UNITED STATES
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 OF 1934

Date of Report (Date of earliest event reported): December 22, 2009

CHINA CARBON GRAPHITE GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
333-114564
 
98-0550699
(State or Other Jurisdiction
 
(Commission File
 
(I.R.S. Employer
of Incorporation)
 
Number)
 
Identification Number)

c/o Xinghe Xingyong 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

 (Former name or 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 the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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 3.02.      Unregistered Sales of Equity Securities.

On December 22, 2009, China Carbon Graphite Group, Inc., a Nevada corporation (the “Company”), sold in a private placement a total of 2,160,500 shares of Series B Convertible Preferred Stock and a five-year warrants to purchase 864,000 shares of common stock at an exercise price of $1.30 per share, for an aggregate purchase price of $2,592,600.   The warrants have terms of five years and expire December 22, 2014.

The Company engaged Maxim Group LLC as exclusive placement agent for the private placement.  As consideration for Maxim’s services, the Company paid Maxim $259,260 and issued Maxim a five-year warrant expiring to purchase 108,025 shares of common stock at an exercise price of $1.32 per share.

The certificate of designation for the series B preferred stock provides that:

  
Each share of series B preferred stock is convertible into one share of common stock, which reflects a conversion price of $1.20 per share, subject to adjustment.
 
  
The Company pays an annual dividend of $0.072 per share of series B preferred stock, which is payable in quarterly installments of $0.018 per share.
 
  
The Company is required to redeem the series B preferred stock at a redemption price of $1.20 per share plus accrued dividends on December 22, 2011 or such earlier date as the Company is merged into another corporation or a sale or other transfer of all or substantially all of the Company’s assets in a transaction in which the proceeds of such sale are distributed to shareholders.
 
  
Prior to the date on which the Company is required to redeem the series B preferred stock, the Company may redeem any or all of the outstanding series B preferred stock at a redemption price of $1.32 per share.
 
  
The Company may not redeem the series B preferred stock if the underlying shares are not registered under the Securities Act of 1933, as amended, or eligible for sale without registration pursuant to Rule 144.
 
  
Upon any voluntary or involuntary liquidation, dissolution or winding-up, the holders of the series B preferred stock are entitled to a preference of $1.20 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 B preferred stock upon liquidation. The series B preferred stock ranks on a parity with the Company’s outstanding series A preferred stock with respect to dividends and on liquidation.
 
  
The holders of the series B preferred stock have no voting rights.  However, so long as any shares of series B preferred stock are outstanding, the Company shall not, without the affirmative approval of the holders of a majority of the outstanding shares of series B preferred stock then outstanding, (i) liquidate; (ii) effect a merger or consolidation of the Corporation into another corporation or a sale, lease, transfer or other disposition of all or substantially all of the assets of the Corporation in a transaction in which the proceeds of such sale are distributed to shareholders;  (iii) alter or change adversely the powers, preferences or rights given to the series B preferred stock or alter or amend the certificate of designation relating to the series B preferred stock, (iv) create or authorize the creation of any convertible debt security if the Company’s aggregate convertible debt would exceed $5,000,000 unless such debt is incurred in connection with an acquisition or an expansion of the Company’s facilities, or (v) authorize or create any class of stock ranking as to dividends or distribution of assets upon a liquidation, dissolution or winding up senior to the Series B Preferred Stock.  The holders of the Series B 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.
 
 
2

 
  
While the series B preferred stock is outstanding, except for excluded issuances, if we issue common stock at a price or warrants or other convertible securities at a conversion or exercise price which is less than the conversion price then in effect, the conversion price shall be adjusted on a formula basis.
 
The warrants issued to the investors are immediately exercisable and have a term of five years.  The Company has the right to redeem the warrants, on 20 trading days’ notice, for $0.01 per share of common stock issuable upon exercise of the warrants if, for 20 trading days during any 30 trading day period, the price of the common stock is greater than $2.60 per share. To the extent that the warrants are not exercised by 5:30 PM, New York City time, on the date set for redemption, the holders of the warrants will have no right under the warrant other than to receive the $0.01 redemption price on presentation of his or her warrant.
 
The warrants issued to Maxim are the same as the warrants issued to the investors except that the Maxim warrants are not exercisable until six months after issuance, may be exercised on a cashless basis and are not subject to redemption.
 
In connection with the private placement and pursuant to the transaction agreements:
 
  
The Company agreed to file a registration statement covering the shares of common stock issuable upon conversion of the series B preferred stock or upon exercise of the warrants issued to the investors and the placement agent.  The Company is to file the registration statement by February 5, 2010 and have the registration statement declared effective by June 21, 2010.
 
  
The Company deposited into escrow 1,080,250 shares of common stock, which are to be held in escrow to be returned to the Company or delivered to the investors, depending on whether the Company meets certain financial performance targets for the years ending December 31, 2010 and December 31, 2011.  The performance target for 2010 is net income, as defined, of at least $5,100,000. The performance target for 2011 is net income of at least $10,000,000.  If the Company completes an underwritten equity financing with gross proceeds in excess of $15,000,000 prior to August 31, 2010, the performance target for 2011 is net income of at least $20,000,000.   In determining net income, to the extent that any excluded items are deducted in computing net income, there shall be added back the amount of such excluded items.  Excluded items means: (i) any income tax, enterprise tax or similar tax in excess of 25% of income before income taxes; and (ii) any items of expense or deduction arising directly or indirectly from the private placement and the transaction contemplated by the private placement.
 
Since the series B preferred stock is on a parity with the outstanding series A convertible preferred stock, the Company obtained the consent of the holders of the series A preferred stock, for which the Company issued warrants to purchase an aggregate of 200,000 shares at an exercise price of $1.30 per share. These warrants bear the same terms and provisions as the warrants issued to the investors in the private placement.
 
 
3

 

 
The issuance of the series B preferred stock and warrants to the investors in the private placement and the issuance of the warrants to the holders of the series A preferred stock was exempt from registration under Section 4(2) of the Securities Act and Rule 506 of the SEC thereunder.  Each of the investors is an “accredited investor,” as defined in Rule 501 of SEC under the Securities Act, and acquired the Company’s common stock for investment purposes for its own accounts and not with a view to the resale or distribution thereof.  The certificates for the series B preferred stock and the warrants bear a restricted stock legend.

Item 7.01.      Regulation FD Disclosure.

On December 23, 2009, the Company issued a press release announcing private placement and the issuance of shares of series B preferred stock and warrants described in Items 1.01 and 3.02 above.  A copy of the press release is being filed as Exhibit 99.7 to this Form 8-K and is incorporated herein by reference in its entirety.
 
In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.7, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.
 
Item 9.01       Financial Statements and Exhibits.

(d) Exhibits.

 
3.1
Certificate of Designation to the Series B Convertible Preferred Stock.
 
99.1
Form of subscription agreement, dated December 22, 2009, by and between China Carbon Graphite Group, Inc. and the investors.
 
99.2
Registration rights agreement, dated December 22, 2009, by and between China Carbon Graphite Group, Inc., Maxim Group LLC, and the investors.
 
99.3
Securities escrow agreement, dated December 22, 2009, by and between China Carbon Graphite Group, Inc., Maxim Group LLC, and the investors.
 
99.4
Escrow agreement, dated December 17, 2009, by and between China Carbon Graphite Group, Inc., Maxim Group LLC, and the investors.
 
99.5
Form of Warrant issued to the investors.
 
99.6
Warrant issued to Maxim Group LLC.
 
99.7
Press release dated December 23, 2009, issued by China Carbon Graphite Group, Inc.
 
 
4

 

 
SIGNATURES
 
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.
 
     
 
CHINA CARBON GRAPHITE GROUP, INC.
 
(Registrant) 
     
Date: December 28, 2009
By:  
/s/ Donghai Yu
 
Donghai Yu
 
Chief Executive Officer

 
 
 
 
 
  5

Exhibit 3.1
 
 

 
 
 

 
 
 
 


 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 
 

 
 
 
 
Exhibit 99.1



SUBSCRIPTION BOOKLET

 
 

 
CHINA CARBON GRAPHITE GROUP, INC.
___________________________
 
PRIVATE OFFERING OF UNITS, WITH EACH UNIT CONSISTING OF:
( i ) ONE (1) SHARE OF SERIES A CONVERTIBLE PREFERRED STOCK, AND
( ii ) A WARRANT TO PURCHASE FOUR-TENTHS OF (1) SHARE OF COMMON STOCK
 
____________________________
 

 


 
PLACEMENT AGENT
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
(212) 895-3500
 

 
DECEMBER 22, 2009
 


CONTENTS

Instructions for Subscription

Exhibit A:                     Wiring and Check Instructions
Exhibit B:                      Subscription Agreement
Exhibit C:                      Confidential Purchaser Questionnaire
 
 

 
 

CHINA CARBON GRAPHITE GROUP, INC.

SUBSCRIPTION BOOKLET


INSTRUCTIONS FOR SUBSCRIPTION FOR UNITS

Each subscriber for Units offered must do the following:

 
1.
Complete, sign and deliver the Subscription Agreement included in this Subscription Booklet.

 
2.
Complete, sign and deliver the Confidential Purchaser Questionnaire included in this Subscription Booklet.

 
3.
Deliver payment in the amount of the Units subscribed for in accordance with the wire transfer and check instructions attached hereto as Exhibit A .

 
4.
Delivery of the completed subscription documents described above and check (if applicable) should be delivered directly to the Company at the following address, which check shall be immediately forwarded to the escrow account:


CHINA CARBON GRAPHITE GROUP, INC.,
c/o Maxim Group LLC
405 Lexington Avenue
New York, New York 10174

Attention: Shunda Cannon

Phone: (212) 895-3500
Fax: (212) 895-3555


THE COMPANY AND MAXIM GROUP MAY ACCEPT OR REJECT SUBSCRIPTIONS IN ITS SOLE DISCRETION.  THE OFFERING IS AVAILABLE ONLY TO “ACCREDITED INVESTORS” AS DEFINED UNDER REGULATION D OF THE SECURITIES OF 1933, AS AMENDED.  In the event that a subscription offer is not accepted by the Company, the subscription funds shall be returned to the subscriber, without interest or deduction thereon.
 
 
 


 
EXHIBIT A

Wire Transfer and Check Instructions


Wiring and Check Instructions :

To subscribe for Units in the private offering of CHINA CARBON GRAPHITE GROUP, INC.
 
 
1.
Date and Fill in the number of Units being purchased and Complete and Sign the Signature Page to Subscription Agreement

2.
Sign the Confidential Purchaser Questionnaire page attached to this letter.

3.
Fax all forms to Shunda Cannon at (212) 895-3555 and then send all signed original documents with a check (if a check is being used) to: Maxim Group LLC, 405 Lexington Avenue, New York, New York 10174 Attention: Shunda Cannon .
 
4.
Please make your subscription payment payable to the order of “Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.”

For wiring funds directly to the escrow account,
see the following instructions:

Name:  JP Morgan Chase Bank    
ABA Number: 021000021   
Account No.: 530-154498
Account Name: Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.

Checks :

Checks should be made out to the order of “Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.”
 

 





EXHIBIT B

SUBSCRIPTION AGREEMENT


 
CHINA CARBON GRAPHITE GROUP, INC.






Please review, sign on page S-1, and return to the placement agent at the address below:

c/o Maxim Group LLC
405 Lexington Avenue
New York, New York 10174

Attention: Shunda Cannon

Phone: (212) 895-3500
Fax: (212) 895-3555






SUBSCRIPTION AGREEMENT

CHINA CARBON GRAPHITE GROUP, INC.

OTCBB:CHGI

Minimum Offering Amount: 1,700,000 Units ($2,040,000)
Maximum Offering Amount: 2,500,000 Units ($3,000,000)

Each Unit Consisting of: (i) One (1) Share of Series B Convertible Preferred Stock, and
(ii) a Warrant to purchase Four-Tenths (0.40) of One (1) Share of Common Stock

Purchase Price: $1.20 per Unit

HOW TO SUBSCRIBE

CHINA CARBON GRAPHITE GROUP, INC., (the “ Company ”) will offer a minimum of 1,000,000 units (“ Units ”) for aggregate proceeds of $2,040,000 (the “ Minimum Amount ”) consisting of (i) one share of Series B Convertible Preferred Stock (the “ Series B Preferred ”) and (ii) a five year warrant to purchase four-tenths of one share of common stock, par value $0.001 per share, of the Company (the “ Common Stock ”) underlying the Series B Preferred at an exercise price of $1.30 per share (“ Warrant ”).  The Units are offered to investors at a price of $1.20 per Unit, on a “best efforts, all-or-none” basis as to 1,700,000 Units and on a “best efforts” basis as to the remaining Units.  We are offering a maximum of 2,000,000 Units (“ Maximum Amount ”).
 
The minimum investment required is $60,000, representing 50,000 Units, although the Company and Maxim Group LLC (the “ Placement Agent ”) may, in their mutual discretion and without notice to investors, accept subscriptions for a lesser amount.  Any qualified subscriber who wishes to purchase Units should deliver the following items to the Placement Agent:
 
(1)  
one dated and executed copy of the Subscription Agreement with all blanks properly completed;

(2)  
one dated and executed copy of the Confidential Purchaser Questionnaire with all blanks properly completed; and

(3)  
either:
 
a.  
a check payable to the order of “Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.” in the amount of $1.20 per each Unit purchased; or
 
b.  
wire transfer to “Continental Stock Transfer & Trust Company” in accordance with the wire transfer instructions attached hereto as Exhibit A. All subscription proceeds received and accepted will be deposited directly into the Escrow Account pending receipt of funds equal or greater than to the Minimum Offering at which time the proceeds will be distributed to the operating account of the Company in the first closing.  Additional closings may from time to time be conducted with the final closing to occur within 10 days after the earlier of the Termination Date or the sale of all Units offered.
 
 
 
B-1

 
 
CHINA CARBON GRAPHITE GROUP, INC.

SUBSCRIPTION AGREEMENT

The undersigned (hereinafter “ Subscriber ”) hereby confirms his/her/its subscription for the purchase of __________________ investment units (the “ Units ”), with each Unit consisting of: (i) one (1) share of Series B Convertible Preferred Stock   (the “ Series B Preferred ”) and (ii) a five-year warrant to purchase four-tenths (0.40) of one (1) share of common stock, par value $0.001 per share, of the Company (the “ Common Stock ”) underlying the Series B Preferred at an exercise price of $1.30 per share (the “ Warrants ”) of CHINA CARBON GRAPHITE GROUP, INC., a Nevada corporation (the “ Company ”), on the terms described below.
 
Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Company’s Private Placement Memorandum, dated December 16, 2009 (the “ Memorandum ”).  The Units, the shares of Series B Preferred and the Warrants are sometimes referred to herein as the “ Securities .”
 
In connection with this subscription, Subscriber and the Company agree as follows:
 
1.              Purchase and Sale of the Units .

(a)   The Company hereby agrees to issue and to sell to Subscriber, and Subscriber hereby agrees to purchase from the Company, Units for the aggregate subscription amount set forth on the signature page hereto.  The Subscriber understands that this subscription is not binding upon the Company until the Company accepts it.  The Subscriber acknowledges and understands that acceptance of this Subscription will be made only by a duly authorized representative of the Company executing and mailing or otherwise delivering to the Subscriber at the Subscriber’s address set forth herein, a counterpart copy of the signature page to this Subscription Agreement indicating the Company’s acceptance of this Subscription.  The Company reserves the right, in its sole discretion for any reason whatsoever, to accept or reject this subscription in whole or in part.  Following the acceptance of this Subscription Agreement by the Company, the Company shall issue and deliver to Subscriber such number of Units subscribed for hereunder against payment in U.S. Dollars of the Purchase Price (as defined below).  If this subscription is rejected, the Company and the Subscriber shall thereafter have no further rights or obligations to each other under or in connection with this Subscription Agreement.  If this subscription is not accepted by the Company on or before the last day of the Offering Period, this subscription shall be deemed rejected.

(b)   Subscriber has hereby delivered and paid concurrently herewith the aggregate purchase price for the Units set forth on the signature page hereof in an amount required to purchase and pay for the Units subscribed for hereunder (the “ Purchase Price ”), which amount has been paid in U.S. Dollars by wire transfer, subject to collection, to the order of “CHINA CARBON GRAPHITE GROUP, INC.”
 
 
B-2


 
(c)   Subscriber understands and acknowledges that this subscription is part of a private placement (“the “ Offering ”) by the Company of up to a minimum of $2,040,000 (the “ Minimum Amount ”) and a maximum of $3,000,000 of Units (the “ Maximum Amount ”) on a “best efforts-all or none” basis with respect to the Minimum Amount and a “best efforts” basis with respect to the Maximum Amount.  Subscriber understands that Company must sell the Minimum Amount before it receives, and has the right to expend, the net proceeds from the sal of any Units. The proceeds from the sale of the Units will be held in escrow until at least the Minimum Amount is met, and the Company, upon accepting subscriptions, at its discretion may immediately thereafter conduct a closing and expend the subscription proceeds.

(d)   At the closing of the Offering, the Company shall deposit with an escrow agent acceptable to the Company and the Placement Agent, as a pledge for the benefit of the Subscriber and the other subscribers in the Offering, a number of shares of Common Stock equal to 50% of the number of shares of Series B Preferred issued in the Offering (the “ Make-Good Shares ”).  The Make-Good Shares shall be held in escrow in the name of the escrow agent and be returned to the Company or delivered to the Subscribers as hereinafter provided and further provided in a Securities Escrow Agreement to be entered into by the Company and such escrow agent (the “ Securities Escrow Agreement ”) in the event that the Company does not meet certain financial performance targets for its fiscal years ending December 31, 2010 and December 31, 2011.

1.  
The performance target for the Company’s fiscal year ended December 31, 2010 is the achievement of net income (defined to include $120,000 of dividends payable and a 25% corporate tax rate) of at least $5,100,000. The performance target for the Company’s fiscal year ended December 31, 2011 is the achievement of net income (defined to include $120,000 of dividends payable and a 25% corporate tax rate) of at least $10,000,000.  If the Company completes an underwritten equity financing with gross proceeds in excess of $15,000,000 prior to August 31, 2010, the performance target for the Company’s fiscal year ended December 31, 2011 is the achievement of net income (defined to include $120,000 of dividends payable and a 25% corporate tax rate) of at least $20,000,000.  In determining net income, to the extent that any Excluded Items are deducted in computing net income, there shall be added back the amount of such Excluded Items.  “ Excluded Items ” shall mean: (i) any income tax, enterprise tax or similar tax in excess of 25% of income before income taxes; and (ii) any items of expense or deduction arising directly or indirectly from the Offering and the transaction contemplated by the Offering.

2.  
The total number of Make-Good Shares shall be allocated 50% to 2010 and 50% to 2011.  If the Company meets the target number for any year, all of the Make-Good Shares allocable to that year shall be returned to the Company for cancellation.  If the Company’s net income is less than the target amount, the percentage shortfall shall be determined to two decimal places.  The Company shall allocate to the Subscribers in the manner hereinafter provided, that percentage of the Make-Good Shares for such year as equals the shortfall. For example, if the shortfall for 2010 is 10% and if the total number of Make-Good Shares for 2010 is 625,000, then 62,500 Make-Good Shares shall be issued to the Subscribers.
 
 
B-3

 

 
3.  
For purposes of paying the Make-Good Shares, a determination will be made separately with respect to each Subscriber.  The number of Make-Good Shares payable to each Subscriber shall be equal to a fraction of the total number of Make-Good shares potentially issuable pursuant to the foregoing provisions (62,500 shares in the example above), the numerator of which shall be the amount by which (a) the number of shares of Common Stock issued or issuable upon Series B Preferred which was initially issued to the Subscriber exceeds (b) the sum of (x) the number of shares of Common Stock sold or otherwise transferred by the Subscriber plus (y) the number of shares of Common Stock issued or issuable upon conversion of the shares of Series B Preferred sold or otherwise transferred by the Subscriber, and the denominator of which is the number of shares of Common Stock issued or issuable upon conversion of all of the Series B Preferred issued by the Company in the offering described in the Memorandum.  Any Make-Good Shares for either year which are not transferred to the Subscribers pursuant to this paragraph shall be returned to the Company for cancellation.

2.              Representations and Warranties of Subscriber .

Subscriber represents and warrants to the Company and Maxim Group LLC (the “ Placement Agent ”) as follows:

(a)   Subscriber is an “accredited investor” as defined by Rule 501 under the Securities Act of 1933, as amended (the “ Act ”), and Subscriber is capable of evaluating the merits and risks of Subscriber’s investment in the Units and has the ability and capacity to protect Subscriber’s interests.

(b)   Subscriber understands that the Securities have not been registered, but Subscriber is entitled to certain rights with respect to the registration of the Common Stock underlying the Series B Preferred and the Warrants (see Section 5 below).  Subscriber understands that the Securities will not be registered under the Act on the ground that the issuance thereof is exempt under Section 4(2) of the Act as a transaction by an issuer not involving any public offering and Regulation D under the Act, and that, in the view of the United States Securities and Exchange Commission (the “ Commission ”), the statutory basis for the exception claimed would not be present if any of the representations and warranties of Subscriber contained in this Subscription Agreement or those of other purchasers of the Units are untrue or, notwithstanding the Subscriber’s representations and warranties, the Subscriber currently has in mind acquiring any of the Units for resale upon the occurrence or non-occurrence of some predetermined event.

(c)   Subscriber is purchasing the Units subscribed for hereby for investment purposes and not with a view to distribution or resale, nor with the intention of selling, transferring or otherwise disposing of all or any part thereof for any particular price, or at any particular time, or upon the happening of any particular event or circumstance, except selling, transferring, or disposing the Units in full compliance with all applicable provisions of the Act, the rules and regulations promulgated by the Commission thereunder, and applicable state securities laws. Subscriber understands that an investment in the Securities is not a liquid investment.
 
 
B-4


 
(d)   Subscriber acknowledges that Subscriber has had the opportunity to ask questions of, and receive answers from, the Company or any authorized person acting on its behalf concerning the Company and its business and to obtain any additional information, to the extent possessed by the Company (or to the extent it could have been acquired by the Company without unreasonable effort or expense) necessary to verify the accuracy of the information received by Subscriber.  In connection therewith, Subscriber acknowledges that Subscriber has had the opportunity to discuss the Company’s business, management and financial affairs with the Company’s management or any authorized person acting on its behalf.  Subscriber has received and reviewed the Memorandum and all the information concerning the Company and the Securities, both written and oral, that Subscriber desires.  Without limiting the generality of the foregoing, Subscriber has been furnished with or has had the opportunity to acquire, and to review: (i) copies of the Memorandum, and (ii) all information, both written and oral, that Subscriber desires with respect to the Company’s business, management, financial affairs and prospects.  In determining whether to make this investment, Subscriber has relied solely on (i) Subscriber’s own knowledge and understanding of the Company and its business based upon Subscriber’s own due diligence investigations and the information furnished pursuant to this paragraph, and (ii) the information described in subparagraph 2(g) below.  Subscriber understands that no person has been authorized to give any information or to make any representations which were not contained in the Memorandum and Subscriber has not relied on any other representations or information.
 
(e)   Subscriber has all requisite legal and other power and authority to execute and deliver this Subscription Agreement and to carry out and perform Subscriber’s obligations under the terms of this Subscription Agreement.  This Subscription Agreement constitutes a valid and legally binding obligation of Subscriber, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other general principles of equity, whether such enforcement is considered in a proceeding in equity or law.

(f)   Subscriber has carefully considered and has discussed with the Subscriber’s legal, tax, accounting and financial advisors, to the extent the Subscriber has deemed necessary, the suitability of this investment and the transactions contemplated by this Subscription Agreement for the Subscriber’s particular federal, state, local and foreign tax and financial situation and has independently determined that this investment and the transactions contemplated by this Subscription Agreement are a suitable investment for the Subscriber.  Subscriber has relied solely on such advisors and not on any statements or representations of the Company or any of its agents.  Subscriber understands that Subscriber (and not the Company) shall be responsible for Subscriber’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Subscription Agreement.

(g)   This Subscription Agreement and the Confidential Purchaser Questionnaire accompanying this Subscription Agreement do not contain any untrue statement of a material fact or omit any material fact concerning Subscriber.
 
 
B-5


 
(h)   There are no actions, suits, proceedings or investigations pending against Subscriber or Subscriber’s assets before any court or governmental agency (nor, to Subscriber’s knowledge, is there any threat thereof) which would impair in any way Subscriber’s ability to enter into and fully perform Subscriber’s commitments and obligations under this Subscription Agreement or the transactions contemplated hereby.

(i)   The execution, delivery and performance of and compliance with this Subscription Agreement and the issuance of the Units will not result in any violation of, or conflict with, or constitute a default under, any of Subscriber’s articles of incorporation or by-laws, or equivalent limited liability company, trust or partnership documents, if applicable, or any agreement to which Subscriber is a party or by which it is bound, nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of Subscriber or the Units.

(j)   Subscriber acknowledges that an investment in the Securities is speculative and involves a high degree of risk and that Subscriber can bear the economic risk of the purchase of the Units, including a total loss of his/her/its investment.

(k)   Subscriber acknowledges that he/she/it has carefully reviewed and considered the risk factors discussed in the “Risk Factors” section of the Memorandum.

(l)   Subscriber recognizes that no federal, state or foreign agency has recommended or endorsed the purchase of the Securities.

(m)   Subscriber is aware that the Units and Series B Preferred are, and the Common Stock issuable upon conversion of the Series B Preferred and upon exercise of the Warrants will be, when issued, “restricted securities” as that term is defined in Rule 144 of the general rules and regulations under the Act.

(n)   Subscriber understands that the Units, the Series B Preferred, and the Common Stock issuable upon conversion of the Series B Preferred and upon exercise of the Warrants shall bear the following legend or one substantially similar thereto, which Subscriber has read and understands:

NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT MAY BE CONVERTED HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT MAY BE CONVERTED NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF AT ANY TIME IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
 
 
B-6


 
(o)   Because of the legal restrictions imposed on resale, Subscriber understands that the Company shall have the right to note stop-transfer instructions in its stock transfer records, and Subscriber has been informed of the Company’s intention to do so.  Any sales, transfers, or other dispositions of the Units by Subscriber, if any, will be made in compliance with the Act and all applicable rules and regulations promulgated thereunder.

(p)   Subscriber acknowledges that Subscriber has such knowledge and experience in financial and business matters that Subscriber is capable of evaluating the merits and risks of an investment in the Securities and of making an informed investment decision with respect thereto.

(q)   Subscriber represents that: (i) Subscriber is able to bear the economic risks of an investment in the Securities and to afford a complete loss of the investment, and (ii) (A) Subscriber could be reasonably assumed to have the ability and capacity to protect his/her/its interests in connection with this subscription; or (B) Subscriber has a pre-existing personal or business relationship with either the Company or any affiliate thereof of such duration and nature as would enable a reasonably prudent purchaser to be aware of the character, business acumen and general business and financial circumstances of the Company or such affiliate and is otherwise personally qualified to evaluate and assess the risks, nature and other aspects of this subscription.

(r)   Subscriber further represents that the address of Subscriber set forth below is his/her principal residence (or, if Subscriber is a company, partnership or other entity, the address of its principal place of business); that Subscriber is purchasing the Securities for Subscriber’s own account and not, in whole or in part, for the account of any other person; Subscriber is purchasing the Securities for investment and not with a view to the resale or distribution thereof; and that Subscriber has not formed any entity, and is not an entity formed, for the purpose of purchasing the Securities.

(s)   Subscriber understands that the Company shall have the unconditional right to accept or reject this subscription, in whole or in part, for any reason or without a specific reason, in the sole and absolute discretion of the Company (even after receipt and clearance of Subscriber’s funds).  This Subscription Agreement is not binding upon the Company until accepted in writing by an authorized officer of the Company.  In the event that this subscription is rejected, then Subscriber’s subscription funds (to the extent of such rejection) will be promptly returned in full without interest thereon or deduction therefrom.

(t)   Subscriber has not been furnished with any oral representation or oral information in connection with the offering of the Securities that is not contained in, or is in any way contrary to or inconsistent with, statements made in the Memorandum and this Subscription Agreement.

(u)   Subscriber represents that Subscriber is not subscribing for the Securities as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over the Internet, television or radio or presented at any seminar or meeting or any public announcement or filing of or by the Company.
 
 
B-7


 
(v)   Subscriber has carefully read and understood this Subscription Agreement and the Memorandum, and Subscriber has accurately completed the Confidential Purchaser Questionnaire which accompanies this Subscription Agreement.

(w)   No representations or warranties have been made to Subscriber by the Company, or any officer, employee, agent, affiliate or subsidiary of the Company, other than the representations of the Company contained herein, and in subscribing for the Securities the Subscriber is not relying upon any representations other than those contained in the Memorandum or in this Subscription Agreement.

(x)   Subscriber represents and warrants, to the best of Subscriber’s knowledge, that no finder, broker, agent, financial advisor or other intermediary, nor any purchaser representative or any broker-dealer acting as a broker other than Maxim Group LLC, is entitled to any compensation in connection with the transactions contemplated by this Subscription Agreement.

(y)   Subscriber represents and warrants that Subscriber has: (i) not distributed or reproduced the Memorandum, in whole or in part, at any time, without the prior written consent of the Company and (ii) kept confidential the existence of the Memorandum and the information contained therein or made available in connection with any further investigation of the Company.

(z)   If the Subscriber is a corporation, partnership, limited liability company, trust, or other entity, the person executing this Subscription Agreement hereby represents and warrants that the above representations and warranties shall be deemed to have been made on behalf of such entity and the Subscriber has made the same after due inquiry to determine the truthfulness of such representations and warranties.

(aa)   If the Subscriber is a corporation, partnership, limited liability company, trust, or other entity, it represents that: (i) it is duly organized, validly existing and in good standing in its jurisdiction of incorporation or organization and has all requisite power and authority to execute and deliver this Subscription Agreement and purchase the Securities as provided herein; (ii) its purchase of the Securities will not result in any violation of, or conflict with, any term or provision of the charter, By-Laws or other organizational documents of Subscriber or any other instrument or agreement to which the Subscriber is a party or is subject; (iii) the execution and delivery of this Subscription Agreement and Subscriber’s purchase of the Securities has been duly authorized by all necessary action on behalf of the Subscriber; and (iv) all of the documents relating to the Subscriber’s subscription to the Securities have been duly executed and delivered on behalf of the Subscriber and constitute a legal, valid and binding agreement of the Subscriber.

(bb)   The Subscriber understands and agrees that the securities are anticipated to be sold by the Company through the Placement Agent, a licensed broker-dealer, on an “all or none” basis with respect to the Minimum Amount and a “best efforts” with respect to the rest of the offering and that the Company has engaged the Placement Agent to sell the securities on its behalf, and will pay the Placement Agent the fees, expenses including (i) a fee of 9% of the gross proceeds, a portion of which the placement agent may pay to other licensed broker-dealers; (ii) a corporate finance fee of 1% of the gross proceeds; and (iii) warrants to purchase the number of shares of Common Stock equal to 5% of the number of shares included as part of the Units sold in this offering at a price equal to $1.32 per share of Common Stock.
 
 
B-8


 
(cc)   The Subscriber should check the Office of Foreign Assets Control (“ OFAC ”) website at http://www.treas.gov/ofac before making the following representations. The Subscriber represents that the amounts invested by it in the Company in the Offering were not and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Federal regulations and Executive Orders administered by OFAC prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals.  The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at http://www.treas.gov/ofac.  In addition, the programs administered by OFAC (the “ OFAC Programs ”) prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists.

(dd)   To the best of the Subscriber’s knowledge, none of: (1) the Subscriber; (2) any person controlling or controlled by the Subscriber; (3) if the Subscriber is a privately-held entity, any person having a beneficial interest in the Subscriber; or (4) any person for whom the Subscriber is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, or a person or entity prohibited under the OFAC Programs.  Please be advised that the Company may not accept any amounts from a prospective investor if such prospective investor cannot make the representation set forth in this and the preceding paragraph.  The Subscriber agrees to promptly notify the Company and the Placement Agent should the Subscriber become aware of any change in the information set forth in these representations.  The Subscriber understands and acknowledges that, by law, the Company may be obligated to “freeze the account” of the Subscriber, either by prohibiting additional subscriptions from the Subscriber, declining any redemption requests and/or segregating the assets in the account in compliance with governmental regulations, and Placement Agent may also be required to report such action and to disclose the Subscriber’s identity to OFAC. The Subscriber further acknowledges that the Company may, by written notice to the Subscriber, suspend the redemption rights, if any, of the Subscriber if the Company reasonably deems it necessary to do so to comply with anti-money laundering regulations applicable to the Company and Placement Agent or any of the Company’s other service providers.  These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

(ee)   To the best of the Subscriber’s knowledge, none of: (1) the Subscriber; (2) any person controlling or controlled by the Subscriber; (3) if the Subscriber is a privately-held entity, any person having a beneficial interest in the Subscriber; or (4) any person for whom the Subscriber is acting as agent or nominee in connection with this investment is a senior foreign political figure, or any immediate family member or close associate of a senior foreign political figure.
 
 
B-9


 
(ff)   If the Subscriber is affiliated with a non-U.S. banking institution (a “ Foreign Bank ”), or if the Subscriber receives deposits from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, the Subscriber represents and warrants to the Company that: (1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.

3.            Representations and Warranties of the Company .  The Company, for itself and on behalf of its wholly-owned subsidiaries Talent International Investment Limited and Xinghe Yongle Carbon Co., Ltd. and Xinghe Xingyong Carbon Co., Ltd., a variable interest entity controlled by the Company (collectively, the “ Subsidiaries ”), represents and warrants to Subscriber as follows:

(a)   Due Organization.  The Company is a corporation duly organized, validly existing and in good standing under the laws of Nevada and has the requisite power and authority to own its properties and to carry on its business as presently conducted.  The Company and its Subsidiaries are qualified to transact business as a domestic or foreign corporation and are in good standing (to the extent the concept of good standing is recognized in such jurisdictions) under the laws of each jurisdiction where the location of its properties or the conduct of its business makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a material and adverse effect on the business, condition (financial or otherwise), operations, prospects or property of the Company or its Subsidiaries, taken as a whole (“ Material Adverse Effect ”).

(b)   Due Authorization; Enforceability.  Each document necessary to effect the Offering, including, without limitation, this Subscription Agreement, the Certificate of Designations of the Series B Preferred, the Warrants, the Registration Rights Agreement (as defined below) and the Securities Escrow Agreement (collectively, the “ Transaction Documents ”) has been duly authorized, executed and delivered by the Company and is a valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.  The Company and its Subsidiaries have full corporate power and authority necessary to conduct its business as presently conducted and to enter into and deliver the Transaction Documents and to perform its obligations thereunder.

(c)   Non Contravention.  None of the execution and delivery of, or performance by the Company or its Subsidiaries, as applicable, under any of the Transaction Documents or the consummation of the transactions herein or therein contemplated conflicts with, violates, or will result in the creation or imposition of any lien, charge or other encumbrance upon any of the assets of the Company or its Subsidiaries, under any agreement or other instrument to which the Company or its Subsidiaries is a party or by which the Company or its Subsidiaries or its assets may be bound, any term of the certificate of incorporation or by-laws of the Company or its Subsidiaries, or any license, permit, judgment, decree, order, statute, rule or regulation including SAFE (as defined in the Memorandum) applicable to the Company or its Subsidiaries or any of its assets, except where such conflict, violation or creation would not have a Material Adverse Effect.  Without limiting the generality of the foregoing, the terms of the Transaction Documents do not conflict rights of, and with respect to the Certificate of Designations of the Series B Preferred, have been duly and lawfully approved by, the holders of the Company’s outstanding shares of Series A Convertible Preferred Stock.
 
 
B-10


 
(d)   Information Provided.  The Memorandum and/or information provided by the Company to the undersigned hereof, including, without limitation, all filings of the Company filed with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended (the “ Exchange Act ”), included therewith or filed prior to the completion of the Offering (collectively, “ SEC Reports ”), taken together, do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Except as may have been corrected or supplemented in a subsequent SEC Report, as of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder. Except as set forth in the SEC Reports, the Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the Exchange Act, as the case may be, is being prepared.  The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as set forth in the most recently filed periodic report under the Exchange Act.

(e)   Internal Controls.  The Company maintains a system of internal accounting and other controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of reliable financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any material differences.

(f)   Securities Exemptions. Neither the Company nor any of its directors, officers, employees, agents or representatives (“ Company Representatives ”) have taken or will take any action which has caused or may cause the Offering not to qualify for exemption from the registration requirements of the Securities Act or of other federal, state or other securities or other laws, it being understood that the Company Representatives do not include the Placement Agent or its managers, members, consultants or employees. In connection with the Offering, neither the Company nor the Company Representatives shall offer or cause to be offered the Units by any form of general solicitation or general advertising as defined in Rule 502(c) of Regulation D.  The Company and the Company Representatives have not taken and shall not take any action that would cause the Offering to be integrated with other transactions under Rule 502(a) of Regulation D.  Neither the Company nor, to the Company’s knowledge, any of its affiliates or Company Representatives has, prior to the date hereof, made any offer or sale of any securities which could be “integrated” for purposes of the Securities Act or the Rules and Regulations with the offer and sale of the Units pursuant to this Offering.
 
 
B-11


 
(g)   No commissions.  The Company has taken no action that would give rise to any claim by any person for brokerage commissions, finder’s fees or similar payments relating to the Offering and the transactions contemplated hereby, other than to the Placement Agent.

(h)   Anti-Dilution. The transaction contemplated hereby will not result in the application of any anti-dilution or price protection provisions attributable to any of the Company’s existing and outstanding securities, whether equity, debt or a hybrid thereof.

(i)   Conduct of Business.  The conduct of business by the Company and its Subsidiaries as presently conducted is not subject to continuing oversight, supervision, regulation or examination by any governmental official or body of the United States or any other jurisdiction wherein the Company or its Subsidiaries conducts or proposes to conduct such business, except as such regulation as is applicable to commercial enterprises generally.  To the Company’s knowledge, the Company and its Subsidiaries have obtained all requisite licenses, permits and other governmental authorization necessary to conduct its business as presently conducted, except where the failure to obtain such license, permit or other governmental authorization would not result in a Material Adverse Effect.

(j)   No Defaults.  Except as disclosed in the Memorandum, to the knowledge of the Company, no default by the Company or its Subsidiaries exists in the due performance under any material agreement to which the Company or its Subsidiaries is a party or to which any of its assets is subject (collectively, the “ Company Agreements ”), except where such defaults do not, individually or in the aggregate, have a Material Adverse Effect.  The Company Agreements are in full force and effect in accordance with their respective terms.

(k)   Intellectual Property.  The Company or its Subsidiaries own all right, title and interest in, or possesses adequate and enforceable rights to use, without further payment, all patents, patent applications, trademarks, trade names, service marks, copyrights, franchises, trade secrets, confidential information, processes, formulations, software and source and object codes employed in the conduct of their business (collectively, the “ Intangibles ”).  To the knowledge of the Company, it has not infringed upon the rights of others with respect to the Intangibles and neither the Company nor its Subsidiaries have received notice that they have or may have infringed or are infringing upon the rights of others with respect to the Intangibles, or any notice of conflict with the asserted rights of others with respect to the Intangibles that could, individually or in the aggregate, have a Material Adverse Effect.

(l)   Anti-Terrorism.  Neither the sale of the Units by the Company nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Without limiting the foregoing, neither the Company nor its Subsidiaries is (a) a person whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) a person who engages in any dealings or transactions, or be otherwise associated, with any such person.  To the Company’s knowledge, the Company and its Subsidiaries are in compliance, in all material respects, with the USA Patriot Act of 2001 (signed into law October 26, 2001).
 
 
B-12


 
(m)   Capitalization; Additional Issuances.  The issued and outstanding securities of the Company as of December 15, 2009 are as set forth in the Memorandum.  Except for XingGuang’s right of first refusal to participate in future financings or as otherwise set forth in the Memorandum, there are no outstanding agreements or preemptive or similar rights affecting the Common Stock and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any Common Stock of the Company as of the date of the Memorandum.

(n)   Tax Returns.  The Company and its Subsidiaries have properly prepared and timely filed all federal, state, foreign and other tax returns that are required to be filed by each of them and have paid or made provision for the payment of, except such as may be contested in good faith, all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company and its Subsidiaries are obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return).  No deficiency assessment with respect to a proposed adjustment of the Company’s or its Subsidiary’s federal, state, local or foreign taxes is pending or, to the Company’s knowledge, threatened which, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.  The accruals and reserves on the books and records of the Company in respect of tax liabilities for any taxable period not finally determined are adequate in all material respects to meet any assessments and related liabilities for any such period and, since the date of the Company’s most recent audited financial statements, the Company has not incurred any liability for taxes other than in the ordinary course of its business.  There is no tax lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or its Subsidiaries.

(o)   Political Contributions.  Neither the Company, nor the Company Representatives, have at any time during the last five (5) years: (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments that are not prohibited by the laws of the United States or any jurisdiction thereof or any foreign jurisdiction.

(p)   Labor disputes.  No labor disturbance by the employees of the Company or its Subsidiaries currently exists or, to the Company’s knowledge, is likely to occur.

(q)   Consents.  No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, its Subsidiaries, or any of its affiliates, is required for the execution by the company of the Transaction Documents and compliance and performance by the Company or its Subsidiaries of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities, other than such consents, approvals and authorizations as shall have been received by the Company or its Subsidiaries as of the closing date, except for any notices of sale required to be filed with the Securities and Exchange Commission under Regulation D of the Act, or such post-closing filings as may be required under applica­ble state securities laws.
 
 
B-13


 
(r)   The Securities.  The Securities upon issuance:

1.  
will be free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the Act and any applicable state securities laws;
2.  
will be duly authorized and validly issued, fully paid and non-assessable;
3.  
will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company;
4.  
will have been issued in reliance upon an exemption from the registration requirements of and, assuming the representations and warranties of the Subscriber herein is true and accurate, will have been issued in compliance with Regulation D under the 1933 Act.

(s)   Litigation.  Except as disclosed in the Memorandum, there are no material legal proceedings, other than routine litigation incidental to the business, pending or, to the knowledge of the Company, threatened against or involving the Company, its Subsidiaries or any of its respective property or assets.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving the Company or its Subsidiaries.

(t)   Disclosure.  All of the disclosure furnished by or on behalf of the Company to the Subscribers regarding the Company, its business and the transactions contemplated hereby, including, without limitation, any disclosure contained in the Memorandum, the SEC Reports or included in presentations to potential investors, taken together, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, taken together, in light of the circumstances under which they were made, not misleading.

4.             Indemnification .  Subscriber agrees to indemnify and hold harmless the Company, the Placement Agent, and their respective officers, directors, employees, shareholders, agents, attorneys, representatives and affiliates, and any person acting for or on behalf of the Company or the Placement Agent, from and against any and all damage, loss, liability, cost and expense (including reasonable attorneys’ fees and disbursements) which any of them may incur by reason of the failure by Subscriber to fulfill any of the terms and conditions of this Subscription Agreement, or by reason of any breach of the representations and warranties made by Subscriber herein, or in any other document provided by Subscriber to the Company in connection with this investment.  All representations, warranties and covenants of each of Subscriber and the Company contained herein shall survive the acceptance of this subscription and the closings.
 
 
B-14


 
5.              Registration Rights .

(a)   In consideration of the investment in the Units described in this Subscription Agreement and the Memorandum, the Company hereby grants to the Subscriber, and Subscriber hereby agrees to and accepts from the Company, the registration rights set forth in the Registration Rights Agreement, substantially in the form attached hereto as Exhibit I (the “ Registration Rights Agreement ”).

(b)   In connection with the exercise by Subscriber of the registration rights set forth in the Registration Rights Agreement, and with respect to the Securities held by such Subscriber, Subscriber hereby covenants that, prior to filing a Registration Statement or Prospectus (each as defined in Registration Rights Agreement) or any amendments or supplements thereto, Subscriber shall promptly and truthfully complete and execute a selling security-holder questionnaire provided by the Company, and provide any and all such other material information as the Company may require in order to prepare and file such Registration Statement, Prospectus or any amendment or supplement thereto.

6.            Miscellaneous .

(a)   Subscriber agrees not to transfer or assign this Subscription Agreement or any of Subscriber’s interests herein without the prior written approval of the Company and further agrees that the transfer or assignment of the Securities acquired pursuant hereto shall be made only in accordance with all applicable laws.

(b)   Subscriber agrees that Subscriber cannot cancel, terminate, or revoke this Subscription Agreement or any agreement of Subscriber made hereunder, and this Subscription Agreement shall survive the death or legal disability of Subscriber and shall be binding upon Subscriber’s heirs, executors, administrators, successors, and permitted assigns.

(c)   Subscriber has read, understood and accurately completed this entire Subscription Agreement.

(d)   This Subscription Agreement and the Confidential Purchase Questionnaire constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended or waived only by a written instrument signed by all parties.

(e)   Subscriber acknowledges that it has been advised and has had the opportunity to consult with Subscriber’s own attorney regarding this subscription and Subscriber has done so to the extent that Subscriber deems appropriate.

(f)   Any notice or other document required or permitted to be given or delivered to the parties hereto shall be in writing and sent: (i) by fax if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (with charges prepaid).
 
 
B-15


 
If to the Company, to:
 
CHINA CARBON GRAPHITE GROUP, INC.
c/o Xinghe Yongle Carbon Co., Ltd.
787 Xicheng Wai, Chengguantown,
Xinghe County, Inner Mongolia, China
Phone: (86) 474-7209723
Attention: Donghai Yu, Chief Executive Officer

With a copy to:

Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, New York 10006
Phone: (212) 981-6767
Fax: (212) 930-9725
Attn: Asher S. Levitsky P.C.

If to the Placement Agent, to:
 
Maxim Group LLC
405 Lexington Avenue
New York, New York 10174
Phone: (212) 895-3500
Fax: (212) 895-3555
Attention: Clifford A. Teller

With a copy to:

Ellenoff Grossman & Schole LLP
150 East 42 nd Street, 11 th Floor
New York, NY 10017
Phone: (212) 370-1300
Fax: (212) 370-7889
Attn: Barry I. Grossman, Esq.

If to the Subscriber, at Subscriber’s address set forth on the signature page to this Subscription Agreement, or such other address as Subscriber shall have specified to the Company in writing.

(g)   It is expressly agreed that that Placement Agent shall be deemed a third party beneficiary of, and shall be entitled to rely on and enforce as if a party hereto, each of the Company’s representations and warranties made to Subscriber herein.

(h)   Failure of the Company to exercise any right or remedy under this Subscription Agreement or any other agreement between the Company and the Subscriber, or otherwise, or any delay by the Company in exercising such right or remedy, will not operate as a waiver thereof.  No waiver by the Company will be effective unless and until it is in writing and signed by the Company.
 
B-16

 

 
(i)   This Subscription Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of New York, as such laws are applied by the New York courts except with respect to the conflicts of law provisions thereof, and shall be binding upon the Subscriber and the Subscriber’s heirs, estate, legal representatives, successors and permitted assigns and shall inure to the benefit of the Company, and its successors and assigns.

(j)   Any legal suit, action or proceeding arising out of or relating to this Subscription Agreement or the transactions contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York.  The parties hereto hereby: (i) waive any objection which they may now have or hereafter have to the venue of any such suit, action or proceeding, and (ii) irrevocably consent to the jurisdiction of the New York Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding.  The parties further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon a party which is mailed by certified mail to such party’s address shall be deemed in every respect effective service of process upon such party in any such suit, action or proceeding.

(k)   If any provision of this Subscription Agreement is held to be invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed modified to conform with such statute or rule of law.  Any provision hereof that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provisions hereof.

(l)   The parties understand and agree that money damages would not be a sufficient remedy for any breach of this Subscription Agreement by the Company or the Subscriber and that the party against which such breach is committed shall be entitled to equitable relief, including an injunction and specific performance, as a remedy for any such breach, without the necessity of establishing irreparable harm or posting a bond therefor.  Such remedies shall not be deemed to be the exclusive remedies for a breach by either party of this Subscription Agreement but shall be in addition to all other remedies available at law or equity to the party against which such breach is committed.

(m)   All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, singular or plural, as identity of the person or persons may require.

(n)   This Subscription Agreement may be executed in counterparts and by facsimile, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
[Signature Page Follows]
 
 
 
B-17

 
 
 
Signature Page for Individuals:

IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be executed as of the date indicated below.


 
$
 
 
/
Aggregate Amount of Investment
 
 
Number of Series B Preferred Shares/
Warrant Shares
 
 
 
Print or Type Name
 
 
Print or Type Name (Joint-owner)
 
 
 
 
Signature
 
 
Signature (Joint-owner)
 
 
 
 
Date
 
 
Date (Joint-owner)
 
 
 
 
Social Security Number
 
 
Social Security Number (Joint-owner)
 
 
 
 
     
     
Address
 
Address (Joint-owner)
     
_______ Joint Tenancy    ______ Tenants in Common

                                                               

S-1


Signature Page for Partnerships, Corporations or Other Entities:

IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be executed as of the date indicated below.

 
$    
Aggregate Amount of Investment    
     
     
Number of Series B Preferred Shares    
     
     
Number of Warrant Shares    
     
     
Print or Type Name of Entity    
     
     
Address    
     
     
Taxpayer I.D. No. (if applicable)      Date
     
     
Signature     Print or Type Name and Indicate Title or Position with Entity
     
     
Signature (other authorized signatory)    Print or Type Name and Indicate Title or Position with Entity
 
 

 
S-2

 
Acceptance:

IN WITNESS WHEREOF, the Company has caused this Subscription Agreement to be executed, and the foregoing subscription accepted, as of the date indicated below, as to   Units (an aggregate investment of $_______).


CHINA CARBON GRAPHITE GROUP, INC.
 
 
 
By:  __________________________________
Name:
Title:



Date: __________________________, 2009
 

 
S-3



 EXHIBIT I
 
 
Registration Rights Agreement
 

[attached hereto]

 
 
 
 
 
 
 
 
 

 

 
 
EXHIBIT C
 

CONFIDENTIAL PURCHASER QUESTIONNAIRE







Please fill in the information and sign on page S-1, and return to the placement agent
at the address below:

Maxim Group LLC
405 Lexington Avenue
New York, New York 10174

Attention: Shunda Cannon

Phone: (212) 895-3500
Fax: (212) 895-3555

 
 
 
 











CONFIDENTIAL PURCHASER QUESTIONNAIRE

CHINA CARBON GRAPHITE GROUP, INC.

THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF SECURITIES FROM CHINA CARBON GRAPHITE GROUP, INC. (THE “ COMPANY ”).

THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT CONFIDENCE.  NO INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH DISCLOSURE IS REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL PROCESS OR IN LITIGATION INVOLVING THE COMPANY.

Capitalized terms used herein without definition shall have the respective meanings given such terms as set forth in the Subscription Agreement between CHINA CARBON GRAPHITE GROUP, INC. and the subscriber signatory thereto (the “ Subscription Agreement ”).

(1)           The undersigned represents and warrants that he, she or it comes within at least one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the undersigned comes within that category.  The undersigned agrees to furnish any additional information which the Company deems neces­sary in order to verify the answers set forth below.

Category A            
The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

Explanation.  In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities.  Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.

Category B            
The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year.

Category C            
The undersigned is a director or executive officer of the Company which is issuing and selling the Securities.
 
 
C-1


 
Category D            
The undersigned is a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Act”); a savings and loan associa­tion or other institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; any insurance company as defined in Section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors (describe entity).
 
Category E              
The undersigned is a private business development company as defined in section 202(a) (22) of the Investment Advisors Act of 1940 (describe entity).
 
Category F            
The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Securities and with total assets in excess of $5,000,000 (describe entity).
 
Category G             
The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, where the purchase is directed by a “sophisticated investor” as defined in Regulation  506(b)(2)(ii) under the Act.
 
 
C-2


 
Category H           
The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories.  If relying upon this Category alone, each equity owner must complete a separate copy of this Purchaser Questionnaire (describe entity).
                                                                                                                                                                                                                          
                                                                                                                                                                                                                            
The undersigned agrees that the undersigned will notify the Company at any time on or prior to the applicable Closing (as defined in the Memorandum) in the event that the representations and warranties in this Purchaser Questionnaire shall cease to be true, accurate and complete.

(2)            Suitability (please answer each question)

 
(a)
For individuals, do you expect your current level of income to significantly decrease in the foreseeable future?
 
YES
   
NO
 

 
(b)
For trust, corporate, partnership and other institutional subscribers, do you expect your total assets to significantly decrease in the foreseeable future?
 
YES
   
NO
 

 
(c)
For all subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you?
 
YES
   
NO
 

 
(d)
For all subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the Securities for which you seek to purchase?
 
YES
   
NO
 

 
(e)
For all subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

YES
   
NO
 
 
 
C-3


 
(3)           Manner in which title is to be held: (circle one)

(a)           Individual Ownership
(b)           Community Property
(c)           Joint Tenant with Right of Survivorship (both parties must sign)
(d)           Partnership
(e)           Tenants in Common
(f)           Company
(g)           Trust
(h)           Other

(4)           FINRA Affiliation.

Are you affiliated or associated with an FINRA member firm (please check one):

YES
   
NO
 

If Yes, please describe how you are affiliated/associated:
_________________________________________________________
_________________________________________________________
_________________________________________________________

*If subscriber is a Registered Representative with a FINRA member firm, have the following acknowledgment signed by the appropriate party:

The undersigned FINRA member firm acknowledges receipt of the notice required by the FINRA Conduct Rules.
 
_________________________________
Name of FINRA Member Firm


By: ______________________________
Authorized Officer

Date: ____________________________


(5)           For Trust Subscribers
 
 
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A. Certain trusts generally may not qualify as accredited investors except under special circumstances.  Therefore, if you intend to purchase the shares of the Company’s stock in whole or in part through a trust, please answer each of the following questions.

Is the trustee of the trust a national or state bank that is acting in its fiduciary capacity in making the investment on behalf of the trust?

Yes o                                          No o

Does this investment in the Company exceed 10% of the trust assets?

Yes o                                          No o

B. If the trust is a revocable trust, please complete Question 1 below.  If the trust is an irrevocable trust, please complete Question 2 below.

1.            REVOCABLE TRUSTS

Can the trust be amended or revoked at any time by its grantors:

Yes o                                          No o

If yes, please answer the following questions relating to each grantor (please add sheets if necessary):

Grantor Name:                                                                                                                     

Net worth of grantor (including spouse, if applicable), including home, home furnishings and automobiles exceeds $1,000,000?

Yes o                                          No o

OR

Income (exclusive of any income attributable to spouse) was in excess of $200,000 for 2007 and 2008 and is reasonably expected to be in excess of $200,000 for 2009?

Yes o                                          No o
 
OR

Income (including income attributable to spouse) was in excess of $300,000 for 2007 and 2008 and is reasonably expected to be in excess of $300,000 for 2009?

Yes o                                          No o
 
 
C-5

 

 
2.            IRREVOCABLE TRUSTS

If the trust is an irrevocable trust, please answer the following questions:

Please provide the name of each trustee:

Trustee Name:                                                                                                                   

Trustee Name:                                                                                                                   

Does the trust have assets greater than $5 million?

Yes o                                          No o

Do you have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Company?

Yes o                                          No o

Indicate how often you invest in:

Marketable Securities

Often o                       Occasionally o                                 Seldom o                       Never o
 
Restricted Securities

Often o                       Occasionally o                                 Seldom o                       Never o

Venture Capital Companies

Often o                       Occasionally o                                 Seldom o                       Never o



[Signature Page follows]
 
 
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The undersigned has been informed of the significance to the Company of the foregoing representations and answers contained in this Confidential Purchaser Questionnaire and such representations and answers have been provided with the understanding that the Company and the Placement Agent will rely on them.

   
Individual
     
Date:                                                                                                                            
   
   
Name of Individual
   
(Please type or print)
     
     
   
Signature of Individual
     
     
     
   
Name of Joint Owner
   
(Please type or print)
     
     
     
   
Signature (Joint Owner)
     
     
Date:                                                                                                                         
 
Partnership, Corporation or Other Entity
     
     
     
   
Print entity name
     
   
By:                                                                                                                                 
   
       (Signature)
     
   
Name:                                                                                                                
   
            (Print signer’s name)
   
            Title:                                                                                                                  
     
     
     
   
Signature (other authorized signatory)
     
     


 
 
  S-1

Exhibit 99.2
 
REGISTRATION RIGHTS AGREEMENT
 
This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of December 22, 2009 among China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), and the several purchasers signatory hereto (each such purchaser is a “ Purchaser ” and collectively, the “ Purchasers ”).

This Agreement is made pursuant to separate Subscription Agreements, dated as of the date hereof, between the Company and each Purchaser (the “ Subscription Agreements ”).

The Company and each Purchaser hereby agrees as follows:

1.            Definitions .                      Capitalized terms used and not otherwise defined herein that are defined in the Subscription Agreements shall have the meanings given such terms in the Subscription Agreements.  In addition to the other capitalized terms defined herein, the following terms shall have the following meanings:

Common Stock ” means the common stock, par value $0.001 per share, of the Company.

Effectiveness Date ” means no later than the 180 th calendar day following the final closing of the Offering; provided , however , that in the event the Company is notified by the Commission that the Registration Statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the date required above.

Filing Date ” means no later than the 45 th calendar day following the closing at which the Minimum Amount has been raised.

Holder(s) ” means each Purchaser and the holder or holders, as the case may be, from time to time of Registrable Securities.

Person(s) ” shall mean a natural person, corporation, trust, estate, partnership, incorporated or unincorporated association or any other legal entity, and also includes any department, agency, authority, or instrumentality of any state or its political subdivisions.

Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
 
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Registrable Securities ” means the Common Stock underlying the shares of Series B Convertible Preferred Stock of the Company issued as part of the Units (the “ Unit Shares ”), the Common Stock issuable upon exercise of the Warrants included as part of the Units (the “ Warrant Shares ”) and the Common Stock issuable upon exercise of the warrant to be issued to the Placement Agent (the “ Placement Agent Shares ”); provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any affiliate of the Company).

Registration Statement ” means any registration statement required to be filed hereunder, including 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.

SEC Guidance ” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

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

Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

Trading Day ” means any day on which the OTC Bulletin Board is open for ordinary business.
 
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2.            Registration Rights .
 
(a)   On or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all or the maximum portion of the Registrable Securities as permitted by SEC Guidance for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain a customary “Selling Stockholders” and “Plan of Distribution” sections reasonably satisfactory to the Placement Agent and its counsel.  Subject to the terms of this Agreement, the Company shall use its commercially reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its commercially reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until sooner of the second anniversary of the date of such effectiveness or the date that all Registrable Securities covered by the Registration Statement have been sold, or may be sold without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “ Effectiveness Period ”).  The Company shall telephonically request effectiveness of the Registration Statement no later than 5:00 pm Eastern time on a Trading Day.   The Company shall immediately notify the Holders via facsimile or by e-mail of the effectiveness of the Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of the Registration Statement.  The Company shall, by 9:30 am Eastern time on the second Trading Day after the Effective Date, file a final Prospectus with the Commission as required by Rule 424.  All selling shareholders included on the applicable Registration Statement shall be given notice of the effectiveness of such Registration Statement substantially at the same time.
 
(b)   Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), then the Company shall include in such Registration Statement: (a) first, the Registrable Securities represented by the Warrant Shares (applied to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders), (b) second, the Unit Shares (applied to the Holders on a pro rata basis based on the total number of unregistered Unit Shares held by such Holders) and (c) third, the Registrable Securities represented by the Placement Agent Shares; provided, however, that, prior to any reduction in the number of Registrable Securities included in a Registration Statement as set forth in this sentence, all shares of Common Stock set forth on Schedule 6(b) hereto shall be reduced first. In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment.
 
3.            Registration Procedures .
 
In connection with each of the Company’s registration obligations hereunder, the Company shall:
 
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(a)   Not less than five (5) Trading Days prior to the filing of the Registration Statement and not less than one Trading Day prior to the filing of the related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall: (i) furnish to each Holder copies of such Registration or Prospectus or any amendment or supplement thereto, as applicable, proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of the Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of the related Prospectus or amendment or supplement thereto. Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex B (a “ Selling Shareholder Questionnaire ”) not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.  The Company shall have the right to exclude any Holder that does not comply with the preceding sentence from the Registration Statement.

(b)   (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement (provided that the Company may excise any information contained therein which would constitute material non-public information as to any Holder which has not executed a confidentiality agreement with the Company); and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the Effectiveness Period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.
 
4

 
(c)   Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, shall also be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement; and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement covering the Registrable Securities or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; (v) of the occurrence of any event not in the ordinary course that makes the financial statements included in the Registration Statement ineligible for inclusion therein or any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (vi) the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of the Registration Statement or Prospectus; provided that any and all of such information shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided , further , that notwithstanding each Holder’s agreement to keep such information confidential, the Holders make no acknowledgement that any such information is material, non-public information.

(d)   Use its commercially reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

(e)   Furnish to each Holder, without charge, at least one (1) conformed copy of the Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference (other than material to which the Commission has granted confidential treatment and thus not publicly filed) to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

(f)   Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(c).
 
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(g)   The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the Corporate Financing Department of the Financial Industry Regulatory, Inc. (“ FINRA ”) pursuant to FINRA Rule 5110 and the Company shall pay the filing fee required by such filing within two (2) Trading Days of request therefor.

(h)   Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable best efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided , that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(i)   If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by the Subscription Agreements, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request.

(j)   Upon the occurrence of any event contemplated by this Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain 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, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its commercially reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of the Registration Statement and Prospectus for a period not to exceed thirty (30) calendar days (which need not be consecutive days) in any twelve (12) month period.

(k)   Comply with all applicable rules and regulations of the Commission.
 
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(l)   The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the Common Stock.

4.            Registration Expenses . All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation: (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any trading market on which the Common Stock is then listed for trading, (B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses of the Company (including, without limitation, expenses of printing certificates for Registrable Securities, (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

5.            Indemnification

(a)   Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of
 
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a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (2) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of the Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex B hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

(b)   Indemnification by Holders . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of distribution of the Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement (it being understood that the Holder has approved Annex B hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
 
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(c)   Conduct of Indemnification Proceedings . If any proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such proceeding; or (3) the named parties to any such proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party, regardless of whether the Losses relate to one or more Registration Statements so long as they arise from the same claim).  The Indemnifying Party shall not be liable for any settlement of any such proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding.

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is judicially determined to be not entitled to indemnification hereunder.
 
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(d)   Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

6.            Miscellaneous

(a)   Remedies .  In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
 
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(b)   No Piggyback on Registrations; Prohibition on Filing Other Registration Statements . Except as set forth on Schedule 6(b) attached hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statement filed pursuant to Section 2 other than the Registrable Securities.  The Company shall not file any other Registration Statements (except Registration Statements on Form S-4 or Form S-8, each as promulgated under the Securities Act, or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option, equity incentive or other employee benefit plans) until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement.

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

(d)   Piggy-Back Registrations . If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Holder a written notice of such determination and, if within fifteen days after the date of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided , however , that, the Company shall not be required to register any Registrable Securities pursuant to this Section 6(d) that are eligible for resale without restriction or limitation pursuant to Rule 144 promulgated under the Securities Act or that are the subject of a then effective Registration Statement. If an underwriter advises the Company that the dollar amount or number of shares of Registrable Securities which the Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which registration has been requested by the Holders (in the order set forth in Section 2(b)) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons, pro rata, and that can be sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i), (ii), and (iii), securities that other security holders of the Company desire to sell, pro rata, that can be sold without exceeding the Maximum Number of Shares.
 
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(e)   Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and Holders holding at least 67% of the then outstanding Registrable Securities.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

(f)   Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Subscription Agreements.

(g)   Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then-outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Subscription Agreements; provided, however, that no such transfer or assignment shall be binding upon or obligate the Company to any such assignee unless and until the Company shall have received written notice of such transfer or assignment as herein provided and a written agreement of the assignee to be bound by the provisions of this Agreement.

(h)   No Inconsistent Agreements . Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

(i)   Execution and Counterparts .  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
 
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(j)   Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the venue for resolution of disputes hereunder shall be determined in accordance with the provisions of the Subscription Agreements.

(k)   Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

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

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

(n)   Independent Nature of Holders’ Obligations and Rights .  The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.


[Signature Page Follows]
 
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IN WITNESS WHEREOF , the parties hereto have caused this Registration Rights Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

COMPANY:

CHINA CARBON GRAPHITE GROUP, INC.



By:    /s/ Donghai Yu ________________________
      Name: Donghai Yu
      Title:   Chief Executive Officer

PURCHASERS:

The Purchasers executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.
 
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Annex A

Registration Rights Agreement
Purchaser Counterpart Signature Page

The undersigned, desiring to: (i) enter into this Registration Rights Agreement, dated as of _________________, 2009 (the “ Agreement ”), between the undersigned, China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), and the other parties thereto, in or substantially in the form furnished to the undersigned and (ii) purchase the securities of the Company appearing below, hereby agrees to purchase such securities from the Company as of the Closing and further agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof.

IN WITNESS WHEREOF , the undersigned has executed the Agreement as of _____________________, 2009.


Name and Address, Fax No. and Social Security No./EIN of Investor:
 
________________________________________________
 
________________________________________________
 
________________________________________________
 
Fax No.: _________________________________________
 
Soc. Sec. No./EIN: _________________________________
 
If a partnership, corporation, trust or other business entity:
 
By: _________________________________________
       Name:
       Title:
If an individual:
 
_________________________________________
Signature
 

 
Annex B
 
CHINA CARBON GRAPHITE GROUP, INC.
 
Selling Securityholder Notice and Questionnaire
 
The undersigned beneficial owner of common stock (the “ Registrable Securities ”) of CHINA CARBON GRAPHITE GROUP, INC., a Delaware corporation (the “ Company ”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “ Commission ”) the Registration Statement (the “ Registration Statement ”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “ Registration Rights Agreement ”) to which this document is annexed.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
 
Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.
 
NOTICE
 
The undersigned beneficial owner (the “ Selling Securityholder ”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.
 
The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:
 
QUESTIONNAIRE
 
1.
Name.
 
 
(a)
Full Legal Name of Selling Securityholder
 
   

 
(b)
Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:
 
       
 
 
(c)
If the Selling Securityholder is not an individual, please provide the full legal name of the Natural Control Person(s) (which means the natural person(s) who directly or indirectly, alone or with others, has power to vote or dispose of the securities covered by the questionnaire):
 
       
 

 
2.  Address for Notices to Selling Securityholder:
 
     
     
     
Telephone:
   
Fax:
   
E-mail address:
   
Contact Person:
   

 
3.  Broker-Dealer Status:
 
 
(a)
Are you a broker-dealer?
 
Yes    o                       No    o
 
 
(b)
If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company.
 
Yes    o                       No    o
 
 
Note:
If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.
 
 
(c)
Are you an affiliate of a broker-dealer?
 
Yes    o                       No    o
 
 
(d)
If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?
 
Yes    o                       No    o
 
 
Note:
If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.
 

 
4.  Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.
 
Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Subscription Agreements.
 
 
(a)
Type and Amount of other securities beneficially owned by the Selling Securityholder:
 
 
 
 

5.  Relationships with the Company:
 
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
 
 
State any exceptions here:
 
 
 
 

 
The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.
 
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.
 
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
 
Dated :                                                       Beneficial Owner :                                                                             

By :                                                                             
Name:
Title:
 


 
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 
[                      ]
 
Exhibit 99.3
 
MAKE GOOD ESCROW AND PLEDGE AGREEMENT

This MAKE GOOD ESCROW AND PLEDGE AGREEMENT (this “ Agreement ”), dated as of December 22, 2009, is entered into by and among China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), the persons or entities signatory (each, an “ Investors ” and collectively, the “ Investors ”), and Continental Stock Transfer & Trust Company (the “ Escrow Agent ”).

WHEREAS , concurrently with the execution hereof, the Company is consummating a private placement transaction (the “ Financing Transaction ”) with the Investors whereby the Company will issue investment units comprised of shares of Series B Convertible Preferred Stock of the Company (the “ Preferred Shares ”) and warrants (the “ Warrants ”) to purchase common stock, par value $0.001 per share, of the Company (together with any securities into which such shares may be reclassified, the “ Common Stock ”);

WHEREAS , in order to provide security to the Investors in the event that Company fails to meet certain future financial performance thresholds, the Company has agreed to issue, pledge and deposit a stock certificate representing 50% of the number of shares of Series B Preferred Stock issued in the Financing Transaction shares of Common Stock (the “ Escrow Shares ”) into escrow for the benefit of the Investors; and

WHEREAS , the Company and the Investors have requested that the Escrow Agent hold the Escrow Shares on the terms and conditions set forth in this Agreement and the Escrow Agent has agreed to act as escrow agent pursuant to the terms and conditions of this Agreement.

NOW, THEREFORE , in consideration of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I.
TERMS OF THE ESCROW

Section 1.01   Appointment of Escrow Agent .  The parties hereby agree to appoint the Escrow Agent as escrow agent to act in accordance with the terms and conditions set forth in this Agreement, and Escrow Agent hereby accepts such appointment and agrees to act in accordance with such terms and conditions.

Section 1.02   Establishment of Escrow Account .

(a)   Upon the execution of this Agreement, the Company shall, as a pledge of securities, deposit the Escrow Agent a certificate or certificates representing the Escrow Shares, together with duly executed stock powers or other appropriate transfer documents executed in blank by the Company (such certificates and such transfer documents, collectively, the “ Escrow Materials ”).  The Escrow Agent shall hold the Escrow Materials and distribute the same as contemplated by this Agreement.
 
 
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(b)   The Company and the Investors hereby agree that the deposit by the Company of the Escrow Materials with the Escrow Agent on the terms and conditions set forth herein is intended to be a bona fide pledge of securities by the Company for the benefit of the Investors (as pledgees), in each case within the meaning of and as contemplated by Rule 144(d)(3)(iv) promulgated by the Securities and Exchange Commission (the “ Commission ”).  In addition the Escrow Shares, if released to the Investors pursuant to the terms hereof, shall be considered “Registrable Securities” for purposes of Section 6(d) of that certain Registration Rights Agreement between the Company and the Investors.

Section 1.03   Performance Threholds .  The distribution of the Escrow Shares shall be based upon the following financial performance thresholds of the Company (the “ Performance Thresholds ”) for the fiscal years ended December 31, 2010 (“ Fiscal Year 2010 ”) and December 31, 2011 (“ Fiscal Year 2011 ”):

(a)   The Fiscal Year 2010 Performance Threshold shall be audited Net Income equal to or greater than $5,100,000 (the “ 2010 PT ”).

(b)   The Fiscal Year 2011 Performance Threshold shall be audited Net Income equal to or greater than $10,000,000 (the “ 2011 PT ”); provided, however , that if the Company completes an equity underwritten financing with gross proceeds in excess of $15,000,000 prior to August 31, 2010, the 2010 PT shall be increased to $20,000,000.

(c)   For the purposes of this Agreement, the term “ Net Income ” shall be defined in accordance with U.S. generally accepted accounting principles, consistently applied (“ U.S. GAAP ”) and reported by the Company in its audited financial statements for each of the Fiscal Year 2010 and Fiscal Year 2011; provided, however , that Net Income for each of Fiscal Year 2010 and Fiscal Year 2011 shall be increased by any non-cash charges incurred: (i) as a result of the Financing Transaction, including without limitation, as a result of the issuance and/or conversion of the Preferred Shares, and the issuance and/or exercise of the Warrants, (ii) any income tax, enterprise tax or similar tax in excess of 25% of income before income taxes.

Section 1.04   Determination of 2010 PT and 2011 PT; Investor Representative .

(a)   The 2010 PT and 2011 PT shall be determined as of the date of the Company’s audited financial statements for the corresponding fiscal year are required to be filed with the Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and, if the Company is not required to file reports pursuant to Section 13(a) or Section 15(d) of the Exchange Act, and therefore prepares and furnishes the documents required by Section 6 of the Registration Rights Agreement, the 2010 PT and 2011 PT shall be determined in accordance with such prepared documents at such time.

(b)   The Company will provide the Investors with the Company’s audited financial statements for the appropriate fiscal year, prepared in accordance with U.S. GAAP, no later than the date for filing the Company’s Annual Report on Form 10-K for the corresponding fiscal year, including any extension for filing the Annual Report which may be requested under Rule 12b-25 of the Securities Exchange Act of 1934, as amended (the “ Annual Report ”), with the Commission so as to allow the Investors the opportunity to evaluate whether each of the 2010 PT and 2011 PT were attained.  Taylor Asset Management, Inc., as representative of the Investors (the “ Investor Representative ”) shall, promptly upon receipt of such financial statements provide each of the Investors with copies of such financial statements and proposed Disbursement Instructions (as defined below) (collectively, the “ Proposed Disbursement Materials ”).  Each of the Investors hereby irrevocably appoints the Investor Representative to act in such capacity on their behalf as provided for herein.
 
 
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Section 1.05   Distribution of the Escrow Shares .  The parties hereby agree that the Escrow Shares shall be distributed for the 2010 PT and the 2011 PT based on the following formula:
 
(a)   In the event the Company achieves no less than 100% of the applicable Performance Threshold, all of the Escrow Shares for the corresponding fiscal year shall be returned to the Company and cancelled.

(b)   If the Company achieves less than 100% of the applicable Performance Threshold, the Investors shall receive in the aggregate, on a pro rata basis (based upon the number of Preferred Shares or shares of Common Stock underlying the Preferred Shares (the “ Conversion Shares ”) then owned by each such Investor as of the date of distribution of the Escrow Shares), an aggregate of 1,080,250 shares of the Escrow Shares for each percentage by which the applicable Performance Threshold was not achieved up to the total number of Escrow Shares for the applicable fiscal year.  The number of Escrow Shares payable to each Investor shall be equal to a fraction of the total number of Escrow Shares potentially issuable pursuant to the terms hereof, the numerator of which shall be the amount by which (i) the number of Conversion Shares issued or issuable upon Preferred Shares which was initially issued to the Investor exceeds (ii) the sum of (x) the number of Conversion Shares sold or otherwise transferred by the Investor plus (y) the number of shares of Conversion Shares issued or issuable sold or otherwise transferred by the Investor, and the denominator of which is the number of Conversion Shares issued or issuable by the Company in the Offering.  Any Escrow Shares for either Fiscal Year 2010 or Fiscal Year 2011 which are not transferred to the Investors pursuant to this paragraph shall be returned to the Company for cancellation.

(c)   No earlier than five (5) and no later than ten (10) business days after the Investor Representative’s delivery to each of the Investors of the Proposed Disbursement Materials pursuant to Section 1.04 hereof, the Company and the Investor Representative shall provide joint written instructions to the Escrow Agent (the “ Disbursement Instructions ”) instructing the Escrow Agent to issue and deliver the applicable Escrow Shares in accordance with the calculations set forth herein.  Notwithstanding anything to the contrary set forth in this Agreement: (i) if Escrow Shares are distributed pursuant to Section 1.05(b) above, only those Investors who own Preferred Shares or Conversion Shares of the Company at the time that the Escrow Shares are distributed hereunder shall be entitled to receive the applicable Escrow Shares calculated based on their ownership interest on the distribution date and (ii) the Investor Representative shall have no authority to provide or to cause to be provided the Disbursement Instructions to the Escrow Agent if Investors holding at least a majority of the Preferred Shares or Conversion Shares on the distribution date (based on the aggregate number of Preferred Shares and Conversion Shares held by all of the Investors on the distribution date), by notice given to the Investor Representative no later than five (5) business days after their receipt of the Proposed Disbursement Materials pursuant to Section 1.04 hereof, dispute the calculation of the 2010 PT, the 20101PT and/or the Escrow Shares to be distributed to the Investors or returned to the Company, as the case may be.  Any Escrow Shares not delivered to any Investor because such Investor no longer holds Preferred Shares or Conversion Shares shall be returned to the Company for cancellation.
 
 
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(d)   If the Company does not achieve the 2010 PT or the 2011 PT, the Company shall use its best efforts to promptly cause the applicable Escrow Shares to be delivered to the Investors, including causing its transfer agent to promptly, but in no event longer than five (5) business days after delivery of the Disbursement Instructions, transfer the certificates into the names of the Investors.  The Company shall also instruct its securities counsel to provide any written instruction required by the Escrow Agent or the transfer agent in a timely manner so that the issuances and delivery contemplated above can be achieved within seven (7) business days following delivery of the Fiscal Year 2010 Annual Report or the Fiscal Year 2011 Annual Report, as applicable, to the Investor Representative.

Section 1.06   Compensation .  For services rendered pursuant to this Agreement, the Company shall pay a documentation fee to the Escrow Agent of $2,500.00 out of the proceeds of the Financing Transaction.  If the Escrow Shares are held longer than January 1, 2012, then thereafter, the Company shall pay a fee of $100 per month until the Escrow Shares are disbursed.

ARTICLE II.
REPRESENTATIONS OF THE COMPANY
 
Section 2.01   Representations and Warranties .  The Company hereby represents and warrants to the Investors as follows:
 
(a)   The Escrow Shares when issued will be free and clear of all pledges, liens, claims and encumbrances, except encumbrances created by this Agreement.  There are no restrictions on the ability of the Company to issue, deposit and transfer the Escrow Shares, other than transfer restrictions under applicable federal and state securities laws.

(b)   The performance of this Agreement and compliance with the provisions hereof will not violate any provision of any law applicable to the Company and will not conflict with or result in any material breach of any of the terms, conditions or provisions of, or constitute a default under the terms of the amended and restated articles of incorporation or by-laws of the Company, or any indenture, mortgage, deed of trust or other agreement or instrument binding upon the Company or affecting the Escrow Shares or result in the creation or imposition of any lien, charge or encumbrance upon, any of the properties or assets of the Company, the creation of which would have a material adverse effect on the business and operations of the Company.  No notice to, filing with, or authorization, registration, consent or approval of any governmental authority or other person is necessary for the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby by the Company, other than those already obtained.  Upon the transfer of the Escrow Shares to the Investors pursuant to this Agreement, the Investors will be the record and beneficial owners of all of such shares and have good and valid title to all of such shares, free and clear of all encumbrances.
 
 
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ARTICLE III.
ESCROW AGENT

Section 3.01   The Escrow Agent’s duties hereunder may be altered, amended, modified or revoked only by a writing signed by the Company, the Investor Representative and the Escrow Agent.

Section 3.02   The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by the Escrow Agent to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall not be personally liable for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while acting in good faith and in the absence of gross negligence, fraud or willful misconduct, and any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow Agent’s attorneys-at-law shall be conclusive evidence of such good faith, in the absence of gross negligence, fraud or willful misconduct.

Section 3.03   The Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent obeys or complies with any such order, judgment or decree, the Escrow Agent shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

Section 3.04   The Escrow Agent shall not be liable in any respect on account of the identity, authorization or rights of the parties executing or delivering or purporting to execute or deliver any documents or papers deposited or called for thereunder in the absence of gross negligence, fraud or willful misconduct.

Section 3.05   The Escrow Agent shall be entitled to employ such legal counsel and other experts as the Escrow Agent may deem necessary to properly advise the Escrow Agent in connection with the Escrow Agent’s duties hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor which shall be paid by the Escrow Agent.

Section 3.06   The Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the Escrow Agent shall resign by giving written notice to the Company and the Investors. In the event of any such resignation, the Investors and the Company shall appoint a successor Escrow Agent and the Escrow Agent shall deliver to such successor Escrow Agent any escrow funds and other documents held by the Escrow Agent.

Section 3.07   If the Escrow Agent reasonably requires other or further instruments in connection with this Escrow Agreement or obligations in respect hereto, the necessary parties hereto shall use its best efforts to join in furnishing such instruments.
 
 
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Section 3.08   It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the Escrow Shares, the Escrow Materials or the Disbursement Instructions held or reeived by the Escrow Agent hereunder, the Escrow Agent is authorized and directed in the Escrow Agent’s sole discretion (1) to retain in the Escrow Agent’s possession without liability to anyone all or any part of said documents or the Escrow Shares until such disputes shall have been settled either by mutual written agreement of the parties concerned by a final order, decree or judgment or a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings or (2) to deliver the Escrow Shares and any other property and documents held by the Escrow Agent hereunder to a state or Federal court having competent subject matter jurisdiction and located in the City of New York, Borough of Manhattan, in accordance with the applicable procedure therefor.

Section 3.09   The Company agrees to indemnify and hold harmless the Escrow Agent and its partners, employees, agents and representatives from any and all claims, liabilities, costs or expenses in any way arising from or relating to the duties or performance of the Escrow Agent hereunder or the transactions contemplated hereby other than any such claim, liability, cost or expense to the extent the same shall have been determined by final, unappealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, fraud or willful misconduct of the Escrow Agent.

ARTICLE IV.
MISCELLANEOUS
 
Section 4.01   Waiver .  No waiver of, or any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

Section 4.02   Notices .  All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day (as evidenced by the printed confirmation of delivery generated by the sending party’s fax machine).  If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 4.02), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender).  All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable.
 
 
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If to Escrow Agent:

Continental Stock Transfer & Trust Company
17 Battery Place, 8 th Floor
New York, NY 10004
Attention: Frank A. Di Paolo
Fax Number: (212) 616-7620

If to the Company:

c/o Xinghe Yongle Carbon Co., Ltd.
787 Xicheng Wai
Chengguantown
Xinghe County
Inner Mongolia, China
Attention: Ting Chen
Fax Number: (718)-661-9959

If to an Investor, to the information indicated on the signature page of each Investor hereto.

or to such other address and to the attention of such other person as any of the above may have furnished to the other parties in writing and delivered in accordance with the provisions set forth above.
 
Section 4.03   Successors and Assigns .  This Agreement shall be binding upon and shall inure to the benefit of the permitted successors and permitted assigns of the parties hereto.

Section 4.04   Entire Agreement; Amendment .  This Agreement contains the entire understanding and agreement of the parties relating to the subject matter hereof and supersedes all prior and/or contemporaneous understandings and agreements of any kind and nature (whether written or oral) among the parties with respect to such subject matter.  This Agreement may not be modified, changed, supplemented, amended or terminated, nor may any obligations hereunder be waived, except by written instrument signed by the parties to be charged or by its agent duly authorized in writing or as otherwise expressly permitted herein.  Notwithstanding anything to the contrary in this Agreement, this Agreement may not be modified, changed, supplemented, amended or terminated, nor may any such provision be waived, without the prior written consent of the Investors holding a majority of the Preferred Shares as of the date of such modification, change, supplement, amendment, termination or waiver (based on the aggregate number of Preferred Shares held by all of the Investors as of the date of such modification, change, supplement, amendment, termination or waiver).
 
 
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Section 4.05   Headings .  The section headings contained in this Agreement are inserted for reference purposes only and shall not affect in any way the meaning, construction or interpretation of this Agreement. Any reference to the masculine, feminine, or neuter gender shall be a reference to such other gender as is appropriate. References to the singular shall include the plural and vice versa.

Section 4.06   Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.


[Signature Page Follows]
 
 
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IN WITNESS WHEREOF , the parties hereto have executed this Make Good Escrow and Pledge Agreement as of date first written above.


COMPANY:

CHINA CARBON GRAPHITE GROUP, INC.



By: _ /s/ Donghai Yu _________________
      Name: Donghai Yu
      Title:   Chief Executive Officer


CONTINENTAL STOCK TRANSFER
& TRUST COMPANY



By:  _ /s/ Cynthia Jordan _______________
        Name:
        Title:

INVESTORS:

The Investors executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.
 
 
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Annex A

Make Good Escrow and Pledge Agreement
Investor Counterpart Signature Page

The undersigned, desiring to enter into this Make Good Escrow and Pledge Agreement, dated as of December 22, 2009 (the “ Agreement ”), between the undersigned, China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), and Continental Stock Transfer & Trust Company, in or substantially in the form furnished to the undersigned hereby agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof.

IN WITNESS WHEREOF , the undersigned has executed the Agreement as of _____________________, 2009.


Name and Address, Fax No. and Social Security No./EIN of Investor:
 
________________________________________________
 
________________________________________________
 
________________________________________________
 
Fax No.: _________________________________________
 
Soc. Sec. No./EIN: _________________________________
 
If a partnership, corporation, trust or other business entity:
 
By: _________________________________________
       Name:
       Title:
If an individual:
 
________________________________________
Signature
 
 
 
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Exhibit 99.4
 
 
ESCROW AGREEMENT

This ESCROW AGREEMENT (this “ Agreement ”) made as of December 17, 2009 by and among China Carbon Graphite Group, Inc., (the “ Issuer ”) and Maxim Group LLC (the “ Placement Agent ”), whose addresses and other information appear on the Information Sheet (as defined herein) attached to this Agreement, and Continental Stock Transfer & Trust Company, 17 Battery Place, 8 th Floor, New York, NY 10004 (the “ Escrow Agent ”).
 
WITNESSETH:

WHEREAS, the Issuer proposes to sell a minimum of $2,040,000 (the “ Offering Amount ”) of the Issuer’s Units comprised of Series B Convertible Preferred Stock and warrants to purchase common stock of the Issuer (the “ Securities ”) to investors (the subscribers of the Securities pursuant to this offering are hereinafter referred to as “ Investors ”), in a private offering to accredited investors on a “best efforts” basis through the Placement Agent (the “ Offering ”);
 
WHEREAS, the Issuer and the Placement Agent propose to establish an escrow account (the “ Escrow Account ”), to which subscription monies which are received by the Escrow Agent from the Placement Agent in connection with such private offering are to be credited, and the Escrow Agent is willing to establish the Escrow Account on the terms and subject to the conditions hereinafter set forth; and
 
WHEREAS, the Escrow Agent has agreed to establish a special bank account at J.P. Morgan Chase Bank (the “ Bank ”) into which the subscription monies, which are received by the Escrow Agent from the Placement Agent and credited to the Escrow Account, are to be deposited.
 
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows:
 
1.            Information Sheet .  Each capitalized term not otherwise defined in this Agreement shall have the meaning set forth for such term on the information sheet which is attached to this Agreement as Exhibit A and is incorporated by reference herein and made a part hereof (the “ Information Sheet ”).
 
2.            Establishment of the Bank Account .

2.1           The Escrow Agent shall establish a non-interest-bearing bank account at the branch of Bank selected by the Escrow Agent, and bearing the designation set forth on the Information Sheet (heretofore defined as the “ Bank Account ”).  The purpose of the Bank Account is for (a) the deposit of all subscription monies (checks or wire transfers) which are received by the Placement Agent from prospective purchasers of the Securities and are delivered by the Placement Agent to the Escrow Agent, (b) the holding of amounts of subscription monies which are collected through the banking system and (c) the disbursement of collected funds, all as described herein.
 
 
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2.2           On or before the date of the initial deposit in the Bank Account pursuant to this Agreement, the Placement Agent shall notify the Escrow Agent in writing of the date of the commencement of the Offering (the “ Effective Date ”), and the Escrow Agent shall not be required to accept any amounts for credit to the Escrow Account or for deposit in the Bank Account prior to its receipt of such notification.
 
2.3           The “ Offering Period ,” which shall be deemed to commence on the Effective Date, shall consist of the number of calendar days or business days set forth on the Information Sheet.  The Offering Period shall be extended at the discretion of the Placement Agent and the Issuer (an “ Extension Period ”) only if the Escrow Agent shall have received written notice thereof prior to the expiration of the Offering Period.  The Extension Period, which shall be deemed to commence on the next calendar day following the expiration of the Offering Period, shall consist of the number of calendar days or business days set forth on the Information Sheet.  The last day of the Offering Period, or the last day of the Extension Period (if the Escrow Agent has received written notice thereof as herein above provided), is referred to herein as the “ Termination Date ”.  Except as provided in Section 4.3 hereof, after the Termination Date, the Placement Agent shall not deposit, and the Escrow Agent shall not accept, any additional amounts representing payments by prospective purchasers.
 
3.            Deposits to the Bank Account .

3.1           The Placement Agent shall promptly deliver to the Escrow Agent all monies which it receives from prospective purchasers of the Securities, which monies shall be in the form of checks or wire transfers, provided however that "Cashiers" checks and "Money Orders" must be in amounts greater than $10,000; Cashiers checks or Money Orders in amounts less than $10,000 shall be rejected by the Escrow Agent.  Upon the Escrow Agent’s receipt of such monies, they shall be credited to the Escrow Account. All checks delivered to the Escrow Agent shall be made payable to “Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.”  Any check payable other than to the Escrow Agent as required hereby shall be returned to the prospective purchaser, or if the Escrow Agent has insufficient information to do so, then to the Placement Agent (together with any Subscription Information, as defined below or other documents delivered therewith) by noon of the next business day following receipt of such check by the Escrow Agent, and such check shall be deemed not to have been delivered to the Escrow Agent pursuant to the terms of this Agreement.
 
3.2           Promptly after receiving subscription monies as described in Section 3.1, the Escrow Agent shall deposit the same into the Bank Account.  Amounts of monies so deposited are hereinafter referred to as “ Escrow Amounts ”.  The Escrow Agent shall cause the Bank to process all Escrow Amounts for collection through the banking system.  Simultaneously with each deposit to the Escrow Account, the Placement Agent (or the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent in writing of the name, address, and the tax identification number of the purchaser, the amount of Securities subscribed for by such purchase, and the aggregate dollar amount of such subscription (collectively, the “ Subscription Information ”).
 
 
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3.3           The Escrow Agent shall not be required to accept for credit to the Escrow Account or for deposit into the Bank Account checks which are not accompanied by the appropriate Subscription Information, which at minimum shall include the name address, tax identification number and the number of Units subscribed for.  Wire transfers representing payments by prospective purchasers shall not be deemed deposited in the Escrow Account until the Escrow Agent has received in writing the Subscription Information required with respect to such payments.
 
3.4           The Escrow Agent shall not be required to accept in the Escrow Account any amounts representing payments by prospective purchasers, whether by check or wire, except during the Escrow Agent’s regular business hours.
 
3.5           Only those Escrow Amounts, which have been deposited in the Bank Account and which have cleared the banking system and have been collected by the Escrow Agent, are herein referred to as the “ Fund .”
 
3.6           If the Offering is terminated before the Termination Date, the Escrow Agent shall refund any portion of the Fund prior to disbursement of the Fund in accordance with Article 4 hereof upon instructions in writing signed by both the Issuer and the Placement Agent.
 
4.            Disbursement from the Bank Account .

4.1           Subject to Section 4.3 below, if by the close of regular banking hours on the Termination Date the Escrow Agent determines that the amount in the Fund is less than the Offering Amount, as indicated by the Subscription Information submitted to the Escrow Agent, then in either such case, the Escrow Agent shall promptly refund to each prospective purchaser the amount of payment received from such purchaser which is then held in the Fund or which thereafter clears the banking system, without interest thereon or deduction there from, by drawing checks on the Bank Account for the amounts of such payments and transmitting them to the purchasers. In such event, the Escrow Agent shall promptly notify the Issuer and the Placement Agent of its distribution of the Fund.
 
4.2           Subject to Section 4.3 below, if at any time up to the close of regular banking hours on the Termination Date, the Escrow Agent determines that the amount in the Fund represents the sale of the Offering Amount, the Escrow Agent shall promptly notify the Issuer and the Placement Agent of such fact in writing.  Upon written notification from the Issuer and the Placement Agent that the closing of the Offering has occurred, the Escrow Agent shall promptly disburse the Fund, by drawing checks on the Bank Account in accordance with instructions in writing signed by both the Issuer and the Placement Agent as to the disbursement of the Fund, promptly after it receives such instructions.
 
 
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4.3           This Section 4.3 applies only if a Collection Period has been provided for by the appropriate indication on the Information Sheet.  If the Escrow Agent or the Placement Agent has on hand at the close of business on the Termination Date any uncollected amounts which when added to the Fund would raise the amount in the Fund to the Offering Amount and result in the Fund representing the sale of the Offering Amount, the Collection Period (consisting of the number of business days set forth on the Information Sheet) shall be utilized to allow such uncollected amounts to clear the banking system.  During the Collection Period, the Placement Agent (and the Issuer) shall not deposit, and the Escrow Agent shall not accept, any additional amounts; provided , however , that such amounts as were received by the Placement Agent (or the Issuer) by the close of business on the Termination Date may be deposited with the Escrow Agent by noon of the next business day following the Termination Date.  If at the close of business on the last day of the Collection Period an amount sufficient to raise the amount in the Fund to represent the sale of the Offering Amount shall not have cleared the banking system, the Escrow Agent shall promptly notify the Issuer and the Placement Agent in writing of such fact and shall promptly return all amounts then in the Fund, and any amounts which thereafter clear the banking system, to the prospective purchasers as provided in Section 4.2 hereof.
 
4.4           Upon disbursement of the Fund pursuant to the terms of this Article 4, the Escrow Agent shall be relieved of further obligations and released from all liability under this Agreement.  It is expressly agreed and understood that in no event shall the aggregate amount of payments made by the Escrow Agent exceed the amount of the Fund.
 
5.            Rights, Duties and Responsibilities of Escrow Agent . It is understood and agreed that the duties of the Escrow Agent are purely ministerial in nature, and that:
 
5.1           The Escrow Agent shall notify the Placement Agent, on a daily basis, of the Escrow Amounts which have been deposited in the Bank Account and of the amounts, constituting the Fund, which have cleared the banking system and have been collected by the Escrow Agent.
 
5.2           The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of the selling agreement or any other agreement between the Placement Agent and the Issuer nor shall the Escrow Agent be responsible for the performance by the Placement Agent or the Issuer of their respective obligations under this Agreement.
 
5.3           The Escrow Agent shall not be required to accept from the Placement Agent (or the Issuer) any Subscription Information pertaining to prospective purchasers unless such Subscription Information is accompanied by checks or wire transfers meeting the requirements of Section 3.1, nor shall the Escrow Agent be required to keep records of any information with respect to payments deposited by the Placement Agent (or the Issuer) except as to the amount of such payments; however, the Escrow Agent shall notify the Placement Agent within a reasonable time of any discrepancy between the amount set forth in any Subscription Information and the amount delivered to the Escrow Agent therewith.  Such amount need not be accepted for deposit in the Escrow Account until such discrepancy has been resolved.
 
5.4           The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder.  The Escrow Agent, within a reasonable time, shall return to the Placement Agent any check received which is dishonored, together with the Subscription Information, if any, which accompanied such check.
 
 
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5.5           The Escrow Agent shall be entitled to rely upon the accuracy, act in reliance upon the contents, and assume the genuineness of any notice, instruction, certificate, signature, instrument or other document which is given to the Escrow Agent pursuant to this Agreement without the necessity of the Escrow Agent verifying the truth or accuracy thereof.  The Escrow Agent shall not be obligated to make any inquiry as to the authority, capacity, existence or identity of any person purporting to give any such notice or instructions or to execute any such certificate, instrument or other document.

5.6           If the Escrow Agent is uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Bank Account, the Escrow Amounts or the Fund which, in its sole determination, are in conflict either with other instructions received by it or with any provision of this Agreement, it shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in the Bank Account pending the resolution of such uncertainty to the Escrow Agent’s sole satisfaction, by final judgment of a court or courts of competent jurisdiction or otherwise.
 
5.7           The Escrow Agent shall not be liable for any action taken or omitted hereunder, or for the misconduct of any employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence.  The Escrow Agent shall be entitled to consult with counsel of its own choosing and shall not be liable for any action taken, suffered or omitted by it in accordance with the advice of such counsel.
 
5.8           The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Amounts, the Fund or any part thereof or to file any financing statement under the Uniform Commercial Code with respect to the Fund or any part thereof.
 
6.            Amendment; Resignation or Removal of Escrow Agent .  This Agreement may be altered or amended only with the written consent of the Issuer, the Placement Agent and the Escrow Agent.  The Escrow Agent may resign and be discharged from its duties hereunder at any time by giving written notice of such resignation to the Issuer and the Placement Agent specifying a date when such resignation shall take effect and upon delivery of the Fund to the successor escrow agent designated by the Issuer or the Placement Agent in writing.  Such successor Escrow Agent shall become the Escrow Agent hereunder upon the resignation date specified in such notice.  If the Company fails to designate a successor Escrow Agent within thirty (30) days after such notice, then the resigning Escrow Agent shall promptly refund the amount in the Fund to each prospective purchaser, without interest thereon or deduction.  The Escrow Agent shall continue to serve until its successor accepts the escrow and receives the Fund.  The Company shall have the right at any time to remove the Escrow Agent and substitute a new escrow agent by giving notice thereof to the Escrow Agent then acting.  Upon its resignation and delivery of the Fund as set forth in this Section 6, the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with the escrow contemplated by this Agreement.  Without limiting the provisions of Section 8 hereof, the resigning Escrow Agent shall be entitled to be reimbursed by the Issuer and the Placement Agent for any expenses incurred in connection with its resignation, transfer of the Fund to a successor escrow agent or distribution of the Fund pursuant to this Section 6.
 
 
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7.            Representations and Warranties . The Issuer and the Placement Agent hereby severally represent and warrant to the Escrow Agent that:
 
7.1           No party other than the parties hereto and the prospective purchasers have, or shall have, any lien, claim or security interest in the Escrow Amounts or the Fund or any part thereof.
 
7.2           No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Amounts or the Fund or any part thereof.
 
7.3           The Subscription Information submitted with each deposit shall, at the time of submission and at the time of the disbursement of the Fund, be deemed a representation and warranty that such deposit represents a bona fide payment by the purchaser described therein for the amount of Securities set forth in such Subscription Information.
 
7.4           All of the information contained in the Information Sheet is, as of the date hereof, and will be, at the time of any disbursement of the Fund, true and correct.
 
7.5           Reasonable controls have been established and required due diligence performed to comply with "Know Your Customer" regulations, USA Patriot Act, Office of Foreign Asset Control (OFAC) regulations and the Bank Secrecy Act.
 
8.            Fees and Expenses .  The Escrow Agent shall be entitled to the Escrow Agent Fees set forth on the Information Sheet, payable as and when stated therein.  In addition, the Issuer and the Placement Agent jointly and severally agree to reimburse the Escrow Agent for any reasonable expenses incurred in connection with this Agreement, including, but not limited to, reasonable counsel fees.
 
9.            Indemnification and Contribution .

9.1           The Issuer and the Placement Agent (collectively referred to as the “ Indemnitors ”) jointly and severally agree to indemnify the Escrow Agent and its officers, directors, employees, agents and shareholders (collectively referred to as the “ Indemnitees ”) against, and hold them harmless of and from, any and all loss, liability, cost, damage and expense, including without limitation, reasonable counsel fees, which the Indemnitees may suffer or incur by reason of any action, claim or proceeding brought against the Indemnitees arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates, unless such action, claim or proceeding is the result of the willful misconduct or gross negligence of the Indemnitees.
 
9.2           If the indemnification provided for in Section 9.1 is applicable, but for any reason is held to be unavailable, the Indemnitors shall contribute such amounts as are just and equitable to pay, or to reimburse the Indemnitees for, the aggregate of any and all losses, liabilities, costs, damages and expenses, including counsel fees, actually incurred by the Indemnitees as a result of or in connection with, and any amount paid in settlement of, any action, claim or proceeding arising out of or relating in any way to any actions or omissions of the Indemnitors.
 
 
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9.3           The provisions of this Article 9 shall survive any termination of this Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent or otherwise.
 
10.            Termination of Agreement .  This Agreement shall terminate on the final disposition of the Fund pursuant to Section 4, provided that the rights of the Escrow Agent and the obligations of the other parties hereto under Section 9 shall survive the termination hereof and the resignation or removal of the Escrow Agent.
 
11.            Governing Law and Assignment .  This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without regard to the conflicts of laws principles thereof, and shall be binding, upon the parties hereto and their respective successors and assigns; provided , however , that any assignment or transfer by any party of its rights under this Agreement or with respect to the Escrow Amounts or the Fund shall be void as against the Escrow Agent unless (a) written notice thereof shall be given to the Escrow Agent; and (b) the Escrow Agent shall have consented in writing to such assignment or transfer.
 
12.            Notices . All notices required to be given in connection with this Agreement shall be sent by registered or certified mail, return receipt requested, or by hand delivery with receipt acknowledged, or by the Express Mail service offered by the United States Postal Service, and addressed, if to the Issuer or the Placement Agent, at their respective addresses set forth on the Information Sheet, and if to the Escrow Agent, at its address set forth above, to the attention of the Trust Department.

13.            Severability .  If any provision of this Agreement or the application thereof to any person or circumstance shall be determined to be invalid or unenforceable, the remaining provisions of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law.
 
14.            Execution in Several Counterparts . This Agreement may be executed in several counterparts or by separate instruments and by facsimile transmission, and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.
 
15.            Entire Agreement .  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings (written or oral) of the parties in connection therewith.


[Signature Page Follows]
 
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.
 
 
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
 
 
 
By:     /s/ Cynthia Jordan               
        Name:
        Title:
 
 
 
CHINA CARBON GRAPHITE GROUP, INC.
 
 
By:     /s/ Ting Chen                
        Name:  Ting Chen
        Title:  CFO
 
 
 
  MAXIM GROUP LLC
 
By:     /s/   Clifford Teller               
        Name: Clifford A. Teller
        Title:  Executive Director, Investment Banking
 
 
 
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EXHIBIT A
 
ESCROW AGREEMENT INFORMATION SHEET
 
1.            The Issuer
Name:  China Carbon Graphite Group, Inc.
Address: c/o Xinghe Yongle Carbon Co., Ltd.
787 Xicheng Wai
Chengguantown
Xinghe County
Inner Mongolia, China

Tax Identification Number: 98-0550699
 
2.            The Placement Agent
Name:       Maxim Group LLC
Address:   405 Lexington Avenue
    New York, New York 10174
 
3.            The Securities
Description of the Securities to be offered: Issuer’s Units, which are comprised of Issuer’s Series B Convertible Preferred Stock and a warrant to purchase common stock of the Issuer.
 
4.            Minimum Amounts and Conditions Required for Disbursement of the Escrow Account
Aggregate dollar amount which must be collected before the Escrow Account may be disbursed to the Issuer: $ 2,040,000 million
 
5.            Plan of Distribution of the Securities
Initial Offering Period: Through December 31, 2009.
Extension Period, if any: No later than 45 days subsequent to the Initial Offering Period.
 
6.            Title of Escrow Account
“Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc .”
 
7.            Escrow Agent Fees and Charges
$2,500: $1250.00 payable at signing of the Escrow Agreement, plus $1250.00 payable prior to the Closing.  A $250.00 will be assessed to review and process a term extension request and a fee of $500 will be payable for document review services related to each amendment to the Escrow Agreement. In addition, the Escrow Agent shall be paid a fee of $500.00 for each additional closing.  Should the Escrow Agent continue for more than one year, the Escrow Agent shall receive a fee of $500.00 per month, or any portion thereof, payable in advance or the first business day of each month.
 
 
 

 
 
Distribution charges:
$15.00 per check
$35.00 per wire
$100.00 per check returned (NSF) check
$100.00 lost check replacement fee


Exhibit 99.5
 
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED (THE  “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

CHINA CARBON GRAPHITE GROUP, INC.

COMMON STOCK PURCHASE WARRANT

Initial Holder:  [                     ]
 
Original Issue Date: December 22, 2009
 
No. of Shares Subject to Warrant: [            ]
 
Exercise Price Per Share: $1.30
 
Expiration Time:  5:00 p.m., New York time, on December 22, 2014 (subject to acceleration as provided herein)
 
 
China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for value received, the Initial Holder shown above, or its permitted registered assigns (the “ Holder ”), is entitled to purchase from the Company up to the number of shares of its common stock shown above (the “ Common Stock ”) (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at the exercise price shown above (as may be adjusted from time to time as provided herein, the “Exercise Price ”), at any time and from time to time on or after the Original Issue Date shown above and through and including the expiration time shown above (the “ Expiration Time ”), and subject to the following terms and conditions:

This Warrant is being issued pursuant to a Subscription Agreement, dated December 22, 2009 (the “ Subscription Agreement ”), by and between the Company and the Initial Holder, and is part of the Units described in the Subscription Agreement. 

1.           Definitions . In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Subscription Agreement.
 
 
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2.           List of Warrant Holders .  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 Holder (which shall include the Initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder from time to time).  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3.           List of Transfers; Restrictions on Transfer . Subject to the restrictions on transfer contained herein, the Company shall register any transfer of all or 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 its address specified herein. 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 Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant.

4.           Exercise and Duration of Warrant .

(a)          All or any part of this Warrant shall be exercisable by the registered Holder in the manner permitted by Section 10 of this Warrant and as set for the below at any time and from time to time on or after the Original Issue Date and through and including the Expiration Time. At the Expiration Time, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and shall no longer be outstanding.

(b)           The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “ Exercise Notice ”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised.  The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “ Exercise Date .”  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, but if it is not so delivered, then such exercise shall constitute an undertaking by the Holder to deliver the original Warrant to the Company as soon as practicable thereafter.  Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares hereof shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

(c)           The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof.
 
 
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5.             Delivery of Warrant Shares .

(a)           Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Business Days after the Exercise Date) issue or cause to be issued and cause to be delivered to and in such name or names as the Holder may designate (subject to the restrictions on transfer contained herein), a certificate for the Warrant Shares issuable upon such exercise.  “ Business Day ” shall mean any day other than a week-end or United States national holiday or other day on which banks in New York City are not open to the public for the regular conduct of business. The Holder, or any person or entity permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.  The Company shall, upon the written request of the Holder, use its best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and Clearing Corporation or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through the Depository Trust and Clearing Corporation.  If as of the time of exercise the Warrant Shares constitute restricted or control securities, the Holder, by exercising, agrees not to resell them except in compliance with all applicable securities laws.

(b)           To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or entity or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person or entity of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person or entity, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

(c)           If the Company fails to cause its transfer agent to transmit to the Holder a certificate or the certificates (either physical or electronic) representing the Warrant Shares pursuant to the terms hereof by the applicable delivery date, then, the Holder will have the right to rescind such exercise prior to the issuance of the Warrant Shares and provided that the Holder or transferee did not receive any benefit as a holder of the Warrant Shares.

6.             Charges, Taxes and Expenses . Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or the Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
 
 
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7.             Replacement of Warrant .  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs, including the cost of an indemnity bond as the transfer agent may require. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant, to the extent reasonably practicable, to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

8.             Reservation of Warrant Shares . The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons or entities other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

9.             Certain Adjustments; Termination Under Certain Circumstances . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

(a)           Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend on its Common Stock or makes a stock distribution with respect to its Common Stock, (ii) subdivides or splits outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares or otherwise effects a reverse split, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
 
 
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(b)           Pro Rata Distributions .  If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration: (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset besides cash (in each case, “ Distributed Property ”), then either upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution or, at the option of the Company, concurrently with such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.

(c)           Fundamental Transactions . As used herein, “ Fundamental Transaction ” means at any time while this Warrant is outstanding: (i) the Company effects any merger or consolidation of the Company into another person or entity, in which the shareholders of the Company immediately prior to the transaction own immediately after the transaction less than a majority of the outstanding stock of the successor entity, or its parent if applicable, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer approved or authorized by the Company’s Board of Directors is completed pursuant to which holders of at least a majority of the outstanding Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification or recombination or similar action of or with respect to 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 the event of a Fundamental Transaction pursuant to which the securities, cash or property issuable with respect to the outstanding Common Stock consist solely of cash and/or securities traded on a national securities exchange or an established over-the-counter market (the “ Alternate Consideration ”), this Warrant shall expire immediately prior to the closing or effective time of the Fundamental Transaction and the Holder of this Warrant shall receive the amount by which the Alternate Consideration per share of Common Stock exceeds the Exercise Price per share (the “ Warrant Buyout Payment ”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, the Warrant Buyout Payment in accordance with the foregoing provisions.  If the value of the Alternate Consideration shall be less than the Exercise Price, the Warrants shall terminate on the closing date or the effective time of the Fundamental Transaction and no payment shall be due to the Holder in respect of this Warrant. In the event of a Fundamental Transaction in which the consideration does not entirely consist of the Alternate Consideration, the Company (or the successor entity) shall purchase this Warrant from the Holder by paying to the Holder, within ten (10) Business Days after the closing of such Fundamental Transaction cash in an amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental Transaction determined as of the day immediately following the public announcement of the applicable Fundamental Transaction.  For purposes hereof, the term “ Black Scholes Value ” means value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“ Bloomberg ”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) if applicable, the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Expiration Time.
 
 
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(d)           Number of Warrant Shares .  Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(e)           Calculations . All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. 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, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(f)           Notice of Adjustments . Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, in good faith, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent for the Common Stock.

(g)           Notice of Corporate Events . If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash (other than a dividend payable out of current earnings), securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary to all holders of Common Stock, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Business Days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all reasonable steps to give Holder the practical opportunity to exercise this Warrant prior to such time; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
 
 
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   10.           Payment of Exercise Price . The Holder shall pay the Exercise Price by delivery to the Company (to an account of the Company specified in writing to the Holder promptly following the Company’s receipt of an Exercise Notice) of immediately available funds by wire transfer.

11.           No Fractional Shares . No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable trading market on the Exercise Date.

12.           Notices .  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be delivered in accordance with the procedures set forth in Section 6(f) of the Subscription Agreement, including by e-mail.

13.           Miscellaneous .

(a)           This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any person or entity other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

(b)           All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated (whether brought against a party hereto or its respective affiliates, employees or agents) shall be adjudicated in accordance with the provisions set forth in Section 6 of the Subscription Agreement.

(c)           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.

(d)           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 reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.
 
 
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(e)           Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

(f)          This Warrant may be redeemed by the Company for $0.01 per Warrant Share (the “ Redemption Price ”) if, for 20 trading days during any 30 trading day period, the price of the Common Stock exceeds $2.60.  The Company shall provide the Holder with written notice given not less than 20 trading days.  Such notice shall state that the Company has exercised its right of redemption pursuant to this Section 13(f) and shall set forth the date (the “ Redemption Date ”) as of which the Warrant shall be redeemed and the address to which this Warrant should be delivered.  This Warrant, to the extent not exercised by 5:30 PM, New York City time, on the Redemption Date shall terminate, and the Holder of this Warrant shall have no right under this Warrant other than to receive the Redemption Price upon presentation of this Warrant to the Company or its transfer agent.

(g)           No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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

 
CHINA CARBON GRAPHITE GROUP, INC.
   
 
By:
 
 
Name:
 
 
Title
 
 
 
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CHINA CARBON GRAPHITE GROUP, INC.

EXERCISE NOTICE

WARRANT ORIGINALLY ISSUED DECEMBER 22, 2009

Ladies and Gentlemen:

(1)           The undersigned hereby elects to exercise the above-referenced Warrant with respect to shares of Common Stock.  Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)           The Holder shall pay the sum of $ ______________ to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder the number of Warrant Shares determined in accordance with the terms of the Warrant.


Dated:
   
HOLDER:
     
     
   
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By:
 
       
   
Title:
 
       
 
 
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CHINA CARBON GRAPHITE GROUP, INC.

WARRANT ORIGINALLY ISSUED SEPTEMBER __, 2009

FORM OF ASSIGNMENT
To be completed and signed only upon transfer of Warrant

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________ the right represented by the within Warrant to purchase _________________ shares of Common Stock to which the within Warrant relates and appoints __________________ attorney to transfer said right on the books of the Company with full power of substitution in the premises.

Dated:
   
TRANSFEROR:
     
     
   
Print name ↑
     
   
By:
 
       
   
Title:
 
       
       
   
TRANSFEREE:
     
     
   
Print name ↑
     
   
By:
 
       
   
Title:
 
WITNESS:
     
   
Address of Transferee:
       
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10

Exhibit 99.6
 
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

IN ADDITION, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF SUCH SECURITIES BY ANY PERSON, UNTIL JUNE 22, 2010, EXCEPT IN ACCORDANCE WITH FINRA RULE 5110(G)(2).

CHINA CARBON GRAPHITE GROUP, INC.

COMMON STOCK PURCHASE WARRANT

Initial Holder:   Maxim Group LLC
 
Original Issue Date: December 22, 2009
405 Lexington Avenue
No. of Shares Subject to Warrant: 108,025
New York, New York 10174
Exercise Price Per Share: $1.32
Attention: Shunda Cannon
Expiration Time:  5:00 p.m., New York time, on December 22, 2014 (subject to acceleration as provided herein)
 
 
China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for value received, the Initial Holder shown above, or its permitted registered assigns (the “ Holder ”), is entitled to purchase from the Company up to the number of shares of its common stock shown above (the “ Common Stock ”) (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at the exercise price shown above (as may be adjusted from time to time as provided herein, the “Exercise Price ”), at any time and from time to time on or after the Original Issue Date shown above and through and including the expiration time shown above (the “ Expiration Time ”), and subject to the following terms and conditions:

This Warrant is being issued pursuant to that certain Placement Agent Agreement between the Initial Holder and the Company dated October 9, 2009 and in connection with a Subscription Agreement, dated December 22, 2009 (the “ Subscription Agreement ”), by and between the Company and certain investors. 

1.           Definitions . In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Subscription Agreement.
 
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2.           List of Warrant Holders .  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 Holder (which shall include the Initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder from time to time).  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3.           List of Transfers; Restrictions on Transfer . Subject to the restrictions on transfer contained herein, the Company shall register any transfer of all or 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 its address specified herein. 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 Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant.

4.           Exercise and Duration of Warrant .

(a)          All or any part of this Warrant shall be exercisable by the registered Holder in the manner permitted by Section 10 of this Warrant and as set for the below at any time and from time to time on or after June 22, 2010, which is six months from the Original Issue Date, and through and including the Expiration Time. At the Expiration Time, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and shall no longer be outstanding.

(b)          The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “ Exercise Notice ”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised, except as provided in Section 4(e).  The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “ Exercise Date .”  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, but if it is not so delivered, then such exercise shall constitute an undertaking by the Holder to deliver the original Warrant to the Company as soon as practicable thereafter.  Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares hereof shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

(c)           The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof.
 
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(d)    E xcept as provided for in Section 4(e) below, each exercise of this Warrant must be accompanied by payment in full of the aggregate Exercise Price in cash by check or wire transfer in immediately available funds for the number of Warrant Shares being purchased by the Holder upon such exercise.
 
(e)         The aggregate Exercise Price for the number of Warrant Shares being purchased may also, in the sole discretion of the Holder, be paid in full or in part on a “cashless basis” at the election of the Holder:
 
(i)           in the form of Common Stock owned by the Holder (based on the Fair Market Value (as defined below) of such Common Stock on the date of exercise);
 
(ii)           in the form of Warrant Shares withheld by the Company from the Warrant Shares otherwise to be received upon exercise of this Warrant having an aggregate Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Warrant Shares being purchased by the Holder; or
 
(iii)           by a combination of the foregoing, provided that the combined value of all cash and the Fair Market Value of any shares surrendered to the Company is at least equal to the aggregate Exercise Price for the number of Warrant Shares being purchased by the Holder.
 
For purposes of this Warrant, the term “ Fair Market Value ” means with respect to a particular date, the average closing price of the Common Stock for the five (5) trading days immediately preceding the applicable exercise herein as officially reported by the principal securities exchange on which the Common Stock is then listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any securities exchange as determined in good faith by resolution of the Board of Directors of the Company or a designated committee thereof, based on the best information available to it, within no greater than five (5) Business Days from the date that the notice of exercise is tendered to the Company by the Holder.
 
For purposes of illustration of a cashless exercise of this Warrant under Section 3.1(c)(ii) (or for a portion thereof for which cashless exercise treatment is requested as contemplated by Section 3.1(c)(iii) hereof), the calculation of such exercise shall be as follows:
 
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X = Y (A-B)/A

where:

 
X =
the number of Warrant Shares to be issued to the Holder (rounded to the nearest whole share).

 
Y =
the number of Warrant Shares with respect to which this Warrant is being exercised.

 
A =
the Fair Market Value of the Common Stock.

 
B =
the Exercise Price.
 
   (f)           For purposes of Rule 144 promulgated under the Securities Act and sub-section (d)(3)(ii) thereof, it is intended, understood, and acknowledged that the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed to have been acquired at the time this Warrant was issued.  Moreover, it is intended, understood, and acknowledged that the holding period for the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed to have commenced on the date this Warrant was issued.
 
5.             Delivery of Warrant Shares .

(a)          Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Business Days after the Exercise Date) issue or cause to be issued and cause to be delivered to and in such name or names as the Holder may designate (subject to the restrictions on transfer contained herein), a certificate for the Warrant Shares issuable upon such exercise.  “ Business Day ” shall mean any day other than a week-end or United States national holiday or other day on which banks in New York City are not open to the public for the regular conduct of business. The Holder, or any person or entity permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.  The Company shall, upon the written request of the Holder, use its best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and Clearing Corporation or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through the Depository Trust and Clearing Corporation.  If as of the time of exercise the Warrant Shares constitute restricted or control securities, the Holder, by exercising, agrees not to resell them except in compliance with all applicable securities laws.

(b)          To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or entity or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person or entity of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person or entity, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
 
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(c)           If the Company fails to cause its transfer agent to transmit to the Holder a certificate or the certificates (either physical or electronic) representing the Warrant Shares pursuant to the terms hereof by the applicable delivery date, then, the Holder will have the right to rescind such exercise prior to the issuance of the Warrant Shares and provided that the Holder or transferee did not receive any benefit as a holder of the Warrant Shares.

6.             Charges, Taxes and Expenses . Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or the Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7.             Replacement of Warrant .  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs, including the cost of an indemnity bond as the transfer agent may require. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant, to the extent reasonably practicable, to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

8.             Reservation of Warrant Shares . The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons or entities other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

9.             Certain Adjustments; Termination Under Certain Circumstances . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.
 
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(a)           Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend on its Common Stock or makes a stock distribution with respect to its Common Stock, (ii) subdivides or splits outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares or otherwise effects a reverse split, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b)           Pro Rata Distributions .  If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration: (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset besides cash (in each case, “ Distributed Property ”), then either upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution or, at the option of the Company, concurrently with such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.

(c)           Fundamental Transactions . As used herein, “ Fundamental Transaction ” means at any time while this Warrant is outstanding: (i) the Company effects any merger or consolidation of the Company into another person or entity, in which the shareholders of the Company immediately prior to the transaction own immediately after the transaction less than a majority of the outstanding stock of the successor entity, or its parent if applicable, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer approved or authorized by the Company’s Board of Directors is completed pursuant to which holders of at least a majority of the outstanding Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification or recombination or similar action of or with respect to 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 the event of a Fundamental Transaction pursuant to which the securities, cash or property issuable with respect to the outstanding Common Stock consist solely of cash and/or securities traded on a national securities exchange or an established over-the-counter market (the “ Alternate Consideration ”), this Warrant shall expire immediately prior to the closing or effective time of the Fundamental Transaction and the Holder of this Warrant shall receive the amount by which the Alternate Consideration per share of Common Stock exceeds the Exercise Price per share (the “ Warrant Buyout Payment ”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, the
 
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Warrant Buyout Payment in accordance with the foregoing provisions.  If the value of the Alternate Consideration shall be less than the Exercise Price, the Warrants shall terminate on the closing date or the effective time of the Fundamental Transaction and no payment shall be due to the Holder in respect of this Warrant. In the event of a Fundamental Transaction in which the consideration does not entirely consist of the Alternate Consideration, the Company (or the successor entity) shall purchase this Warrant from the Holder by paying to the Holder, within ten (10) Business Days after the closing of such Fundamental Transaction cash in an amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental Transaction determined as of the day immediately following the public announcement of the applicable Fundamental Transaction.  For purposes hereof, the term “ Black Scholes Value ” means value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“ Bloomberg ”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) if applicable, the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Expiration Time.

(d)           Number of Warrant Shares .  Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(e)           Calculations . All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. 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, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(f)           Notice of Adjustments . Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, in good faith, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent for the Common Stock.
 
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(g)           Notice of Corporate Events . If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash (other than a dividend payable out of current earnings), securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary to all holders of Common Stock, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Business Days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all reasonable steps to give Holder the practical opportunity to exercise this Warrant prior to such time; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

    10.           Payment of Exercise Price . The Holder shall pay the Exercise Price by delivery to the Company (to an account of the Company specified in writing to the Holder promptly following the Company’s receipt of an Exercise Notice) of immediately available funds by wire transfer.

11.           No Fractional Shares . No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable trading market on the Exercise Date.

12.           Notices .  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be delivered in accordance with the procedures set forth in Section 6(f) of the Subscription Agreement, including by e-mail.

13.            Registration . The Company shall file with the Securities and Exchange Commission a registration statement under the Securities Act covering the resale of the Warrant Shares, pursuant to that certain Registration Rights Agreement entered into by the Company and the signatories thereto dated December 22, 2009, the provisions of which are incorporated herein.

14.           Miscellaneous .

(a)           This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any person or entity other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.
 
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(b)           All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated (whether brought against a party hereto or its respective affiliates, employees or agents) shall be adjudicated in accordance with the provisions set forth in Section 6 of the Subscription Agreement.

(c)           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.

(d)           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 reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(e)           Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

(g)           No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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

 
CHINA CARBON GRAPHITE GROUP, INC.
   
 
By:
/s/ Donghai Yu
 
Name:
Donghai Yu
 
Title
Chief Executive Officer

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CHINA CARBON GRAPHITE GROUP, INC.

EXERCISE NOTICE

WARRANT ORIGINALLY ISSUED DECEMBER 22, 2009

Ladies and Gentlemen:

(1)           The undersigned hereby elects to exercise the above-referenced Warrant with respect to shares of Common Stock.  Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)           The Holder shall pay the sum of $ ______________ (if a cashless exercise, insert “cashless”) to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder the number of Warrant Shares determined in accordance with the terms of the Warrant.


Dated:
   
HOLDER:
     
     
   
Print name ↑
     
   
By:
 
       
   
Title:
 
       
 
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CHINA CARBON GRAPHITE GROUP, INC.

WARRANT ORIGINALLY ISSUED SEPTEMBER __, 2009

FORM OF ASSIGNMENT
To be completed and signed only upon transfer of Warrant

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________ the right represented by the within Warrant to purchase _________________ shares of Common Stock to which the within Warrant relates and appoints __________________ attorney to transfer said right on the books of the Company with full power of substitution in the premises.

Dated:
   
TRANSFEROR:
     
     
   
Print name ↑
     
   
By:
 
       
   
Title:
 
       
       
   
TRANSFEREE:
     
     
   
Print name ↑
     
   
By:
 
       
   
Title:
 
WITNESS:
     
   
Address of Transferee:
       
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Exhibit 99.7

 China Carbon Announces Closing of $2,592,600 Private Placement



Press Release
Source: China Carbon Graphite Group, Inc.
On Wednesday December 23, 2009, 9:30 am EST
 
NEW YORK, Dec. 23, 2009 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. ("China Carbon" or the "Company") (OTCBB: CHGI - News ), one of China's leading non-state-owned producers and wholesale suppliers of fine grain and high purity graphite, announced today that it has completed a private placement for gross proceeds of $2,592,600. Maxim Group LLC acted as the exclusive placement agent in connection with the financing.
 
The Company issued a total of 2,160,500 shares of Series B Convertible Preferred Stock and a five year warrant to purchase a total of 864,200 shares of common stock at an exercise price of $1.30 per share. The Company will redeem any outstanding Series B Preferred at $1.20 per share upon the second anniversary of the closing of the Offering. The net proceeds of the financing will be used for working capital.
 
About China Carbon Graphite Group, Inc.
 
China Carbon Graphite Group, through its affiliate, Xingyong Carbon Co., Ltd., manufactures carbon and graphite based products in China. The company is the largest wholesale supplier of fine grain and high purity graphite in China and one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in 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. In September 2007, the company was approved and designated by Ministry of Science & Technology as a "National Hi-tech Enterprise." Of the 400 plus carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor. For more information, visit http://www.chinacarboninc.com . Any information on the Company's website or any other website does not constitute a part of this press release.
 
Safe Harbor Statement
 
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website ( www.sec.gov ). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors. The Company does not assume a duty to update these forward-looking statements.