock on such date. This Section 6 may not be waived or amended. As used in this Warrant, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13d-3 thereunder.
 
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7.   Adjustment of Exercise Price and Number of Shares . The Exercise Price and the number of shares of Common Stock set forth in the Warrant reflect a 3.2-for-one whereby each share of common stock became converted into 3.2 shares of Common Stock which was approved by the Company’s board of directors on or about the Original Issuance Date (the “3.2-for-one Distribution”). The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant and the Exercise Price therefore, are subject to adjustment upon the occurrence any of the following events which shall have occurred or which shall occur at any time on or after the Closing Date, as defined in the Purchase Agreement and regardless of whether any Warrants were issued on the Closing Date but shall not include the 3.2-for-one Distribution, and all such adjustments shall be cumulative:
 
a.   Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc. The Exercise Price of this Warrant and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, stock distribution, combination of shares , reverse split , reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.
 
b.   Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a Reorganization ), then, in each case, the holder of this Warrant, on exercise hereof at any time after the consummation or effective date of such Reorganization (the Effective Date ), shall receive, in lieu of the shares of stock or other securities at any time issuable upon the exercise of the Warrant issuable on such exercise prior to the Effective Date, the stock and other securities and property (including cash) to which such holder would have been entitled upon the Effective Date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).
 
c.   Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.
 
8.   Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.
 
9.   Sale or Merger of the Company . Upon a Merger Transaction , the restriction contained in Section 6 shall immediately be released and the Warrant Holder will have the right to exercise this Warrant concurrently with such Merger Transaction . For purposes of this Warrant, the term “ Merger Transaction ” shall mean a consolidation or merger of the Company into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company .
 
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10.   Notice of Intent to Sell or Merge the Company . The Company will give Warrant Holder ten (10) business days notice before any Merger Transaction .
 
11.   Issuance of Substitute Warrant . In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant and/or the Exercise Price hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares and/or Exercise Price upon the surrender of this Warrant to the Company. However, in the event that the Company does not issue a substitute warrant, the number and class of Warrant Shares or other securities and the Exercise Price shall be adjusted as provided in this Warrant, and this Warrant shall relate the adjusted number of Warrant Shares and Exercise Price.
 
12.   Notice . All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the date of delivery after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:
 
If to the Company :
 
China Carbon Graphic Group, Inc.
c/o Xinghe Xingyong Carbon Co., Ltd.
787 Xicheng Wai
Chengguantown
Xinghe County
Inner Mongolia, China      
Attention: Dengyong Jin, CEO
Fax: 86-0474-7209799
 
With a copy to :
 
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 Floor
New York, New York 10006
Attention: Asher S. Levitsky PC
E-mail: alevitsky@srff.com
Fax: (212) 930-9725
 
If to the Warrant Holder :
 
 
 
at the address or telecopier number and to the attention of the person shown on the Company’s warrant register.:
 
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13. Miscellaneous.
 
a.   This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only by a writing signed by the Company and the Warrant Holder.
 
b.   Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.
 
c.   This Warrant shall be governed by, construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.
 
d.   The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.
 
e.   In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.
 
f.   The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.
 
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

China Carbon Graphic Group, Inc.
     
 
By: /s/
 
Name:
 
 
Title:
Chief Executive Officer
 
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FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To: China Carbon Graphic Group, Inc.:

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of Common Stock (“Common Stock”), $.001 par value, of Capital Solutions I, Inc. and encloses the warrant and $____ for each Warrant Share being purchased or an aggregate of $________________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:
 
______________________________________________
______________________________________________
______________________________________________
(Please print name and address)
______________________________________________
(Please insert Social Security or Tax Identification Number)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

______________________________________________
______________________________________________
______________________________________________
(Please print name and address)

Dated:   __________                Name of Warrant Holder:

(Print)     ______________________________________________
 
(By:)       ______________________________________________
 
(Name:)  ______________________________________________

(Title:)    ______________________________________________

Signature must conform in all respects to name of
Warrant Holder as specified on the face of the
Warrant
 
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Exhibit E-2
 
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES OF COMMON STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 1933 ACT ), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT , OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO SUCH EXEMPTION .

IN ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF DECEMBER 14, 2007, (THE “PURCHASE AGREEMENT”), A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS WARRANT.



CHINA CARBON GRAPHIC GROUP, INC.

COMMON STOCK PURCHASE WARRANT “A”

Number of Shares: [                    ]
                                   Holder: [                                    ]

Original Issue Date: December 17, 2007
 
Expiration Date: December 17, 2012

Exercise Price per Share: $2.00

China Carbon Graphic Group, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for value received, [                                 ], or registered assigns (the “ Warrant Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company up to 3,000,000 shares (as adjusted from time to time as provided in Section 7 of this Warrant, the “ Warrant Shares ”) of common stock, $.001 par value (the “ Common Stock ”), of the Company at a price of two dollars ($2.00) per Warrant Share (as adjusted from time to time as provided in Section 7, the “ Exercise Price ”), at any time and from time to time from and after the date thereof and through and including 5:00 p.m. New York City time on December 17, 2012 (the “Expiration Date”), and subject to the following terms and conditions:
 
1.   Registration of Warrant . The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Warrant Holder hereof from time to time. The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.
 

 
2.   Investment Representation . The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate that is an accredited investor which has been identified to and approved by (such approval not to be unreasonably withheld or delayed) for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. The Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the 1933 Act , and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws. If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof. Person means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.
 
3.   Validity of Warrant and Issue of Shares . The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof other than those incurred by the Holder . The Company further warrants and agrees that during the Exercise Period , the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.
 
4.   Registration of Transfers and Exchange of Warrants .
 
a.   Subject to compliance with the federal and state securities laws , the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 12. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.
 
b.   This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 9 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange.
 
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5. Exercise of Warrants .
 
a.   Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 13, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, by wire transfer or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue or cause to be issued and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act. Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.
 
b.   A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.
 
c.   This Warrant shall be exercisable at any time and from time to time during the Exercise Period for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.
 
d.   (i)   Notwithstanding anything contained herein to the contrary , but subject to Section 5(e) and Section 6, the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “ Net Number ” of shares of Common Stock determined according to the following formula (a “ Cashless Exercise ”):
 
Net Number = (A x (B - C))/B
 
(ii)   For purposes of the foregoing formula:
 
A= the total number shares with respect to which this Warrant is then being exercised.
 
B= the last reported sale price (as reported by Bloomberg) of the Common Stock on the trading day immediately preceding the date of the Exercise Notice.
 
C= the Warrant Exercise Price then in effect at the time of such exercise.
 
e.   The holder of this Warrant may not make a Cashless Exercise (i) during the twelve (12) months following the Original Issue Date and (ii) thereafter if the sale by the Holder of the Warrant Shares is covered by an effective registration statement .
 
6.   Maximum Exercise . The Warrant Holder shall not be entitled to exercise this   Warrant on a Date of Exercise in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Warrant Holder and its affiliates on the Date of Exercise , and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an Date of Exercise , which would result in beneficial ownership by the Warrant Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock on such date. This Section 6 may not be waived or amended. As used in this Warrant, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13d-3 thereunder.
 
- 3 -

 
7.   Adjustment of Exercise Price and Number of Shares . The Exercise Price and the number of shares of Common Stock set forth in the Warrant reflect a 3.2-for-one whereby each share of common stock became converted into 3.2 shares of Common Stock which was approved by the Company’s board of directors on or about the Original Issuance Date (the “3.2-for-one Distribution”). The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant and the Exercise Price therefore, are subject to adjustment upon the occurrence any of the following events which shall have occurred or which shall occur at any time on or after the Closing Date, as defined in the Purchase Agreement and regardless of whether any Warrants were issued on the Closing Date but shall not include the 3.2-for-one Distribution, and all such adjustments shall be cumulative:
 
a.   Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc. The Exercise Price of this Warrant and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, stock distribution, combination of shares , reverse split , reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.
 
b.   Adjustment for Reorganization, Consolidation, Merger, Etc. In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a Reorganization ), then, in each case, the holder of this Warrant, on exercise hereof at any time after the consummation or effective date of such Reorganization (the Effective Date ), shall receive, in lieu of the shares of stock or other securities at any time issuable upon the exercise of the Warrant issuable on such exercise prior to the Effective Date, the stock and other securities and property (including cash) to which such holder would have been entitled upon the Effective Date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).
 
c.   Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.
 
8.   Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.
 
9.   Sale or Merger of the Company . Upon a Merger Transaction , the restriction contained in Section 6 shall immediately be released and the Warrant Holder will have the right to exercise this Warrant concurrently with such Merger Transaction . For purposes of this Warrant, the term “ Merger Transaction ” shall mean a consolidation or merger of the Company into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company .
 
- 4 -

 
10.   Notice of Intent to Sell or Merge the Company . The Company will give Warrant Holder ten (10) business days notice before any Merger Transaction .
 
11.   Issuance of Substitute Warrant . In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant and/or the Exercise Price hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares and/or Exercise Price upon the surrender of this Warrant to the Company. However, in the event that the Company does not issue a substitute warrant, the number and class of Warrant Shares or other securities and the Exercise Price shall be adjusted as provided in this Warrant, and this Warrant shall relate the adjusted number of Warrant Shares and Exercise Price.
 
12.   Notice . All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the date of delivery after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:
 
If to the Company :
 
China Carbon Graphic Group, Inc.
c/o Xinghe Xingyong Carbon Co., Ltd.
787 Xicheng Wai
Chengguantown
Xinghe County
Inner Mongolia, China      
Attention: Dengyong Jin, CEO
Fax: 86-0474-7209799
 
With a copy to :
 
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 Floor
New York, New York 10006
Attention: Asher S. Levitsky PC
E-mail: alevitsky@srff.com
Fax: (212) 930-9725
 
If to the Warrant Holder :
 
 
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at the address or telecopier number and to the attention of the person shown on the Company’s warrant register.:
 
13. Miscellaneous.
 
a.   This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only by a writing signed by the Company and the Warrant Holder.
 
b.   Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.
 
c.   This Warrant shall be governed by, construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.
 
d.   The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.
 
e.   In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.
 
f.   The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.
 
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

Date:                  , 2007
China Carbon Graphic Group, Inc.
   
 
/s/  Dengyong Jin
 
 
Dengyong Jin, CEO
 

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FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To: China Carbon Graphic Group, Inc.:

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of Common Stock (“Common Stock”), $.001 par value, of Capital Solutions I, Inc. and encloses the warrant and $____ for each Warrant Share being purchased or an aggregate of $________________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

   
   
   
   
   
(Please print name and address)
 
   
   
(Please insert Social Security or Tax Identification Number)
 

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

   
   
   
   
   
(Please print name and address)
 

 
Name of Warrant Holder:
 
 
 
(Print)
 
     
 
(By:)
 
     
     
 
(Name:)
 
     
 
(Title:)
 
     
 
Signature must conform in all respects to name of
 
Warrant Holder as specified on the face of the
 
Warrant

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