Asia Fiber Holdings Ltd – ‘SB-2’ on 2/12/02

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Registration of Securities by a Small-Business Issuer   —   Form SB-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SB-2        Registration of Securities by a Small-Business       218    887K 
                          Issuer                                                 
 2: EX-5.1      Opinion re: Legality                                   1      6K 
 3: EX-23.1     Consent of Experts or Counsel                          1      6K 

SB-2   —   Registration of Securities by a Small-Business Issuer
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION
 FORM SB-2
REGISTRATION STATEMENT
 UNDER
THE SECURITIES ACT OF 1933

 ASIA FIBER HOLDINGS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                                        [Enlarge/Download Table]
                                                                                     
       DELAWARE                                                     75-1071589       
(STATE OR OTHER JURISDICTION OF  (PRIMARY STANDARD INDUSTRIAL     (I.R.S. EMPLOYER   
 INCORPORATION OR ORGANIZATION)   CLASSIFICATION CODE NUMBER)  IDENTIFICATION NUMBER)


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

 ROOM 2105, 21/F, WEST TOWER
 SHUN TAK CENTRE
200 CONNAUGHT ROAD CENTRAL
 SHEUNG WAN, HONG KONG
ATTENTION: MR. LUNG PO CHING
(NAME, ADDRESS, TELEPHONE NUMBER AND FACSIMILE NUMBER OF AGENT
 FOR SERVICE OF PROCESS)

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

COPIES OF ALL COMMUNICATIONS TO:

 DAVID L. FICKSMAN, ESQ.
SHERI M. WATTS, ESQ.
 LOEB & LOEB LLP
10100 SANTA MONICA BOULEVARD
SUITE 2200
LOS ANGELES, CALIFORNIA 90067-4164
TEL: (310) 282-2350/2167
 FAX: (310) 282-2192

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:                                

As soon as possible after the Registration Statement becomes effective.         

       If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and   
list the Securities Act registration statement number of the earlier effective  
registration statement for the same offering. [ ]                               

        If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [ ]                                                      

        If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [ ]                                                      

     If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]                                        

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T                                                                                                                                   
                                                   CALCULATION OF REGISTRATION FEE                                                  
------------------------------------------------------------------------------------------------------------------------------------

  TITLE OF EACH CLASS                       AMOUNT               PROPOSED MAXIMUM                                  AMOUNT           
     OF SECURITIES                           TO BE                OFFERING PRICE         PROPOSED MAXIMUM             OF            
    TO BE REGISTERED                      REGISTERED(1)              PER UNIT        AGGREGATE OFFERING PRICE  REGISTRATION FEE(4)  
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                                    
Common Stock underlying the Series C         6,375,000                  .64                      $4,080,000           $376          
Convertible Preferred Stock                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------

Common Stock underlying the Warrants         3,500,000(3)               .01                      $   35,000           $  4          

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

                      Total                  9,875,000(2)                -                       $4,115,000           $380          
------------------------------------------------------------------------------------------------------------------------------------


(1)    The shares of common stock being registered are offered by certain       
    security holders of Asia Fiber Holdings Limited. See "Selling Security
holders". Pursuant to the terms of the Preferred Stock Purchase   
       Agreement, dated December 21, 2001, Asia Fiber is registering 200% of the
shares of common stock issuable upon conversion of the Series C   
       Convertible Preferred Stock and exercise of certain outstanding warrants.
    Pursuant to Rule 416(a) of the Securities Act of 1933, as amended (the
      "Securities Act") the shares of common stock offered hereby include such
  presently indeterminate number of shares of common stock as shall be
    issued by Asia Fiber in connection with the conversion and exercise of
    certain securities. Such number of shares is subject to adjustment and
could be materially less than such estimated amount depending upon
     factors that cannot be predicted by Asia Fiber at this time, including,
among others, the future market price of the common stock. This   
      presentation is not intended to constitute a prediction as to the future
      market price of the common stock or as to the number of shares of common
      stock issuable upon exercise of the convertible debenture or convertible
preferred stock.                                                  

(2)    Represents: (i) 4,937,500 shares issuable upon conversion of the Series C
       Convertible Preferred Stock and exercise of certain outstanding warrants,
     and (ii) 4,937,500 for reserve shares that may be needed to account for
market fluctuations in the price of the common stock prior to the 
    conversion of the Series C Convertible Preferred Stock and exercise of
certain outstanding warrants.                                     

(3)    Represents: (i) 1,750,000 shares issuable upon exercise of the Warrants, 
and (ii) 1,750,000 shares for reserve shares that may be needed to
       account for market fluctuations in the price of the common stock prior to
exercise of the Warrants.                                         

(4)    Estimated solely for the purpose of calculating the registration fee     
pursuant to Rule 457(c) and (g) of the Securities Act.            

        The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effectiveness date until the registrant  
shall file a further amendment which specifically states that this registration 
statement shall thereafter become effective in accordance with section 8(a) of  
the Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said    
section 8(a), may determine.                                                    

PART I

INFORMATION REQUIRED IN PROSPECTUS

          The selling security holders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is     
effective. These securities may not be sold nor may offers to buy be accepted   
prior to the time that the registration statement becomes effective. This       
prospectus is not an offer to sell these securities and it is not soliciting an 
offer to buy these securities in any state where the offer or sale is not       
permitted.                                                                      

 WHERE YOU CAN FIND MORE INFORMATION

We are a public company and file annual, quarterly and special reports, proxy   
statements and other information with the Securities and Exchange Commission.   
You may read and copy any document we file at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these 
documents by writing to the SEC and paying a fee for the copying cost. Please   
call the SEC at 1-800-SEC-0330 for more information about the operation of the  
public reference room. Our SEC filings are also available to the public at the  
SEC's web site at http://www.sec.gov. In addition,                              

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you may read and copy our SEC filings at the office of the New York Stock       
Exchange at 20 Broad Street, New York, New York 10005.                          

     This Prospectus is only part of a Registration Statement on Form SB-2
that we have filed with the SEC under the Securities Act of 1933 and therefore  
omits certain information contained in the Registration Statement. We have also 
filed exhibits and schedules to the Registration Statement that are excluded    
from this Prospectus, and you should refer to the applicable exhibit or schedule
for a complete description of any statement referring to any contract or other  
document. You may inspect or obtain a copy of the Registration Statement,       
including the exhibits and schedules, as described in the previous paragraph.   

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PROSPECTUS                                                                      

 ASIA FIBER HOLDINGS LIMITED

9,875,000 Shares of Common Stock

    The 9,875,000 shares of common stock par value $.01 being offered by
this prospectus are being offered by the selling security holders listed on page
6. The common stock offered by this prospectus is issuable to the selling       
security holders upon the conversion of the Series C Convertible Preferred Stock
issued to them on December 21, 2001, in a private placement relating to the sale
of $2,000,000 in the principal amount of our Series C Convertible Preferred     
Stock and upon the conversion of warrants to purchase up to 1,750,000 shares of 
our common stock.                                                               

    Our common stock trades on the Over-the-Counter Bulletin Board, also
called the OTCBB, under the trading symbol "AFBR". On February 9, 2002, the     
closing bid for our common stock as reported on the OTCBB was $.64 per share.   

      This investment involves risk. See "Risk Factors" beginning on page 1.

       Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities or determined that this   
prospectus is complete or accurate. Any representation to the contrary is a     
criminal offense.                                                               

The date of this Prospectus is February __, 2002                

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 TABLE OF CONTENTS

                                                                [Download Table]

                                                                          PAGE
                                                                          ----
                                                                              
Risk Factors..............................................................  1 
Forward-looking Statements................................................  6 
Use of Proceeds...........................................................  6 
Selling Security Holders..................................................  6 
Plan of Distribution......................................................  7 
Market Price for the Common Stock.........................................  8 
Transfer Agent and Registrar..............................................  9 
Dividend Policy...........................................................  9 
Management................................................................  9 
Description of Securities................................................. 10 
Business.................................................................. 13 
Management's Discussion and Analysis or Plan of Operation................. 28 
Executive Compensation.................................................... 29 
Certain Relationships and Related Transactions............................ 30 
Security Ownership of Certain Beneficial Owners and Management............ 30 
Delaware Anti-Takeover Provisions......................................... 39 
Legal Proceedings......................................................... 39 
Experts................................................................... 39 
Legal Matters............................................................. 39 
Financial Statements .....................................................F-1 


 CORPORATE INFORMATION

Our corporate offices are located at Room 2105, 21/F, West Tower, Shun Tak      
Centre, 200 Connaught Road Central, Sheung Wan, Hong Kong. Our telephone number 
at that location is 011-852-2810- 6226. The URL for our Web site is             
http://www.asiafiberholdings.com                                                

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RISK FACTORS

        You should carefully consider the risks described below before making an
investment in Asia Fiber. The risks and uncertainties described below are not   
the only ones facing Asia Fiber, and there may be additional risks that we do   
not presently know of or that we consider immaterial. All of these risks may    
impair our business operations. If any of the following risks actually occur,   
our business, financial condition or results of operations could be materially  
adversely affected. In such case, the trading price of our common stock could   
decline, and you may lose all or part of your investment.                       

THE MARKETS FOR OUR PRODUCTS ARE CHARACTERIZED BY EVOLVING INDUSTRY STANDARDS   
AND NEW PRODUCT INTRODUCTIONS.                                                  

Our success to depends, in substantial part, on the timely and  
successful introduction of new products and services and upgrades of current    
products. The success of products depends on a number of other factors including
the timely introduction of such products, market acceptance and industry        
standards, the pricing and marketing of such products, and the availability of  
funding. An unanticipated change in one or more of the technologies affecting   
our industry could have a material adverse effect on our business, results of   
operations, and financial condition if we fail to respond in a timely and       
effective manner to such changes.                                               

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY AND WE MAY NOT HAVE ADEQUATE        
RESOURCES TO MARKET OUR PRODUCTS IN ORDER TO COMPETE SUCCESSFULLY.              

   Competition in our industry is intense. We expect that we will face
additional competition from existing competitors and from a number of companies 
that have entered or may enter our existing and future markets. Some of our     
current and potential competitors have greater financial (which includes the    
ability to provide customer financing in connection with the sale of its        
products), marketing and technical resources. Increased competition could result
in price reductions, reduced profit margins and loss of market share, each of   
which could have a material adverse effect on our business, results of          
operations, and financial condition.                                            

FLUCTUATIONS IN OPERATING RESULTS, GENERAL INDUSTRY, MARKET CONDITIONS AND      
GROWTH RATES MAY EFFECT OUR BUSINESS.                                           

-    Our results of operations for any quarter or year are not necessarily      
indicative of results to be expected in future periods. Our future    
   operating results may be affected by various trends and factors that must
   be managed in order to achieve favorable operating results. The inability
   to forecast these trends and factors could have a material adverse effect
on our business, results of operations, and financial condition. Our  
     operating results have historically been and are expected to continue to be
 subject to quarterly and yearly fluctuations as a result of a number of
factors.                                                              

       In addition, there are trends and factors beyond our control, which may
affect our operations. Such potential trends and factors include:               

-    adverse changes in the conditions in the specific markets for our products;

-    visibility to, and the actual size and timing of, capital expenditures by  
our customers;                                                        

-                                                                               
    inventory practices, including the timing of deployment, of our customers;

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-    the conditions in the broader market for our products, and the domestic or 
global economy generally;                                             

-    governmental regulation.                                                   

As a consequence, operating results for a particular period are 
difficult to predict. Any of the above factors could have a material adverse    
effect on our business, results of operations, and financial condition.         

DEPENDENCE ON ECONOMIC CONDITIONS AND CONSUMER PREFERENCES MAY ADVERSELY EFFECT 
OUR BUSINESS                                                                    

Our business is subject to economic cycles and changing consumer
preferences. As such, any significant decline in general economic conditions or 
uncertainties regarding future economic prospects that affect consumer spending 
could have a material adverse effect on our business, results of operations and 
financial condition.                                                            

IT MAY BE DIFFICULT TO SERVE US WITH LEGAL PROCESS OR ENFORCE JUDGMENTS AGAINST 
US OR OUR MANAGEMENT.                                                           

   All or a substantial portion of our assets are located in China. In
addition, all of our directors and officers are non-residents of the United     
States, and all or substantial portions of the assets of such non-residents are 
located outside the United States. As a result, it may not be possible to effect
service of process within the United States upon such persons. Moreover, there  
is doubt as to whether the courts of China would enforce:                       

-    judgments of United States courts against us, our directors or our officers
based on the civil liability provisions of the securities laws of the 
United States or any state; or                                        

-    in original actions brought in China, liabilities against non-residents or 
us based upon the securities laws of the United States or any state.  

FUTURE ACQUISITIONS MAY AFFECT OUR BUSINESS AND DISTRACT MANAGEMENT DUE TO      
DIFFICULTIES IN ASSIMILATING PERSONNEL AND OPERATIONS.                          

        If we acquire a company, we could face difficulties in assimilating that
company's personnel and operations. Acquisitions also involve the need for      
integration into existing administration, services marketing, and support       
efforts. These acquisitions and investments could disrupt its ongoing business, 
distract management and employees and increase its expenses. In addition, key   
personnel of the acquired company may decide not to work for us.                

OUR BUSINESS IS DEPENDANT ON THE AVAILABILITY OF RAW MATERIALS                  

 Our operations are substantially dependent on the availability of
certain new materials. We currently rely on a single source for the supply of   
polyester chip. The effect of the loss of our such source, or a disruption of   
our suppliers business or a failure to meet our product needs on a timely basis 
would depend primarily upon the length of time necessary to find a suitable     
alternative source. At a minimum, temporary shortages in needed raw materials   
could have an adverse effect on our results of operations.                      

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OUR STOCK PRICE IS VOLATILE                                                     

 Our common stock has experienced, and may continue to experience,
substantial price volatility, particularly as a result of variations between our
actual or anticipated financial results and the published expectations of       
analysts and as a result of announcements by our competitors and us. In         
addition, the stock market has experienced extreme price fluctuations that have 
affected the market price of many technology companies in particular and that   
have often been unrelated to the operating performance of these companies. A    
major decline in the capital markets generally, or in the market price of our   
securities may negatively impact our ability to make future strategic           
acquisitions, raise capital, issue debt, or retain employees. These factors, as 
well as general economic and political conditions, may in turn have a material  
adverse effect the market price of our common shares.                           

FUTURE SALES OF OUR COMMON STOCK REGISTERED FOR PUBLIC SALE BY THIS REGISTRATION
STATEMENT COULD CAUSE OUR STOCK PRICE TO PLUMMET, ADVERSELY AFFECTING OUR       
ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.                                  

    After this offering, approximately 35,000,000 shares of common stock
shares may be sold on the public market as compared to 25,000,000 prior to this 
offering. If demand to purchase our shares is weak, our stock price could       
plummet and cause a significant loss of investment.                             

THE CHINESE GOVERNMENT COULD CHANGE ITS POLICIES TOWARD PRIVATE ENTERPRISE OR   
EVEN NATIONALIZE OR EXPROPRIATE IT, WHICH COULD RESULT IN THE TOTAL LOSS OF OUR 
INVESTMENT IN THAT COUNTRY.                                                     

Our business is subject to significant political and economic   
uncertainties and may be adversely affected by political, economic and social   
developments in China. Over the past several years, the Chinese government has  
pursued economic reform policies including the encouragement of private economic
activity and greater economic decentralization. The Chinese government may not  
continue to pursue these policies or may significantly alter them to our        
detriment from time to time with little, if any, prior notice.                  

       Changes in policies, laws and regulations or in their interpretation or
the imposition of confiscatory taxation, restrictions on currency conversion,   
restrictions or prohibitions on dividend payments to stockholders, devaluations 
of currency or the nationalization or other expropriation of private enterprises
could have a material adverse effect on our business. Nationalization or        
expropriation could even result in the total loss of our investment in China and
in the total loss of your investment.                                           

IF RELATIONS BETWEEN THE UNITED STATES AND CHINA WORSEN, OUR STOCK PRICE MAY    
DECREASE AND WE MAY HAVE DIFFICULTY ACCESSING U.S. CAPITAL MARKETS              

      At various times during recent years, the United States and China have
had significant disagreements over political and economic issues. Controversies 
may arise in the future between these two countries. Any political or trade     
controversies between the United States and China, whether or not directly      
related to our business, could adversely affect the market price of our common  
stock and our ability to access U.S. capital markets.                           

PRC ECONOMIC, POLITICAL AND SOCIAL CONDITIONS AS WELL AS GOVERNMENT POLICIES    
COULD AFFECT OUR BUSINESS.                                                      

       Substantially all of our business, assets and operations are located in
China. The economy of China differs from the economies of most developed        
countries in many respects, including:                                          

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- government involvement;                                       

- level of development;                                         

- growth rate;                                                  

- control of foreign exchange; and                              

- allocation of resources.                                      

       The economy of China has been transitioning from a planned economy to a
more market-oriented economy. Although in recent years the PRC government has   
implemented measures emphasizing the utilization of market forces for economic  
reform, the reduction of state ownership of productive assets and the           
establishment of sound corporate governance in business enterprises, a          
substantial portion of productive assets in China is still owned by the PRC     
government. In addition, the PRC government continues to play a significant role
in regulating industry by imposing industrial policies. It also exercises       
significant control over China's economic growth through the allocation of      
resources, controlling payment of foreign currency-denominated obligations,     
setting monetary policy and providing preferential treatment to particular      
industries or companies.                                                        

      The economy of China has experienced significant growth in the past 20
years, but growth has been uneven both geographically and among various sectors 
of the economy. The PRC government has implemented various measures from time to
time to control the rate of economic growth. Some of these measures benefit the 
overall economy of China, but may have a negative effect on us. For example, our
operating results and financial condition may be adversely affected by:         

- changes in the rate or method of taxation;                    

  - imposition of additional restrictions on currency conversion and
remittances abroad;                                         

        - reduction in tariff or quota protection and other import restrictions;
and                                                         

   - state policies affecting the industries that are key consumers of
        polyester fiber products as well as policies affecting the polyester
fiber industry.                                             

GOVERNMENT CONTROL OF CURRENCY CONVERSION AND FUTURE MOVEMENTS IN EXCHANGE RATES
MAY ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS.                      

      We receive substantially all of our revenues in renminbi. A portion of
such revenues will be converted into other currencies to meet our foreign       
currency obligations. We have insignificant foreign currency needs for debt     
service and for purchases of raw materials. Foreign exchange transactions,      
including purchases of plant and equipment which are denominated in foreign     
currency, continue to be subject to significant foreign exchange controls and   
require the approval of the State Administration of Foreign Exchange. These     
limitations could affect our ability to obtain foreign exchange for capital     
expenditures.                                                                   

Since 1994, the conversion of renminbi into foreign currencies, 
including U.S. dollars, has been based on rates set by the People's Bank of     
China, which are set daily based on the previous day's PRC interbank foreign    
exchange market rate and current exchange rates on the world financial markets. 
Since 1994, the official exchange rate for the conversion of renminbi to U.S.   
dollars has generally been stable.                                              

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      Our financial condition and results of operations may also be affected
by changes in the value of certain currencies other than the renminbi in which  
our earnings and obligations are denominated. In particular, a devaluation of   
the renminbi is likely to increase the portion of our cash flow required to     
satisfy our foreign currency-denominated obligations.                           

THE PRC LEGAL SYSTEM IS NOT FULLY DEVELOPED AND HAS INHERENT UNCERTAINTIES THAT 
COULD LIMIT THE LEGAL PROTECTIONS AVAILABLE TO YOU.                             

    The PRC legal system is a system based on written statutes and their
interpretation by the Supreme People's Court. Prior court decisions may be cited
for reference but have limited precedential value. Since 1979, the PRC          
government has been developing a comprehensive system of commercial laws, and   
considerable progress has been made in introducing laws and regulations dealing 
with economic matters such as foreign investment, corporate organization and    
governance, commerce, taxation and trade. Two examples are the promulgation of  
the Contract Law of the PRC to unify the various economic contract laws into a  
single code, which went into effect on October 1, 1999, and the Securities Law  
of the PRC, which went into effect on July 1, 1999. However, because these laws 
and regulations are relatively new, and because of the limited volume of        
published cases and their non-binding nature, interpretation and enforcement of 
these laws and regulations involve uncertainties. In addition, as the PRC legal 
system develops, changes in such laws and regulations, their interpretation or  
their enforcement may have a material adverse effect on our business operations.

STOCKHOLDERS MAY NOT SUCCESSFULLY ENFORCE THEIR RIGHTS UNDER THE PRC COMPANY LAW
OR HONG KONG REGULATORY PROVISIONS IN THE PRC.                                  

       The legal framework to which we are subject may be materially different
from laws in the United States with respect to, for example, the protection of  
minority stockholders. In addition, the mechanisms for enforcement of rights    
under the corporate framework to which we are subject is also relatively        
undeveloped and untested. In China, stockholders do not have the right to sue   
the directors, supervisors, officers or other stockholders on behalf of the     
corporation to enforce a claim against such party or parties which the          
corporation has failed to enforce itself.                                       

     China does not have treaties providing for the reciprocal recognition
and enforcement of judgments of courts with the United States and therefore     
recognition and enforcement in China of judgments of a court in any of these    
jurisdictions in relation to any matter not subject to a binding arbitration    
provision may be difficult or impossible.                                       

OUR FUTURE SUCCESS IS DEPENDENT UPON OUR ABILITY TO RETAIN KEY MANAGEMENT.      

Our success is dependent upon the continued services, our chief 
Executive Officer and Chairman of the Board of Directors and upon the skills,   
experience and efforts of our key marketing and other management personnel. The 
loss of the continued services of any of these individuals could have a negative
effect on our business.                                                         

THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE         
PREFERRED STOCK COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF     
SHARES WHICH WILL CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS.                  

        Our obligation to issue shares upon conversion of the Preferred Stock is
essentially limitless. The following is an example of the amount shares of our  
common stock that is issuable, upon conversion of                               

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the Preferred Stock, based on market prices 25%, 50% and 75% below the market   
price, as of February 9, 2002 of $14.                                           

                                                                [Download Table]

                      Price        Number of shares       Percentage of   
% Below Market      Per Share          Issuable          Outstanding Stock
--------------      ---------      ----------------      -----------------
                                                                          
     25%              $.40             9,000,000               20%        
     50%              $.32             6,250,000               25%        
     75%              $.16            12,500,000               50%        


  As illustrated, the number of shares of common stock issuable upon
conversion of the Preferred Stock will increase if the market price of our stock
declines, which will cause dilution to our existing stockholders.               

THE ISSUANCE OF SHARES UPON CONVERSION OF THE PREFERRED STOCK, AND EXERCISE OF  
THE WARRANTS MAY CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR EXISTING .     

  The issuance of shares upon conversion of the Preferred Stock, and
exercise of the warrants, may result in substantial dilution to the interests of
other holders since the selling security holder may ultimately convert and sell 
the full amount issuable on conversion. Although the selling security holder may
not convert their securities and/or exercise their warrants into more than 4.99%
of our outstanding common stock, this restriction does not prevent the selling  
security holder from converting and/or exercising some of its holdings and then 
converting the rest of its holdings. In this way, the selling security holder   
could sell more than this limit while never holding more than this limit. In    
addition, the selling security holder may waive the 4.99% limitation upon 75    
days prior written notice or upon an event of default. If this limit is waived  
there is no upper limit on the number of shares that may be issued which will   
have the effect of further diluting the proportionate equity interest and voting
power of holders of our common stock.                                           

FORWARD-LOOKING STATEMENTS

        Certain statements in this prospectus that are not related to historical
results, including statements regarding our business strategy and objectives and
future financial position, are forward-looking statements within the meaning of 
the federal securities laws. Although we believe that the assumptions on which  
these forward-looking statements are based are reasonable, we cannot assure that
they will prove to be accurate. Actual results could be substantially different 
from those discussed in the forward-looking statements, due to a variety of     
factors, including unforeseen changes in regulatory policies, competition from  
other similar businesses, market factors and general economic conditions. All   
forward-looking statements contained in this prospectus are qualified in their  
entirety by this statement.                                                     

 USE OF PROCEEDS

      We have registered these shares because of registration rights granted
to the selling security holders. We will not receive any proceeds from the      
issuance of common stock to the selling security holders, however, we will      
receive the proceeds from the exercise of the warrants, when and if exercised.  

 SELLING SECURITY HOLDER

The following table sets forth certain information concerning the resale of the 
shares of common stock by the selling security holder. We will not receive any  
proceeds from the resale of the common stock by the selling security holder. We 
will receive proceeds from the exercise of the warrants.                        

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Assuming all the shares registered below are sold by the selling security       
holder, the selling security holder will not continue to own any shares of our  
common stock.                                                                   

  The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the number of 
shares of common stock beneficially owned by each person, the number of shares  
of common stock that may be sold in this offering and the number of shares of   
common stock each person will own after the offering, assuming they sell all of 
the shares offered.                                                             

       The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended,  
and the information is not necessarily indicative of beneficial ownership for   
any other purpose. Under such rule, beneficial ownership includes any shares as 
to which the selling stockholder has sole or shared voting power or investment  
power and also any shares which the selling stockholder has the right to acquire
within 60 days. The actual number of shares of common stock issuable upon the   
conversion of the preferred stock is subject to adjustment depending on, among  
other factors, the future market price of the common stock, and could be        
materially less or more than the number estimated in the table.                 

                                                        [Enlarge/Download Table]


------------------------------------------------------------------------------------------------------------------------------------
                   Total Shares of                                                                                                  
                    Common Stock                                                                                                    
                    Issuable Upon         Total          Shares of                                                                  
                    Conversion of     Percentage of     Common Stock     Beneficial    Percentage of    Beneficial    Percentage of 
                    the Preferred     Common Stock,     Included in      Ownership     Common Stock     Owner-ship    Common Stock  
                    Stock and/or      Assuming Full      Prospectus      Before the    Owned Before     After the      Owned After  
     Name            Warrants(2)      Conversion(2)        (1)           Offering       Offering        Offering       Offering     
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
 GEM Global            3,187,500          12.58%           9,875,000         --              4.99%           --              --     
 Yield Fund                                                                                                                         
 Limited                                                                                                                            
------------------------------------------------------------------------------------------------------------------------------------

   (1) Because the number of shares of common stock issuable upon conversion
       of the preferred stock are dependent in part upon the market price of
        the common stock prior to a conversion, the actual number of shares of
       common stock that will be issued upon conversion will fluctuate daily
     and cannot be determined at this time. However the selling security
       holder has contractually agreed to restrict its ability to convert or
        exercise its warrants and receive shares of our common stock such that
    the number of shares of common stock held by it and its affiliates
     after such conversion or exercise does not exceed 4.99% of the then
   issued and outstanding shares of common stock. As a result of the
     contractual agreement not to exceed 4.99% beneficial ownership, the
        selling stockholder does not believe it is a control person as defined
in the Exchange Act or is required to file a Schedule 13D.    

  (2) The conversion price of $.64 is calculated as 100% of the average of
    the three lowest closing prices of our common stock for the thirty
         trading days immediately prior to February 9, 2002 which is the assumed
conversion date for purposes of this officer.                 

(3) Includes 1,750,000 shares underlying warrants that are currently  
        exercisable at an exercise price of $.01 per share. In accordance with
       Rule 13d-3 under the Securities Exchange Act of 1934, may be deemed a
control person of the shares owned by such entity.            

    (4) Common stock subject to conversion of the preferred stock, or exercise
      of the warrants, is deemed outstanding for purposes of computing the
         percentage of the person holding such preferred stock, or warrants, but
        is not deemed outstanding for purposes of computing the percentage for
    any other person. Percentages based on 25,321,319 shares of common
stock outstanding as of February 9, 2002.                     

PLAN OF DISTRIBUTION

  The selling security holder and any of its pledges, assignees, and
successors-in-interest may, from time to time, sell any or all of their shares  
of common stock on any stock exchange, market, or trading facility on which the 
shares are traded or in private transactions. These sales may be at fixed or    
negotiated prices. There is no assurance that the selling security holders will 
sell any or all of the                                                          

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common stock in this offering. The selling security holder may use any one or   
more of the following methods when selling shares:                              

Ordinary brokerage transactions and transactions in which the   
broker-dealer solicits purchasers; Block trades in which the broker-dealer will 
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; Purchases by a broker-dealer  
as principal and resale by the broker-dealer for its own account; an exchange   
distribution following the rules of the applicable exchange; Privately          
negotiated transactions; short sales or sales of shares not previously owned by 
the seller; Broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share; A combination  
of any such methods of sale; or any other lawful method                         

        Broker-dealers engaged by the selling security holders might arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive       
commissions or discounts from selling security holders in amounts to be         
negotiated. If any broker-dealer acts as agent for the purchaser of shares, the 
broker-dealer may receive commission from the purchaser in amounts to be        
negotiated. The selling security holders do not expect these commissions and    
discounts to exceed what is customary in the types of transactions involved.    

UNDERWRITER STATUS                                              

Under certain circumstances, the selling security holder and any
broker-dealers or agents that are involved in selling the shares may be         
considered "underwriters" within the meaning of the Securities Act for such     
sales. An underwriter is a person who has purchased shares from an issuer with a
view towards distributing the shares to the public. In such event, any          
commissions received by such broker-dealers or agents and any profit on the     
resale of the shares purchased by them may be considered to be underwriting     
commissions or discounts under the Securities Act.                              

     Because the selling security holder is deemed an "underwriter" within
the meaning of Section 2(11) of the Securities Act, it will be subject to the   
prospectus delivery requirements.                                               

We are required to pay all fees and expenses incident to the    
registration of the shares in this offering. However, we will not pay any       
commissions or any other fees in connection with the resale of the common stock 
in this offering. We have agreed to indemnify the selling security holder and   
its officers, directors, employees and agents, and each person who controls any 
selling shareholder, in certain circumstances against certain liabilities,      
including liabilities arising under the Securities Act. The selling security    
holder has agreed to indemnify Asia Fiber and our directors and officers in     
certain circumstances against certain liabilities, including liabilities arising
under the Securities Act.                                                       

  If we are notified by the selling security holder that they have a
material arrangement with a broker-dealer for the resale of the common stock,   
then we would be required to amend the registration statement of which this     
prospectus is a part, and file a prospectus supplement to describe the          
agreements between the selling security holder and the broker-dealer.           

 MARKET PRICE FOR COMMON STOCK

Our common stock began quotation on the OTCBB in August 1995 under the symbol   
"AFBR". The trading market is limited and sporadic and should not be deemed to  
constitute an established trading market. The high and low bid prices of the    
common stock as reported on the OTCBB for the time periods indicated are set    
forth on the table below. Bid prices reflect inter-dealer prices with retail    
mark-up, mark-                                                                  

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down or commission and may not represent actual transactions; prices do not     
reflect any commission or discount.                                             

                                                                [Download Table]

                                             PRICE RANGE   
                                          -----------------
                                          HIGH         LOW 
                                          -----      ----- 
                                                           

  FISCAL YEAR ENDED DECEMBER 31, 2000                      
.     First Quarter                       $1.70      $ .80 
      Second Quarter                      $1.00      $ .45 
      Third Quarter                       $ .70      $ .45 
      Fourth Quarter                      $ .72      $ .18 

  FISCAL YEAR ENDED DECEMBER 31, 2001                      
      First Quarter                       $3.60      $ .18 
      Second Quarter                      $1.24      $1.73 
      Third Quarter                       $1.22      $ .49 
      Fourth Quarter                      $1.65      $ .61 

        As of February 9, 2002, there were 25,321,319 shares of our common stock
outstanding and we had approximately 1100 stockholders of record.               

TRANSFER AGENT AND REGISTRAR

 Our transfer agent is High Country Stock Transfer Inc. located in
Colorado Springs, CO.                                                           

 DIVIDEND POLICY

       No dividends have been declared or paid on the common stock of we since
our incorporation. We are required to pay dividends on the preferred stock at a 
rate of two percent (2%) per annum. Such dividends may be paid in cash, common  
stock or Preferred Stock at the discretion of our Board of Directors.           

MANAGEMENT

 The following table and text sets forth the names and ages of all
directors and executive officers and the key management personnel as of December
31, 2001. Our Board of Directors is comprised of only one class. All of the     
directors will serve until the next annual meeting of stockholders and until    
their successors are elected and qualified, or until their earlier death,       
retirement, resignation or removal. Executive officers serve at the discretion  
of the Board of Directors, and are appointed to serve until the first Board of  
Directors meeting following the annual meeting of stockholders. Also provided is
a brief description of the business experience of each director and executive   
officer and the key management personnel during the past five years and an      
indication of directorships held by each director in other companies subject to 
the reporting requirements under the Federal securities laws.                   

                                                                [Download Table]

     NAME              AGE                   POSITION                       
     ----              ---                   --------                       
                                                                            
Lung Po Ching          55           Chairman of the Board and CEO           

Rui Min Zhao           53           Vice Chairman of the Board and President

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                                                                [Download Table]
                                                                        
Feng Jie Liu           54           Chief Financial Officer and Director

Wai On Wan             28           Secretary and Director              


MR. LUNG PO CHING, has been the Chairman of the Board since January 22, 2000 and
was appointed Chief Executive Officer on June 1, 2000. Mr. Ching has been       
involved for more than 20 years in the management of production and technology  
of industrial enterprises in the PRC. Mr. Ching graduated from the Harbin       
Military and Engineering Institute in 1968 and holds the title of Senior        
Engineer. Mr. Ching is also the president of two US corporations, one of which  
is listed on Nasdaq and the other is included on the OTC Bulletin Board operated
by the NASD.                                                                    

MR. RUI MIN ZHAO, has been the Vice Chairman of the Board and President since   
January 22, 2000. Mr. Zhao is also the General Manager of Asibao. Mr. Zhao has  
many years of experience in the management of chemical fiber and textile        
enterprises. He has won several titles and awards such as the "National Medal of
Outstanding Entrepreneur", the "National Model Worker of Textile Industry" and  
the "May First Labor Medal". Mr. Zhao graduated from the department of          
mechanical engineering of Harbin Industrial University in 1975.                 

MR. FENG JIA LIU, has been the Chief Financial Officer and a Director since     
January 22, 2000. Mr. Liu has over 30 years of financial management experiences.
Mr. Liu graduated from Forestry Institute in Heilongjiang Province in 1967 with 
a concentration in financial management.                                        

 MR. WAI ON WAN, has been the Secretary and a Director of we since
January 22, 2000. Mr. Wan has been involved in corporate strategy and business  
development for high-tech industry. He was the Founder and Co-CEO of            
Iconcept.net Ltd., a company that focuses on providing web solution services to 
local companies. Mr. Wan graduated from Rutgers University, New Jersey in 1996  
with a concentration in Finance.                                                

 DESCRIPTION OF SECURITIES

      As of the date of this prospectus, one authorized capital stock of our
Company consisted of 75,000,000 shares $0.01 par value, per share of common     
stock of which 25,321,319 shares are issued and outstanding and 10,000,000      
shares of preferred stock of which there are 80,000 shares of Series B preferred
stock outstanding. There are approximately 1,100 shareholders of record.        

      The following is a description of our securities taken from provisions
of our Articles of Incorporation and by-laws, each as amended. The following    
description is a summary and is qualified in its entirety by the above          
referenced provisions of the Articles of Incorporation and by-laws as currently 
in effect.                                                                      

COMMON STOCK                                                                    

      All shares of common stock have one vote and vote together as a single
class. Voting rights are not cumulative, and, therefore, the holders of more    
than 50% of the common stock could, if they chose to do so, elect all of the    
Directors.                                                                      

  Upon liquidation, dissolution or winding up, our assets, after the
payment of our liabilities, will be distributed pro rata to the holders of the  
common stock. The holders of the and class B common stock do not have preemptive
rights to subscribe for any of our securities and have no right to require us to
redeem or purchase their shares.                                                

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        Holders of common stock are entitled to share equally in dividends when,
as and if declared by our board of directors, out of funds legally available for
the payment of dividends. We have not paid any cash dividends on the common     
stock, and it is unlikely that any dividends will be declared in the foreseeable
future.                                                                         

     The securities being offered by the selling security holder represent
shares of common stock that are issuable upon the conversion of the Series C    
Convertible Preferred Stock and upon the exercise of warrants that we issued in 
a private placement on December 21, 2001.                                       

       Each share of Preferred Stock is convertible into our common stock at a
rate equal to the lower of (i) $4.00 or one hundred-twenty five percent (125%)  
of the average of the closing bid prices for the common stock on the OTCBB,     
Nasdaq SmallCap Market, Nasdaq National Market System, American Stock Exchange, 
or New York Stock Exchange hereinafter referred to as the "Principal Market", or
if not then trading on a Principal Market, such other principal market or       
exchange where the common stock is listed or traded for the five (5) trading    
days prior to but not including the closing date of the private placement which 
is defined in the Convertible Preferred Stock Purchase Agreement as five (5)    
days after this Registration Statement is declared effective; or (ii) one       
hundred percent (100%) percent of the average of the three (3) lowest closing   
bid prices for the common stock on the Principal Market, or on any securities   
exchange or other securities market on which the common stock is then being     
listed or traded, for the thirty (30) trading days prior to but not including   
the date of conversion. However, the Preferred Stock may not be converted into  
common stock if the note holder and any affiliate would, as a result,           
beneficially own more than 4.99% of our issued and outstanding shares of common 
stock provided, however, the selling security holder may waive the 4.99%        
limitation upon 75 days prior written notice or upon an event of default.       

WARRANTS                                                                        

      Thirty-month warrants to purchase up to 1,750,000 shares of our common
stock were issued to GEM Global Yield Fund Limited. The warrants were issued in 
connection with the Convertible Preferred Stock Purchase Agreement, dated as of 
December 21, 2001. The warrants are exercisable at a purchase price of $.01 per 
share.                                                                          

REGISTRATION RIGHTS                                                             

We agreed to file a Registration Statement to register under the
Securities Act not less than 200% of the shares issuable upon exercise of the   
warrants and upon conversion of the Preferred Stock. We agreed to pay all       
expenses for registration of the securities. In addition, we agreed to comply   
with all necessary state securities laws so as to permit the sale of the common 
stock by the investors.                                                         

      We agreed to use our best efforts to cause this Registration Statement
to become effective within 150 days from the execution date or December 21, 2001
of the Convertible Preferred Stock Purchase Agreement. We also agreed that, if  
this Registration Statement has not been declared effective by the specified    
date, we will pay certain liquidated damages in the amount of 4% per month or   
part thereof until the registration statement is declared effective.            

   Pursuant to the Convertible Preferred Stock Purchase Agreement, the
selling security holders may transfer the Preferred Stock warrants under certain
circumstances. Such transferees may also be selling security holders under this 
Prospectus. One or more supplemental prospectuses will be filed pursuant to Rule
424 under the Securities Act of 1933 to set forth the required information      
regarding any additional selling security holders.                              

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SERIES C CONVERTIBLE PREFERRED STOCK                                            

DIVIDENDS                                                       

  The holder of the Series C Preferred Stock are entitled to receive
dividends in cash or shares of common stock at the rate of two percent (2%) per 
annum (computed on the basis of a 360-day year) on the stated value of $100 per 
share of Series C Preferred Stock on and as of the most recent conversion date. 
The dividends on the Series C Preferred Stock are cumulative from the Issuance  
Date.                                                                           

CONVERSION                                                      

       The shares of Series C Preferred Stock shall be convertible into shares
of common stock at the conversion price, at the option of the holder in whole or
in part, at any time during the period of two and one half years commencing on  
December 21, 2001. Any conversion shall be for a minimum stated value of        
$10,000.00 of Series C Preferred Stock. Series C Preferred Stock is             
automatically converted into shares of common stock upon maturity on June 21,   
2004.                                                                           

      The conversion price for each share of Series C Preferred Stock is the
lesser of (a) $4.00 or one hundred twenty-five percent (125%) of the average of 
the closing bid price per share of our common stock during the five (5) trading 
days immediately preceding the closing date of the private placement which is   
defined as in the Convertible Preferred Stock Purchase Agreement as five (5)    
days after this Registration Statement is declared effective or (b) one hundred 
percent (100%) of the average of the three (3) lowest closing bid prices per    
share of our common stock during the thirty (30) trading days immediately       
preceding the conversion date.                                                  

REDEMPTION                                                      

        The shares of Series C Preferred Stock are redeemable at our sole option
prior to receipt of a notice of conversion to the extent funds are legally      
available therefor, at any time and from time to time in whole or in part at a  
redemption price equal to 150% of the stated value of each share of Series C    
Preferred Stock being redeemed plus accrued and unpaid dividends, if any. We are
not obligated to provide for redemption of the Series C Preferred Stock through 
a sinking fund.                                                                 

RANK                                                            

   The Series C Preferred Stock, as to dividends, redemptions, and the
distribution of assets upon liquidation, dissolution or winding up, rank (i)    
prior to common stock; (ii) prior to any class or series of capital stock       
hereafter created that, by its terms, ranks junior to the Series C Preferred    
Stock; (iii) junior to any class or series of capital stock hereafter created   
(with consent of the holders of a majority of the outstanding Series C Preferred
Stock) which by its terms ranks senior to the Series Preferred Stock; and (iv)  
except as to dividends, pari passu with any other series of our preferred stock 
hereafter created which by its terms ranks on a parity with the Series C        
Preferred Stock.                                                                

LIQUIDATION PREFERENCE                                          

    If upon liquidation or winding up the assets and funds available for
distribution among the holders of the Series C Preferred Stock and holders of   
pari passu securities there is insufficient cash to permit the payment to such  
holders of the preferential amounts payable thereon, then the entire assets and 
funds legally available for distribution to the Series C Preferred Stock and the
pari passu securities shall be distributed ratably among such shares in         
proportion to the ratio that the liquidation preference payable on each such    
share bears to the aggregate liquidation preference payable on all such shares. 

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VOTING RIGHTS                                                   

The holders of the Series C Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporate Law, 
or DGCL. To the extent that under the DGCL the vote of the holders of the Series
C Preferred Stock, voting separately as a class or series, as applicable, is    
required to authorize a given action of the Company, the affirmative vote or    
consent of the holders of at least a majority of the then outstanding shares of 
the Series C Preferred Stock represented at a duly held meeting at which a      
quorum is present or by written consent of the holders of at least a majority of
the then outstanding shares of Series C Preferred Stock (except at otherwise may
be required under the DGCL) shall constitute the approval of such action by the 
class. To the extent that under the DGCL holders of the Series C Preferred Stock
are entitled to vote on a matter with holders of Common Stock, voting together  
as one class, each share of Series C Preferred Stock shall be entitled to a     
number of votes equal to the number of shares of Common Stock into which it is  
then convertible using the record date for the taking of such vote of           
shareholders as the date as of which the conversion price is calculated.        

BUSINESS

GENERAL                                                                         

    We were incorporated in the State of Delaware in 1982 under the name
Regal International, Inc., and became a separate publicly traded corporation as 
a result of a spin-off from Delaware International Company. The stockholders of 
Delaware International Company were issued one share of our common stock for    
each two shares of Delaware International's common stock.                       

     On December 7, 1994, the New York Stock Exchange suspended trading of
our common stock pending delisting as we no longer met the exchanges criteria   
for continued listing. we decided not to contest the delisting and the common   
stock was delisted on February 9, 1995. Our common stock began quotations on the
OTCBB in August 1995.                                                           

  On February 8, 1996, we acquired all of the issued and outstanding
shares of capital stock of Acewin Profits Limited, a British Virgin Islands     
Corporation from China Strategic Holdings Limited, a Hong Kong company.         
Immediately following the acquisition of the capital stock of Acewin, and as a  
condition thereto, we sold and transferred all of our operating assets and real 
property existing as of January 31, 1996 to Regal (New) International Inc. A    
portion of the purchase price was paid by delivery of a promissory note dated   
February 13, 1996 executed by Harlequin Investment Holdings Limited in favor for
the sum of US $800,000; and (ii) a promissory note dated February 13, 1996      
issued by New Regal in favor of we for the sum of US $900,000. The promissory   
not to Harlequin bore no interest and was due and payable in one installment on 
February 1, 2001. The promissory note to New Regal bore interest at 9% per year 
and was payable in sixty (60) equal installments of principal and interest.     
Harlequin was at the time of this transaction the beneficial owner of           
approximately 55% of the then currently outstanding shares of our common stock. 
Subsequent to this transaction, Harlequin reduced its beneficial ownership in   
the company to less than 1%.                                                    

  Pursuant to a Deed of Variation dated July 27, 1998, New Regal and
Harlequin, Harlequin agreed and undertook to assume all of the obligations and  
liabilities of New Regal under the New Regal promissory note in consideration of
our agreement to release New Regal from all obligations relating to the New     
Regal promissory note. All other terms of the New Regal promissory note remained
the same.                                                                       

       During 1998, In agreement with New Regal we agreed on a revised payment
schedule relating to the Harlequin promissory note. Under the revised payment   
schedule, the payment of several monthly installments by New Regal in 1998 and  
1999 was suspended and the outstanding principal balance was                    

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revised to be settled in sixty (60) equal monthly installments commencing March 
1999. The promissory note in favor of Harlequin continued to bear interest at 9%
per year during the period of payment suspension in 1998 and 1999 and           
thereafter. Both the Harlequin promissory note and the New Regal promissory Note
were assigned to China Strategic Holdings Limited in February as indicated      
below.                                                                          

    On September 10, 1996 we acquired the entire issued share capital of
Westronix Limited, for US $30 million to be satisfied by a convertible          
promissory note executed in favor of Horler. This Note to Horler was a US $30   
million convertible Note bearing interest at 9% per year after an initial       
6-month interest-free period with all principal being due and payable on        
September 10, 1999. On April 14, 1998, Horler agreed to reduce the interest rate
on the note from 9% to 5% per year for the year ended December 31, 1997. In     
addition, Horler agreed that after December 31, 1998, no principal repayment on 
the Note would be demanded until we were financially capable of doing so. The   
Note was paid off in February as indicated below.                               

  On September 11, 1996, we sold our interest in Acewin to BTR China
Holdings B.V., a Netherlands company. At that time, we had the following        
subsidiaries:                                                                   

    -  Westronix Limited - A holding company incorporated in the British
Virgin Islands.                                           

       -  China Construction Holdings Limited - A company incorporated in Hong
    Kong, formerly known as China Construction International Group
Limited.                                                  

     -  Hangzhou Zhongche Huantong Development Ltd. - A Sino-foreign joint
      venture company located in Hangzhou, Zhejiang Province, the PRC.

      We held a 100% interest in Westronix Limited. Westronix Limited held a
100% interest in China Construction Holdings Limited that in turn held a 51%    
interest in Hangzhou. Hangzhou was established to develop the Hangzhou Toll     
Road.                                                                           

        We filed an Amendment to our Certificate of Incorporation on February 8,
1999 changing our name from "Regal International, Inc." to "Asia Resources      
Holdings Ltd." and increasing our capital stock to 1,100,000,000 shares. On     
February 19, 1999, we effected a 1-for-138 reverse stock split of our common    
stock that resulted in approximately 597,132 shares of common stock outstanding.

     On January 22, 2000, pursuant to an Acquisition Agreement dated as of
September 10, 1999 by and among, Horler, Far Beyond and the stockholders of Far 
Beyond, the stockholders of Far Beyond transferred all of the issued and        
outstanding shares of the capital stock of Far Beyond to us in exchange for     
8,757,951 shares of our common stock, representing approximately 88% of our then
outstanding shares of the common stock.                                         

     Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to a Disposal Agreement, we transferred to      
Horler the entire share capital of Westronix Limited in full and final          
satisfaction of their Note. Also, concurrently with and as a condition of such  
closing, pursuant to an Assignment Agreement, we assigned to China Strategic    
Holdings Limited, in settlement of all of the outstanding indebtedness we owed  
to China Strategic Holdings Limited, the New Regal Note and the Harlequin Note. 
Pursuant to the Disposal Agreement and the Assignment Agreement (but prior to   
giving effect to the acquisition of the Far Beyond shares) we disposed of all of
its assets other than approximately $150,000 in cash or cash equivalents and all
of its liabilities.                                                             

     At the closing of the Far Beyond Acquisition Agreement, our executive
officers and directors resigned. Immediately following their resignations, the  
following persons became members of the Board                                   

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of Directors: Lung Po Ching, Rui Min Zhao, Ming Xue Liu, Feng Jie Liu and Wai On
Wan. Also immediately following such resignations, the Board of Directors of we 
elected Lung Po Ching as Chairman of the Board, Rui Min Zhao as Vice Chairman of
the Board and President, Ming Xue Liu as Vice President, Feng Jie Liu as Chief  
Financial Officer and Wai On Wan as the Secretary of we.                        

      On February 28, 2001 we effectuated a 2.5:1 forward stock split of our
common stock for all Stockholders of record on February 26, 2001.               

On March 14, 2000, we filed an Amendment to the Certificate of  
Incorporation to decrease our authorized capital stock to 40,000,000 shares     
(consisting of 30,000,000 shares of common stock and 10,000,000 shares of       
Preferred Stock) and to change our name from "Asia Resources Holdings Ltd." to  
"Asia Fiber Holdings Limited."                                                  

BUSINESS OPERATIONS                                                             

     Our only significant asset is our 100% equity interest in Far Beyond.
Far Beyond owns a 70% equity interest in Asibao, the principal activity of which
is the manufacture and sale of polyester fiber products. Asibao was established 
as a Sino-foreign joint venture company in the PRC between Heilongjiang Longdi  
Group Co. Limited, a PRC state-owned enterprise and Far Beyond on October 18,   
1995 with a duration of thirty (30) years from the date of the business license.
Far Beyond contributed cash in the amount of US $8.40 million in exchange for   
its seventy percent (70%) equity interest in Asibao and Longdi contributed its  
operating assets, having an aggregate fair market value of US $3.60 million in  
exchange for its 30% equity interest in Asibao. The registered capital of Asibao
is approximately US $12 million.                                                

  Asibao also acquired from Londgi as of January 1, 1996 other fixed
assets, including production facilities, with an aggregate fair value of US     
$46.81 million pursuant to an agreement between Asibao and Londgi approved by   
the relevant governmental authorities of the PRC. Asibao has assumed            
substantially all of the business previously engaged in by Longdi, which        
business consists primarily of the production and distribution in China of      
polyester filament and polyester staple fiber. Polyester fiber is mainly used by
the textile industry for apparel, household, industrial and other fabrics.      
Before the formation of Asibao, Longdi produced polyester filament and polyester
staple fiber in standardized forms and as "differential" fiber with particular  
specifications.                                                                 

 Asibao's products are primarily distributed throughout China to a
diversified customer base. Currently, management of Asibao believes that demand 
in China for polyester filament and staple fiber exceeds the locally produced   
supply.                                                                         

THE POLYESTER INDUSTRY                                                          

  Polyester is a synthetic polymer formed by the reaction between an
organic acid (usually PTA) and organic alcohol (usually MEG). Both PTA and MEG  
are petrochemical derivatives. The production of polyester involves two phases: 

       -  PHASE ONE - The polymerization phase which leads to the formation of
a viscous paste known as polyester melt.                  

     -  PHASE TWO - The processing phase in which polyester melt if formed
        into a range of end products. The production process can either be
         continuous from the initial reactants to the end products or it can
          be interrupted (the batch process) by allowing the polyester melt to
solidify.                                                 

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This intermediate product, known as polyester chip, reverts to  
polyester melt on reheating and can then be further processed.  

 At the end of the processing phase, polyester can take one of the
following forms: staple fiber, filament, resin or film. Polyester fiber (staple 
and filament) was estimated to account for approximately 70% of worldwide       
polyester production. It is the leading synthetic fiber in commercial production
worldwide. Polyester fiber is either drawn into continuous strands known as     
filament or into bundles of strands which are then cut into short lengths to    
form staple fiber. Staple fibers more closely resembles the physical            
characteristics of naturally occurring fibers, such as cotton and wool. It is   
typically used in pure form or blended with cotton, wool, acrylic or viscose.   
Polyester fiber has one of the widest range of applications of any synthetic    
fiber.                                                                          

APPLICATIONS INCLUDE:                                                           

-    Apparel - Outerwear, lingerie, sweaters, socks, leisure-wear, workwear,    
medical staff wear                                                    

-    Household - Carpet pile and backing, upholstery, household textiles,       
fiberfill                                                             

-    Industrial - Tire cord, other rubber reinforcements, geotextiles,          
    composites, ropes and cordage, coated fabrics, seat belts and filter media

GROWTH IN PRODUCTION                                                            

     The global polyester industry has experienced significant growth over
the last decade, primarily as a result of the substitution of polyester for     
other synthetic and natural materials, general economic growth (especially in   
certain parts of the developing world), technological advancements and new      
applications. Processed polyester can take one of three principal forms: PET    
packaging resin, fiber (either polyester staple fiber or polyester filament), or
film.                                                                           

GEOGRAPHY OF PRODUCTION                                                         

      Most of the growth in world polyester fiber production has occurred in
Asia (excluding Japan), where production has increased at an estimated compound 
annual growth rate of approximately 14.9%. The estimated compound annual growth 
in production in North America and western Europe, where the polyester industry 
was originally established, has generally been slower or negative in the same   
period. During the same period, China, the world's second largest producer of   
polyester fiber, had the largest absolute increase in polyester fiber production
of approximately 2,215,000 tons. Absolute world polyester fiber production      
increased by 6,359,000 tons. This gradual shift of production base of polyester 
fiber has been driven by demographic and cost considerations in general and by  
the relocation of the textile and apparel industries to Asia in particular. Asia
is already the world's largest producing region for polyester fiber and the only
one which is expected to increase its market share and production over the      
medium and longer term.                                                         

PRODUCT PRICES AND PRODUCERS' MARGIN                                            

    The price of polyester on the open market is dependent mainly on the
level of demand for particular products relative to production capacity and the 
price of raw materials. There is also some variation in the price of polyester  
as between the major regional markets of North America, Europe and the Far East.
This variation reflects the supply and demand balances within each region, the  
pressure on domestic suppliers from imports, and the prevalence of tariff       
barriers, both for polyester products and raw materials.                        

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        Since 1996, the prices of PTA and MEG offered by international suppliers
has been declining as a result of new production capacities, stagnant growth in 
demand for polyester products and a slump in crude oil prices. Affected by the  
Asian financial crisis that occurred in 1997, the prices of polyester fiber     
reached the cyclical bottom in mid-1998. Since then, the polyester industry has 
rebounded from the bottom with the recovery in economies taking place in Asia   
and Europe. These recoveries are positive for GDP sensitive commodity products  
such as polyester and textiles. However, the price for polyester fiber has      
dropped again since the second quarter of 2001 due to the decrease in crude oil 
prices.                                                                         

POLYESTER INDUSTRY IN CHINA                                                     

     The five (5) major synthetic fibers produced in the PRC are polyester
fiber, acrylic fiber, polyvinyl alcohol fiber, polypropylene fiber and nylon.   
Polyester fiber is the most important synthetic fiber produced in the PRC       
representing approximately 80% of the total domestic consumption of synthetic   
fibers.                                                                         

  The textile and garments industry is a major sector in the Chinese
economy, accounting for approximately 9.3% of the gross value of industrial     
output in 2000 (Source: Statistical Yearbook of China 2001). China has one of   
the lowest per capita ratios of arable land in the world, with only 0.77        
hectares per capita, and as such it cannot produce all the natural fibers for   
the consumption by the textile industry. The synthetic fiber industry thus has a
key role in sustaining China's textile output. At present, the fiber consumption
in the PRC is approximately 6 kilograms per capita which is below the world's   
average of 7.7 kilograms per capita.                                            

      The polyester industry in the PRC began in the 1960's, which was later
than much of the developed world. Despite its late start, the PRC has since     
experienced a tremendous pace of development in the polyester industry. The     
PRC's total polyester production output of approximately 3.8 million tons placed
it as the second largest producer of polyester in the world, after the United   
States.                                                                         

        During the initial phase of development of the PRC's polyester industry,
reliance was placed on domestic technology for research and development and a   
large number of small scale plants were constructed using the batch production  
method. These plants were geographically dispersed, relying on outside suppliers
of chips for their raw materials and producing a relatively narrow range of     
products. From the mid-1970's to the mid-1980's, the PRC concentrated instead on
importing technology and equipment and the construction of a few large scale    
complexes. Over the years, there has been rapid expansion of production         
capacity, mainly focused around these large scale complexes. The import of      
relatively new technology, processes, equipment and management systems has      
enabled the PRC's polyester industry to develop at a rapid pace. However, the   
problem remains that the industry is very fragmented with many small plants.    

     China had a 21.8% world market share of polyester fiber production in
1998. In 1999 and 2000, the polyester fiber production in China increased by    
28.3% and 16.7%, respectively.                                                  

      It is expected that the polyester fiber sector will ultimately benefit
from China's entry into the World Trade Organization, on the back of higher     
exports of textile products as the present quota system is gradually phased out 
over the next five to six (6) years. The present tariff system on polyester     
fiber, will likely remain, albeit at slightly lower rates. It may take five (5) 
years before the average tariff of 17% falls to 9%. At the same time, a cyclical
upturn in the polyester sector plus higher export demand will likely keep       
product products prices and margins high. Furthermore, China has raised export  
tax rebates on textile products from 14% to 17%, which should encourage more    
exports. Together with the projected growth in population and the expected      
improvement in the living standards in the PRC, the demand for polyester fiber  
will certainly increase significantly.                                          

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 POLYESTER PRODUCTION AND CONSUMPTION IN THE PRC
(IN THOUSANDS OF TONS)

                                                                [Download Table]


Consumption               1998    1999    2000
-----------              -----   -----   -----
                                              
Polyester Filament       2,598   3,335   3,419

Polyester Staple Fiber   1,754   2,033   2,542

Production                1998    1999    2000
-----------              -----   -----   -----
Polyester Filament       2,276   2,931   3,152

Polyester Staple Fiber   1,183   1,506   1,949


PRODUCTS                                                                        

       Asibao currently produces two main products: polyester staple fiber and
polyester filament. Asibao sells its polyester staple fiber with approximately  
fifty (50) different specifications under the brand name of "Yin Chau". It sells
its polyester filament with approximately twenty-five (25) different            
specifications kinds under the brand names "Asibao," "Baiyu" and "Yinling."     
Asibao sells its products in over 180 factories in eighteen (18) different      
provinces, cities and autonomous regions in China and eighteen (18) of its      
products have been honored with the title of top quality product of the ministry
and the province in China.                                                      

        The polyester staple fiber produced by Asibao has the characteristics of
high tenacity, low elongation and high resistance of heat so that it is widely  
used in the textile industry. The three-dimensional crimped hollow fiber is one 
of the variations of staple fiber and was introduced in the 1980s. It is used   
mainly as an insulation and stuffing material for pillows, quilts, upholstery,  
ski-wear, and toys, as well as for processing suede-like woven products.        

RAW MATERIALS                                                                   

The principal raw material used by Asibao is polyester chip.    
Approximately 85% of Asibao's total cost of sales is attributable to raw        
materials. Raw materials are mainly purchased from Longdi.                      

       Asibao is not committed to any supply agreements with suppliers. Asibao
chooses its suppliers based upon the price and quality of their raw materials.  

DISTRIBUTION OF PRODUCTS                                                        

        Approximately all of our sales are made to domestic customers located in
Heilongjiang, Henan, Liaoning, Jilin, Shandong, Hebei, Tienjin, Shanxi,         
Zhejiang, Shaaxi, Jiangsu and approximately 11 other provinces or cities.       

      From 1993 until the present, total export sales of we were 500 tons of
its products. Demand in China for polyester staple fiber well exceeds domestic  
supply and we has consistently sold all of the polyester staple fiber that it   
has been able to produce.                                                       

   In 2000, the average prices of polyester staple fiber and polyester
filament sold were approximately US $1,036 and US $1,365 per ton, respectively. 
The customers of we are mainly textile factories and wholesalers of polyester   
fiber. Our customer base is well established and approximately 75-80% of our    
sales are repeat orders to existing customers.                                  

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MARKETING                                                                       

     Asibao conducts its marketing efforts through its sales and marketing
division, comprised of approximately fifty-three (53) employees working in      
Liaoning, Shandong, Beijing, Tienjin, Zhejiang and Heilongjiang. Approximately  
thirty-one (31) of such employees are market promotion staff and after-sales    
technicians and are responsible for conducting market research, sales planning, 
marketing strategy, order consultation with customers, sales coordination and   
control, and payment collection.                                                

PRICING                                                                         

     Until the end of 1992, a control price for polyester products sold by
Chinese producers in China was set for each calendar year by the Commodities    
Price Bureau in consultation with the Textile Ministry. Individual producers    
could apply to the Commodities Price Bureau for permission to sell specific     
products at higher prices, but not at lower prices.                             

   In 1993, the pricing system was reformed and the price of polyester
staple fiber was deregulated while the price for its primary raw material,      
polyester chip, was based on a pre-set reference control price around which     
producers could adjust up or down within a range of ten percent (10%) for       
standard products.                                                              

        However, in 1994, the pricing system was reformed once again and now the
producers themselves may determine the prices of polyester chip, as well as     
polyester staple fiber. In response to these changes, Asibao reviews pricing    
policy on a quarterly basis and adjusts prices according to such factors as     
changes in demand, international product prices, costs of raw materials and     
exchange rates. The sales prices for all orders are now determined by direct    
negotiations with the customers and slightly favorable terms are granted to     
regular customers.                                                              

COMPETITION                                                                     

  In the domestic market, Asibao's main competitors are mainly large
manufacturers located close to the coastal regions. Such competitors include    
Yizheng Chemical Fiber Company Limited, Tianjin Petrochemical Company, Liaoyaong
Petrochemical Fiber Company, Shanghai Petrochemical Polyester Factory and       
Guangdong Zinhui Chemical Fiber Factory, among others.                          

        Asibao competes with domestic producers on the basis of product quality,
wide variety of product specifications, delivery performance and after-sales    
services. Far Beyond believes that Asibao has a pricing advantage over its      
competitors due to a number of factors including, economies of sale, its ability
to purchase cheaper raw materials through various channels and its use of the   
raw materials in its production of not only the polyester staple fiber, but also
the polyester filament.                                                         

    Longdi owns a polyester chip plant that commenced operations in 1996
with a production capacity of 80,000 tons of polyester chip per annum. On       
January 10, 1996, Longdi and Asibao entered into a purchase agreement pursuant  
to which Longdi agreed to guarantee the supply of polyester chip to Asibao at a 
5% to 10% discount to the prevailing market prices offered to other purchasers  
of polyester chip with a right of first refusal to Asibao.                      

Far Beyond believes that product price is the major competitive 
advantage that Asibao has over importers of similar products. The import prices 
of staple fibers and filament are generally about 20% higher than those of      
Asibao. Presently, the domestic market in China is protected by tariffs on      
imported chip and staple fiber. Even if China becomes a signatory of GATT and   
import tariffs decrease, Far                                                    

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Beyond anticipates that the PRC government will likely promulgate appropriate   
regulations to protect local manufacturers against overseas dumping.            

RESEARCH AND DEVELOPMENT                                                        

    The research and development division for both Asibao and Longdi are
centralized within the organizational structure of Longdi and is known as the   
research institute. The research institute originated in 1983 and provides      
technical expertise for the improvement of the production facilities. The       
research institute also provides advanced technical training for employees.     
Asibao shares the costs incurred for the services provided by that division.    

MANAGEMENT AND EMPLOYEES                                                        

      Asibao employs approximately 1,100 employees. The number of employees,
categorized by function, is approximately as follows:                           

                                                                [Download Table]

 Function                                Number of Employees
 --------                                -------------------
                                                            
 Production, Engineers and Technicians         1,055        

 Sales and Marketing                              15        

 Accounting, General and Administration           42        


PROPERTIES                                                                      

As of December 31, 2001, we had no office or facility for U.S.  
operations. The head office and production facilities of we are located in      
Harbin City, the capital of the Heilongjiang province. These facilities are     
leased by Longdi to us pursuant to a 15-year lease, commencing January 1, 1996  
at a rate of US $121,000 per year. The rental rate is adjustable, based on      
further mutual negotiation, every three years. The factories and office         
buildings cover a total area of approximately 317,000 square meters, comprising 
244,000 square meters for production plants and 73,000 square meters for        
warehouses and offices.                                                         

        Our production facilities at present consist of a polyester staple fiber
plant and polyester filament plant numbers 1 and 2. We own all plant and        
machinery at these factories. Long term land use rights for the land on which   
these facilities are situated are held by Longdi. Other supporting facilities,  
including a power plant and a thermo-electricity plant, are provided by Longdi  
at agreed rates.                                                                

    All land in the PRC is owned by the government. According to the PRC
law, land may be leased (under land use rights) for certain periods of time to  
businesses. While Chinese law expressly protects the status and rights of       
Sino-foreign joint venture enterprises, including their right to use land during
the term of their respective joint venture contracts, the state reserves the    
right, in extreme and exceptional circumstances, to terminate the joint venture 
and provide compensation therefor. In such an event, a joint venture's right to 
use land would terminate and all facilities would revert to the state in        
exchange for just compensation. Although management sees little risk in not     
having title to the land use rights, no assurances can be given that such land  
use rights may not be terminated by the government.                             

SEASONALITY                                                                     

      The retailing business is seasonal in nature with a high proportion of
sales and operating income generated in the months of October, November and     
December. Working capital requirements fluctuate                                

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during the year, increasing somewhat in mid-Summer in anticipation of the Fall  
merchandising season and increasing substantially prior to the Christmas season 
when we must carry significantly higher inventory levels.                       

GOVERNMENTAL REGULATION OF OUR OPERATIONS IN CHINA                              

        All of our subsidiary companies operate from facilities that are located
in the People's Republic of China. Accordingly, our subsidiaries' operations    
must conform to the governmental regulations and rules of China.                

THE CHINESE LEGAL SYSTEM                                        

      The practical effect of the People's Republic of China legal system on
our business operations in China can be viewed from two separate but intertwined
considerations. First, as a matter of substantive law, the Foreign Invested     
Enterprise laws provide significant protection from government interference. In 
addition, these laws guarantee the full enjoyment of the benefits of corporate  
Articles and contracts to Foreign Invested Enterprise participants. These laws, 
however, do impose standards concerning corporate formation and governance,     
which are not qualitatively different from the General Corporation Laws of the  
several states. Similarly, the People's Republic of China accounting laws       
mandate accounting practices, which are not consistent with US Generally        
Accepted Accounting Principles. The China accounting laws require that an annual
"statutory audit" be performed in accordance with People's Republic of China    
accounting standards and that the books of account of Foreign Invested          
Enterprises are maintained in accordance with Chinese accounting laws. Article  
14 of the People's Republic of China Wholly Foreign-Owned Enterprise Law        
requires a Wholly Foreign-Owned Enterprise to submit certain periodic fiscal    
reports and statements to designate financial and tax authorities, at the risk  
of business license revocation.                                                 

   Second, while the enforcement of substantive rights may appear less
clear than United States procedures, the Foreign Invested Enterprises and Wholly
Foreign- Owned Enterprises are Chinese registered companies which enjoy the same
status as other Chinese registered companies in business-to-business dispute    
resolution. Because the terms of the respective Articles of Association provide 
that all business disputes pertaining to Foreign Invested Enterprises are to be 
resolved by the Arbitration Institute of the Stockholm Chamber of Commerce in   
Stockholm, Sweden applying Chinese substantive law, the Chinese minority partner
in our joint venture companies will not assume a privileged position regarding  
such disputes. Any award rendered by this arbitration tribunal is, by the       
express terms of the respective Articles of Association, enforceable in         
accordance with the "United Nations Convention on the Recognition and           
Enforcement of Foreign Arbitral Awards (1958)." Therefore, as a practical       
matter, although no assurances can be given, the Chinese legal infrastructure,  
while different in operation from its United States counterpart, should not     
present any significant impediment to the operation of Foreign Invested         
Enterprises.                                                                    

ECONOMIC REFORM ISSUES                                          

    Although the majority of productive assets in China are owned by the
Chinese government, in the past several years the government has implemented    
economic reform measures that emphasize decentralization and encourage private  
economic activity. Because these economic reform measures may be inconsistent or
ineffectual, there are no assurances that:                                      

-    We will be able to capitalize on economic reforms;                         

-    The Chinese government will continue its pursuit of economic reform        
policies;                                                             

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-    The economic policies, even if pursued, will be successful;                

-    Economic policies will not be significantly altered from time to time; and 

-    Business operations in China will not become subject to the risk of        
nationalization.                                                      

      Negative impact upon economic reform policies or nationalization could
result in a total investment loss in our common stock.                          

     Since 1979, the Chinese government has reformed its economic systems.
Because many reforms are unprecedented or experimental, they are expected to be 
refined and improved. Other political, economic and social factors, such as     
political changes, changes in the rates of economic growth, unemployment or     
inflation, or in the disparities in per capita wealth between regions within    
China, could lead to further readjustment of the reform measures. This refining 
and readjustment process may negatively affect our operations.                  

     Over the last few years, China's economy has registered a high growth
rate. Recently, there have been indications that rates of inflation have        
increased. In response, the Chinese government recently has taken measures to   
curb this excessively expansive economy. These measures have included           
devaluations of the Chinese currency, the Rennin, restrictions on the           
availability of domestic credit, reducing the purchasing capability of certain  
of its customers, and limited re-centralization of the approval process for     
purchases of some foreign products. These austerity measures alone may not      
succeed in slowing down the economy's excessive expansion or control inflation, 
and may result in severe dislocations in the Chinese economy. The Chinese       
government may adopt additional measures to further combat inflation, including 
the establishment of freezes or restraints on certain projects or markets. These
measures may adversely affect our telephone communications manufacturing        
company's operations.                                                           

      To date reforms to China's economic system have not adversely impacted
our operations and are not expected to adversely impact operations in the       
foreseeable future; however, there can be no assurance that the reforms to      
China's economic system will continue or that we will not be adversely affected 
by changes in China's political, economic, and social conditions and by changes 
in policies of the Chinese government, such as changes in laws and regulations, 
measures which may be introduced to control inflation, changes in the rate or   
method of taxation, imposition of additional restrictions on currency conversion
and remittance abroad, and reduction in tariff protection and other import      
restrictions.                                                                   

CHINA'S ACCESSION INTO THE WTO                                  

     On November 11, 2001, China signed an agreement to become a member of
the World Trade Organization sometimes referred to as the WTO, the international
body that sets most trade rules, further integrating China into the global      
economy and significantly reducing the barriers to international commerce.      
China's membership in the WTO was effective on December 11, 2001. China has     
agreed upon its accession to the WTO to reduce tariffs and non-tariff barriers, 
remove investment restrictions, provide trading and distribution rights for     
foreign firms, and open various service sectors to foreign competition. China's 
accession to the WTO may favorably affect our business in that reduced market   
barriers and a more transparent investment environment will facilitate increased
investment opportunities in China, while tariff rate reductions and other       
enhancements will enable us to develop better investment strategies and attract 
investment capital. In addition, the WTO's dispute settlement mechanism provides
a credible and effective tool to enforce members' commercial rights. Also, with 
China's entry to the WTO, it is believed that the relevant laws on foreign      
investment in China will be amplified and will follow common practices.         

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information as of December 31,
2001 with respect to (i) the beneficial ownership of our common stock by each   
beneficial owner of more than 5% of the outstanding shares of common stock of   
we, each director, each executive officer and all of our executive officers and 
directors as a group, (ii) the number of shares of common stock owned by each   
such person and group and (iii) the percent of our common stock so owned. The   
percentages are based on shares outstanding.                                    

        As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Exchange Act as consisting of sole  
or shared voting power (including the power to vote or direct the vote) and/or  
sole or shared investment power (including the power to dispose of or direct the
disposition of) with respect to the security through any contract, arrangement, 
understanding, relationship or otherwise, subject to community property laws    
where applicable. Each person has sole voting and investment power with respect 
to the shares of common stock, except as otherwise indicated. Beneficial        
ownership consists of a direct interest in the shares of common stock, except as
otherwise indicated.                                                            

                                                        [Enlarge/Download Table]

                                       Number of Shares of Common  Percentage of Outstanding Common 
Name and Address of Beneficial Owner    Stock Beneficially Owned      Stock Beneficially Owned      
------------------------------------   --------------------------  ---------------------------------
                                                                                                    
Hearty Holdings Limited                    10,115,435                       39.95%                  
Room 2105, 21/F, West Tower, Shun Tak                                                               
Center 200 Connaught Road Central                                                                   
Sheung Wan, Hong Kong                                                                               

Lung Po Ching (1)                         10,115,435                       39.95%                   
Room 2105, 21/F, West Tower, Shun Tak                                                               
Center 200 Connaught Road Central,                                                                  
Sheung Wan, Hong Kong                                                                               

Well Gain Investments Limited              1,751,950                        6.92%                   
Room 2103-2104                                                                                      
21/F Treasure Centre                                                                                
42 Hung To Road                                                                                     
Kwun Tong, Hong Kong                                                                                

NJI No. 2 Investment Fund                  4,981,085                       19.67%                   
6 Battery Road, No. 42-01                                                                           
Singapore 049909                                                                                    

All Officers and Directors as a group     10,115,435                       39.95%                   
 (4 persons)                                                                                        


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

(1)  Mr. Ching is the beneficial owner of these shares through his 100%         
ownership of Hearty Holdings Limited.                                 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

The following discussion should be read in conjunction with our 
Consolidated Financial Statements and other financial information included      
elsewhere herein. The financial statements of we are prepared in conformity with
generally accepted accounting principles of the United States.                  

RESULTS OF OPERATIONS                                                           

       The following table shows the selected unaudited condensed consolidated
income statement data of the Company and its subsidiaries for the three months  
and nine months ended September 30, 2001 and                                    

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2000. The data should be read in conjunction with our unaudited Condensed       
Consolidated Financial Statements and related notes thereto.                    

      The discussions below are presented in our primary operating currency,
which is the Renminbi Yuan or "RMB". For information purposes only, the amounts 
may be translated into US dollars at an exchange rate of $1.00 = RMB8.28, which 
represents the approximate single rate of exchange as quoted by the People's    
Bank of China on September 30, 2001. No representation is made that RMB amounts 
could have been, or could be, converted into U.S. dollars at that rate or any   
other rate.                                                                     

                                                        [Enlarge/Download Table]

 (Amounts in thousands)           THREE MONTHS ENDED SEPTEMBER 30,  NINE MONTHS ENDED SEPTEMBER 30,
                                         2001              2000             2001           2000    
                                          RMB               RMB              RMB            RMB    
                                   ----------        ----------       ----------      ----------   
                                                                                                   
Sales                                 111,073           156,664          303,187         415,472   
Cost of sales                        (108,383)         (162,283)        (274,903)       (370,975)  
                                   ----------        ----------       ----------      ----------   
Gross profit/(loss)                     2,690            (5,619)          28,284          44,497   
Gross profit margin (%)                   2.4              (3.6)             9.3            10.7   

Income/(loss) before income taxes      (4,164)           (8,660)          10,282          25,698   
Income taxes                              493               602           (1,218)         (2,129)  
                                   ----------        ----------       ----------      ----------   
Income/(loss)before minority                                                                       
 interests                             (3,671)           (8,058)           9,064          23,569   
Minority interests                        665             2,227           (4,062)         (7,879)  
                                   ----------        ----------       ----------      ----------   
Net income/(loss)                      (3,006)           (5,831)           5,002          15,690   
                                       ======            ======           ======          ======   


SALES AND GROSS PROFIT MARGIN                                                   

     Total sales for the nine months ended September 30, 2001 decreased by
RMB112.3 million (US$13.6 million) or 27.0% to RMB303.2 million (US$36.6        
million), compared to RMB415.5 million (US$50.2 million) for corresponding      
period in 2000. The decrease was mainly due to the decrease in selling price of 
polyester staple fiber and polyester filament by approximately 12% and 21%,     
respectively, because of the unfavorable market condition during the current    
period. In addition, sales volume decreased by approximately 8% in 2001 compared
to that of the corresponding period in 2000. Gross profit margin decreased from 
10.7% for the nine months ended September 30, 2000 to 9.3% for the corresponding
period in 2001. The decrease in gross profit margin was mainly attributable to a
decrease in the selling price of polyester staple fiber and polyester filament, 
which was partly offset by the decrease in purchase price of the raw materials. 

      Total sales for the third quarter of 2001 decreased by RMB45.6 million
(US$5.5 million) or 29.1% to RMB111.1 million (US$13.4 million), compared to    
RMB156.7 million (US$18.9 million) for corresponding period in 2000. The        
decrease was mainly due to the reasons described above. In addition, sales      
volume decreased by approximately 4% in the third quarter of 2001 compared to   
that of the corresponding period in 2000. Gross profit margin for the third     
quarter of 2000 was (3.6%) compared to 2.4% for the corresponding period in     
2001.                                                                           

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                    

Selling and administrative expenses decreased by RMB1.6 million 
(US$193,000) or 10.7% to RMB13.2 million (US$1.6 million) for the nine months   
ended September 30, 2001 from RMB14.8 million (US$1.8 million) for the          
corresponding period in 2000. The decrease was mainly due to a decrease in      
sales, which was partly offset by an increase in transportation costs. As a     
result of a decline in the polyester fiber market, we have absorbed the full    
transportation costs for the customers since the second half of 2001 instead of 
only partial costs for 2000 so as to attract customers and maintain its         
competitiveness.                                                                

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       Selling and administrative expenses increased by RMB584,000 (US$71,000)
or 13.3% to RMB5.0 million (US$602,000) for the third quarter of 2001 from      
RMB4.4 million (US$531,000) for the corresponding period in 2000.               

FINANCIAL INCOME/(EXPENSE), NET                                                 

     Net financial expense increased by RMB784,000 (US$95,000) or 19.6% to
RMB4.8 million (US$577,000) for the nine months ended September 30, 2001 from   
RMB4.0 million (US$483,000) for the corresponding period in 2000. The increase  
in net financial expense was mainly attributable to the decrease in interest    
income received of RMB1.1 million (US$135,000) on the amount due from           
Heilongjiang Longdi Group Co., Ltd., a 30% interest minority shareholder of     
Harbin Asibao Chemical Fiber Co. Limited ("Asibao"). The decrease in interest   
income was partly offset by the decrease in interest expense on short-term bank 
loans of RMB353, 000 (US$43,000) due to a decrease in average interest rates.   

    Net financial expense for the third quarter of 2001 was RMB1,870,000
(US$226,000) compared to net financial income in RMB1.4 million (US$164,000) for
the third quarter of 2000. The decrease in net financial income was mainly      
attributable to a decrease in interest income on the amount due from            
Heilongjiang Longdi Group Co., Ltd., partly offset by a decrease in interest    
expense as described above.                                                     

INCOME TAXES                                                                    

       Through Far Beyond, we own 70% interest in Asibao, which is governed by
the Income Tax Laws of the PRC. Being a Sino-foreign joint venture established  
in the Harbin Economic Development Zone and being awarded the status of         
"advanced technology enterprise", Asibao was exempted from income taxes for a   
period of three years commencing from its first profitable year and is entitled 
to a preferential income tax rate of 15% for the remaining years of the Joint   
Venture with a 50% reduction for three consecutive years commencing from its    
fourth profitable year. The years 2000 and 2001 are the fifth and sixth         
profitable years, respectively, and the income taxes are provided accordingly.  
The decrease in income taxes was due to the decrease of income/loss of Asibao   
for the nine months and three months ended September 30, 2001, respectively,    
compared to those of the corresponding periods in 2000.                         

MINORITY INTEREST                                                               

  Minority interest for the nine months ended September 30, 2001 was
RMB4.1 million (US$491,000) compared to RMB7.9 million (US$952,000) for the     
corresponding period in 2000. Minority interest for the third quarter of 2001   
was (RMB655, 000) (US$80,000) compared to RMB2.2 million (US$269,000) for the   
corresponding period in 2000. The decrease in minority interest was mainly      
attributable to a decrease in net income/(loss) of Asibao, one of our           
subsidiaries, in which HLG holds a 30% interest.                                

LIQUIDITY AND CAPITAL RESOURCES                                                 

Our primary liquidity needs are to fund inventories and trade   
receivables and to expand business operations. We have financed our working     
capital requirements primarily through internally generated cash and bank       
borrowings.                                                                     

     During the current period, through Asibao, incurred an additional net
RMB50.7 million (US$6.1 million) in short-term bank borrowings to be used to    
support our working capital needs, and made an additional advance of RMB82.9    
million (US$10 million) to the minority joint venture partner. We had a working 
capital surplus of approximately RMB228.9 million (US$27.6 million) as of       
September 30,                                                                   

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2001, compared to that of approximately RMB136.8 million (US$16.5 million) as of
December 31, 2000. Net cash provided by operating activities for the nine months
ended September 30, 2001 was approximately RMB40.6 million (US$4.9 million), as 
compared to RMB90.2 million (US$10.9 million) for the corresponding period in   
2000. Net cash flows from our operating activities are attributable to our      
income and changes in operating assets and liabilities.                         

     There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 2000. We believe that        
internally generated funds will be sufficient to satisfy its anticipated working
capital needs for at least the next twelve months.                              

RESULTS OF OPERATIONS                                                           

    The following table shows our selected consolidated income statement
data and our subsidiaries for the three fiscal years ended December 31, 1998,   
1999 and 2000. The data should be read in conjunction with, and qualified in    
their entirety by reference to our Consolidated Financial Statements and related
Notes thereto and other financial information included elsewhere therein:       

                                                                [Download Table]


Year Ended December 31,                1998       1999       2000        2000  

(In thousands)                         (RMB)      (RMB)      (RMB)       (US)  
                                     --------   --------   --------   -------- 
                                                                               
Sales                                 460,448    452,218    538,493     65,093 

Cost of Sales                        (375,559)  (364,174)  (459,048)   (55,490)
                                     --------   --------   --------   -------- 

Gross Profit                           84,889     88,044     79,445      9,603 

Gross Profit Margin                      18.4%      19.5%      14.8%      14.8%

Other Income                             --          913       --         --   

Selling and administrative expenses   (19,271)   (29,863)   (19,598)    (2,369)

Financial income/(expenses), net      (10,694)    (4,978)    (8,468)    (1,023)
                                     --------   --------   --------   -------- 

Income before income taxes             54,924     54,116     51,379      6,211 

Income taxes                           (4,568)      (268)    (4,377)      (529)
                                     --------   --------   --------   -------- 

Income before minority interests       50,356     53,848     47,002      5,682 

Minority interests                    (16,502)   (17,301)   (15,951)    (1,928)
                                     --------   --------   --------   -------- 

Net income                             33,854     36,547     31,051      3,754 


YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 SALES AND 
GROSS PROFIT MARGIN                                                             

       Total sales for the year ended December 31, 2000, increased by RMB 86.3
million (US $10.4 million) or 19.1% to RMB 538.5 million (US $65.1 million),    
compared to RMB 452.2 million (US $54.7 million) for the corresponding period in
1999. The total sales volume for the year ended December 31, 2000 increased by  
2.7% compared to that of the corresponding period in 1999. The selling prices of
polyester products for the year ended December 31, 2000 increased by 2% to 10%  
compared to that of the corresponding period in 1999. As a series of            
anti-smuggling campaign and expansionary fiscal policies were launched by the   
PRC government in 1999, the over-supply of polyester products in the domestic   
market was considerably reduced. This has resulted in a marginal increase in    
both the selling prices and sales volume of polyester fibers product. Moreover, 
the cost of petroleum, being the major raw material of all polyester products,  
increased during the year, which has resulted in the increase in selling prices 
of polyester fiber products. The increase in sales were also attributable to the
increase in sales of polyester chips and sub-standard polyester products to     
outsiders and related companies at cost.                                        

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       The decrease in gross profit margin from 19.5% in 1999 to 14.8% in 2000
was mainly due to the increase in the cost of polyester chips by 28.5% which    
outweigh the marginal increase in selling prices of polyester fiber products.   

OTHER INCOME                                                                    

  Other income for the year ended December 31, 1999 represented cash
dividend income received from the investment in the Heilongjiang Longdi Limited 
Liability Company.                                                              

SELLING AND ADMINISTRATIVE EXPENSES                                             

     Selling and administrative expenses decreased by RMB 10.3 million (US
$1.2 million) or 34.4% to RMB 19.6 million (US $2.4 million) in 2000 from RMB   
29.9 million (US $3.6 million) in 1999. The following events attributed to the  
overall decrease in selling and administrative expenses:                        

       (a) Asibao made provision of RMB 12.1 million (US $1.5 million) in 1999
(2000: nil) on certain trade receivables recovery of which was considered by    
management to be doubtful.                                                      

      (b) There was a decrease in administrative expenses by RMB 2.4 million
(US $290,000). Asibao incurred professional and consultancy fee for tax filing  
in the PRC and settled claims for damages due to sub-standard quality of product
sold of approximately RMB 1.1 million (US $133,000) in 1999 (2000: nil). There  
was an overall decrease in salaries, office expenses, travelling and            
entertainment expenses as a tighter cost control system was applied in 2000.    

       (c) There was an increase in commission expenses by RMB 1.5 million (US
$181,000) as more salesperson met the sales budget during the year.             

       (d) There was an increase in transportation expenses by RMB 1.3 million
(US $157,000) as there was no discount offered by PRC railway authorities during
the year while there was a charge reduction of 25-30% in 1999.                  

FINANCIAL INCOME/(EXPENSES), NET                                                

      Net financial expenses increased from RMB 5.0 million (US $602,000) in
1999 to RMB 8.5 million (US $1.0 million) in 2000. The increase was mainly due  
to the decrease in interest income on the amount due from Longdi from RMB 8.4   
million (US $1.0 million) in 1999 to RMB 2.8 million (US $338,000) in 2000.     

INCOME TAXES                                                                    

       It is management's intention to reinvest all the income attributable to
us earned by its operations outside the United States of America (the "USA").   
Accordingly, no USA corporate income taxes have been provided in these financial
statements.                                                                     

Asibao is governed by the Income Tax Laws of the PRC. Being a   
Sino-foreign joint venture established in the Harbin Economic Development Zone  
and being awarded the status of "advanced technology enterprise", Asibao is     
exempted from income taxes for a period of two years commencing from its first  
profitable year and is entitled to a preferential income tax rate of 15% for the
remaining years of the Joint Venture with a 50% reduction for 3 consecutive     
years commencing from its third profitable year. 1998 was the third profitable  
year and the income taxes were provided accordingly. Asibao's net income        
originated in the PRC.                                                          

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    Under the current British Virgin Islands' Law, dividends and capital
gains arising from our investments in the BVI are not subject to income taxes.  

     During 1999, Asibao was successful in a claim to the local tax bureau
for an additional tax-free holiday for 1998, its third profitable year.         
Accordingly, the preferential income tax rate of 15% for the remaining years of 
the Joint Venture with a 50% reduction for 3 consecutive years commenced from   
1999, its fourth profitable year, under certain tax regulations for the advanced
technology enterprises issued by the local government. Accordingly, the income  
taxes provided in 1998 were reversed in 1999. 2000 was the fifth profitable year
and the income taxes were provided accordingly.                                 

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998           

SALES AND GROSS PROFIT MARGIN                                                   

      Total sales for the year ended December 31, 1999, decreased by RMB 8.2
million (US $992,000) or 1.8% to RMB 452.2 million (US $54.7 million), compared 
to RMB 460.4 million (US $55.7 million) for the corresponding period in 1998.   
The total sales volume for the year ended December 31, 1999 decreased by 3.4%   
compared to that of the corresponding period in 1998. As a series of            
anti-smuggling campaign and expansionary fiscal policies were launched by the   
PRC government during the year, the over-supply of polyester products in the    
domestic market was considerably reduced. This has resulted in a marginal       
increase in both the selling prices and sales volume of polyester fibers        
product, with the exception of the staple fibers. Marginal decreases in selling 
prices and sales volume of staple fibers were mainly due to the decreasing price
of cotton during 1999, and the demand and selling price of staple fibers were   
vulnerable to the selling price of cotton. As the sales of staple fibers        
accounted for 57% of total sales in 1999, the decreasing sales of staple fibers 
more than offset the increasing sales of other polyester fiber products and     
accounted for the overall decrease in sales.                                    

       The increase in gross profit margin from 18.4% in 1998 to 19.5% in 1999
was mainly due to the slightly increase in selling prices of polyester fiber    
products (except for staple fiber).                                             

OTHER INCOME                                                                    

  Other income for the year ended December 31, 1999 represented cash
dividend income received from the investment in the Heilongjiang Longdi Limited 
Liability Company.                                                              

SELLING AND ADMINISTRATIVE EXPENSES                                             

     Selling and administrative expenses increased by RMB 10.6 million (US
$1.3 million) or 55.0% to RMB 29.9 million (US $3.6 million) in 1999 from RMB   
19.3 million (US $2.3 million) in 1998. The following events occurred in 1999   
that attributed to the overall increase in selling and administrative expenses: 

       (a) Asibao made provision of RMB 12.1 million (US $1.5 million) in 1999
(1998: nil) on certain trade receivables recovery of which was considered by    
management to be doubtful.                                                      

      (b) Asibao incurred professional and consultancy fee for tax filing in
the PRC and settled claims for damages due to sub-standard quality of product   
sold of approximately RMB 1.1 million (US $133,000) (1998:nil).                 

      (c) There was a decrease in transportation expenses by RMB 2.6 million
(US $314,000) as a result of a 25-30% charge reduction by PRC railway           
authorities during 1999.                                                        

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FINANCIAL INCOME/EXPENSES, NET                                                  

    Net financial expenses decreased by RMB 5.7 million (US $691,000) or
53.5% to RMB 5.0 million (US $602,000) in 1999 from RMB 10.7 million (US $1.3   
million) in 1998. The decrease was primarily due to the decrease in average bank
borrowing rate from 8.7% in 1998 to 7.6% in 1999 and the increase in interest   
income on the amount due from Longdi.                                           

EXECUTIVE COMPENSATION

        The following table sets forth the compensation paid during fiscal years
ended December 31, 1999, 2000 and 2001 to our Chief Executive Officer. No       
executive officer received annual compensation in excess of $50,000 per annum.  

                                                        [Enlarge/Download Table]

                                                      SUMMARY COMPENSATION TABLE                                                   
-----------------------------------------------------------------------------------------------------------------------------------

                              Annual Compensation                                                     Long-Term Compensation       
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                  Awards            Payouts        
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                Restricted      Securities                         
                                                                                 Stock         Underlying      LTIP     All Other  
Name and Principal                                             Other Annual     Award(s)       Options/SARs   Payouts  Compensation
Position                Year      Salary ($)    Bonus ($)    Compensation ($)     ($)              (#)           ($)       ($)     
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                                                   
Lung Po Ching, CEO      2001      154,000            -               -             -                -           -          -       
---------------------------------------------------------------------------------------------------------------------------------- 

Lung Po Ching, CEO      2000       90,000            -               -            -                 -           -          -       
-----------------------------------------------------------------------------------------------------------------------------------

Lung Po Ching, CEO      1999            -            -                -            -                -           -         -        
-----------------------------------------------------------------------------------------------------------------------------------


COMPENSATION AGREEMENTS                                                         

        On June 1, 2000, we entered into a Service Agreement with Lung Po Ching.
In accordance with the terms of the Service Agreement, Mr. Ching was employed as
our Chief Executive Officer to perform such duties as the Board of Directors    
shall from time to time determine. Mr. Ching shall receive a base salary of     
HK$1,200,000 (US$154,000) annually, which base salary shall be adjusted on each 
anniversary of the Service Agreement to reflect a change in the applicable      
consumer price index or such greater amount as the Company's Board of Directors 
may determine. The Service Agreement has a term of two years and shall be       
automatically renewed unless earlier terminated as provided therein.            

      On June 1, 2000, the Company entered into an Employment Agreement with
Wai On Wan. In accordance with the terms of the Employment Agreement, Mr. Wan   
was employed as our Corporate Secretary and to perform such duties as the Board 
of Directors shall from time to time determine. Mr. Wan shall receive a base    
salary of HK $480,000 (US$62,000) annually, which base salary shall be adjusted 
on each anniversary of the Employment Agreement to reflect a change in the      
applicable consumer price index or such greater amount as the Board of Directors
may determine. The Employment Agreement has a term of two years and shall be    
automatically renewed unless earlier terminated as provided therein.            

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BOARD OF DIRECTORS                                                              

  Directors are reimbursed for travel and other expenses relating to
meetings of the Board of Directors and its committees.                          

STOCK OPTION PLAN                                                               

 No stock options or stock appreciation rights were granted to any
directors or officers of we during 2000 or 2001.                                

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Pursuant to a supplementary stockholders' agreement dated May 18, 1998
between China Construction Holdings Limited and the Chinese joint venture       
partner of Hangzhou Zhongche (the "Chinese Partner"), the Chinese Partner agreed
to pay China Construction Holdings Limited a fixed annual income of RMB         
15,300,000 (the "Guaranteed Distribution") from January 1, 1998 through the     
expiration of the joint venture period of Hangzhou Zhongche. Any surplus income 
generated from the Hangzhou Toll Road in excess of the amount of the Guaranteed 
Distribution would belong to the Chinese Partner and any shortfall would be made
up by the Chinese Partner. In addition, as part of the Guaranteed Distribution  
Agreement, an amount of RMB 178,500,000 would be paid to China Construction     
Holdings Limited upon the expiration of the joint venture period of Hangzhou    
Zhongche and the assets of the joint venture would be surrendered to the Chinese
Partner at no further consideration. This Guaranteed Distribution Agreement was 
subject to approvals by the authorities which originally approved the set up of 
the joint venture. To date, the approvals have not been obtained despite efforts
by the management of the joint venture and we.                                  

       On April 14, 1998, Horler, a wholly-owned subsidiary of China Strategic
Holdings Limited, a major shareholder of we, agreed to reduce the interest rate 
of the Second Horler Note from 9% to 5% per year for the year ended December 31,
1997. In addition, Horler agreed that after December 31, 1998, no principal     
repayment of the second Horler Note would be demanded until we were financially 
capable of doing so. However, following January 1, 1998, the second Horler Note 
continued to bear interest at 9% per year.                                      

        On July 27, 1998, we entered into a Deed of Variation with Harlequin and
New Regal pursuant to which Harlequin agreed and undertook to assume all of the 
obligations and liabilities of New Regal under the New Regal Note in            
consideration of our agreement to release New Regal from all obligations        
relating to the New Note. All other terms of the New Regal Note remained the    
same. At that time, Richard N. Gray was a director of we. Mr. Gray was also a   
director of GHL (Senior ) Pension Fund, of which Harlequin was a wholly-owned   
subsidiary.                                                                     

  During 1998, New Regal and we agreed on a revised payment schedule
relating to the Harlequin Note. Under the revised payment schedule, the payment 
of several monthly installments by New Regal in 1998 and 1999 was suspended and 
the outstanding principal balance was revised to be settled in sixty (60) equal 
monthly installments commencing March 1999. The Harlequin Note continued to bear
interest at nine percent (9%) per year during the period of payment suspension  
in 1998 and 1999 and thereafter.                                                

 We paid to China Strategic Holdings Limited management fees of US
$155,000 per year for 1997 and 1998 and US $38,000 during the three months ended
March 31, 1999 for the office space and administrative support it shared with   
China Strategic Holdings Limited.                                               

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   Hangzhou Zhongche guaranteed bank borrowing of a company related to
China Strategic Holdings Limited in the amount of RMB 56 million and RMB 93     
million as of December 31, 1997 and 1998, respectively.                         

China Strategic Holdings Limited committed to provide continuing
financial support to us to the extent of China Strategic Holdings interest in we
for the period ending on December 31, 1999.                                     

  On January 22, 2000, pursuant to the an agreement by and among us,
Horler, Far Beyond and the Far Beyond stockholders, Far Beyond stockholders     
transferred all of the issued and outstanding shares of the capital stock of Far
Beyond to us in exchange for 8,757,951 shares of our common stock, representing 
approximately 88% of our outstanding shares of the common stock.                

     Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to the Disposal Agreement between us and Horler,
we transferred to Horler the entire share capital of Westronix Limited in full  
and final satisfaction of the Second Horler Note. Also, concurrently with and as
a condition of such closing, pursuant to the Assignment Agreement between us and
China Strategic Holdings Limited, we assigned to China Strategic Holdings       
Limited, in settlement of the outstanding indebtedness we owed to China         
Strategic Holdings Limited, the New Regal Note and the Harlequin Note.          

 DELAWARE ANTI-TAKEOVER PROVISIONS

   The anti-takeover provisions of the Delaware General Corporate Laws
prohibits us from merging with or selling Asia Fiber or more than 5% of our     
assets or stock to any shareholder who owns or owned more than 10% of any stock 
or any entity related to a 10% shareholder for three years after the date on    
which the shareholder acquired the Asia Fiber shares, unless the transaction is 
approved by Asia Fiber's Board of Directors. The provisions also prohibit us    
from completing any of the transactions described in the preceding sentence with
a 10% shareholder who has held the shares more than three years and its related 
entities unless the transaction is approved by our Board of Directors or a      
majority of our shares, other than shares owned by that 10% shareholder or any  
related entity. These provisions could delay, defer or prevent a change in      
control of Asia Fiber.                                                          

 LEGAL PROCEEDINGS

      We are not a party to any pending or to the best of its knowledge, any
threatened legal proceedings. No director, officer or affiliate of the company, 
or owner of record or of more than five percent (5%) of the securities of the   
company, or any associate of any such director, officer or security holder is a 
party adverse to the company.                                                   

 EXPERTS

     Our consolidated financial statements have been audited and reviewed,
respectively, by Ernst & Young LLP independent certified accountants. The       
report, a copy of which is attached to this prospectus, and is included in this 
prospectus in reliance upon authority of Ernst & Young.                         

 LEGAL MATTERS

 Loeb & Loeb, LLP, Los Angeles is passing upon the validity of the
securities offered hereby for us.                                               

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

CONTENTS                                                                        

                                                                [Download Table]

                                                              Pages 
                                                              ----- 
                                                                    
Report of Independent Auditors                                 F-1  

Consolidated Balance Sheets                                    F-2  

Consolidated Statements of Income                              F-3  

Consolidated Statements of Changes in Shareholders' Equity     F-4  

Consolidated Statements of Cash Flows                          F-5  

Notes to Consolidated Financial Statements                  F6 - F21

REPORT OF INDEPENDENT AUDITORS                                                  

To the Board of Directors and Shareholders Asia Fiber Holdings Limited          

We have audited the accompanying consolidated balance sheets of Asia Fiber      
Holdings Limited (the Company) and its subsidiaries (collectively the Group) as 
of December 31, 1999 and 2000, and the related consolidated statements of       
income, cash flows and changes in shareholders' equity for each of the three    
years in the period ended December 31, 2000. These financial statements are the 
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audits.                      

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and       
perform the audit to obtain reasonable assurance about whether the financial    
statements are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements. An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall     
financial statement presentation. We believe that our audits provide a          
reasonable basis for our opinion.                                               

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the consolidated financial position of the    
Group as of December 31, 1999 and 2000, and the consolidated results of its     
operations and its cash flows for each of the three years in the period ended   
December 31, 2000, in conformity with accounting principles generally accepted  
in the United States of America.                                                

/s/ Ernst & Young                                                               

Hong Kong                                                                       
January 31, 2001, except for                                                    
note 1, as to which the date is                                                 
March 14, 2001                                                                  

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
CONSOLIDATED BALANCE SHEETS                                                     
AS OF DECEMBER 31, 1999 AND 2000                                                
(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]

                                                                 1999     2000     2000  
                                                         Notes    RMB      RMB      US$  
                                                         -----  -------  -------  -------
                                                                                         
ASSETS                                                                                   

CURRENT ASSETS                                                                           

Cash and cash equivalents                                         8,427   11,403    1,378
Trade receivables, less provision for doubtful debts                                     
    of RMB12,128 in 1999 and 2000                          6     56,868   58,071    7,020
Bills receivable                                                  1,300    6,889      832
Other receivables and prepayments                                   561      285       34
Inventories                                                7     26,789   28,367    3,429
Amount due from a minority joint venture partner          12    261,070  359,762   43,488
Amounts due from related companies                        12     29,161    5,184      627
                                                                -------  -------  -------

TOTAL CURRENT ASSETS                                            384,176  469,961   56,808

FIXED ASSETS                                               8    133,642  120,652   14,584

INVESTMENT                                                 9     13,390   13,995    1,692

DEFERRED INCOME TAXES                                      5      2,042    1,842      223
                                                                -------  -------  -------

TOTAL ASSETS                                                    533,250  606,450   73,307
                                                                =======  =======  =======

LIABILITIES AND SHAREHOLDERS' EQUITY                                                     

CURRENT LIABILITIES                                                                      
Bank loans                                                10    177,880  181,600   21,959
Accounts payable                                                  4,315      455       55
Deposits from customers                                          44,280   16,183    1,956
Accrued liabilities and other payables                           29,677   21,389    2,585
Amount due to a director                                  12      5,734    6,503      786
Amounts due to related companies                          12     12,098   72,481    8,761
Income taxes payable                                                536      827      100
Dividend payable                                                 19,961   33,717    4,076
                                                                -------  -------  -------

TOTAL CURRENT LIABILITIES                                       294,481  333,155   40,271

MINORITY INTERESTS                                               21,988   24,183    2,924
                                                                -------  -------  -------

TOTAL LIABILITIES AND MINORITY INTERESTS                        316,469  357,338   43,195
                                                                -------  -------  -------

COMMITMENTS AND CONTINGENCIES                             15                             

SHAREHOLDERS' EQUITY                                                                     
Preferred stock, par value of US$0.01 each; Authorized:                                  
        10,000,000 (1999: 10,000,000) shares                                             
Common stock, par value of US$0.01 each                                                  
    Authorized:                                                                          
        75,000,000 (1999: 2,750,000) shares                                              
    Issued and fully paid:                                                               
        24,881,319 (1999: 21,895,655) shares              11      1,811    2,057      244
Additional paid-in capital                                11     68,742   69,738    8,480
Reserves                                                  14     15,845   19,451    2,351
Retained earnings                                               130,002  157,447   19,032
Accumulated other comprehensive income                              381      419       50
                                                                -------  -------  -------

TOTAL SHAREHOLDERS' EQUITY                                      216,781  249,112   30,112
                                                                -------  -------  -------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                      533,250  606,450   73,307
                                                                =======  =======  =======

The accompanying notes form an integral part of these consolidated financial    
statements.                                                                     

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
CONSOLIDATED STATEMENTS OF INCOME                                               
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000                            
(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]

                                                         Year ended     Year ended     Year ended     Year ended  
                                                        December 31,   December 31,   December 31,   December 31, 
                                                            1998           1999           2000           2000     
                                                        ------------   ------------   -------------  -------------
                                             Notes           RMB            RMB            RMB            US$     
                                          ------------  ------------   ------------   -------------  -------------
                                                                                                                  
SALES, including finished goods sold                                                                              
    to related parties of RMB10,361,                                                                              
    RMB17,912 and RMB64,017 in 1998,                                                                              
    1999 and 2000, respectively                              460,448        452,218        538,493         65,093 

COST OF SALES, including raw                                                                                      
     materials purchased from                                                                                     
     related parties of                                                                                           
     RMB275,041, RMB247,156 and                                                                                   
     RMB379,979; finished goods                                                                                   
     purchased from related parties                                                                               
     of RMB nil, RMB18,344 and                                                                                    
     RMB14,308; utility charges paid                                                                              
     to related parties of                                                                                        
     RMB23,941, RMB26,409 and                                                                                     
     RMB27,431; rental expenses for                                                                               
     leasing of plant and machinery                                                                               
     from related parties of                                                                                      
     RMB1,004, RMB1,004 and RMB1,004                                                                              
     in 1998, 1999 and 2000, respectively                   (375,559)      (364,174)      (475,816)       (57,516)
                                                           ---------      ---------      ---------      --------- 

GROSS PROFIT                                                  84,889         88,044         62,677          7,577 

OTHER INCOME, NET, including                                                                                      
     dividend income of RMB nil,                                                                                  
     RMB1,030 and RMB nil                                                                                         
     from an associate company of                                                                                 
     the Company's minority                                                                                       
     shareholders in                                                                                              
     1998, 1999 and 2000, respectively                             -            913              -              - 

SELLING AND ADMINISTRATIVE EXPENSES                          (19,271)       (17,735)       (19,598)        (2,369)

PROVISION FOR DOUBTFUL DEBTS                                       -        (12,128)             -              - 

FINANCIAL INCOME/(EXPENSES), NET, including                                                                       
     interest income from related                                                                                 
     party of RMB5,242, RMB8,360 and                                                                              
     RMB19,583 in 1998, 1999 and 2000,                                                                            
     respectively                                  4         (10,694)        (4,978)         8,300          1,003 
                                                           ---------      ---------      ---------      --------- 

INCOME BEFORE INCOME TAXES                                    54,924         54,116         51,379          6,211 

INCOME TAXES                                       5          (4,568)          (268)        (4,377)          (529)
                                                           ---------      ---------      ---------      --------- 

INCOME BEFORE MINORITY INTERESTS                              50,356         53,848         47,002          5,682 

MINORITY INTERESTS                                           (16,502)       (17,301)       (15,951)        (1,928)
                                                           ---------      ---------      ---------      --------- 

NET INCOME                                                    33,854         36,547         31,051          3,754 
                                                           =========      =========      =========      ========= 

EARNINGS PER SHARE                                                                                                
     Basic and Diluted                           3(k)           1.55           1.67           1.26           0.15 
                                                           =========      =========      =========      ========= 

The accompanying notes form an integral part of these consolidated financial    
statements.                                                                     

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY                      
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000                            
(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]

                                                                                                Accumulated            
                                                            Additional                            other                
                                                   Share     paid-in                Retained   comprehensive           
                                        Notes     capital    capital     Reserves   earnings      income        Total  
                                      ---------  ---------  ----------  ---------  ---------   -------------  ---------
                                                    RMB        RMB         RMB        RMB          RMB           RMB   
                                      ---------  ---------  ---------   ---------  ---------     ---------    ---------
                                                                                                                       
Balance at January 1, 1998                           1,811     64,771       7,866     67,580           356      142,384
Net income and comprehensive income                     --         --          --     33,854           --        33,854
Transfer to/(from) reserves                  14         --         --       3,771     (3,771)          --            --
                                                 ---------  ---------   ---------  ---------     --------     ---------
Balance at December 31, 1998                         1,811     64,771      11,637     97,663          356       176,238
Gain on sales of fixed assets to the                                                                                   
    Company's minority shareholder                                                                                     
    attributable to the Group                           --      3,971          --         --           --         3,971
Net income                                              --         --          --     36,547           --        36,547
Currency translation adjustments                        --         --          --         --           25            25
                                                                                                              ---------
Comprehensive income                                                                                             36,572
                                                                                                              ---------
Transfer to/(from) reserves                  14         --         --       4,208     (4,208)          --           -- 
                                                 ---------  ---------   ---------  ---------     --------     ---------
Balance at December 31, 1999                         1,811     68,742      15,845    130,002          381       216,781
Shares of common stock owned by                                                                                        
    the original shareholders of                                                                                       
    ARHL at the date of Reverse                                                                                        
    Acquisition                                        846        996          --         --           --         1,242
Net income                                              --         --          --     31,051           --        31,051
Currency translation adjustments                        --         --          --         --           38            38
                                                                                                              ---------
Comprehensive income                                                                                                310
                                                                                                              ---------
Transfer to/(from) reserves                  14         --         --       3,606     (3,606)          --           -- 
                                                 ---------  ---------   ---------  ---------     --------     ---------
Balance at December 31, 2000                         2,057     69,738      19,451    138,936          419       249,112
                                                 =========  =========   =========  =========     =========    =========

The accompanying notes form an integral part of these consolidated financial    
statements.                                                                     

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
CONSOLIDATED STATEMENTS OF CASH FLOWS                                           
AS OF DECEMBER 31, 1998, 1999 AND 2000                                          
(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]

                                                          Year ended     Year ended      Year ended     Year ended   
                                                         December 31,   December 31,    December 31,   December 31,  
                                                            1998            1999           2000           2000       
                                                            RMB             RMB            RMB             US$       
                                                         ------------    ------------   ------------    ------------ 
                                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES                                                                                 
    Net income                                                 33,854          36,547         31,051           3,754 
Adjustments to reconcile net income to net                                                                           
    cash provided by operating activities:                                                                           
        Depreciation                                           17,581          17,209         13,567           1,640 
        Minority interests                                     16,502          17,301         15,951           1,928 
Decrease/(increase) in assets:                                                                                       
    Trade receivables                                         (15,560)         18,317         (1,203)           (145)
    Bills receivable                                            4,080           4,099         (5,589)           (676)
    Other receivables and prepayments                             379             170            276              34 
    Inventories                                                13,835          11,822         (1,578)           (191)
    Amount due from related companies                            (332)            332         23,977           2,898 
    Deferred income taxes                                         200             200            200              24 
Increase/(decrease) in liabilities:                                                                                  
    Accounts payable                                           (1,569)          2,419         (3,860)           (467)
    Deposits from customers                                   (11,996)         32,220        (28,097)         (3,396)
    Accrued liabilities and other payables                     10,857             356         (8,288)         (1,002)
    Amount due to a director                                      506           4,566            769              93 
    Amount due to related companies                            (7,718)         (1,641)        46,902           5,673 
    Income taxes payable                                        2,468          (1,932)           291              35 
                                                         ------------    ------------   ------------    ------------ 
Net cash provided by operating activities                      63,087         141,985         84,369          10,202 
                                                         ------------    ------------   ------------    ------------ 
CASH FLOWS USED IN INVESTING ACTIVITIES                                                                              
    Purchases of fixed assets                                    (561)         (1,017)          (577)            (70)
    Proceeds on sales of fixed assets to related party             --          47,218             --              -- 
    Advances to a minority joint venture partner              (19,416)       (166,557)       (98,692)        (11,934)
    Increase in investment                                     (3,900)         (9,490)          (605)            (73)
    Amounts due from related companies                           (283)        (17,954)            --              -- 
    Advances to related companies                                (186)         10,282         13,481           1,630 
                                                         ------------    ------------   ------------    ------------ 
Net cash used in investing activities                         (24,346)       (137,518)       (86,393)        (10,447)
                                                         ------------    ------------   ------------    ------------ 
CASH FLOWS PROVIDED BY/(USED IN)                                                                                     
    FINANCING ACTIVITIES                                                                                             
        New issue shares for Reverse Acquisition                   --              --          1,242             150 
        Proceeds from bank borrowings                         138,800         177,880        181,600          21,952 
        Repayments of bank borrowings                        (139,200)       (179,400)      (177,880)        (21,502)
        Dividend paid to minority joint venture partner       (39,757)             --             --              -- 
                                                         ------------    ------------   ------------    ------------ 
Net cash provided by/(used in) financing activities           (40,157)         (1,520)         4,962             600 
                                                         ------------    ------------   ------------    ------------ 

Exchange differences on cash and cash equivalents                  --              24             38               4 
                                                         ------------    ------------   ------------    ------------ 

Net increase/(decrease) in cash and cash equivalents           (1,416)          2,971          2,976             359 

Cash and cash equivalents, at beginning of year                 6,872           5,456          8,427           1,019 
                                                         ------------    ------------   ------------    ------------ 

Cash and cash equivalents, at end of year                       5,456           8,427         11,403           1,378 
                                                         ============    ============   ============    ============ 

The accompanying notes form an integral part of these consolidated financial    
statements.                                                                     

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

1. ORGANIZATION AND PRINCIPAL ACTIVITIES                                        

Asia Fiber Holdings Limited (the Company) was formerly known as Asia Resources  
Holdings Limited (ARHL) which was incorporated in the State of Delaware, the    
United States of America and the shares of which are listed for trading on the  
United States Over-the-counter Bulletin Board. On March 14, 2000, ARHL changed  
its name to Asia Fiber Holdings Limited.                                        

Far Beyond Investments Limited (FB) was incorporated in the British Virgin      
Islands on March 21, 1995 with limited liability. Its principal activity is to  
conduct activities through its subsidiary and its principal investment is a 70% 
equity interest in Harbin Asibao Chemical Fiber Co., Limited (Asibao or the     
Joint Venture) and the principal activity of Asibao is the manufacture and sale 
of synthetic fiber products.                                                    

Asibao was established as a Sino-foreign joint venture company in the People's  
Republic of China (the PRC) between Heilongjiang Longdi Group Co., Limited (HLG)
(30%) and FB (70%) on October 18, 1995 with a tenure of 30 years from the date  
of the business licence. The tenure can be extended by agreement between the    
joint venture partners with the necessary approval from the relevant government 
agencies. The registered capital of Asibao is US$12 million, contributed by HLG 
as to US$3.60 million (approximately RMB29.88 million) and by FB as to US$8.40  
million (approximately RMB69.72 million).                                       

On January 24, 2000, pursuant to an acquisition agreement dated September 10,   
1999, FB merged with ARHL and became a wholly-owned subsidiary of ARHL. The     
transaction was executed as a reverse acquisition (Reverse Acquisition) whereby 
all of the issued and outstanding shares of common stock of FB were exchanged   
for 88% of the aggregate issued and outstanding common stock of ARHL. For       
accounting purposes, this transaction has been treated as the issuance of the   
stock by FB for the net monetary assets of ARHL, accompanied by a               
recapitalization, with no goodwill or other intangible assets recorded. For     
financial reporting purposes, FB is considered the acquiror and therefore, the  
historical operating results of ARHL are not presented.                         

On March 1, 2001, the Board of directors declared a 2.5 for 1 forward stock     
split of its common shares. The financial statements have been restated to give 
effect to the retroactive recognition to the stock split in prior periods by    
reclassifying from additional paid-in capital to common stock, the par value of 
the additional shares arising from the split. In addition, all references in the
financials statements to number of shares and per share amounts have been       
restated.                                                                       

On March 14, 2001, the authorized capital stock of the Company was decreased    
from 2,760,000,000 shares (consisting of 2,750,000,000 shares of Common Stock   
and 10,000,000 shares of Preferred Stock) to 85,000,000 shares (consisting of   
75,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock).    

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

2. BASIS OF PRESENTATION                                                        

The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (US GAAP). This   
basis of accounting differs from that used in the statutory financial statements
of the Joint Venture in the PRC which are prepared in accordance with the       
accounting principles and the relevant PRC financial regulations.               

The principal adjustment made to the statutory financial statements of the Joint
Venture to conform with US GAAP is the reclassification of the staff bonus and  
welfare reserve appropriation from reserves to a charge to income.              

3. PRINCIPAL ACCOUNTING POLICIES                                                

(a) BASIS OF CONSOLIDATION The consolidated financial statements include the    
accounts of the Company and its subsidiaries. The results of the subsidiary     
acquired during the year are consolidated from its acquisition date. All        
material intercompany balances and transactions have been eliminated on         
consolidation.                                                                  

(b) CASH AND CASH EQUIVALENTS The Group considers cash and cash equivalents to  
include cash on hand and deposits with banks with original terms of maturity of 
three months or less at the date of acquisition.                                

At December 31, 2000, cash and cash equivalents included foreign currency       
deposits equivalent to RMB1,727 (US$208) (1999: RMB4,521 (US$547)).             

(c) INVENTORIES Inventories are stated at the lower of cost or market value.    
Cost is determined on the weighted average cost basis and, in the case of work  
in progress and finished goods, comprised of direct materials, direct labour and
an appropriate portion of overhead.                                             

Market value is based on estimated selling prices less any further costs        
expected to be incurred for completion and disposal.                            

(d) FIXED ASSETS AND DEPRECIATION Fixed assets are stated at cost less          
accumulated depreciation.                                                       

Depreciation is calculated on the straight-line basis to write off the cost less
estimated residual value of each asset over its estimated useful life. The      
estimated useful lives of fixed assets are as follows:                          

Plant, machinery and equipment         8 - 15 years                   
Motor vehicles                         10 years                       

(e)  INVESTMENT                                                                 

The unlisted equity investment, not being a subsidiary or company over which the
Group is in a position to exercise significant influence or to control the      
financing and operating decisions, is accounted for by the cost method.         

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

3. PRINCIPAL ACCOUNTING POLICIES (continued)                                    

(f) REVENUE RECOGNITION Sales represent the invoiced value of goods sold, net of
returns and allowances. Revenue is recognised upon delivery of goods to         
customers.                                                                      

(g) FOREIGN CURRENCY TRANSACTIONS The functional currency of substantially all  
the operations of the Group is Renminbi (RMB), the national currency of the PRC.
The financial statements of operations with functional currency other than RMB  
have been translated into RMB using the respective applicable rates of exchange 
quoted by the People's Bank of China (the Exchange Rates) prevailing at the     
dates of the transactions. Monetary assets and liabilities in US$ and other     
foreign currencies are translated using the applicable Exchange Rates at the    
respective balance sheet dates. The resulting exchange gains or losses are      
reported separately as a component of shareholders' equity.                     

The financial records of Asibao are maintained in RMB. In preparing these       
financial statements, foreign currency transactions and monetary assets and     
liabilities of Asibao denominated in foreign currencies are translated into RMB 
using the applicable Exchange Rates. Monetary assets and liabilities denominated
in foreign currencies are translated into RMB at the applicable Exchange Rates  
at the respective balance sheet dates. The resulting exchange gains or losses   
are credited or charged to the statements of income.                            

Translation of amounts from RMB into US$ for the convenience of the reader has  
been made at the Exchange Rate on December 31, 2000 of US$1.00 = RMB8.27 and,   
accordingly, differs from the underlying foreign currency amounts. No           
representation is made that the RMB amounts could have been, or could be,       
converted into US$ at that rate on December 31, 2000 or at any other date.      

The market risks associated with changes in exchange rates and the restriction  
over the convertibility of RMB into foreign currencies are discussed in note 17 
to the financial statements.                                                    

(h) INCOME TAXES Income taxes are determined under the liability method as      
required by Financial Accounting Standards Board Statement No. 109, Accounting  
for Income Taxes.                                                               

(i) COMPREHENSIVE INCOME The Group adopted Statement of Financial Accounting    
Standards No. 130 Comprehensive Income (SFAS 130) in 1998, which established    
standards for reporting and display of comprehensive income/loss and its        
components. SFAS 130 requires foreign currency translation adjustments to be    
included in other comprehensive income/loss. Accumulated other comprehensive    
income/loss, which consists of the foreign currency translation adjustments     
only, is reported in the consolidated statements of shareholders' equity. The   
adoption of SFAS 130 did not have a material effect on the Group's financial    
position or results of operations.                                              

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

3. PRINCIPAL ACCOUNTING POLICIES (continued)                                    

(j) RETIREMENT BENEFITS The Group has a defined contribution retirement plan for
the staff of Asibao. As stipulated by the regulations of the PRC Government,    
Asibao is required to make an annual contribution to an insurance company       
equivalent to 15% of its annual basic salaries paid to its PRC staff. All staff 
of Asibao are covered under the plan and upon retirement, the retired staff are 
entitled to a monthly pension payment borne by the above-mentioned insurance    
company under the plan. Asibao is not responsible for any payments beyond the   
contributions to the plan as noted above.                                       

The contributions to the retirement plan for the employees are charged to the   
statement of income as services are provided. The amounts of contribution paid  
by Asibao, which were charged to the consolidated statements of income, were    
RMB1,965 for the year ended December 31, 2000 (1999: RMB2,022 and 1998:         
RMB2,019).                                                                      

(k) EARNINGS PER SHARE The calculation of earnings per share is based on the    
weighted average number of ordinary shares of 21,895,655, 21,895,655 and        
24,685,538 outstanding during each of the years ended December 31, 1998, 1999   
and 2000, respectively.                                                         

The weighted average number of shares outstanding have been adjusted for the 2.5
for 1 forward stock split of common shares and as if the shares issued to the   
original shareholders of FB under the Reverse Acquisition had been completed as 
at January 1, 1998.                                                             

(l) USE OF ESTIMATES The preparation of financial statements in conformity with 
US GAAP requires management to make estimates and assumptions that affect the   
amounts reported in the financial statements and accompanying notes. Actual     
results could differ from those estimates.                                      

(m) DIVIDENDS PAYABLE Dividends payable represent dividends declared by Asibao  
payable to HLG, but unpaid at year end.                                         

(n) COMPARATIVE AMOUNTS Certain comparative amounts have been reclassified to   
conform with the current year's presentation.                                   

4. FINANCIAL EXPENSES, NET                                                      

                                                                [Download Table]

                                Year ended      Year ended        Year ended  
                               December 31,     December 31,     December 31, 
                                  1998             1999             2000      
                                  RMB               RMB             RMB       
                               ------------     ------------     ------------ 
                                                                              
Interest expenses                   (16,129)         (13,495)         (11,452)
Interest income                       5,434            8,515           19,752 
Foreign exchange gains, net               1                2               -- 
                               ------------     ------------     ------------ 
                                    (10,694)          (4,978)           8,300 
                               ============     ============     ============ 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

5. INCOME TAXES                                                                 

Pre-tax profit from continuing operations for the years ended December 31 was   
taxed in the following jurisdictions:                                           

                                                                [Download Table]

                   Year ended        Year ended       Year ended  
                   December 31,     December 31,     December 31, 
                      1998              1999             2000     
                      RMB               RMB              RMB      
                   ------------     ------------     ------------ 
                                                                  
PRC                      54,941           54,576           54,187 
Other countries             (17)            (460)         (21,319)
                   ------------     ------------     ------------ 
                         54,924           54,116           32,868 
                   ============     ============     ============ 

The component of the provision for income taxes are as follows:                 

                                                        [Enlarge/Download Table]

                                             Year ended     Year ended     Year ended 
                                            December 31,   December 31,   December 31,
                                                1998           1999          2000     
                                                RMB            RMB           RMB      
                                           ------------   ------------   ------------ 
                                                                                      
Current PRC income taxes, the amount in                                               
    1999 including tax credit of RMB4,368                                             
    received in 1999 but related to 1998          4,368             68          4,177 
Deferred income taxes                               200            200            200 
                                           ------------   ------------   ------------ 
                                                  4,568            268          4,377 
                                           ============   ============   ============ 

It is management's intention to reinvest all the income attributable to the     
Company earned by its operations outside the United States of America (the USA).
Accordingly, no USA federal and state income taxes have been provided in these  
financial statements.                                                           

Asibao is governed by the Income Tax Laws of the PRC. Being a Sino-foreign joint
venture established in the Harbin Economic Development Zone and being awarded   
the status of advanced technology enterprise, Asibao is exempted from income    
taxes for a period of two years commencing from its first profitable year and is
entitled to a preferential income tax rate of 15% for the remaining years of the
Joint Venture with a 50% reduction for 3 consecutive years commencing from its  
third profitable year. The year ended December 31, 1998 was the third profitable
year and the income taxes were provided accordingly. Asibao's net income        
originated in the PRC.                                                          

During 1999, Asibao was successful in a claim to the local tax bureau for an    
additional tax-free holiday for the year ended December 31, 1998, the Company's 
third profitable year. Accordingly, the preferential income tax rate of 15% for 
the remaining years of the Joint Venture with a 50% reduction for 3 consecutive 
years commenced for the year ended December 31, 1999, the Company's fourth      
profitable year, under certain tax regulations for the advanced technology      
enterprises issued by the local government. As a result, the Company was given  
an income tax credit relating to 1998 to be applied against income taxes for the
year ended December 31, 1999.                                                   

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

5. INCOME TAXES (continued)                                                     

The year ended December 31, 2000 was the fifth profitable year and the income   
taxes were provided accordingly.                                                

A reconciliation between the actual income tax expense and income taxes computed
by applying the statutory PRC tax rate applicable to foreign investment         
enterprises operating in the Harbin Development Zone in the PRC to the income   
before income taxes is as follows:                                              

                                                        [Enlarge/Download Table]

                                             Year ended     Year ended     Year ended  
                                            December 31,   December 31,   December 31, 
                                                1998           1999          2000      
                                                 RMB            RMB           RMB      
                                            ------------   ------------   ------------ 
                                                                                       
Statutory PRC income tax rate                         15%            15%            15%

Provision computed at statutory rate               8,239          8,117          7,707 
Impact of tax holiday/benefit of Asibao                                                
    (RMB0.16 (1999: RMB0.37 and                                                        
    1998: RMB0.18) per share based on                                                  
    24,685,538 (1999: 21,895,655 and 1998:                                             
    21,895,655) ordinary shares)                  (4,040)        (8,120)        (3,951)
Item which gives rise to no tax benefit:                                               
    Net increase in valuation allowance               --             --            344 
    Non-deductible expenses                          177            198            213 
Others                                               192             73             64 
                                            ------------   ------------   ------------ 
Provision for income taxes                         4,568            268          4,377 
                                            ============   ============   ============ 

The impact of tax holiday/benefit for the year ended December 31, 1998 and 2000 
represented the 50% reduction of income taxes granted by the local tax bureau in
the PRC to Asibao.                                                              

In addition to the 50% reduction of income taxes for the year ended December 31,
1999, the impact of tax holiday/benefit for that year included a tax credit     
received in 1999 for the year ended December 31, 1998 for which Asibao was      
successful in claiming from the local tax bureau during 1999.                   

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

5. INCOME TAXES (continued)                                                     

The deferred tax asset of the Group is comprised of the following:              

                                                        [Enlarge/Download Table]

                                                                  Year ended    Year ended  
                                                                 December 31,  December 31, 
                                                                     1999           2000    
                                                                 ------------  ------------ 
                                                                     RMB            RMB     
                                                                                            
Deferred tax asset:                                                                         
  Temporary differences on revaluation of fixed assets                                      
     between Asibao's PRC financial statements for tax purposes                             
     and its US GAAP financial statements                               2,042         1,842 
  Net operating loss carryforwards                                         --           344 
  Less: Valuation allowance for deferred tax asset                         --          (344)
                                                                 ------------  ------------ 
                                                                        2,042         1,842 
                                                                 ============  ============ 

Undistributed earnings of the Company's foreign subsidiaries amounted to        
approximately RMB157,447 at December 31, 2000. Because those earnings are       
considered to be permanently invested, no provision for U.S. federal and state  
income taxes on those earnings has been provided. Upon distribution of those    
earnings in the form of dividends or otherwise, the Company would be subject to 
U.S. income taxes. Determination of the amount of unrecognized deferred U.S.    
income tax liability is not practicable because of the complexities associated  
with its hypothetical calculation.                                              

At December 31, 2000, the Company had net operating loss carryforwards (NOLs) of
approximately RMB2,292 million for U.S. income tax purposes.                    

6. TRADE RECEIVABLES                                                            

                                                                [Download Table]

                                              1999              2000    
                                              RMB               RMB     
                                          ------------     ------------ 
                                                                        
Trade receivables                               68,996           70,199 
Less: Provision for doubtful debts             (12,128)         (12,128)
                                          ------------     ------------ 
                                                56,868           58,071 
                                          ============     ============ 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

6. TRADE RECEIVABLES (continued)                                                

                                                                [Download Table]

                                            Year ended    Year ended     Year ended 
                                           December 31,  December 31,   December 31,
                                               1998         1999           2000     
                                                RMB          RMB           RMB      
                                           ------------  ------------  ------------ 
                                                                                    
Movement of provision for doubtful debts:                                           
   Balance at beginning of year                      --            --        12,128 
   Provision for the year                            --        12,128            -- 
                                           ------------  ------------  ------------ 
Balance at end of year                               --        12,128        12,128 
                                           ============  ============  ============ 

7. INVENTORIES                                                                  

                                                                [Download Table]

                                           1999             2000     
                                            RMB              RMB     
                                       ------------     ------------ 
                                                                     
Raw materials                                21,453            3,926 
Work in progress                              2,480            6,695 
Finished goods                                4,763           18,139 
                                       ------------     ------------ 
                                             28,696           28,760 

Less: Provision for inventories              (1,907)            (393)
                                       ------------     ------------ 
                                             26,789           28,367 
                                       ============     ============ 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

8. FIXED ASSETS                                                                 

                                                                [Download Table]

                                              1999             2000     
                                               RMB              RMB     
                                          ------------     ------------ 
                                                                        
Cost:                                                                   
    Plant, machinery and equipment             188,226          188,803 
    Motor vehicles                               1,418            1,418 
                                          ------------     ------------ 
                                               189,644          190,221 

Accumulated depreciation                       (56,002)         (69,569)
                                          ------------     ------------ 
Net book value                                 133,642          120,652 
                                          ============     ============ 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

9. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL                                  

As of January 24, 2000, 597,133 shares of common stock of par value of US$0.01  
each were outstanding to the then existing shareholders of the Company.         

As of the same date, 8,757,951 shares of common stock of par value US$0.01 each 
were allotted to the then shareholders of FB pursuant to the Reverse Acquisition
set out in note 1 to the consolidated financial statements.                     

As of the same date, 597,133 shares of common stock of par value of US$0.01 each
were allotted to the financial advisor as the return for the services rendered  
for the Reverse Acquisition. Such shares of common stock are stated at market   
value as at the date of issuance.                                               

On March 1, 2001, the Company announced a 2.5 for 1 stock split of its shares of
common stock.                                                                   

10. RELATED PARTY BALANCES AND TRANSACTIONS                                     

The Group's amounts due from/to related companies owned and/or controlled by HLG
comprise:                                                                       

                                                                [Download Table]

                                                       1999          2000    
                                                       RMB           RMB     
                                                   ------------  ------------
                                                                             
Due from related companies:                                                  
    Heilongjiang North Chemical Fiber Company                                
        (North Chemical)                                 10,503            --
    Heilongjiang Longdi Economic Trading Co. Ltd.        18,058         4,268
    Harbin Hua Jia Construction Materials Co. Ltd.          600           600
    Heilongjiang Longdi Weaving Factory                      --           316
                                                   ------------  ------------
                                                         29,161         5,184
                                                   ============  ============

Due from a minority joint venture partner - HLG         261,070       359,762
                                                   ============  ============
Due to related companies:                                                    
    Heilongjiang Dragon Rising Chemical Fiber                                
        Company (Dragon Rising)                           8,488        35,017
    Heilongjiang Dragon Flying Chemical Fiber                                
        Company (Dragon Flying)                           1,816        23,983
    North Chemical                                           --        13,481
    Heilongjiang Longdi Staff's Family Members                               
        Factory (Factory)                                 1,794            --
                                                   ------------  ------------

                                                         12,098        72,481
                                                   ============  ============

Except for the balance with HLG which bears interest at the prevailing 3-month  
bank loans interest rate in the PRC, the balances with the above related        
companies and a director are unsecured and interest-free. The average interest  
rate charged by HLG for current year is 5.36% (1999:                            
6.12%).                                                                         

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

11. RELATED PARTY BALANCES AND TRANSACTIONS (continued)                         

A significant portion of transactions undertaken by the Group has been effected 
with HLG and companies owned and/or controlled by HLG, as follows:              

(a) PURCHASES OF POLYESTER CHIPS                                                

Pursuant to a purchase agreement dated January 10, 1996 between Longdi and      
Asibao, Longdi agreed to guarantee the supply of polyester chips, to Asibao at a
5% - 10% discount to the prevailing market prices offered to other purchasers of
polyester chips with a first right of refusal to Asibao. The discount was agreed
based on mutual negotiation and after taking into account the savings in        
transportation costs (excluding packaging costs) and wastage on transportation. 
In addition, an additional 3% discount was also granted by Longdi to allow for  
savings of packaging materials as a result of the reduced distance of           
transportation. The polyester chips purchased from Longdi or its subsidiary,    
Harbin Long Xing Chemical Fiber Co. Ltd., through HLG in 2000 amounted to       
RMB341,899 (1999: RMB239,053 and 1998: RMB260,247).                             

(b) LEASE OF FACTORIES AND OFFICE BUILDINGS                                     

Pursuant to the supplementary Restructuring Agreement, as amended, HLG agreed to
lease to Asibao the factories and office buildings in Harbin, the PRC commencing
on January 1, 1996. The rental agreement is for a period of 15 years at an      
annual rental of RMB1,004, which is adjustable, based on further mutual         
negotiation, every three years.                                                 

(c) Other transactions with related companies are summarized as follows:        

                                                        [Enlarge/Download Table]

                                             Year ended     Year ended     Year ended  
                                            December 31,   December 31,   December 31, 
                                                1998           1999          2000      
                                                RMB            RMB           RMB       
                                            ------------   ------------   ------------ 
                                                                                       
Sales of finished goods to HLG                     7,146         15,245         54,705 
Sales of finished goods to Dragon Rising           2,889          2,667          1,959 
Sales of finished goods to North  Chemical            --             --          4,473 
Sales of finished goods to Factory                   326             --             -- 
Sales of finished goods to Heiongjiang                                                 
    Longdi Packaging Co. Ltd.                         --             --          2,880 
Sales of fixed assets to HLG                          --         47,218             -- 
Interest income charged to HLG                     5,242          8,360         19,583 
Purchase of raw materials from HLG               (14,794)        (6,522)       (37,813)
Purchase of raw materials                                                              
    from Dragon Rising                                --         (1,581)          (267)
Purchase of finished goods                                                             
   from Dragon Flying                                 --         (2,877)        (5,380)
Purchase of finished goods from HLG                   --        (15,467)        (8,928)
Utilities charged by HLG                         (23,941)       (26,409)       (27,431)
                                            ============   ============   ============ 

(d) Amount due to a director represents amount paid by a director on behalf of  
the Group and the unpaid director's salary. This amount has no stated repayment 
term and is interest-free.                                                      

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                            

                                                                [Download Table]

                                 Year ended    Year ended    Year ended 
                                December 31,  December 31,  December 31,
                                    1998          1999          2000    
                                     RMB           RMB           RMB    
                                ------------  ------------  ------------
                                                                        
Cash paid during the year for:                                          

    Interest expenses                 16,129        13,495        11,452
                                ============  ============  ============
    Income taxes paid                  1,900         2,000         3,886
                                ============  ============  ============

13. RESERVES AND DISTRIBUTION OF PROFITS                                        

The Company's ability to pay dividends is primarily dependent on the Company    
receiving distributions from its subsidiary, Asibao. In accordance with the     
relevant PRC regulations and the articles of association of Asibao,             
appropriations of the net income as reflected in its statutory financial        
statements will be allocated to each of the general reserve, enterprise         
expansion reserve and staff bonus and welfare reserve, respectively, as         
determined by the resolution of the board of directors annually.                

The appropriations to general reserve and enterprise expansion reserve          
attributable to the Company totalling RMB19,451 were reflected as reserves in   
the consolidated balance sheet as at December 31, 2000 (1999: 15,845 and 1998:  
RMB11,637).                                                                     

The staff bonus and welfare reserve are set aside for the provision of bonus and
welfare benefits to the employees of Asibao. In accordance with US GAAP, the    
amounts designated for payments of staff bonus and welfare benefits to employees
have been charged to income before arriving at the net consolidated income. The 
staff bonus and welfare benefits to employees charged to the statement of income
amounted to RMB515 for the year ended December 31, 2000 (1999: RMB601 and 1998: 
RMB539).                                                                        

As described in note 2 to the consolidated financial statements, the net income 
as reported in the US GAAP financial statements differs from that reported in   
the statutory financial statements. In accordance with the relevant laws and    
regulations in the PRC, the profits available for distribution are based on the 
statutory financial statements. At December 31, 2000, the Group's share of the  
distributable profits of Asibao amounted to RMB175,584 (1999: RMB143,486).      

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

14. COMMITMENTS AND CONTINGENCIES                                               

As at December 31, 2000, the Group had the following commitments:               

(i)     The future minimum payments under the operating leases with HLG for     
    factories and office buildings located in the PRC for a period of 15
years commencing on January 1, 1996 are as follows:             

                                                                [Download Table]

                                             RMB 
                                                 
Payable in:                                      
    2001                                    1,004
    2002                                    1,004
    2003                                    1,004
    2004                                    1,004
    2005                                    1,004
    Thereafter                              5,020
                                           ------
Total minimum lease payments               10,040
                                           ======

Rental expense under the operating leases for the year ended December 31, 2000  
amounted to RMB1,004 (1999: RMB1,004 and 1998: RMB1,004).                       

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

15. FOREIGN CURRENCY EXCHANGE                                                   

RMB is not freely convertible into foreign currencies.                          

Effective from January 1, 1994, a single rate of exchange is quoted daily by the
People's Bank of China (the Exchange Rate). However, this does not imply        
convertibility of RMB into United States dollars (US$) or other foreign         
currencies. All foreign exchange transactions continue to take place either     
through the Bank of China or other institutions authorized to buy and sell      
foreign currencies at the exchange rates quoted by the People's Bank of China.  
Approval of foreign currency payments by the Bank of China or other institutions
requires submitting a payment application form together with suppliers'         
invoices, shipping documents and signed contracts.                              

The Exchange Rates at December 31, 1998, 1999 and 2000 were US$1: RMB8.28, US$1:
RMB8.27 and US$1: RMB8.27, respectively.                                        

16. FAIR VALUE OF FINANCIAL INSTRUMENTS                                         

The carrying amounts of the Group's cash and cash equivalents, trade            
receivables, bills receivable and accounts payable approximate their fair value 
because of their short maturity period.                                         

The carrying amounts of the balances with a minority joint venture partner,     
directors and related companies are reasonable estimates of the fair values due 
to the short maturity of these assets and liabilities.                          

It was not practicable to estimate the fair values of the Group's cost method   
investment in non-traded investments because of the lack of quoted market prices
and the inability to estimate fair values without incurring excessive costs. The
carrying amounts of RMB13,995 at December 31, 2000 represent the Group's best   
estimates of current economic values of this investment.                        

The carrying amounts of the bank loans approximate their fair value based on the
borrowing rates currently available for bank loans with similar terms and       
average maturity.                                                               

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

17. CONCENTRATION OF CREDIT RISKS                                               

The financial instruments which potentially subject the Group to a significant  
concentration of credit risk consist are principally the following:             

(i)     Cash deposits                                                           

The Group places its cash deposits with various PRC State-owned banks.          

(ii)    Trade receivables                                                       

    The Group manufactures and sells synthetic fiber products to garment
       manufacturers in the PRC. Concentration of credit risks with respect to
trade receivables is limited due to the large number of entities
comprising the Group's customer base.                           

     Management considers that the Group's current customers are generally
 creditworthy and credit is extended based on an evaluation of the
       customers' financial conditions and, therefore, generally collateral is
not required.                                                   

    As of December 31, 2000, trade receivables totalled RMB58,071 (1999:
RMB56,868) and are generally due within 60 days.                

(iii)   Bills receivable                                                        

     As of December 31, 2000, bills receivable amounted to RMB6,889 (1999:
     RMB1,300) and their collectability was guaranteed by banks. The bills
receivable have normal terms of maturity of four to six months. 

(iv)    Due from related companies                                              

   The balances due from related companies include the advances to and
trade receivables from related companies.                       

 The Group does not require collateral and all of the balances are
unsecured.                                                      

(v)     Due from a minority joint venture partner                               

  The balance due from a minority joint venture partner includes the
   advances to HLG less the amounts payable to HLG for purchase of raw
materials and utilities.                                        

 The Group does not require collateral and all of the balances are
unsecured.                                                      

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
(Amounts in thousands except share and per share data)                          

18. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS                         

The Group's operating assets and primary source of income and cash flows are    
located in the PRC, and may be adversely affected by significant political,     
economic and social uncertainties in the PRC. Although the PRC government has   
been pursuing economic reform policies for the past 22 years, no assurance can  
be given that the PRC government will continue to pursue such policies or that  
such policies may not be significantly altered, especially in the event of a    
change in leadership, social or political disruption or unforeseen circumstances
affecting the PRC's political, economic and social conditions. There is also no 
guarantee that the PRC government's pursuit of economic reforms will be         
consistent or effective.                                                        

The Group is dependent on HLG and its subsidiaries for providing substantially  
all of the supply of polyester chips and some auxiliary materials. While Asibao 
has entered into an agreement with Longdi which requires Long Xing, an          
associated company of HLG, to prioritize allocation of polyester chips in favor 
of Asibao, there can be no assurances that this agreement will result in        
continued allocations of satisfactory supplies of polyester chips.              

Currently, a large proportion of the Group's revenue comes from the sales of    
synthetic fiber products manufactured in the PRC, which is vulnerable to an     
increase in the level of competition or a change in the supply and demand       
relationship in the synthetic fiber industry in the PRC.                        

19. SEGMENT FINANCIAL INFORMATION                                               

The Group is engaged in the manufacture and sale of synthetic fiber products.   
Its assets, operations and customer base are principally within the PRC.        

20. SUMMARIZED QUARTERLY DATA (UNAUDITED)                                       

The following financial information reflects all normal recurring adjustments   
that are, in the opinion of management, necessary for a fair statement of the   
results of the interim periods. Summarized quarterly data for fiscal 2000 and   
1999 is as follows (Amounts in thousands, except per share data):               

                                                        [Enlarge/Download Table]

                                 1st quarter    2nd quarter    3rd quarter   4th quarter 
                                     RMB            RMB            RMB           RMB     
                                ------------   ------------   ------------   ------------
                                                                                         
2000                                                                                     

Revenue                              104,676        154,132        156,664        123,021
Gross profit/(loss)(1)                23,342         20,234         (7,003)        26,014
Operating income/(loss)(1)            (1,240)        17,087         (8,660)        25,681
Net income/(loss)(1)                  (7,758)        10,768         (5,831)        15,361
Basic and diluted net earnings                                                           
   /(loss) per common share(3)         (0.34)          0.43          (0.23)          0.62

1999                                                                                     

Revenue                              104,278         64,577        139,543        143,820
Gross profit                          19,172          7,142         22,311         39,419
Operating income/(loss)(2)             9,232         (1,209)        15,985         30,108
Net income/(loss)(2)                   6,367           (945)        11,154         19,971
Basic and diluted net earnings                                                           
   /(loss) per common share(3)          0.29          (0.04)          0.51           0.91

(1)   The operating loss and net loss for the first quarter was restated due to 
  inclusion of transaction costs in relation to the reverse acquisition.

The gross loss, operating loss and net loss in the third quarter was
 mainly attributable to an increase in purchase price of raw materials
which was in turn resulted from the increase in oil price.          

(2)   The operating income and net income was comparatively lower in the first  
  two quarters due to the effect of temporary suspension of a production
 plant of polyester filaments from August 1998 to the third quarter of
1999.                                                               

(3)   Earning/(loss) per common share are computed independently for each       
      quarter based on the respective average shares outstanding with adjustment
   stated in note 1 to the financial statements. Therefore, the sum of the
   quarterly net earnings/(loss) per common share amounts may not equal to
the annual amounts reported.                                        

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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
 (Amounts in thousands, except share and per share data)

                                                        [Enlarge/Download Table]

                                  THREE MONTHS ENDED SEPTEMBER 30,                  NINE MONTHS ENDED SEPTEMBER 30,        
                           ----------------------------------------------   ---------------------------------------------- 
                               2001              2000             2001          2001             2000              2001    
                               RMB               RMB              US$            RMB             RMB               US$     
                           ------------     ------------     ------------   ------------     ------------     ------------ 
                                                                                                                           
SALES                           111,073          156,664           13,415        303,187          415,472           36,616 
COST OF SALES*                 (108,383)        (162,283)         (13,090)      (274,903)        (370,975)         (33,201)
                           ------------     ------------     ------------   ------------     ------------     ------------ 
GROSS PROFIT/(LOSS)               2,690           (5,619)             325         28,284           44,497            3,415 

SELLING AND                                                                                                                
ADMINISTRATIVE EXPENSES          (4,984)          (4,400)            (602)       (13,222)         (14,803)          (1,597)

FINANCIAL INCOME/                                                                                                          
EXPENSE, NET#                    (1,870)           1,359             (226)        (4,780)          (3,996)            (577)
                           ------------     ------------     ------------   ------------     ------------     ------------ 

INCOME/(LOSS) BEFORE                                                                                                       
INCOME TAXES                     (4,164)          (8,660)            (503)        10,282           25,698            1,241 

INCOME TAXES                        493              602               60         (1,218)          (2,129)            (147)
                           ------------     ------------     ------------   ------------     ------------     ------------ 
INCOME/(LOSS) BEFORE             (2,671)          (8,058)            (443)         9,064           23,569            1,094 
MINORITY INTERESTS                                                                                                         

MINORITY INTERESTS                  665            2,227               80         (4,062)          (7,879)            (490)
                           ------------     ------------     ------------   ------------     ------------     ------------ 

NET INCOME/(LOSS)                (3,006)          (5,831)            (363)         5,002           15,690              604 
                           ============     ============     ============   ============     ============     ============ 
BASIC AND DILUTED                                                                                                          
EARNINGS/(LOSS) PER SHARE         (0.12)           (0.23)           (0.01)          0.20             0.63             0.02 
                           ============     ============     ============   ============     ============     ============ 
WEIGHTED  AVERAGE                                                                                                          
NUMBER OF SHARES                                                                                                           
OUTSTANDING                  24,881,319       24,880,585       24,881,319     24,881,319       24,749,825       24,881,319 
                           ============     ============     ============   ============     ============     ============ 
*  including:                                                                                                              
   Raw materials                                                                                                           
   Purchased from                                                                                                          
   related parties               87,464          128,718           10,563        197,740          265,598           23,882 

   Utility charges                                                                                                         
   paid to related                                                                                                         
   parties                        5,003            3,795              604         13,176           12,332            1,591 

Rental expenses                                                                                                            
   For leasing of                                                                                                          
   Plant and machinery                                                                                                     
   From related parties             251              251               30            753              753               91 

   # Interest income                                                                                                       
   from - related party           1,081            3,675              131          4,127            5,251              498 
   - others                          12               34                1             79               92               10 
                           ------------     ------------     ------------   ------------     ------------     ------------ 
   Total interest income          1,093            3,709              132          4,206            5,343              508 
   Interest expense              (2,963)          (2,350)            (358)        (8,986)          (9,339)          (1,085)
                           ------------     ------------     ------------   ------------     ------------     ------------ 
   Financial income/             (1,870)           1,359             (226)        (4,780)          (3,996)            (577)
  (expense),net                                                                                                            
                           ============     ============     ============   ============     ============     ============ 

See notes to condensed consolidated financial statements.                       

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
 (Amounts in thousands, except share and per share data)

                                                        [Enlarge/Download Table]

                                              September 30,  December 31,  September 30,
                                                 2001           2000           2001     
                                                  RMB            RMB            US$     
                                   Notes       (Unaudited)                  (Unaudited) 
                                ------------  ------------   ------------  ------------ 
                                                                                        
ASSETS                                                                                  
CURRENT ASSETS:                                                                         
  Cash and cash equivalents                         19,134         11,403         2,311 
  Trade receivables                                 46,233         58,071         5,584 
  Bills receivable                                  11,097          6,889         1,340 
  Other receivables and                                133            285            16 
   prepayments                                                                          

  Inventories                              2        41,343         28,367         4,993 
  Amount due from a minority               3       482,434        359,762        58,265 
   joint venture partner                                                                
  Amounts due from related                           4,612          5,184           557 
   companies                                                                            

                                              ------------   ------------  ------------ 
TOTAL CURRENT ASSETS                               604,986        469,961        73,066 
FIXED ASSETS                               4       111,254        120,652        13,436 
INVESTMENT                                          13,995         13,995         1,690 
DEFERRED INCOME TAXES                                1,692          1,842           204 
                                              ------------   ------------  ------------ 
TOTAL ASSETS                                       731,927        606,450        88,396 
                                              ============   ============  ============ 
LIABILITIES AND SHAREHOLDERS'                                                           
EQUITY                                                                                  
CURRENT LIABILITIES:                                                                    
  Bank loans                               5       232,300        181,600        28,056 
  Accounts payable                                     175            455            21 
  Deposits from customers                           16,814         16,183         2,031 
  Accrued liabilities and                           10,720          8,438         1,295 
   other payables                                                                       
  Value-added tax payable                            1,544         12,951           186 
  Amount due to a director                           6,652          6,503           803 
  Amounts due to related                                                                
   companies                               6       106,814         72,481        12,900 

  Income taxes payable                               1,068            827           129 
  Dividend payable                         7            --         33,717            -- 
                                              ------------   ------------  ------------ 
TOTAL CURRENT LIABILITIES                          376,087        333,155        45,421 

MINORITY INTERESTS                                 101,718         24,183        12,285 
                                              ------------   ------------  ------------ 
TOTAL LIABILITIES AND MINORITY                                                          
 INTERESTS                                         477,805        357,338        57,706 
                                              ------------   ------------  ------------ 
SHAREHOLDERS' EQUITY                                                                    
   Preferred stock, par value                                                           
   of US$0.01 each                                                                      
   authorized: 10,000,000                                                               
   shares in 2001 and 2000                                                              
 Common  stock, par value of                                                            
   US$0.01 each authorized:                                                             
   75,000,000 shares in 2001                                                            
   and 2000 issued and                                                                  
   outstanding - 24,881,319                                                             
   shares in 2001 and 2000                 8         2,057          2,057           248 
Additional paid-in capital                 8        69,738         69,738         8,422 
Reserves                                            19,451         19,451         2,349 
Retained earnings                                  162,449        157,447        19,619 
Accumulated other                                                                       
comprehensive income                       9           427            419            52 
                                              ------------   ------------  ------------ 
TOTAL SHAREHOLDERS' EQUITY                         254,122        249,112        30,690 
                                              ------------   ------------  ------------ 
TOTAL LIABILITIES AND                                                                   
SHAREHOLDERS' EQUITY                               731,927        606,450        88,396 
                                              ============   ============  ============ 

Translations of amounts from Renminbi (RMB) into United States Dollars (US$) for
the convenience of the reader has been made at the unified exchange rate quoted 
by the People's Bank of China on September 30, 2001 of US$1.00 = RMB8.28. No    
representation is made that the Renminbi amounts could have been, or could be,  
converted into United States Dollars at that rate on September 30, 2001 or at   
any other certain rate.                                                         

See notes to condensed consolidated financial statements.                       

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(Amounts in thousands)

                                                        [Enlarge/Download Table]

                                                                                     Accumulated               
                                           Additional                                   other                  
                              Common        paid-in                    Retained     comprehensive              
                               stock        capital       Reserves     earnings         income         Total   
                                RMB           RMB            RMB          RMB            RMB            RMB    
                            ------------  ------------  ------------  ------------   ------------  ------------
                                                                                                               
Balance at January 1, 2001         2,057        69,738        19,451       157,447            419       249,112
Net income for                                                                                                 
the period currency                   --            --            --         5,002             --         5,002
translation adjustments               --            --            --            --              8             8
                            ------------  ------------  ------------  ------------   ------------  ------------
Comprehensive income                                                                                      5,010
                                                                                                   ============
Balance at                                                                                                     
September 30, 2001                 2,057        69,738        19,451       162,449            427       254,122
                            ============  ============  ============  ============   ============  ============

Translations of amounts from Renminbi (RMB) into United States Dollars (US$) for
the convenience of the reader has been made at the unified exchange rate quoted 
by the People's Bank of China on September 30, 2001 of US$1.00 = RMB8.28. No    
representation is made that the Renminbi amounts could have been, or could be,  
converted into United States Dollars at that rate on September 30, 2001 or at   
any other certain rate.                                                         

See notes to condensed consolidated financial statements.                       

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Amounts in thousands)

                                                        [Enlarge/Download Table]

                                              NINE MONTHS ENDED SEPTEMBER 30,         
                                       ---------------------------------------------- 
                                           2001             2000             2001     
                                           RMB              RMB              US$      
                                       ------------     ------------     ------------ 
                                                                                      
Net cash provided by operating                                                        
activities                                   40,590           90,189            4,903 

INVESTING ACTIVITIES                                                                  
  Purchases of fixed assets                    (643)            (546)             (78)
  Increase in investment                         --             (605)              -- 
  Advances to a minority joint              (82,916)         (90,566)         (10,014)
   venture partner                                                                    
                                       ------------     ------------     ------------ 
Net cash used in investing activities       (83,559)         (91,717)         (10,092)
                                       ------------     ------------     ------------ 
FINANCING ACTIVITIES                                                                  
  Proceeds from bank borrowings             198,200           95,080           23,937 
  Repayments of bank borrowings            (147,500)         (93,080)         (17,814)
  New issue shares for reverse                                                        
   Acquisition                                   --            1,242               -- 
                                       ------------     ------------     ------------ 
Net cash provided by financing                                                        
   activities                                50,700            3,242            6,123 
                                       ------------     ------------     ------------ 

NET INCREASE IN CASH AND CASH                                                         
   EQUIVALENTS                                7,731            1,714              934 

Cash and cash equivalent, at                                                          
   beginning of period                       11,403            8,427            1,377 
                                       ------------     ------------     ------------ 
Cash and cash equivalent, at end of                                                   
  period                                     19,134           10,141            2,311 
                                       ============     ============     ============ 

See notes to condensed consolidated financial statements.                       

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in thousands)

1. BASIS OF PRESENTATION                                                        

The unaudited condensed consolidated financial statements have been prepared in 
accordance with generally accepted accounting principles for interim financial  
information and with the instructions to Form 10-QSB and Article 10 of          
Regulation S-X. Accordingly, they do not include all of the information and     
footnotes required by generally accepted accounting principles for complete     
financial statements. In the opinion of management, all adjustments (consisting 
of normal recurring accruals) considered necessary for a fair presentation have 
been included. Operating results for the three months and nine months periods   
ended September 30, 2001, are not necessarily indicative of the results that may
be expected for the year ending December 31, 2001.                              

The balance sheet at December 31, 2000 has been derived from the audited        
financial statements at that date but does not include all of the information   
and footnotes required by generally accepted accounting principles for complete 
financial statement. For further information, refer to the consolidated         
financial statements and footnotes thereto included in the Asia Fiber Holdings  
Limited and Subsidiaries' annual report on Form 10-KSB for the year ended       
December 31, 2000.                                                              

Certain comparative amounts have been reclassified to conform with the current  
period classifications.                                                         

2. INVENTORIES                                                                  

                                                                [Download Table]

                                       September 30,    December 31, 
                                            2001            2000     
                                             RMB             RMB     
                                       ------------     ------------ 
                                                                     
Raw materials                                 7,208            3,926 
Work in progress                              5,295            6,695 
Finished goods                               31,233           18,139 
                                       ------------     ------------ 
                                             43,736           28,760 
Less: Provision for inventories              (2,393)            (393)
                                       ------------     ------------ 
                                             41,343           28,367 
                                       ============     ============ 

3. AMOUNT DUE FROM A MINORITY JOINT VENTURE PARTNER                             

During 2001, the Group advanced approximately RMB82.9 million to a minority     
joint venture partner. The advance is unsecured and bears interest at the       
prevailing three-month interest rate in the Peoples's Republic of China (5.58%  
at September 30, 2001).                                                         

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4. FIXED ASSETS                                                                 

                                                                [Download Table]

                                        September 30,     December 31,
                                            2001             2000     
                                             RMB              RMB     
                                        ------------     ------------ 
                                                                      
At cost:                                                              
  Plant, machinery and equipment             189,446          188,803 
  Motor vehicles                               1,418            1,418 
                                        ------------     ------------ 
                                             190,864          190,221 
Accumulated depreciation                     (79,610)         (69,569)
                                        ------------     ------------ 
Net book value                               111,254          120,652 
                                        ============     ============ 

5. BANK LOANS                                                                   

During 2001, the Group entered into five bank loans totaling RMB198,200         
repayable within one year at interest rates range from 5.85% to 6.14% per annum 
and repaid four bank loans totaling RMB147,500.                                 

6. AMOUNTS DUE TO RELATED COMPANIES                                             

The Group's amounts due to related companies owned and/or controlled by         
Heilongjiang Longdi Group Co., Limited (HLG) comprise:                          

                                                                [Download Table]

                                                   September 30,   December 31,
                                                       2001            2000    
                                                       RMB             RMB     
                                                   ------------   ------------ 
                                                                               
Heilongjiang Dragon Rising Chemical Fiber Company        47,534         35,017 
Heilongjiang Dragon Flying Chemical Fiber Company        36,419         23,983 
Heilongjiang North Chemical Fiber Company                22,861         13,481 
                                                   ------------   ------------ 
                                                        106,814         72,481 
                                                   ============   ============ 

The balances with the above related companies are unsecured and interest-free.  

7. DIVIDEND PAYABLE                                                             

In 1998, 1999 and 2000, Asibao, declared dividends payable to the minority joint
venture partner totaling RMB73,473,000, of which RMB39,756,000 had been paid    
prior to 2001. Pursuant to the resolution dated August 20, 2001, passed by      
Asibao's Board of Directors, the declared dividends were cancelled and hence,   
the dividend payable of RMB33,717,000 were reversed and the paid portion was    
considered as an advance to the minority joint partner.                         

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8. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL                                  

On March 14, 2000, the authorized capital stock of the Company was decreased    
from 2,760,000,000 shares (consisting of 2,750,000,000 shares of Common Stock   
and 10,000,000 shares of Preferred Stock) to 85,000,000 shares (consisting of   
75,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock).    

On March 1, 2001, the Board of directors of the Company declared a 2.5 for 1    
forward stock split of its common shares. The unaudited condensed consolidated  
financial statements have been restated to give effect to the retroactive       
recognition to the stock split in prior period by reclassifying from additional 
paid-in capital to common stock, the par value of the additional shares arising 
from the split. In addition, all references in the unaudited condensed          
consolidated financial statements to number of shares and per share amounts have
been restated.                                                                  

9. ACCUMULATED OTHER COMPREHENSIVE INCOME                                       

Total Comprehensive (Loss)/Income was (RMB3,004) and RMB5,010 for The three and 
nine-months ended September 30, 2001, respectively, And (RMB5,831) and RMB15,717
for the three and nine-months ended September 30, 2000, respectively.           

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10. RESTATEMENT OF QUARTERLY INFORMATION                                        

In preparing the financial statements for the quarter ended September 30, 2001, 
the Company determined that the net resaleable value of inventories as of March 
31, 2001 and June 30, 2001 had been improperly calculated. In addition, the     
Company determined that interest expenses, net for the period ended June 30,2001
had been overstated.                                                            

The financial statements for the quarter ended March 31, 2001 and June 30, 2001 
have been restated as follows:                                                  

                                                                [Download Table]

                                            Three months         Three Months 
                                                 ended               ended    
                                            March 31, 2001      June 30, 2001 
                                                  RMB                RMB      
                                            --------------     -------------- 
                                                                              
Sales                                               88,915            103,199 
Cost of sales                                     *(75,327)          *(91,193)
                                            --------------     -------------- 
Gross profit                                        13,588             12,006 

Selling and administrative expenses                 (4,314)            (3,924)
Financial expense, net                              (1,332)          **(1,578)
                                            --------------     -------------- 
Income before income taxes                           7,942              6,504 
Income taxes                                          (849)              (862)
                                            --------------     -------------- 
Income before minority interests                     7,093              5,642 
Minority interests                                  (2,553)            (2,174)
                                            --------------     -------------- 
Net profit for the period                            4,540              3,468 
                                            ==============     ============== 

*     Adjusted to reflect reduction in inventory values of RMB2,140,000 and     
RMB5,560,000 as of March 31, 2001 and June 30, 2001, respectively.  

**    Adjusted to reflect reduction in interest expense of RMB2,000,000 for the 
quarter ended June 30, 2001.                                        

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 ASIA FIBER HOLDINGS LIMITED

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

PROSPECTUS

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

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 PART II

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS                              

     The Company's Certificate of Incorporation includes provisions, which
limit the liability of our directors. As permitted by applicable provisions of  
the Delaware Law, directors will not be liable to Asia Fiber for monetary       
damages arising from a breach of their fiduciary duty as directors in certain   
circumstances. This limitation does not affect liability for any breach of a    
director's duty to Asia Fiber or our stockholders (i) with respect to approval  
by the director of any transaction from which he or she derives an improper     
personal benefit, (ii) with respect to acts or omissions involving an absence of
good faith, that the director believes to be contrary to the best interests of  
Asia Fiber or our stockholders, that involve intentional misconduct or a knowing
and culpable violation of law, that constitute an unexcused pattern or          
inattention that amounts to an abdication of his or her duty to Asia Fiber or   
our stockholders, or that show a reckless disregard for duty to Asia Fiber or   
our stockholders in circumstances in which he or she was, or should have been   
aware, in the ordinary course of performing his or her duties, of a risk of     
serious injury to Asia Fiber or our stockholders, or (iii) based on transactions
between Asia Fiber and our directors or another corporation with interrelated   
directors or based on improper distributions, loans or guarantees under         
applicable sections of Delaware Law. This limitation of directors' liability    
also does not affect the availability of equitable remedies, such as injunctive 
relief or rescission.                                                           

      The Company has been advised that it is the position of the Commission
that insofar as the provision in Asia Fiber's Articles of Incorporation, as     
amended, may be invoked for liabilities arising under the Securities Act, the   
provision is against public policy and is therefore unenforceable.              

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION                            

   The Company is not issuing any common stock under this Registration
Statement. All common stock registered pursuant to this Registration Statement  
is being registered on behalf of selling security holders. The Company has      
agreed to pay all costs of this Registration Statement. The estimated expenses  
for the distribution of the common stock registered hereby, other than          
underwriting commissions, fees and Representative's nonaccountable expense      
allowance are set forth in the following table:                                 

                                                                [Download Table]

          ITEM                   AMOUNT
          ----                  -------
                                       
SEC Registration Fee .......   $   500 
Transfer Agent Fees ........       500 
Legal Fees .................     5,000 
Accounting Fees ............     1,000 
Printing and Engraving Costs     1,500 
Miscellaneous ..............     1,000 
                               ------- 
                    Total ..   $12,000 
                               ======= 

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES                                

During the past three years, the following transactions were effected by us in  
reliance upon exemptions from registration under the Securities Act as amended. 
Unless stated otherwise; (i) that each of the persons who received these        
unregistered securities had knowledge and experience in financial and business  
matters which allowed them to evaluate the merits and risk of the receipt of    
these securities, and that they were knowledgeable about our operations and     
financial condition; (ii) no underwriter participated in, nor did we pay any    
commissions or fees to any underwriter in connection with the transactions;     
(iii) the transactions did not involve a public offerings; and (iv) each        
certificate issued for                                                          

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these unregistered securities contained a legend stating that the securities    
have not been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities.                                 

     On January 22, 2000, pursuant to an Acquisition Agreement dated as of
September 10, 1999 by and among, Horler, Far Beyond and the stockholders of Far 
Beyond, the stockholders we issued 8,757,951 shares of our common stock to the  
shareholders of Far Beyond. The shares were issued in a private placement       
pursuant to an exemption provided by Section 4(2) of the Securities Act of 1933,
as amended.                                                                     

      On December 21, 2001, pursuant to the terms of a Convertible Preferred
Stock Purchase Agreement, we issued 20,000 share of our Series C Convertible    
Preferred Stock to GEM Global Yield Fund Limited in exchange for $2,000,000. The
shares were issued in a private placement pursuant to a exemption provided by   
Section 4(2) of Securities Act of 1933, as amended.                             

EXHIBITS

                                                                [Download Table]

Exhibit Number                 Description                                  
--------------                 -----------                                  
                                                                            
     2.1         Acquisition Agreement; incorporated herein by reference to 
                 Exhibit C of the Proxy Statement of we filed on November 2,
                 1999.                                                      

     2.2         Disposal Agreement; incorporated herein by reference to    
                 Exhibit A of the Proxy Statement of we filed on November 2,
                 1999.                                                      

     2.3         Assignment Agreement; incorporated herein by reference to  
                 Exhibit B of the Proxy Statement of we filed on November 2,
                 1999.                                                      

     3.1(4)      Certificate of Incorporation as filed with the Delaware    
                 Secretary of State with amendments; Incorporated herein by 
                 reference to Form 10-KSB filed on April 14, 2000.          

     3.2(4)      Bylaws.                                                    

     4.1         Convertible Preferred Stock Purchase Agreement, dated as of
                 December 21, 2001*                                         

     5.1         Opinion Regarding Legality*                                

    23.1         Consent of Independent Accountants*                        

    23.2         Consent of Legal Counsel; contained in Exhibit 5.1.        


ITEM 28.   UNDERTAKINGS                                                         

The undersigned Registrant hereby undertakes as follows:                        

       (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:                      

      (i)  To include any prospectus required by Section 10(a)(3) of the
Securities Act;                                                 

 (ii)  To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the 
information set forth in the Registration Statement; and        

         (iii) To include any material information with respect to the plan of
    distribution not previously disclosed in the Registration Statement.

(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons  
of the Registrant pursuant to the provisions described above in Item 24, or     
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification 
against such liabilities (other than the payment by the Registrant of expenses  
incurred or paid by a director, officer or controlling person of the            

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Registrant in the successful defense of any action, suit or proceeding) is      
asserted by such director, officer or controlling person in connection with the 
securities being registered, the Registrant will, unless in the opinion of our  
counsel the matter has been settled by controlling precedent, submit to a court 
of appropriate jurisdiction of the question whether such indemnification by it  
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.                                        

       (3) For purposes of determining any liability under the Securities Act,
to treat the information omitted from the form of prospectus filed as part of   
this Registration Statement in reliance upon Rule 430A and contained in a form  
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4), or    
497(h) under the Securities Act as part of this Registration Statement as of the
time the Commission declared it effective.                                      

     (4) For the purpose of determining any liability under the Securities
Act, to treat each post-effective amendment that contains a form of prospectus  
as a new registration statement for the securities offered in the Registration  
Statement, and the offering of such securities at that time as the initial bona 
fide offering of those securities.                                              

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SIGNATURES

       Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this report 
to be signed on its behalf by the undersigned, thereunto duly authorized.       

                                     ASIA FIBER HOLDINGS LIMITED

                                  By:     /s/ Rui Min Zhao
                                              ----------------------------
                                    Rui Min Zhao
                                 President

Dated: February 11, 2002                                                        

       Pursuant to the requirements of the Securities Act of 1933, as amended,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.                               

                                                                [Download Table]


                                                                               
By:        /s/ Rui Min Zhao                            Dated: February 11, 2002
   -------------------------------------------------                           
           Rui Min Zhao                                                        
           President and Vice Chairman of the Board                            

By:        /s/ Feng Jie Liu                            Dated: February 11, 2002
   -------------------------------------------------                           
           Feng Jie Liu                                                        
           Chief Financial Officer and Director                                
           (principal financial and accounting                                 
           officer)                                                            

By:        /s/ Lung Po Ching                           Dated: February 11, 2002
   -------------------------------------------------                           
           Lung Po Ching                                                       
           Chairman of the Board and CEO                                       

By:        /s/ Wai On Wan                              Dated: February 11, 2002
   -------------------------------------------------                           
           Wai On Wan                                                          
           Secretary and Director                                              


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                                                                     EXHIBIT 4.1
------------------------------------------------------------------------------- 

CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

 BETWEEN

 ASIA FIBER HOLDINGS LIMITED

 AND

THE PURCHASER(S) LISTED ON
 SCHEDULE 1 HERETO

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

 _____________, 2001

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

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

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 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]
                                                                                                  
ARTICLE I                                                                                         

         CERTAIN DEFINITIONS.....................................................................1
              1.1      Certain Definitions.......................................................1

ARTICLE II                                                                                        

         PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES......................................6 
              2.1      Purchase and Sale........................................................6 
              2.2      Registration Statement; Execution and Delivery of Documents..............6 
              2.3      The Closing..............................................................7 

ARTICLE III                                                                                       

         REPRESENTATIONS AND WARRANTIES.........................................................9 
              3.1      Representations, Warranties and Agreements of the Company................9 
              3.2      Representations and Warranties of the Purchaser.........................12 

ARTICLE IV                                                                                        

         OTHER AGREEMENTS OF THE PARTIES.......................................................13 
              4.1      Manner of Offering......................................................13 
              4.2      Furnishing of Information...............................................13 
              4.3      Notice of Certain Events................................................14 
              4.4      Copies and Use of Disclosure Documents..................................14 
              4.5      Modification to Disclosure Documents....................................14 
              4.6      Integration.............................................................14 
              4.7      Furnishing of Rule 144A Materials.......................................14 
              4.8      Solicitation Materials..................................................15 
              4.9      Subsequent Financial Statements.........................................15 
              4.10     Prohibition on Certain Actions..........................................15 
              4.11     Listing of Common Stock.................................................15 
              4.12     Escrow..................................................................15 
              4.13     Conversion and Exercise Procedures; Maintenance of Escrow Shares........15 
              4.14     Attorney-in-Fact........................................................16 
              4.15     Indemnification.........................................................16 
              4.16     Exclusivity.............................................................18 
              4.17     Blue Sky Qualification..................................................18 
              4.18     Purchaser's Ownership of Common Stock...................................19 
              4.19     Purchaser's Rights if Trading in Common Stock is Suspended..............19 
              4.20     No Violation of Applicable Law..........................................20 


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                                                        [Enlarge/Download Table]
                                                                                                  
              4.21     Redemption Restrictions.................................................20 
              4.22     No Other Registration Rights............................................21 
              4.23     Merger or Consolidation.................................................21 
              4.24     Registration of Underlying Shares and Warrant Shares....................21 
              4.25     Liquidated Damages......................................................21 
              4.26     Selling Restrictions; Short Sales.......................................22 
              4.27     Fees....................................................................22 

ARTICLE V                                                                                         

         TERMINATION...........................................................................22 
              5.1      Termination by the Company or the Purchaser.............................22 
              5.2      Remedies................................................................23 

ARTICLE VI                                                                                        

         LEGAL FEES AND DEFAULT INTEREST RATE..................................................24 

ARTICLE VII                                                                                       

         MISCELLANEOUS.........................................................................24 
              7.1      Fees and Expenses.......................................................24 
              7.2      Entire Agreement; Amendments............................................25 
              7.3      Notices.................................................................25 
              7.4      Amendments; Waivers.....................................................26 
              7.5      Headings................................................................26 
              7.6      Successors and Assigns..................................................26 
              7.7      No Third Party Beneficiaries............................................26 
              7.8      Governing Law; Venue; Service of Process................................26 
              7.9      Survival................................................................26 
              7.10     Counterpart Signatures..................................................27 
              7.11     Publicity...............................................................27 
              7.12     Severability............................................................27 
              7.13     Limitation of Remedies..................................................27 
              7.14     Omnibus Provision.......................................................27 


                                                                [Download Table]
LIST OF SCHEDULES:                                       

                                                         
Schedule 1        Purchaser(s)                           
Schedule 3.1(a)   Subsidiaries                           
Schedule 3.1(c)   Capitalization and Registration Rights 
Schedule 3.1(d)   Equity and Equity Equivalent Securities


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                                                                [Download Table]
                                                    
Schedule 3.1(e)   Conflicts                         
Schedule 3.1(f)   Consents and Approvals            
Schedule 3.1(g)   Litigation and Claims             
Schedule 3.1(h)   Defaults and Violations           
Schedule 3.1(i)   Insurance                         
Schedule 3.1(j)   Issuances of Securities           
Schedule 3.1(r)   Leases                            
Schedule 5.1      Form 8-K Disclosure Obligations   

LIST OF EXHIBITS:                                   

Exhibit A      Form of Certificate of Designation   
Exhibit B      Form of Warrant                      
Exhibit C      Form of Registration Rights Agreement
Exhibit D      Conversion And Exercise Procedures   
Exhibit E      Form of Escrow Agreement             
Exhibit F      Form of Power of Attorney            
Exhibit G      Form of Legal Opinion                
Exhibit H      Termination Warrant                  
Exhibit I      Special Escrow Agreement             
Exhibit J      Special Registration Rights Agreement
Exhibit K      Special Power of Attorney            
Exhibit L      Special Opinion                      


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       THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), is made and
entered into as of ______________, 2001, between Asia Fiber Holdings Limited, a 
corporation organized and existing under the laws of the State of Delaware (the 
"Company"), and the purchaser(s) listed on SCHEDULE 1 hereto (the "Purchaser"). 

WHEREAS, subject to the terms and conditions set forth in this  
Agreement, the Company desires to issue and sell to the Purchaser and the       
Purchaser desires to acquire from the Company shares of the Company's Series C  
Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred  
Stock"), with an aggregate stated value of $2,000,000 (the "Shares").           

     IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and each Purchaser agree as follows:                                

 ARTICLE I

 CERTAIN DEFINITIONS

  1.1 Certain Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings     
indicated:                                                                      

        "Affiliate" means, with respect to any Person, any Person that, directly
or indirectly, controls, is controlled by or is under common control with such  
Person. For the purposes of this definition, "control" (including, with         
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or    
cause the direction of the management and policies of such Person, whether      
through the ownership of voting securities or by contract or otherwise.         

"Agreement" shall have the meaning set forth in the introductory
paragraph of this Agreement.                                                    

"Attorney-in-Fact" shall have the meaning set forth in Section  
2.2(c)(vi) hereof.                                                              

      "Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of 
New York are authorized or required by law or other government actions to close.

        "Certificate of Designation" means the Certificate of Designation of the
Series C Convertible Preferred Stock, in the form of EXHIBIT A annexed hereto.  

"Closing" shall have the meaning set forth in Section 2.3(a).   

  "Closing Date" shall have the meaning set forth in Section 2.3(c).

"Commission" means the Securities and Exchange Commission.      

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       "Common Stock" means shares now or hereafter authorized of the class of
common stock, par value $.01 per share, of the Company and stock of any other   
class into which such shares may hereafter have been reclassified or changed.   

"Company" shall have the meaning set forth in the introductory  
paragraph.                                                                      

    "Control Person" shall have the meaning set forth in Section 4.15(a)
hereof.                                                                         

        "Conversion Date" shall have the meaning set forth in the Certificate of
Designation.                                                                    

      "Conversion Price" shall have the meaning set forth in the Certificate
of Designation.                                                                 

    "Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,      
unless cured or waived, become an Event of Default.                             

"Disclosure Documents" means (a) the Schedules required to be to
furnished to the Purchaser by or on behalf of the Company pursuant to Section   
3.1 hereof and (b) all reports required to be and as filed by the Company with  
the Commission under the Exchange Act during the two (2) year period prior to   
the date hereof.                                                                

        "Effective Date" shall mean the date on which the Registration Statement
shall have been declared effective by the Commission.                           

 "Escrow Agent" means Kaplan Gottbetter & Levenson, LLP, 630 Third
Avenue, 5th Floor, New York, NY 10017; Tel: 212-983-6900; Fax: 212-983-9210.    

   "Escrow Agreement" shall have the meaning set forth in Section 4.12
hereof.                                                                         

        "Escrow Shares" means the certificates representing 32,000,000 shares of
duly issued Common Stock, in share denominations of ten thousand (10,000)       
shares, registered in the name of the Purchaser and/or its assigns to be held in
escrow pursuant to this Agreement and the Escrow Agreement; 1,750,000 of such   
shares to be held in escrow with respect to the Warrant Shares and the remainder
for the Underlying Shares.                                                      

  "Event of Default," shall have the meaning set forth in Section 5.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Execution Date" shall have the meaning set forth in Section 2.2(a)
hereof.                                                                         

        "GEM" means Global Emerging Markets, Ltd. with its registered address at
712 Fifth Avenue, 7th Floor, New York, NY 10019; Phone: 212-582-3400; Fax:      
212-265-4035.                                                                   

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   "GEMA" means GEM Advisors, Inc., with its registered address at 712
Fifth Avenue, 7th Floor, New York, NY 10019; Phone: 212-582-3400; Fax:          
212-265-4035.                                                                   

       "Indemnified Party" shall have the meaning set forth in Section 4.15(b)
hereof.                                                                         

       "Indemnifying Party"shall have the meaning set forth in Section 4.15(b)
hereof.                                                                         

"KGL" means Kaplan Gottbetter & Levenson, LLP.                  

      "Limitation on Conversion" shall have the meaning set forth in Section
4.18 hereof.                                                                    

    "Losses" shall have the meaning set forth in Section 4.15(a) hereof.

 "Material" shall mean having a financial consequence in excess of
$100,000.                                                                       

     "Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).                                                                         

 "NASD" means the National Association of Securities Dealers, Inc.

"Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R)            

   "Non-Edgar Filings" shall have the meaning set forth in Section 4.2
hereof.                                                                         

    "Notice of Conversion" shall have the meaning set forth in EXHIBIT D
annexed hereto.                                                                 

  "Notice of Exercise" shall have the meaning set forth in EXHIBIT D
annexed hereto.                                                                 

"Original Issue Date," shall have the meaning set forth in the  
Certificate of Designation.                                                     

"OTCBB" shall mean the NASD over-the-counter Bulletin Board(R). 

    "Per Share Market Value" of the Common Stock means on any particular
date (a) the last sale price of shares of Common Stock on such date or, if no   
such sale takes place on such date, the last sale price on the most recent prior
date, in each case as officially reported on the principal national securities  
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if the Common Stock is not then listed or admitted to trading on any national   
securities exchange, the closing bid price per share as reported by Nasdaq, or  
(c) if the Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Common Stock on such date as reported on 
the OTCBB or if there is no such price on such date, then the last bid price on 
the date nearest preceding such date, or (d) if the Common Stock is not quoted  
on the OTCBB, the closing bid price for a share of Common Stock on such date in 
the over-the-counter market as reported by the National Quotation Bureau        
Incorporated (or similar organization or agency succeeding to its functions of  
reporting prices) or if there is no such price on such date, then the last bid  
price on the date nearest preceding such date, or (e) if the Common Stock is no 

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longer publicly traded, the fair market value of a share of Common Stock as     
determined by an Appraiser (as defined in the Certificate of Designation)       
selected in good faith by the holders of a majority of the Series C Convertible 
Preferred Stock; provided, however, that the Company, after receipt of the      
determination by such Appraiser, shall have the right to select an additional   
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.                                      

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

        "Power of Attorney" means the power of attorney in the form of EXHIBIT F
annexed hereto.                                                                 

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

    "Purchase Price" shall have the meaning set forth in Section 2.1(b).

"Purchaser" shall have the meaning set forth in the introductory
paragraph.                                                                      

      "Registration Rights Agreement" means the agreement to be entered into
on the Execution Date, in the form of EXHIBIT C annexed hereto, setting forth   
the obligation of the Company with respect to registration of the Underlying    
Shares and the Warrant Shares.                                                  

    "Registration Statement" shall have the meaning set forth in Section
2.2(a) hereof.                                                                  

        "Required Approvals" shall have the meaning set forth in Section 3.1(f).

"Securities Act" means the Securities Act of 1933, as amended.  

  "Series C Preferred Stock" shall have the meaning set forth in the
recital.                                                                        

"Shares" shall have the meaning set forth in Section 2.1(a).    

     "Short Sale" shall have the meaning set forth in Section 4.26 hereof.

    "Special Escrow Agreement" shall mean the agreement, dated the dated
hereof, among the parties and the Escrow Agent, a copy of which is annexed as   
EXHIBIT I hereto.                                                               

     "Special Opinion" shall mean the opinion of Counsel to the Company, a
copy of which is annexed as EXHIBIT L hereto.                                   

       "Special Power of Attorney" shall mean the power of attorney, dated the
date hereof, a copy of which is annexed as EXHIBIT K hereto.                    

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       "Special Registration Rights Agreement" shall mean the agreement, dated
the date hereof, between the Purchaser and the Company, a copy of which is      
annexed as EXHIBIT J hereto.                                                    

  "Subsidiaries" shall have the meaning set forth in Section 3.1(a).

       "Termination Warrant" means the common stock purchase warrant issued to
the Purchaser and/or its assigns, in the form of EXHIBIT H annexed hereto,      
pursuant to which the Purchaser and/or its assigns shall have the right to      
acquire the number of Termination Warrant Shares set forth in SCHEDULE 1        
pursuant to Section 2.2(c) hereof.                                              

       "Termination Warrant Escrow Shares" means the certificates representing
two (2) times the number of shares of duly issued Termination Warrant Shares set
forth in SCHEDULE 1 in share denominations of ten thousand (10,000) shares,     
registered in the name of the Purchaser and/or its assigns to be held in escrow 
pursuant to this Agreement and the Special Escrow Agreement.                    

       "Termination Warrant Shares" means the shares of Common Stock for which
the Termination Warrant may be exercised in accordance with the terms hereof and
of the Termination Warrant.                                                     

    "Trading Day" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has 
been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or   
any stock exchange, a day on which the Common Stock is quoted in the            
over-the-counter market, as reported by the National Quotation Bureau           
Incorporated (or any similar organization or agency succeeding its functions of 
reporting prices).                                                              

 "Transaction Documents" means this Agreement and all exhibits and
schedules hereto and all other documents, instruments and writings required     
pursuant to this Agreement.                                                     

   "Underlying Shares" means the shares of Common Stock into which the
Shares are convertible in accordance with the terms hereof and the Certificate  
of Designation.                                                                 

  "Warrant" means the common stock purchase warrant(s) issued to the
Purchaser and/or its assigns, in the form of EXHIBIT B annexed hereto, pursuant 
to which the Purchaser and/or its assigns shall have the right to acquire       
1,750,000 shares of Common Stock.                                               

       "Warrant Shares" means the shares of Common Stock for which the Warrant
may be exercised in accordance with the terms hereof and of the Warrant.        

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ARTICLE II

 PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES

2.1 Purchase and Sale.                                          

           (a) Subject to the terms and conditions set forth herein, the
Company shall issue and sell and the Purchaser shall purchase an aggregate of   
Two Million Dollars ($2,000,000) of Series C Preferred Stock (the "Shares"). The
Series C Preferred Stock shall have the respective rights, preferences and      
privileges as set forth in the Certificate of Designation to be filed by the    
Company with the Secretary of State of Delaware prior to the Execution Date.    

           (b) The purchase price for each Share shall be $100 (the "Per
Share Consideration"). The Per Share Consideration multiplied by the number of  
Shares to be purchased by the Purchaser as set forth in SCHEDULE 1 is referred  
to as the "Purchase Price".                                                     

2.2 Registration Statement; Execution and Delivery of Documents.

            (a) As soon as practicable after the date on which the parties shall
have executed this Agreement (the "Execution Date"), but in no event more than  
ninety (90) calendar days after the Execution Date, the Company shall, in       
accordance with the terms hereof and the Registration Rights Agreement, file a  
duly completed registration statement on the appropriate form with the          
Commission to register the resale of the Underlying Shares and the Warrant      
Shares under the Securities Act (the "Registration Statement").                 

  (b) Simultaneously with the execution and delivery of this
Agreement,                                                                      

               (i)  the parties shall execute and deliver the (A) Registration
        Rights Agreement, (B) Escrow Agreement, (C) Special Registration
Rights Agreement, and (D) Special Escrow Agreement;;    

                (ii) the Company shall deliver to the Purchaser a certified copy
        of the Certificate of Designation as filed with the Secretary of
State of Delaware;                                      

               (iii) the Company shall execute and deliver to the Escrow Agent
          the (A) Warrant, (B) Termination Warrant, and (C) Special Power of
Attorney;                                               

               (iv)  the Company shall deliver to the Escrow Agent duly issued
  stock certificates registered in the name of the Purchaser
            representing the number of Shares as set forth in SCHEDULE 1 hereto,
    the Escrow Shares and the Termination Warrant Escrow Shares;

              (v)   the Company shall execute and deliver to the Purchaser a
          certificate of its President certifying that attached thereto is a
copy of resolutions duly adopted by the Board of        

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       Directors of the Company authorizing the Company to execute and
            deliver the Transaction Documents and to enter into the transactions
contemplated thereby; and                               

         (vi)  the Purchaser shall deliver to the Escrow Agent the
Purchase Price.                                         

      (c) If this Agreement is terminated for any reason pursuant to
Sections 5.1(a) or (b) hereof other than solely due to the Escrow Agent's       
failure to deliver the Purchase Price to the Company on the Closing Date or an  
Event of Default pursuant to Section 5.1 (c), then, within two (2) Business Days
from the date of termination, either the Company or the Purchaser shall notify  
the Escrow Agent of same, and                                                   

               (i) the Escrow Agent shall, within two (2) Business Days of its
receipt of such notice,                                 

       (A) return the Purchase Price to the Purchaser;

                   (B) deliver the Termination Warrant to the Purchaser, which
               the Purchaser shall retain together with any and all rights and
               privileges thereunder without any conditions or any obligations
to the Company.                                 

The Termination Warrant shall have the terms and conditions and be in the form  
of the Termination Warrant annexed as EXHIBIT H hereto. The Purchaser shall have
piggyback registration rights with respect to the Termination Warrant Shares    
pursuant to the terms of this Agreement, the Termination Warrant and the Special
Registration Rights Agreement; and                                              

              (C) return the certificates representing the number of
              Shares registered in the name of the Purchaser as set forth in
           SCHEDULE 1 hereto, the Warrant and the Escrow Shares to the
Company.                                        

2.3 The Closing.                                                

   (a) The closing of the purchase and sale of the Shares (the
"Closing") shall take place no later than five (5) Business Days after the      
Effective Date of the Registration Statement (the "Closing Date") at the offices
of Kaplan Gottbetter & Levenson, LLP, 630 Third Avenue, New York, NY 10017;     
provided, however, that the Closing may not occur later than one hundred fifty  
(150) days after the Execution Date (except if such 150th day is not a Business 
Day, then the next Business Day), unless the Purchaser agrees in writing in     
advance to an extension, which writing shall set forth the new Effective Date.  

(b) At the Closing,                                     

       (i) the Escrow Agent shall deliver to the Purchaser the
following:                                              

              (A) the certificates representing the number of Shares
                registered in the name of the Purchaser as set forth in SCHEDULE
1 hereto. The Shares shall have the             

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             respective rights, preferences and privileges as set forth in
               the Certificate of Designation annexed as EXHIBIT A hereto; and

                   (B) an original and duly executed Warrant registered in the
               name of the Purchaser and/or its assigns to purchase the number
                of shares of the Common Stock as set forth in SCHEDULE 1 hereto.
                The Warrant shall have the terms and conditions set forth in the
form of Warrant annexed as EXHIBIT B hereto;    

              (ii) the Company shall deliver to the Purchaser the following:

                    (A) a legal opinion of counsel to the Company, substantially
         in the form annexed as EXHIBIT G hereto, addressed to the
Purchaser and dated the Closing Date;           

                   (B) a certificate, dated the Closing Date and signed by the
              Secretary of the Company, certifying (A) that attached thereto
          are true, correct and complete copies of (1) the Company's
                articles or certificate of incorporation, as amended to the date
          thereof, (2) the Company's by-laws, as amended to the date
               thereof, (3) resolutions duly adopted by the Board of Directors
             of the Company authorizing the execution and delivery of this
                Agreement, the issuance and sale of the Shares, the Warrant, the
              Underlying Shares and the Warrant Shares, and the appointment,
        pursuant to Section 4.14 hereof, of the attorney-in-fact
                pursuant to a power of attorney in the form annexed as EXHIBIT F
              hereto (the "Attorney-in-Fact"), and (4) a certificate of good
            standing from the Secretary of State of Delaware and (B) the
   incumbency of the officer executing this Agreement;

               (C) a certificate of the Company's President, dated the
                Closing Date, certifying that the representations and warranties
           of the Company contained in Article III hereof are true and
         correct in all material respects on the Closing Date; and

                  (D) all other documents, instruments and writings required
                to have been delivered by the Company at or prior to the Closing
pursuant to this Agreement.                     

           (c) Upon receipt by the Purchaser of those items set forth in
Sections 2.3(b)(i) and (ii) above, the Escrow Agent shall deliver the following 
to the Company:                                                                 

                (i) the Purchase Price by wire transfer of immediately available
         funds pursuant to written wire transfer instructions delivered by
       the Company to the Escrow Agent at least five (5) Business Days
prior to the Closing Date;                              

               (ii) the Termination Warrant and the Termination Warrant Escrow
Shares; and                                             

               (iii) all documents, instruments, and writings required to have
           been delivered or necessary at or prior to Closing by the Purchaser
pursuant to this Agreement.                             

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               (d) The Escrow Agent shall retain and hold the Escrow Shares, all
of which shall be held in accordance with the terms of this Agreement, the      
Warrant and the Escrow Agreement.                                               

 ARTICLE III

REPRESENTATIONS AND WARRANTIES

  3.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the        
Purchaser, all of which shall survive the Closing:                              

               (a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the  
State of Delaware, with the requisite corporate power and authority to own and  
use its properties and assets and to carry on its business as currently         
conducted. The Company has no subsidiaries other than as set forth on SCHEDULE  
3.1(a) attached hereto (collectively, the "Subsidiaries"). Each of the          
Subsidiaries is a corporation, duly incorporated, validly existing and in good  
standing under the laws of the jurisdiction of its incorporation, with the full 
corporate power and authority to own and use its properties and assets and to   
carry on its business as currently conducted. Each of the Company and the       
Subsidiaries is duly qualified to do business and is in good standing as a      
foreign corporation in each jurisdiction in which the nature of the business    
conducted or property owned by it makes such qualification necessary, except    
where the failure to be so qualified or in good standing, as the case may be,   
would not, individually or in the aggregate, have a material adverse effect on  
the results of operations, assets, prospects, or financial condition of the     
Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").   

           (b) Authorization, Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions  
contemplated hereby and by each other Transaction Document and to otherwise to  
carry out its obligations hereunder and thereunder. The execution and delivery  
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby has  
been duly authorized by all necessary action on the part of the Company. Each of
this Agreement and each of the other Transaction Documents has been or will be  
duly executed by the Company and when delivered in accordance with the terms    
hereof or thereof will constitute the valid and binding obligation of the       
Company enforceable against the Company in accordance with its terms, except as 
such enforceability may be limited by applicable bankruptcy, insolvency,        
reorganization, moratorium, liquidation or similar laws relating to, or         
affecting generally the enforcement of, creditors' rights and remedies or by    
other equitable principles of general application.                              

        (c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth on SCHEDULE 3.1(c). No shares of the  
Series C Preferred Stock have been issued as of the date hereof. No shares of   
Common Stock are entitled to preemptive or similar rights, nor is any holder of 
the Common Stock entitled to preemptive or similar rights arising out of any    
agreement or understanding with the Company by virtue of this Agreement. Except 
as disclosed in SCHEDULE 3.1(c),                                                

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there are no outstanding options, warrants, script, rights to subscribe to,     
registration rights, calls or commitments of any character whatsoever relating  
to, or, except as a result of the purchase and sale of the Series C Preferred   
Stock hereunder, securities, rights or obligations convertible into or          
exchangeable for, or giving any person any right to subscribe for or acquire,   
any shares of Common Stock, or contracts, commitments, understandings, or       
arrangements by which the Company or any Subsidiary is or may become bound to   
issue additional shares of Common Stock, or securities or rights convertible or 
exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its respective Certificate of       
Incorporation, bylaws or other charter documents.                               

             (d) Issuance of Shares and Warrant. The Shares, the Warrant and
the Escrow Shares have ben duly and validly authorized for issuance, offer and  
sale pursuant to this Agreement and, when issued and delivered as provided      
hereunder against payment in accordance with the terms hereof, shall be valid   
and binding obligations of the Company enforceable in accordance with their     
respective terms. The Termination Warrant and the Termination Warrant Escrow    
Shares have been duly and validly authorized for issuance, offer and sale       
pursuant to this Agreement and constitute the valid and binding obligations of  
the Company enforceable in accordance with their respective terms. The Company  
has and at all times while the Shares and the Warrant are outstanding has and   
will continue to maintain an adequate reserve of shares of Common Stock to      
enable it to perform its obligations under this Agreement, the Certificate of   
Designation and the Warrant. When issued in accordance with the terms hereof,   
the Shares, the Warrant, the Termination Warrant, the Underlying Shares, the    
Warrant Shares, Termination Warrant Shares, the Escrow Shares, and the          
Termination Escrow Shares will be duly authorized, validly issued, fully paid   
and non-assessable. Except as set forth in SCHEDULE 3.1(d) hereto, there is no  
equity or equity equivalent security outstanding that is substantially similar  
to the Shares, including any security having a floating conversion price        
substantially similar to the Shares; provided, however, that nothing contained  
in this Section 3.1(d) shall be deemed to permit any equity or equity equivalent
security of the Company to provide for a floating conversion price, other than  
any security issued or that may be issued to the Purchaser or any of its        
respective Affiliates or assigns, including, without limitation, GEM and GEMA.  

               (e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the            
consummation by the Company of the transactions contemplated hereby and thereby 
do not and will not (i) conflict with or violate any provision of its           
Certificate of Incorporation or bylaws (each as amended through the date hereof)
or (ii) be subject to obtaining any of the consents referred to in Section      
3.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any      
rights of termination, amendment, acceleration or cancellation of, any          
agreement, indenture or instrument to which the Company is a party, or (iii)    
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the 
Company or its Subsidiaries is subject (including, but not limited to, those of 
other countries and the federal and state securities laws and regulations), or  
by which any property or asset of the Company or its Subsidiaries is bound or   
affected, except in the case of clause (ii), such conflicts, defaults,          
terminations, amendments, accelerations, cancellations and violations as would  
not, individually or in the aggregate, have a Material Adverse Effect. The      
business of the Company and its Subsidiaries is not being conducted in violation
of any law, ordinance or regulation of any governmental authority.              

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             (f) Consents and Approvals. Except as specifically set forth in
SCHEDULE 3.1(f), neither the Company nor any Subsidiary is required to obtain   
any consent, waiver, authorization or order of, or make any filing or           
registration with, any court or other federal, state, local or other            
governmental authority or other Person in connection with the execution,        
delivery and performance by the Company of this Agreement and each of the other 
Transaction Documents, except for (i) the filing of the Certificate of          
Designation with respect to the Series C Preferred Stock with the Secretary of  
State of Delaware, which filing shall be effected prior to the Closing Date, and
(ii) the filing of the Registration Statement relating to the Underlying Shares 
and Warrant Shares contemplated by the Registration Rights Agreement with the   
Commission, which shall be filed in the time period set forth in Section 2.2(a) 
(together with the consents, waivers, authorizations, orders, notices and       
filings referred to in SCHEDULE 3.1(f), the "Required Approvals").              

              (g) Litigation; Proceedings. Except as specifically disclosed in
SCHEDULE 3.1(g), there is no action, suit, notice of violation, proceeding or   
investigation pending or, to the best knowledge of the Company, threatened      
against or affecting the Company or any of its Subsidiaries or any of their     
respective properties before or by any court, governmental or administrative    
agency or regulatory authority (federal, state, county, local or foreign) which 
(i) relates to or challenges the legality, validity or enforceability of any of 
the Transaction Documents, the Shares, the Underlying Shares or the Warrant     
Shares, (ii) could, individually or in the aggregate, have a Material Adverse   
Effect or (iii) could, individually or in the aggregate, materially impair the  
ability of the Company to perform fully on a timely basis its obligations under 
the Transaction Documents.                                                      

          (h) No Default or Violation. Except as set forth in SCHEDULE
3.1(h) hereto, neither the Company nor any Subsidiary (i) is in default under or
in violation of any indenture, loan or credit agreement or any other agreement  
or instrument to which it is a party or by which it or any of its properties is 
bound, except such conflicts or defaults as do not have a Material Adverse      
Effect, (ii) is in violation of any order of any court, arbitrator or           
governmental body, except for such violations as do not have a Material Adverse 
Effect, or (iii) is in violation of any statute, rule or regulation of any      
governmental authority which could (individually or in the aggregate) (x)       
adversely affect the legality, validity or enforceability of this Agreement, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability or 
obligation to perform fully on a timely basis its obligations under this        
Agreement.                                                                      

            (i) Certain Fees. No fees or commission will be payable by the
Company to any investment banker, broker, placement agent or bank with respect  
to the consummation of the transactions contemplated hereby except as provided  
in Section 4.27 hereof.                                                         

             (j) Disclosure Documents. The Disclosure Documents are accurate
in all material respects and do not contain any untrue statement of a material  
fact or omit to state any material fact necessary in order to make the          
statements made therein, in light of the circumstances under which they were    
made, not misleading.                                                           

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             (k) Reporting Company. The Company's Common Stock is registered
under the Exchange Act, the Company is subject to the reporting requirements of 
Section 13 or Section 15(d) of the Exchange Act, and the Company is current in  
its reporting requirements.                                                     

The Purchaser acknowledges and agrees that the Company makes no representation  
or warranty with respect to the transactions contemplated hereby other than     
those specifically set forth in Section 3.1 hereof.                             

  3.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:                       

            (a) Organization; Authority. The Purchaser is a corporation or
limited partnership, as the case may be, duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its         
incorporation with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated hereby and by the    
other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The acquisition of the Shares and the Warrant to be purchased by
the Purchaser hereunder has been duly authorized by all necessary action on the 
part of the Purchaser. This Agreement has been duly executed and delivered by   
the Purchaser and constitutes the valid and legally binding obligation of the   
Purchaser, enforceable against it in accordance with its terms, except as such  
enforceability may be limited by applicable bankruptcy, insolvency,             
reorganization, moratorium or similar laws relating to, or affecting generally  
the enforcement of, creditors rights and remedies or by other general principles
of equity.                                                                      

              (b) Investment Intent. The Purchaser is acquiring the Shares and
the Warrant to be purchased by it hereunder, and will acquire the Underlying    
Shares and the Warrant Shares relating to such Shares and the Warrant for its   
own account for investment purposes only and not with a view to or for          
distributing or reselling such Shares or Underlying Shares or Warrant or Warrant
Shares or any part thereof or interest therein, without prejudice, however, to  
such Purchaser's right, subject to the provisions of this Agreement and the     
Registration Rights Agreement, at all times to sell or otherwise dispose of all 
or any part of such Shares or Underlying Shares or Warrant or Warrant Shares in 
compliance with applicable federal and state securities laws.                   

             (c) Purchaser Status. At the time the Purchaser was offered the
Shares to be acquired by it hereunder, it was and at the date hereof, it is an  
"accredited investor" as defined in Rule 501(a) under the Securities Act.       

         (d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and       
experience in business and financial matters so as to be capable of evaluating  
the merits and risks of an investment in the securities to be acquired by it    
hereunder, and has so evaluated the merits and risks of such investment.        

      (e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the securities  
to be acquired by it hereunder and, at the present time, is able to afford a    
complete loss of such investment.                                               

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               (f) Prohibited Transactions. The securities to be acquired by the
Purchaser hereunder are not being acquired, directly or indirectly, with the    
assets of any "employee benefit plan," within the meaning of Section 3(3) of the
Employment Retirement Income Security Act of 1974, as amended.                  

              (g) Access to Information. The Purchaser acknowledges receipt of
the Disclosure Documents and further acknowledges that it has been afforded (i) 
the opportunity to ask such questions as it has deemed necessary of, and to     
receive answers from, representatives of the Company concerning the terms and   
conditions of the securities offered hereunder and the merits and risks of      
investing in such securities; (ii) access to information about the Company and  
the Company's financial condition, results of operations, business, properties, 
management and prospects sufficient to enable it to evaluate its investment in  
such securities; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or       
expense that is necessary to make an informed investment decision with respect  
to the investment and to verify the accuracy and completeness of the information
contained in the Disclosure Documents.                                          

               (h) Reliance. The Purchaser understands and acknowledges that (i)
the Shares and the Warrant being offered and sold to it hereunder are being     
offered and sold without registration under the Securities Act in a private     
placement that is exempt from the registration provisions of the Securities Act 
under Section 4(2) of the Securities Act and (ii) the availability of such      
exemption depends in part on, and that the Company will rely upon the accuracy  
and truthfulness of, the foregoing representations and such Purchaser hereby    
consents to such reliance.                                                      

The Company acknowledges and agrees that the Purchaser makes no 
representations or warranties with respect to the transactions contemplated     
hereby other than those specifically set forth in this Section 3.2.             

ARTICLE IV

 OTHER AGREEMENTS OF THE PARTIES

   4.1 Manner of Offering. The Shares and the Warrant are being issued
pursuant to Rule 506 of Regulation D of the Securities Act. The Shares, the     
Warrant, the Underlying Shares and the Warrant Shares will bear restrictions on 
transfer, and will carry a restrictive legend with respect to the exemption from
registration under the Securities Act. The transfer and resale of the Shares,   
the Warrant, the Underlying Shares, and the Warrant Shares may be made only     
pursuant to registration under the Securities Act or an exemption from such     
registration.                                                                   

        4.2 Furnishing of Information. As long as the Purchaser owns any Shares,
the Warrant, Underlying Shares, Warrant Shares, Termination Warrant, or         
Termination Warrant Shares, the Company will furnish to the Purchaser, promptly 
after they have been prepared, its annual report and other reports and filings  
required by Section 13(a) or 15(d) of the Exchange Act that are not available on
EDGAR (the "Non-Edgar Filings").                                                

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       4.3 Notice of Certain Events. The Company shall, on a continuing basis,
(i) advise the Purchaser promptly after obtaining knowledge of, and, if         
requested by the Purchaser, confirm such advice in writing, of (A) the issuance 
by any state securities commission of any stop order suspending the             
qualification or exemption from qualification of the Shares, the Warrant, the   
Underlying Shares or the Warrant Shares, for offering or sale in any            
jurisdiction, or the initiation of any proceeding for such purpose by any state 
securities commission or other regulatory authority, or (B) any event that makes
any statement of a material fact made in the Disclosure Documents untrue or that
requires the making of any additions to or changes in the Disclosure Documents  
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, (ii) use its best efforts to prevent the   
issuance of any stop order or order suspending the qualification or exemption   
from qualification of the Shares, the Warrant, the Underlying Shares or the     
Warrant Shares under any state securities or Blue Sky laws, and (iii) if at any 
time any state securities commission or other regulatory authority shall issue  
an order suspending the qualification or exemption from qualification of the    
Shares, the Warrant, the Underlying Shares or the Warrant Shares under any such 
laws, and use its best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.                                                  

     4.4 Copies and Use of Disclosure Documents. The Company shall furnish
the Purchaser, without charge, as many copies of the Non-Edgar Filings and any  
amendments or supplements thereto as the Purchaser may reasonably request. The  
Company consents to the use of the Disclosure Documents and any amendments and  
supplements to any of them by the Purchaser in connection with resales of the   
Shares, the Warrant, the Termination Warrant, the Underlying Shares, the Warrant
Shares or the Termination Warrant Shares.                                       

       4.5 Modification to Disclosure Documents. If any event shall occur as a
result of which, in the reasonable judgment of the Company or the Purchaser, it 
becomes necessary or advisable to amend or supplement any of the Disclosure     
Documents in order to make the statements therein, in the light of the          
circumstances at the time such Disclosure Document(s) were delivered to the     
Purchaser, not misleading, or if it becomes necessary to amend or supplement any
of the Disclosure Documents to comply with applicable law, the Company shall    
promptly prepare an appropriate amendment or supplement to each such Document in
form and substance reasonably satisfactory to both the Purchaser and Company so 
that (i) as so amended or supplemented, each such Document will not include an  
untrue statement of material fact or omit to state a material fact necessary in 
order to make the statements therein, in the light of the circumstances existing
at the time it is delivered to the Purchaser, not misleading and (ii) the       
Disclosure Documents will comply with applicable law.                           

        4.6 Integration. The Company shall not and shall use its best efforts to
ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or 
otherwise negotiate in respect of any security (as defined in Section 2 of the  
Securities Act) that would be integrated with the offer or sale of the Shares,  
the Warrant, Underlying Shares, or the Warrant Shares in a manner that would    
require the registration under the Securities Act of the sale of the Shares or  
the Warrant to the Purchaser.                                                   

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        4.7 Furnishing of Rule 144A Materials. The Company shall, for so long as
any of the Shares, Warrant, Termination Warrant, Underlying Shares, Warrant     
Shares, or Termination Warrant Shares remains outstanding and during any period 
in which the Company is not subject to Section 13 or 15(d) of the Exchange's    
Act, make available to any registered holder of the Shares, Warrant, Termination
Warrant, Underlying Shares, Warrant Shares, or Termination Warrant Shares in    
connection with any sale thereof and any prospective purchaser of such Shares,  
Warrant, Termination Warrant, Underlying Shares, Warrant Shares, or Termination 
Warrant Shares from such Person, the following information in accordance with   
Rule 144A(d)(4) under the Securities Act: a brief statement of the nature of the
business of the Company and the products and services it offers and the         
Company's most recent audited balance sheet and profit and loss and retained    
earnings statements, and similar audited financial statements for such part of  
the two preceding fiscal years as the Company has been in operation.            

    4.8 Solicitation Materials. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Shares,      
Warrant, Underlying Shares or Warrant Shares other than the Disclosure Documents
and any amendments and supplements thereto prepared in compliance herewith or   
(ii) solicit any offer to buy or sell the Shares, Warrant, Underlying Shares or 
Warrant Shares by means of any form of general solicitation or advertising.     

     4.9 Subsequent Financial Statements. The Company shall furnish to the
Purchaser, promptly after filing with the Commission, a copy of all financial   
statements for any period subsequent to the period covered by the financial     
statements included in the Disclosure Documents until the full conversion of the
Shares and exercise of the Warrants.                                            

     4.10 Prohibition on Certain Actions. From the date hereof through the
Closing Date, the Company shall not and shall cause the Subsidiaries not to,    
without the prior written consent of the Purchaser, (i) amend its certificate or
articles of incorporation, by-laws or other charter documents so as to adversely
affect any rights of the Purchaser; (ii) split, combine or reclassify its       
outstanding capital stock; (iii) declare, authorize, set aside or pay any       
dividend or other distribution with respect to the Common Stock; (iv) redeem,   
repurchase or offer to repurchase or otherwise acquire shares of its Common     
Stock; or (v) enter into any agreement with respect to any of the foregoing.    

        4.11 Listing of Common Stock. The Company shall (a) use its best efforts
to maintain the listing of its Common Stock on the OTCBB or such other exchange 
on which the Common Stock is then listed until expiration of each of the periods
during which the Shares may be converted or the Warrant may be exercised and (b)
shall provide to the Purchaser evidence of such listing.                        

        4.12 Escrow. The Company and the Purchaser agree to execute and deliver,
simultaneously with the execution and delivery of this Agreement, the escrow    
agreement attached hereto and made part hereof as EXHIBIT E (the "Escrow        
Agreement").                                                                    

      4.13 Conversion and Exercise Procedures; Maintenance of Escrow Shares.
EXHIBIT D attached hereto and made a part hereof sets forth the procedures with 
respect to the conversion of the Shares and the exercise of the Warrant,        
including the forms of Notice of Conversion and Notice of Exercise to be        

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provided upon conversion or exercise, instructions as to the procedures for     
conversion or exercise, the form of legal opinion, if necessary, that shall be  
rendered to the Company and such other information and instructions as may be   
reasonably necessary to enable the Purchaser or its permitted transferee(s) to  
exercise the right of conversion or exercise smoothly and expeditiously. The    
Company agrees that, at any time the conversion price of the Shares is such that
the number of Escrow Shares with respect to the Shares is less than 200% of the 
number of shares of Common Stock that would be needed to satisfy full conversion
of all of the Shares given the then current conversion price (the "Full         
Conversion Shares"), upon ten (10) Business Days written notice of such         
circumstance to the Company by the Purchasers and/or Escrow Agent, the Company  
shall issue additional share certificates in the names of each of the Purchasers
in denominations of 10,000 shares, and deliver same to the Escrow Agent, such   
that the new number of Escrow Shares with respect to the Shares is equal to 200%
of the Full Conversion Shares.                                                  

     4.14 Attorney-in-Fact. To effectuate the terms and provisions of this
Agreement, the Certificate of Designation, the Escrow Agreement, and the        
Warrant, the Company hereby agrees to give a power of attorney as is evidenced  
by Exhibit F annexed hereto. All acts done under such power of attorney are     
hereby ratified and approved and neither the Attorney-in-Fact nor any designee  
or agent thereof shall be liable for any acts of commission or omission, for any
error of judgment or for any mistake of fact or law, as long as the             
Attorney-in-Fact is operating within the scope of the power of attorney and this
Agreement and its exhibits. The power of attorney, being coupled with an        
interest, shall be irrevocable while any of the Shares remain unconverted, any  
of the Warrant remains unexercised or any portion of this Agreement or the      
Escrow Agreement remains unsatisfied. In addition, the Company shall give the   
Attorney-in-Fact resolutions executed by the Board of Directors of the Company  
which authorize future issuances of the Underlying Shares for the Shares and the
Warrant Shares for the Warrant, and which resolutions state that they are       
irrevocable while any of the Shares remain unconverted, any of the Warrant      
remains unexercised or any portion of this Agreement or the Escrow Agreement    
remains unsatisfied.                                                            

4.15   Indemnification.                                         

(a) Indemnification                               

                (i) The Company shall, notwithstanding termination of this
        Agreement and without limitation as to time, indemnify and hold harmless
   GEM, GEMA and the Purchaser and its respective officers, directors,
       agents, employees and affiliates, each Person who controls GEM, GEMA or
        the Purchaser (within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act) (each such Person, a "Control Person")
     and the officers, directors, agents, employees and affiliates of each
       such Control Person, to the fullest extent permitted by applicable law,
        from and against any and all losses, claims, damages, liabilities, costs
   (including, without limitation, costs of preparation and attorneys'
     fees) and expenses (collectively, "Losses"), as incurred, arising out
of, or relating to, a breach or breaches of any representation, 
      warranty, covenant or agreement by the Company under this Agreement or
any other Transaction Document.                                 

          (ii) The Purchaser, severally and not jointly, shall
       notwithstanding termination of this Agreement and without limitation as
to time, indemnify and hold harmless the Company, its           

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      officers, directors, agents and employees, each Control Person and the
        officers, directors, agents and employees of each Control Person, to the
     fullest extent permitted by application law, from and against any and
    all Losses, as incurred, arising out of, or relating to, a breach or
      breaches of any representation, warranty, covenant or agreement by the
  Purchaser under this Agreement or the other Transaction Documents.

           (b) 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 promptly shall notify the      
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and 
the Indemnifying Party shall 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 proximately   
and materially adversely 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 to   
pay such fees and expenses; or (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 impeded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified    
Party shall have been advised by counsel that a 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 of the claim against the Indemnified Party but will 
retain the right to control the overall Proceedings out of which the claim arose
and such counsel employed by the Indemnified Party shall be at the expense of   
the Indemnifying Party). 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. 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.         

         All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (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 (10) Business Days of written    
notice thereof to the Indemnifying Party.                                       

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          No right of indemnification under this Section 4.15 shall be
available as to a particular Indemnified Party if there is a non-appealable     
final judicial determination that such Losses arise solely out of the negligence
or bad faith of such Indemnified Party in performing the obligations            
of such Indemnified Party under this Agreement or a breach by such Indemnified  
Party of its obligations under this Agreement.                                  

         (c) Contribution. If a claim for indemnification under this
Section 4.15(a) is unavailable to an Indemnified Party or is insufficient to    
hold such Indemnified Party harmless for any Losses in respect of which this    
Section 4.15 would apply by its terms (other than by reason of exceptions       
provided in this Section 4.15(c)), then each Indemnifying Party, in lieu of     
indemnifying such Indemnified Party, shall contribute to the amount paid or     
payable by such Indemnified Party as a result of such Losses in such proportion 
as is appropriate to reflect the relative benefits received by the Indemnifying 
Party on the one hand and the Indemnified Party on the other and the relative   
fault of the Indemnifying Party and Indemnified Party in connection with the    
actions 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 there was a judicial determination that such Losses arise in part out of
the negligence or bad faith of the Indemnified Party in performing the          
obligations of such Indemnified Party under this Agreement or the Indemnified   
Party's breach of its obligations under this Agreement. The amount paid or      
payable by a party as a result of any Losses shall be deemed to include any     
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.                                                        

            (d) Non-Exclusivity. The indemnity and contribution agreements
contained in this Section are in addition to any obligation or liability that   
the Indemnifying Parties may have to the Indemnified Parties.                   

     4.16 Exclusivity. Other than any equity or equity equivalent security
issued to GEM, GEMA, or any of their respective Affiliates, during the period   
commencing on the date of this Agreement and ending on the date that all of the 
Shares shall have been converted into shares of Common Stock in accordance with 
the terms and conditions of this Agreement, the Company shall not offer or issue
any equity or equity equivalent security (a) with a floating conversion price or
(b) at a price that is less than the Conversion Price (as defined in the        
Certificate of Designation) at the time of the closing of such offering;        
provided, however, that in the event the Company wants to close any equity      
related financing below the Fixed Conversion Price, then the Fixed Conversion   
Price will be reset to equal the price of the proposed equity financing, but in 
no event shall any proposed financing be priced below the then Floating         
Conversion Price.                                                               

       4.17 Blue Sky Qualification. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares and the Warrant      
Shares under the securities or Blue Sky laws of such jurisdictions as the       
Purchaser may reasonably request and shall continue such qualification at all   
times through the second anniversary of the Closing Date; provided, however,    
that neither the Company nor its Subsidiaries shall be required in connection   
therewith to qualify as a foreign corporation where they are not now so         
qualified or to take any action that would subject the Company to general       
service of                                                                      

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process in any such jurisdiction where it is not then so subject or subject the 
Company to any material tax in any such jurisdiction where it is not then so    
subject.                                                                        

     4.18 Purchaser's Ownership of Common Stock. In addition to and not in
lieu of the limitations on conversion set forth in the Certificate of           
Designation, the conversion and exercise rights of the Purchaser set forth in   
the Certificate of Designation and the Warrant, as applicable, shall be limited,
solely to the extent required, from time to time, such that, unless the         
Purchaser gives written notice 75 days in advance to the Company of the         
Purchaser's intention to exceed the Limitation on Conversion as defined herein, 
with respect to all or a specified amount of the Shares and the corresponding   
number of the Underlying Shares, in no instance shall the maximum number of     
shares of Common Stock which the Purchaser (singularly, together with any       
Persons who in the determination of the Purchaser, together with the Purchaser, 
constitute a group as defined in Rule 13d-5 of the Exchange Act) may receive in 
respect of any conversion of the Shares or exercise of the Warrant, exceed, at  
any one time, an amount equal to the remainder of (i) 4.99% of the then issued  
and outstanding shares of Common Stock of the Company following such conversion 
or exercise minus (ii) the number of shares of Common Stock of the Company then 
owned by the Purchaser (including any shares of Common Stock deemed beneficially
owned due to ownership of the Shares and Warrant) (the foregoing being herein   
referred to as the "Limitation on Conversion"); provided, however, that the     
Limitation on Conversion shall not apply to any forced or automatic conversion  
pursuant to this agreement or the Certificate of Designation; and provided,     
further that if the Purchaser shall have declared an Event of Default and, if a 
cure period is provided, the Company shall not have properly and fully cured    
such Event of Default within any such cure period, the provisions of this       
Section 4.18 shall be null and void from and after such date. The Company shall,
promptly upon its receipt of a Notice of Conversion tendered by the Purchaser   
(or its sole designee) for the Shares, as applicable, and upon its receipt of a 
Notice of Exercise under the terms of the Warrant, notify the Purchaser by      
telephone and by facsimile of the number of shares of Common Stock outstanding  
on such date and the number of Underlying Shares and Warrant Shares, as the case
may be, which would be issuable to the Purchaser (or its sole designee, as the  
case may be) if the conversion requested in such Notice of Conversion or        
exercise requested in such Notice of Exercise were effected in full, whereupon, 
in accordance with the Certificate of Designation and notwithstanding anything  
to the contrary set forth in the Warrant, the Purchaser may within one (1)      
Business Day of its receipt of the Company notice required by this Section 4.18 
by facsimile revoke such conversion or exercise to the extent (in whole or in   
part) that the Purchaser determines that such conversion or exercise would      
result in the ownership by the Purchaser of shares of Common Stock in excess of 
the Limitation on Conversion.                                                   

       4.19 Purchaser's Rights if Trading in Common Stock is Suspended. In the
event that at any time after the Closing and during the period when the         
Registration Statement is to remain effective under the Securities Act in       
accordance with the Registration Rights Agreement, trading in the shares of the 
Common Stock is suspended (and not reinstated within ten (10) Trading Days) on  
such stock exchange or market upon which the Common Stock is then listed for    
trading (other than as a result of the suspension of trading in securities on   
such market generally or temporary suspensions pending the release of material  
information), or the Common Stock is delisted from the OTCBB (and not reinstated
within ten (10) Trading Days), then, at the option of the Purchaser exercisable 
by giving written notice to the Company, the                                    

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Company shall redeem, as applicable, all of the Shares, Warrant, Underlying     
Shares and Warrant Shares owned by the Purchaser at an aggregate purchase price 
equal to the sum of:                                                            

               (i) the product of (1) the average Per Share Market Value for the
five (5) Trading Days immediately preceding (a) the day of such notice, (b) the 
date of payment in full of the repurchase price calculated under this Section   
4.19, or (c) the day when the Common Stock was suspended, delisted or deleted   
from trading, whichever is greater, multiplied by (2) the aggregate number of   
Underlying Shares and Warrant Shares owned by the Purchaser;                    

         (ii) the product of (A) the difference, but not below zero,
between (1) the average Per Share Market Value for the five (5) Trading Days    
immediately preceding (a) the day of such notice, (b) the date of payment in    
full of the repurchase price calculated under this Section 4.19, or (c) the day 
when the Common Stock was suspended, delisted or deleted from trading, whichever
is greater, and (2) the then-current conversion price of the Shares, multiplied 
by (B) the aggregate number of Underlying Shares issuable upon the conversion of
the Shares owned by the Purchaser;                                              

          (iii) the product of (A) the difference, but not below zero,
between (1) the average Per Share Market Value for the five (5) Trading Days    
immediately preceding (a) the day of such notice, (b) the date of payment in    
full of the repurchase price calculated under this Section 4.19, or (c) the day 
when the Common Stock was suspended, delisted or deleted from trading, whichever
is greater, and (2) the then-current exercise price of the Warrant, multiplied  
by (B) the aggregate number of Warrant Shares issuable upon exercise of the     
Warrant owned by the Purchaser; and                                             

          (iv) interest on such amounts set forth in (i) - (iii) above
accruing from the seventh (7th) day after such notice until the repurchase price
under this Section 4.19 is paid in full, at the rate of fifteen percent (20%)   
per annum.                                                                      

     4.20 No Violation of Applicable Law. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of the Shares, the Warrant,   
the Underlying Shares or the Warrant Shares otherwise required under this       
Agreement, the Certificate of Designation, the Warrant, or the Registration     
Rights Agreement would be prohibited by the relevant provisions of Delaware law,
such redemption shall be effected as soon as it is permitted under such law;    
provided, however, that interest payable by the Company with respect to any such
redemption shall accrue in accordance with Section 4.19.                        

   4.21 Redemption Restrictions. Notwithstanding any provision of this
Agreement to the contrary, if any redemption of the Shares, the Warrant,        
Underlying Shares or the Warrant Shares otherwise required under this Agreement,
the Certificate of Designation, the Warrant, or the Registration Rights         
Agreement would be prohibited in the absence of consent from any lender to the  
Company or any of the Subsidiaries, or by the holders of any class of securities
of the Company, the Company shall use its best efforts to obtain such consent as
promptly as practicable after any such redemption is required. Interest payable 
by the Company with respect to any such redemption shall accrue in accordance   
with Section 4.19 until such consent is obtained. Nothing contained in this     
Section 4.21 shall be construed as a waiver by the Purchaser                    

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of any rights they may have by virtue of any breach of any representation or    
warranty of the Company herein as to the absence of any requirement to obtain   
any such consent.                                                               

      4.22 No Other Registration Rights. During the period commencing on the
date hereof and ending on the Closing Date, the Company shall not file any      
registration statement that provides for the registration of shares of Common   
Stock to be sold by securityholders of the Company, other than the Purchaser    
and/or its respective Affiliates or assigns, without the prior written consent  
of the Purchaser or its assigns, provided, however, that the limitation on the  
right to file registration statements contained in this Section 4.22 shall not  
apply to registration statements relating solely to (i) employee benefit plans, 
notwithstanding the inclusion of a resale prospectus for securities received    
under any such employee benefit plan, or (ii) business combinations not         
otherwise prohibited by the terms of this Agreement or the other Transaction    
Documents.                                                                      

4.23 Merger or Consolidation. Until the earlier of (a) the full 
conversion of the Shares and (b) the Maturity Date of the Shares (as that term  
is defined in the Certificate of Designation), the Company and each Subsidiary  
will not, in a single transaction or a series of related transactions, (i)      
consolidate with or merge with or into any other Person, or (ii) permit any     
other Person to consolidate with or merge into it, unless (w) either (A) the    
Company shall be the survivor of such merger or consolidation or (B) the        
surviving Person shall expressly assume by supplemental agreement all of the    
obligations of the Company under the Shares and the Warrant and this Agreement; 
(x) immediately before and immediately after giving effect to such transactions 
(including any indebtedness incurred or anticipated to be incurred in connection
with the transactions), no Event of Default shall have occurred and be          
continuing; (y) if the Company is not the surviving entity, such surviving      
entity's common shares will be listed on either The New York Stock Exchange,    
American Stock Exchange, Nasdaq National Market or Nasdaq SmallCap Market, or   
the OTCBB on or prior to the closing of such transaction(s) and (z) the Company 
shall have delivered to Purchaser an officers' certificate and opinion of       
counsel, each stating that such consolidation, merger or transfer complies with 
this Agreement, that the surviving Person agrees to be bound thereby and that   
all conditions precedent in this Agreement relating to such transaction(s) have 
been satisfied.                                                                 

      4.24 Registration of Underlying Shares and Warrant Shares. Pursuant to
the terms of the Registration Rights Agreement between the Company and the      
Purchaser, the Company shall cause the Underlying Shares and Warrant Shares to  
be registered under the Securities Act, and so long as any of the Shares remain 
unconverted or any of the Warrant remain unexercised, the Company agrees to keep
such registration current with the Commission and with such states of the United
States as any of the holders of the Shares or the Warrant shall reasonably      
request in writing. All costs and expenses of registration shall be borne by the
Company.                                                                        

   4.25 Liquidated Damages. The Company understands and agrees that an
Event of Default as contained in this Agreement and/or any other Transaction    
Document will result in substantial economic loss to the Purchaser, which loss  
will be extremely difficult to calculate with precision. Therefore, if, for any 
reason, the Company fails to cure any Event of Default within the time, if any, 
given to cure such Event of Default, as compensation and liquidated damages for 
such default, and not as a penalty, the Company agrees to pay the Purchaser an  
amount obtained by multiplying the Purchase Price times two (2). The            

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Company shall, upon demand, pay the Purchaser such liquidated damages by wire   
transfer of immediately available funds to an account designated by the         
Purchaser. Nothing herein shall limit the right of the Purchaser to pursue      
actual damages (less the amount of any liquidated damages received pursuant to  
the foregoing) for the Company's failure to cure an Event of Default, consistent
with the terms of this Agreement. NOTWITHSTANDING ANYTHING TO THE CONTRARY      
CONTAINED IN THIS AGREEMENT, THE COMPANY'S OBLIGATIONS UNDER THIS SECTION SHALL 
SURVIVE ANY TERMINATION OF THIS AGREEMENT.                                      

4.26 Selling Restrictions; Short Sales.                         

             (a) The Purchaser shall not sell, on any day, Underlying Shares
and/or Warrant Shares which, in the aggregate for the Purchaser on such day,    
exceed fifteen percent (15%) of the average daily trading volume of the Common  
Stock for the previous five (5) Trading Days.                                   

            (b) The Purchaser agrees that it will not enter into any Short
Sales (as hereinafter defined) until the earlier to occur of the date that the  
Purchaser no longer owns the Shares and the Maturity Date. For purpose hereof, a
"Short Sale" shall mean a sale of Common Stock by the Purchaser that is marked  
as a short sale and that is made at a time when there is no equivalent          
offsetting long position in the Common Stock by the Purchaser. For the purposes 
of determining whether there is an equivalent offsetting long position in the   
Common Stock held by the Purchaser, shares of Common Stock issuable upon        
conversion of the Shares or exercise of the Warrant shall be deemed to be held  
long by the Purchaser with respect to the Underlying Shares and/or Warrant      
Shares for which a Notice of Conversion or Notice of Exercise, as appropriate,  
is delivered within two (2) Trading Days following the Trading Day that such    
short sale is entered into.                                                     

  4.27 Fees. The Company will pay the following fees and expenses in
connection with the transactions contemplated hereby and, except with respect to
the escrow agent fee and commission to GEM/GEMA, regardless of whether the      
transactions contemplated under this Agreement are closed or otherwise          
completed: (a) to KGL (i) $15,000 for document preparation fees; and (ii) all   
reasonable disbursements and expenses incurred by KGL;(b) $5,000 to the Escrow  
Agent for the escrow agent fee; and (c) a commission to GEM/GEMA equal to ten   
percent (10%) of the Purchase Price received by the Company. All fees and       
expenses will be paid at Closing and the Escrow Agent shall deduct such fees and
expenses directly from escrow.                                                  

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 ARTICLE V

 TERMINATION

        5.1 Termination by the Company or the Purchaser. This Agreement shall be
terminated as follows upon the occurrence of any of the following events (each  
an "Event of Default"):                                                         

(a) Automatically terminated prior to Closing if: 

            (i) there shall be in effect any statute, rule, law or
      regulation, including an amendment to Regulation D or an
         interpretive release promulgated or issued thereunder, that
              prohibits the consummation of the Closing or if the consummation
             of the Closing would violate any non-appealable final judgment,
    order, decree, ruling or injunction of any court of or
   governmental authority having competent jurisdiction;

                  (ii) the Closing shall not have occurred by the Closing Date
               except as a result of an Event of Default pursuant to Section 5.1
(c);                                              

              (iii) the Company's Common Stock is not registered under
Section 12 of the Exchange Act;                   

                  (iv) the Company is not current in its reporting obligations
under Section 13 or 15(d) of the Exchange Act;    

            (v) an event occurs prior to the Closing requiring the
         Company to report such event to the SEC on Form 8-K and not
          otherwise set forth in SCHEDULE 5.1, provided, however, such
               event shall only include the following items under Form 8-K: Item
             1; Item 2 to the extent that any event is reported under Item 2
               that involves a change in the nature of the Company's business or
             a change of control of the Company; Item 3; or Item 4 (provided
               further, that as to Item 4, only if the event requires disclosure
under Item 304 (a)(1)(iv) under Regulation S-B);  

          (vi) trading in the Common Stock has been suspended,
            delisted, or otherwise ceased by the Commission or the NASD or
          other exchange or the Nasdaq (whether the National Market or
         otherwise), except for any suspension of trading of limited
             duration solely to permit dissemination of material information
               regarding the Company, and not reinstated within ten (10) Trading
Days; or                                          

            (vii) the transfer agent for the Common Stock fails to
             deliver certificates for the shares of Common Stock as required
 by and by the date set forth in Section 2.2 hereof.

             (b) Prior to Closing by the Purchaser, by giving written notice
of such termination to the Company, if the Company has breached any             
representation, warranty, covenant or agreement                                 

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contained in this Agreement or the other Transaction Documents and such breach  
is not cured within five (5) Business Days following receipt by the Company of  
notice of such breach.                                                          

              (c) Prior to Closing by the Company, by giving written notice of
such termination to the Purchaser, if the Purchaser has breached any            
representation, warranty, covenant or agreement contained in this Agreement or  
the other Transaction Documents and such breach is not cured within five (5)    
Business Days following receipt by the Purchaser of notice of such breach.      

   5.2 Remedies. Notwithstanding anything else contained herein to the
contrary, if an Event of Default has occurred pursuant to Section 5.1, and only 
with respect to Section 5.1(b) has not been cured within the cure period        
provided for therein, the defaulting party shall be deemed in default hereof and
the non-defaulting party shall be entitled to pursue all available rights       
without further notice. The defaulting party shall pay all attorney's fees and  
costs incurred in enforcing this Agreement and the other Transaction Documents. 
In addition, all unpaid amounts shall accrue interest at a rate of 20% per      
annum.                                                                          

ARTICLE VI

LEGAL FEES AND DEFAULT INTEREST RATE

   In the event any party hereto commences legal action to enforce its
rights under this Agreement or any other Transaction Document, the              
non-prevailing party shall pay all reasonable costs and expenses (including but 
not limited to reasonable attorney's fees, accountant's fees, appraiser's fees  
and investigative fees) incurred in enforcing such rights. In the event of an   
uncured Event of Default by any party hereunder, interest shall accrue on all   
unpaid amounts due the aggrieved party at the rate of 20% per annum, compounded 
annually.                                                                       

 ARTICLE VII

 MISCELLANEOUS

        7.1 Fees and Expenses. Except as set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other 
experts, if any, and all other expenses incurred by such party incident to the  
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay the fees of the Escrow Agent and all stamp and other taxes
and duties levied in connection with the issuance of (a) the Shares and the     
Warrant (and, upon conversion or exercise thereof, the Underlying Shares and    
Warrant Shares) and (b) the termination Warrant (and, upon exercise thereof, the
Termination Warrant Shares) pursuant hereto. The Purchaser shall be responsible 
for any taxes payable by the Purchaser that may arise as a result of the        
investment hereunder or the transactions contemplated by this Agreement or any  
other Transaction Document. Whether or not the transactions contemplated hereby 
and thereby are consummated or this Agreement is terminated, the Company shall  
pay (i) all costs, expenses, fees and all taxes incident to and in connection   
with: (A) the preparation,                                                      

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printing and distribution of the Registration Statement and all amendments and  
supplements thereto (including, without limitation, financial statements and    
exhibits), and all preliminary and final Blue Sky memoranda and all other       
agreements, memoranda, correspondence and other documents prepared and delivered
in connection herewith, (B) the issuance and delivery of the Shares and the     
Warrant and, upon conversion or exercise thereof, the Underlying Shares and the 
Warrant Shares, (C) the exemption from registration of the Shares and the       
Warrant and, upon conversion or exercise thereof, the Underlying Shares and     
Warrant Shares for offer and sale to the Purchaser under the securities or Blue 
Sky laws of the applicable jurisdiction, (D) furnishing such copies of the      
Registration Statement, the preliminary and final prospectuses and all          
amendments and supplements thereto, as may reasonably be requested for use in   
connection with resales of the Shares and the Warrant and, upon conversion or   
exercise thereof, the Underlying Shares and the Warrant Shares, and (E) the     
preparation of certificates for the Shares and the Warrant and, upon conversion 
or exercise thereof, the Underlying Shares and Warrant Shares (including,       
without limitation, printing and engraving thereof), (ii) all fees and expenses 
of counsel and accountants of the Company and (iii) all expenses and fees of    
listing on securities exchanges, if any.                                        

      7.2 Entire Agreement; Amendments. This Agreement, together with all of
the Exhibits and Schedules annexed hereto, and any other Transaction Document   
contains the entire understanding of the parties with respect to the subject    
matter hereof and supersede all prior agreements and understandings, oral or    
written, with respect to such matters. This Agreement shall be deemed to have   
been drafted and negotiated by both parties hereto and no presumptions as to    
interpretation, construction or enforceability shall be made by or against      
either party in such regard.                                                    

       7.3 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly    
given upon facsimile transmission (with written transmission confirmation       
report) at the number designated below (if delivered on a Business Day during   
normal business hours where such notice is to be received), or the first        
Business Day following such delivery (if delivered other than on a Business Day 
during normal business hours where such notice is to be received) whichever     
shall first occur. The addresses for such communications shall be:              

If to the Company:     Asia Fiber Holdings Limited
                       Room 2105, 21/F, West Tower
           Shun Tak Centre
             200 Connaught Rd.
                 Sheung Wan, Hong Kong
                        Attn: Mr. Ching Lung Po, CEO
Tel:
Fax:

With copies to:        Loeb & Loeb LLP            
                    10100 Santa Monica Blvd.
      Suite 2200
                          Los Angeles, California  90067
                       Attn:  David Ficksman, Esq.

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                Tel:  (310) 282-2350
                Fax:  (310) 282-2192

   If to the Purchaser:   See SCHEDULE 1 attached hereto

      With copies to:        Kaplan Gottbetter & Levenson, LLP
            630 Third Avenue
                   New York, NY 10017-6705
                           Attn:  Adam S. Gottbetter, Esq.
                Tel:  (212) 983-6900
                Fax:  (212) 983-9210

      If to Escrow Agent:    Kaplan Gottbetter & Levenson, LLP
            630 Third Avenue
                   New York, NY 10017-6705
                           Attn:  Adam S. Gottbetter, Esq.
                Tel:  (212) 983-6900
                Fax:  (212) 983-9210

or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 7.3.                                                  

        7.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by  
both the Company and the Purchaser, or, in the case of a waiver, by the party   
against whom enforcement of any such waiver is sought. No waiver of any default 
with respect to any provision, condition or requirement of this Agreement shall 
be deemed to be a continuing waiver in the future or a waiver of any other      
provision, condition or requirement hereof, nor shall any delay or omission of  
either party to exercise any right hereunder in any manner impair the exercise  
of any such right accruing to it thereafter.                                    

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

    7.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and         
permitted assigns. The assignment by a party of this Agreement or any rights    
hereunder shall not affect the obligations of such party under this Agreement.  

    7.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and     
assigns and is not for the benefit of, nor may any provision hereof be enforced 
by, any other person.                                                           

7.8 Governing Law; Venue; Service of Process. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the        
exhibits hereto bear a reasonable relation to the State                         

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of New York. The parties hereto agree that the internal laws of the State of New
York shall govern this Agreement and the exhibits hereto, including, but not    
limited to, all issues related to usury. Any action to enforce the terms of this
Agreement or any of its exhibits shall be brought exclusively in the state      
and/or federal courts situate in the County and State of New York. Service of   
process in any action by Purchaser to enforce the terms of this Agreement may be
made by serving a copy of the summons and complaint, in addition to any other   
relevant documents, by commercial overnight courier to the Company at its       
principal address set forth in this Agreement.                                  

       7.9 Survival. The representations and warranties of the Company and the
Purchaser contained in Article III and the agreements and covenants of the      
parties contained in Article IV and this Article VII shall survive the Closing  
(or any earlier termination of this Agreement).                                 

     7.10 Counterpart Signatures. 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, such signature shall create a valid and    
binding obligation of the party executing (or on whose behalf such signature is 
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.                                                  

     7.11 Publicity. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with  
respect to the transactions contemplated hereby and neither party shall issue   
any such press release or otherwise make any such public statement without the  
prior written consent of the other, which consent shall not be unreasonably     
withheld or delayed, unless counsel for the disclosing party deems such public  
statement to be required by applicable federal and/or state securities laws.    
Except as otherwise required by applicable law or regulation, the Company will  
not disclose to any third party the names of the Purchaser.                     

    7.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and    
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute   
therefor, and upon so agreeing, shall incorporate such substitute provision in  
this Agreement.                                                                 

     7.13 Limitation of Remedies. With respect to claims by the Company or
any person acting by or through the Company for remedies at law or at equity    
relating to or arising out of a breach of this Agreement, liability, if any,    
shall, in no event, include loss of profits or incidental, indirect, exemplary, 
punitive, special or consequential damages of any kind.                         

 7.14 Omnibus Provision. Anything contained herein or in the other
Transaction Documents notwithstanding, in the event that the Common Stock ceases
to be listed for trading on the OTCBB, then any reference thereto in this       
Agreement or the other Transaction Documents shall be deemed to be a reference  
to (a) the principal national securities exchange on which the Common Stock is  
then listed or                                                                  

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admitted to trading, or (b) if the Common Stock is not then listed or admitted  
to trading on any national securities exchange, Nasdaq, or (c) if the Common    
Stock is not then listed or admitted to trading on Nasdaq, then the             
over-the-counter market reported by the National Quotation Bureau Incorporated  
(or similar organization or agency succeeding to its functions of reporting     
prices).                                                                        

[ SIGNATURE PAGE FOLLOWS ]

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

Company:  

                 ASIA FIBER HOLDINGS LIMITED

By:       
                               -----------------------------------
 Name:
  Title:

Purchaser:

                   GEM GLOBAL YIELD FUND LIMITED

By:       
                               -----------------------------------
 Name:
  Title:

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Schedule 1

Purchaser(s)

                                                        [Enlarge/Download Table]

                                                                   No. of      No. of Termination 
 Name and Address of Purchaser  Purchase Price  No. of Shares  Warrant Shares    Warrant Shares   
 -----------------------------  --------------  -------------  --------------  -------------------
                                                                                                  
GEM Global Yield Fund Limited    $2,000,000.00      20,000        1,750,000         500,000       
Hunkins Waterfront Plaza                                                                          
P.O. Box 556, Main Street                                                                         
Nevis, West Indies                                                                                
Tel:  44.171.355.2051                                                                             
Fax:  44.171.355.4975                                                                             


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 Schedule 3.1(a)

Subsidiaries

 Asia Fiber Holdings
 Limited
 (a US listed company)
 |
        |   100%
 |
Far Beyond
Investments Ltd.
 (a BVI company)
                                   |               Heilongjiang Longdi
                                 |                 Group Co., Ltd.
                    |   70%            /
                 |               /
                   Harbin Asibao      /        30%
    Chemical Fiber   /
Co., Ltd. 
 (a Sino-foreign JV)
 |
  - - - - - - - - - - - |- - - - - - - - - - - -
  |                      |                       |
  Polyester               Polyester              Polyester
Staple Fiber             Filament               Filament
      Plant               Plant No. 1            Plant No. 2

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 Schedule 3.1(c)

Capitalization and Registration Rights

 As of September 30, 2001, the capitalization of the Company is as
follows:                                                                        

                                                                [Download Table]


Preferred Stock (par value of US$0.01 each)                     
-------------------------------------------                     
                                                                
        Authorized:                            10,000,000 shares
        Issued and Outstanding:                Nil              

Common Stock (par value of US$0.01 each)                        
---------------------------------------                         
       Authorized:                             75,000,000 shares
       Issued and Outstanding:                 24,881,319 shares


Pursuant to certain registration rights agreement dated January 26, 2000, the   
Company has granted certain shareholders of the Company registration rights as  
set forth therein.                                                              

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 Schedule 3.1(d)

 Equity and Equity Equivalent Securities

There is no equity or equity equivalent security having a floating conversion   
price substantially similar to the Shares, other than any security to be issued 
to the Purchaser or any of its respective Affiliates.                           

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 Schedule 3.1(f)

Consents and Approvals

Neither the Company nor any Subsidiary is required to obtain any consent,       
waiver, authorization or order of, or make any filing or registration with, any 
court or other federal, state, local or other governmental authority or other   
Person in connection with the execution, delivery and performance by the Company
of this Agreement and each of the other Transaction Documents, except for (i)   
the filing of the Certificate of Designation with respect to the Series C       
Preferred Stock with the Secretary of State of Delaware, which filing shall be  
effected prior to the Closing Date, and (ii) the filing of the Registration     
Statement relating to the Underlying Shares and Warrants Shares contemplated by 
the Registration Rights Agreement with the Commission.                          

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 Schedule 3.1(g)

 Litigation and Claims

To the best of the Company's knowledge, there is no action suit, notice of      
violation, proceeding or investigation pending or threatened against or         
affecting the Company or any of its Subsidiaries or any of their respective     
properties.                                                                     

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 Schedule 3.1(h)

 Defaults and Violations

      7.15 Neither the Company nor any Subsidiary (i) is in default under or
in violation of any indenture, loan or credit agreement of any other agreement  
or instrument to which it is a party or by which it or any of its properties is 
bound, except such conflicts or defaults as not having a Material Adverse       
Effect, (ii) is in violation of any order of any court, arbitrator or government
body, except for such violations as not having a Material Adverse Effect, or    
(iii) is in violation of any status, rule or regulation of any governmental     
authority which could (individually or in the aggregate) (x) adversely affect   
the legality, validity or enforceability of this Agreement, (y) have a Material 
Adverse Effect, or (z) adversely impair the Company's ability or obligation to  
perform fully on a timely basis its obligations under this Agreement.           

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 EXHIBIT A

 CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
OF
SERIES C PREFERRED STOCK
OF
 ASIA FIBER HOLDINGS LIMITED

       Asia Fiber Holdings Limited, a corporation organized and existing under
the laws of the State of Delaware (the "Company"), hereby certifies that the    
following resolutions were adopted by the Board of Directors of the Company     
pursuant to the authority of the Board of Directors as required by Section 151  
of the Delaware General Corporation Law (the "DGCL").                           

     RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company (the "Board of Directors" or the "Board") in 
accordance with the provisions of its Certificate of Incorporation and Bylaws,  
each as amended through the date hereof, the Board of Directors hereby          
authorizes a series of the Company's previously authorized Preferred Stock, par 
value $.01 per share (the "Preferred Stock"), and hereby states the designation 
and number of shares, and fixes the relative rights, preferences, privileges,   
powers and restrictions thereof as follows:                                     

I. CERTAIN DEFINITIONS

      For purposes of this Certificate of Designation, capitalized terms are
defined in this Certificate of Designation or shall have the following meanings:

        "Common Stock" means the common stock of the Company, $.01 par value per
share.                                                                          

"Escrow Agent" means the Escrow Agent as defined in the Purchase
Agreement.                                                                      

      "Issuance Date" means the date of the Closing under the Agreement with
respect to the initial issuance of the Series C Preferred Stock.                

     "Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Over-The-Counter    
Bulletin Board, the OTC Bulletin Board(R) ("OTCBB") or other stock exchange on  
which the Common Stock has been listed or if there is no such price on such     
date, then the last bid price on such exchange on the date nearest preceding    
such date, or (b) if the Common Stock is not listed on OTCBB or any stock       
exchange, the closing bid price for a share of Common Stock in the              
over-the-counter market, as reported by the NASD at the close of business on    
such date, or (c) if the Common Stock is not quoted by the NASD, the closing bid
price for a share of Common Stock in the over-the-counter market as reported by 
the National Quotation Bureau Incorporated (or similar organization or agency   
succeeding to its functions of reporting prices), or (d) if the Common Stock is 
no longer publicly traded the fair market value of a share of Common Stock as   

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determined by an Appraiser (as defined in Section IV(c)(iv)) selected in good   
faith by the Holders of a majority of the outstanding Series C Preferred Stock; 
provided, however, that the Company, after receipt of the determination by such 
Appraiser, shall have the right to select an additional Appraiser, in which     
case, the fair market value shall be equal to the average of the determinations 
by each such Appraiser, in each case as reported by Bloomberg Financial Markets,
or if not available, a comparable reporting service chosen by the Company       
reasonably acceptable to the Holder of a majority of the outstanding shares of  
Series C Preferred Stock.                                                       

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

       "Purchase Agreement" is the Series C Preferred Stock Purchase Agreement
dated _____, 2001, by and among the Company and the purchaser set forth in      
Schedule 1 thereto (the "Purchaser").                                           

        "Trading Day" means (a) a day on which the Common Stock is quoted on the
OTCBB or principal stock exchange on which the Common Stock has been listed, or 
(b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day 
on which the Common Stock is quoted in the over-the-counter market, as reported 
by the National Association of Securities Dealers, Inc. ("NASD"), or (c) if the 
Common Stock is not quoted on the NASD, a day on which the Common Stock is      
quoted in the over-the-counter market as reported by the National Quotation     
Bureau Incorporated (or any similar organization or agency succeeding its       
functions of reporting prices).                                                 

II. DESIGNATION AND AMOUNT

      The designation of this series, which consists of ____________ (_____)
shares of Preferred Stock, is the Series C Preferred Stock (the "Series C       
Preferred Stock") and the stated value shall be One Hundred U.S. Dollars        
($100.00) per share (the "Stated Value").                                       

III. DIVIDENDS

      The holder of the shares of Series C Preferred Stock as they appear on
the stock records of the Company ("Holder" or "Holders") shall be entitled to   
receive, the Board of Directors shall be obligated to declare and the Company   
shall be obligated to pay, out of funds legally available for the payment of    
dividends, dividends in cash or (as provided herein) shares of Common Stock at  
the rate of two percent (2%) per annum (computed on the basis of a 360-day year)
(the "Dividend Rate") on the Stated Value of each share of Series C Preferred   
Stock on and as of the most recent Conversion Date (as defined below) with      
respect to each Dividend Period (as defined below). Dividends on the Series C   
Preferred Stock shall be cumulative from the Issuance Date.                     

     (a) Each dividend (other than the first dividend, which shall reflect
accrual only from the Issuance Date) shall be payable on each Conversion Date   
(as defined below), to the Holders of record of shares of the Series C Preferred
Stock, as they appear on the stock records of the Company at the close          

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of business on such Conversion Date. For the purposes hereof, "Dividend Period" 
means the period commencing on and including the day after the immediately      
preceding Conversion Date and ending on and including the immediately subsequent
Conversion Date.                                                                

       (b) The dividend shall be paid in (i) cash or (ii) through the issuance
of duly and validly authorized and issued, fully paid and non-assessable, shares
of Series C Preferred Stock valued at the Stated Value, or (iii) through the    
issuance of duly and validly authorized and issued, fully paid and              
non-assessable, shares of Common Stock valued at one hundred percent (100%) of  
the average of the three (3) lowest closing bid prices per share of the Common  
Stock during the thirty (30) Trading Days immediately preceding the Conversion  
Date; provided, however, that (i) there shall not have occurred and be          
continuing any Event of Default (as defined herein) and (ii) the Registration   
Statement (as defined herein) is effective on the date of payment.              

(c) So long as any shares of the Series C Preferred Stock are   
outstanding, no dividends, except as described in the next succeeding sentence, 
shall be declared or paid or set apart for payment on Pari Passu Securities (as 
defined herein) for any period unless full cumulative dividends required to be  
paid in cash have been or contemporaneously are declared and paid or declared   
and a sum sufficient for the payment thereof set apart for such payment on the  
Series C Preferred Stock for all Dividend Periods terminating on or prior to the
date of payment of the dividend on such class or series of Pari Passu           
Securities. When dividends are not paid in full or a sum sufficient for such    
payment is not set apart, as aforesaid, all dividends declared upon shares of   
the Series C Preferred Stock and all dividends declared upon any other class or 
series of Pari Passu Securities shall be declared ratably in proportion to the  
respective amounts of dividends accumulated and unpaid on the Series C Preferred
Stock and accumulated and unpaid on such Pari Passu Securities.                 

(d) So long as any shares of the Series C Preferred Stock are   
outstanding, no dividends shall be declared or paid or set apart for payment or 
other distribution declared or made upon Junior Securities (as defined herein), 
nor shall any Junior Securities be redeemed, purchased or otherwise acquired    
(other than a redemption, purchase or other acquisition of shares of Common     
Stock made for purposes of an employee incentive or benefit plan (including a   
stock option plan) of the Company or any subsidiary) for any consideration (or  
any moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Company, directly or indirectly, unless in 
each case (i) the full cumulative dividends required to be paid in cash on all  
outstanding shares of the Series C Preferred Stock and any other Pari Passu     
Securities shall have been paid or set apart for payment for all past Dividend  
Periods with respect to the Series C Preferred Stock and all past dividend      
periods with respect to such Pari Passu Securities, and (ii) sufficient funds   
shall have been paid or set apart for the payment of the dividend for the       
current Dividend Period with respect to the Series C Preferred Stock and the    
current dividend period with respect to such Pari Passu Securities.             

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IV. CONVERSION

(a) The outstanding shares of Series C Preferred Stock shall be 
convertible into shares of Common Stock at the Conversion Price as defined      
below, and subject to the Limitation on Conversion in Section 4.19 of the       
Purchase Agreement, at the option of the Holder in whole or in part, at any time
during the period of two and one half years commencing on the Issuance Date (the
"Holder Conversion Period"). Any conversion under this Section IV(a) shall be   
for a minimum Stated Value of $10,000.00 of Series C Preferred Stock. The Holder
shall effect conversions by surrendering the shares of Series C Preferred Stock 
(or such portions thereof) to be converted to the Company, together with the    
form of conversion notice attached hereto as Appendix I (the "Notice of         
Conversion") in the manner set forth in Section IV(i). Each Notice of Conversion
shall specify the Stated Value of Series C Preferred Stock to be converted, and 
the date on which such conversion is to be effected (the "Conversion Date").    
Except as provided herein, each Notice of Conversion, once given, shall be      
irrevocable. If the Holder is converting less than all of the Stated Value      
represented by a certificate for the Series C Preferred Stock(s) tendered by the
Holder in the Notice of Conversion, the Company shall deliver to the Escrow     
Agent a new Series C Preferred Stock certificate for such Stated Value as has   
not been converted within five (5) Business Days of the Company's receipt of the
original Series C Preferred Stock and Notice of Conversion. In the event that   
the Escrow Agent holds the Series C Preferred Stock on behalf of the Holder, the
Company agrees that in lieu of surrendering the Series C Preferred Stock upon   
every partial conversion, the Escrow Agent shall give the Company and the Holder
written notice of the amount of the Series C Preferred Stock left unconverted.  
Upon the entire conversion of the Series C Preferred Stock or the redemption of 
the Series C Preferred Stock, the Escrow Agent shall return the Series C        
Preferred Stock to the Company for cancellation.                                

        (b) Immediately subsequent to the Holder Conversion Period (the "Company
Conversion Date") for each share of Series C Preferred Stock that has not       
previously been converted, such share of Series C Preferred Stock shall be      
automatically convertible into shares of Common Stock at the Conversion Price;  
provided, however, that no shares of Series C Preferred Stock shall be converted
(i) unless the Company shall have duly reserved for issuance to the Holder a    
sufficient number of shares of Common Stock to issue upon such conversion or    
(ii) if an Event of Default shall have occurred hereunder and is continuing. In 
connection with such conversion, the Company shall deliver to the Holder of such
shares of Series C Preferred Stock a written notice in the form attached hereto 
as Appendix II (the "Company Conversion Notice"). The Company Conversion Notice 
shall specify the number of shares of Series C Preferred Stock that will be     
subject to automatic conversion on the Company Conversion Date. The Company     
shall deliver or cause to be delivered the Company Conversion Notice at least   
two (2) Business Days before the Company Conversion Date. The Holder of the     
Series C Preferred Stock shall surrender the certificates representing such     
shares at the office of the Company or the Escrow Agent not later than five (5) 
Business Days after the Company Conversion Date. Each of a Notice of Conversion 
and a Company Conversion Notice is sometimes referred to herein as a Notice of  
Conversion, and each of a Conversion Date and a Company Conversion Date is      
sometimes referred to herein as a Conversion Date.                              

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       (c) Not later than two (2) Business Days after the Conversion Date, the
Escrow Agent will deliver to the Holder (i) a certificate or certificates which 
shall be free of restrictive legends and trading restrictions, representing the 
number of shares of Common Stock being acquired upon the conversion of Series C 
Preferred Stock and (ii) once received from the Company, Series C Preferred     
Stock in principal amount equal to the principal amount of Series C Preferred   
Stock not converted; provided, however, that the Company shall not be obligated 
to issue certificates evidencing the shares of Common Stock issuable upon       
conversion of any Series C Preferred Stock until the Series C Preferred Stock   
are either delivered for conversion to the Escrow Agent or Company or any       
transfer agent for the Series C Preferred Stock or Common Stock, or the Holder  
notifies the Company that such Series C Preferred Stock have been lost, stolen  
or destroyed and provides an agreement reasonably acceptable to the Company to  
indemnify the Company from any loss incurred by it in connection therewith. In  
the case of a conversion pursuant to a Notice of Conversion, if such certificate
or certificates are not delivered by the date required under this Section IV(c),
the Holder shall be entitled by providing written notice to the Company at any  
time on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
Series C Preferred Stock tendered for conversion.                               

       (d) (i) The Conversion Price for each share of Series C Preferred Stock
in effect on any Conversion Date shall be the LESSER of (a) $4.00 or one hundred
twenty-five percent (125%) of the average of the closing bid price per share of 
the Common Stock during the five (5) Trading Days immediately preceding the     
Closing Date (the "Fixed Conversion Price") or (b) one hundred percent (100%) of
the average of the three (3) lowest closing bid prices per share of the Common  
Stock during the thirty (30) Trading Days immediately preceding the Conversion  
Date (the "Floating Conversion Price"). For purposes of determining the closing 
bid price on any day, reference shall be to the closing bid price for a share of
Common Stock on such date on the NASD OTC Bulletin Board, as reported on        
Bloomberg, L.P. (or similar organization or agency succeeding to its functions  
of reporting prices).                                                           

           (ii) If the Company, at any time while any Series C Preferred Stock
are outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Junior Securities payable in shares of its    
capital stock (whether payable in shares of its Common Stock or of capital stock
of any class), (b) subdivide outstanding shares of Common Stock into a larger   
number of shares, (c) combine outstanding shares of Common Stock into a smaller 
number of shares, or (d) issue by reclassification of shares of Common Stock any
shares of capital stock of the Company, the Fixed Conversion Price designated in
Section IV(d)(i) shall be multiplied by a fraction of which the numerator shall 
be the number of shares of Common Stock of the Company outstanding before such  
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section      
IV(d)(ii) shall become effective immediately after the record date for the      
determination of stockholders entitled to receive such dividend or distribution 
and shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.                                   

            (iii) If the Company, at any time while any Series C Preferred Stock
are outstanding, shall issue or sell shares of Common Stock, or options,        
warrants or other rights to subscribe for or purchase shares of Common Stock,   
(excluding shares of Common Stock issuable upon exercise of options, warrants or
conversion rights granted prior to the date hereof) and at a price per share    
less than the Per                                                               

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Share Market Value of Common Stock at the issue date mentioned below, the Fixed 
Conversion Price designated in Section IV(d)(i) shall be multiplied by a        
fraction, of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such 
rights or warrants plus the number of additional shares of Common Stock offered 
for subscription or purchase, and of which the numerator shall be the number of 
shares of Common Stock (excluding treasury shares, if any) outstanding on the   
date of issuance of such shares, options, warrants or rights plus the number of 
shares which the aggregate offering price of the total number of shares so      
offered would purchase at such Per Share Market Value. Such adjustment shall be 
made whenever such rights or warrants are issued, and shall become effective    
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted in an adjustment
in the Conversion Price designated in Section IV(d)(i) pursuant to this Section 
IV(d)(iii), if any such right or warrant shall expire and shall not have been   
exercised, the Fixed Conversion Price designated in Section IV(d)(i) shall      
immediately upon such expiration be recomputed and effective immediately upon   
such expiration be increased to the price which it would have been (but         
reflecting any other adjustments in the Conversion Price made pursuant to the   
provisions of this Article IV after the issuance of such rights or warrants) had
the adjustment of the Conversion Price made upon the issuance of such rights or 
warrants been made on the basis of offering for subscription or purchase only   
that number of shares of Common Stock actually purchased upon the exercise of   
such rights or warrants actually exercised.                                     

           (iv) If the Company, at any time while Series C Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to Holders
of Series C Preferred Stock) evidences of its indebtedness or assets or rights  
or warrants to subscribe for or purchase any security (excluding those referred 
to in Section IV(d)(iii) above) then in each such case the Conversion Price at  
which each Series C Preferred Stock shall thereafter be convertible shall be    
determined by multiplying the Fixed Conversion Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to receive  
such distribution by a fraction of which the denominator shall be the Per Share 
Market Value of Common Stock determined as of the record date mentioned above,  
and of which the numerator shall be such Per Share Market Value of the Common   
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however that in the event of a distribution exceeding  
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally recognized or major regional investment banking   
firm or firm of independent certified public accountants of recognized standing 
(which may be the firm that regularly examines the financial statements of the  
Company) (an "Appraiser") selected in good faith by the Holders of a majority of
the principal amount of the Series C Preferred Stock then outstanding; and      
provided, further, that the Company, after receipt of the determination by such 
Appraiser shall have the right to select an additional Appraiser, in which case 
the fair market value shall be equal to the average of the determinations by    
each such Appraiser. In either case the adjustments shall be described in a     
statement provided to the Holder and all other Holders of Series C Preferred    
Stock of the portion of assets or evidences of indebtedness so distributed or   
such subscription rights applicable to one share of Common Stock. Such          
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.                    

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       (v) All calculations under this Article IV shall be made to the
nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may  
be. Any calculation over .005 shall be rounded up to the next cent or share and 
any calculation less than .005 shall be rounded down to the previous cent or    
share.                                                                          

    (vi) In the event the Fixed Conversion Price is not adjusted
pursuant to Section IV(d)(ii), (iii), (iv), or (v), within two (2) Business Days
following the occurrence of an event described therein, the Holder shall have   
the right to require the Company to redeem all of the Holder's Series C         
Preferred Stock at 150% of the Stated Value of such Holder's Series C Preferred 
Stock and simultaneously pay such amount and all accrued and unpaid dividends to
the Holder pursuant to the written instructions provided by the Holder.         

         (vii) Whenever the Fixed Conversion Price is adjusted pursuant to
Section IV(d)(ii),(iii), (iv) or (v), or redeemed pursuant to Section IV(d)(vi),
the Company shall within two (2) days after the determination of the new Fixed  
Conversion Price mail and fax to the Holder and to each other Holder of Series C
Preferred Stock, a notice setting forth the Fixed Conversion Price after such   
adjustment and setting forth a brief statement of the facts requiring such      
adjustment.                                                                     

       (viii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or 
transfer of all or substantially all of the assets of the Company or any        
compulsory share exchange pursuant to which the Common Stock is converted into  
other securities, cash or property, then each holder of Series C Preferred Stock
then outstanding shall have the right thereafter to convert such Series C       
Preferred Stock only into the shares of stock and other securities and property 
receivable upon or deemed to be held by holders of Common Stock following such  
reclassification, consolidation, merger, sale, transfer or share exchange       
(except in the event the property is cash, then the Holder shall have the right 
to convert the Series C Preferred Stock and receive cash in the same manner as  
other stockholders), and the Holder shall be entitled upon such event to receive
such amount of securities or property as the shares of the Common Stock into    
which such Series C Preferred Stock could have been converted immediately prior 
to such reclassification, consolidation, merger, sale, transfer or share        
exchange would have been entitled. The terms of any such consolidation, merger, 
sale, transfer or share exchange shall include such terms so as to continue to  
give to the holder the right to receive the securities or property set forth in 
this Section IV(d)(viii) upon any conversion following such consolidation,      
merger, sale, transfer or share exchange. This provision shall similarly apply  
to successive reclassifications, consolidations, mergers, sales, transfers or   
share exchanges.                                                                

(ix) If:                                                

       (A)    the Company shall declare a dividend (or any other
 distribution) on its Common Stock; or

          (B)    the Company shall declare a special nonrecurring cash
               dividend on or a redemption of its Common Stock; or

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               (C)    the Company shall authorize the granting to all holders of
                   the Common Stock rights or warrants to subscribe for or
                   purchase any shares of capital stock of any class or of
any rights; or                      

             (D)    the approval of any stockholders of the Company shall be
                   required in connection with any reclassification of the
                    Common Stock of the Company (other than a subdivision or
                   combination of the outstanding shares of Common Stock),
                 any consolidation or merger to which the Company is a
                      party, any sale or transfer of all or substantially all of
              the assets of the Company, or any compulsory share
                     exchange whereby the Common Stock is converted into other
securities, cash or property; or    

             (E)    the Company shall authorize the voluntary or involuntary
                    dissolution, liquidation or winding-up of the affairs of
the Company;                        

then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Series C Preferred Stock, and shall cause to be    
mailed and faxed to the Holders of Series C Preferred Stock at their last       
addresses as it shall appear upon the Series C Preferred Stock Register, at     
least thirty (30) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be 
taken for the purpose of such dividend, distribution, redemption, rights or     
warrants, or if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distributions,          
redemption, rights or warrants are to be determined, or (y) the date on which   
such reclassification, consolidation, merger, sale, transfer, share exchange,   
dissolution, liquidation or winding-up is expected to become effective, and the 
date as of which it is expected that holders of Common Stock of record shall be 
entitled to exchange their shares of Common Stock for securities or other       
property deliverable upon such reclassification, consolidation, merger, sale,   
transfer, share exchange, dissolution, liquidation or winding-up; provided,     
however, that the failure to mail such notice or any defect therein or in the   
mailing thereof shall not affect the validity of the corporate action required  
to be specified in such notice.                                                 

(e) If at any time conditions shall arise by reason of action or
inaction taken by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which might materially
and adversely affect the rights of the Holders of Series C Preferred Stock      
(different than or distinguished from the effect generally on rights of holders 
of any class of the Company's capital stock), the Company shall, at least thirty
(30) calendar days prior to the effective date of such action, mail and fax a   
written notice to each Holder of Series C Preferred Stock briefly describing the
action contemplated and the material adverse effects of such action on the      
rights of such Holders and an Appraiser selected by the Holders of majority of  
the outstanding Series C Preferred Stock shall give its opinion as to the       
adjustment, if any (not inconsistent with the standards established in this     
Article IV), of the Fixed Conversion Price (including, if necessary, any        
adjustment as to the securities into which Series C Preferred Stock may         
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the Holders of Series C Preferred Stock;
provided, however, that the Company, after receipt of the determination by such 
Appraiser, shall have the right to select an                                    

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additional Appraiser, in which case the adjustment shall be equal to the average
of the adjustments recommended by each such Appraiser. The Board of Directors   
shall make the adjustment recommended forthwith upon the receipt of such opinion
or opinions or the taking of any such action contemplated, as the case may be;  
provided, however, that no such adjustment of the Fixed Conversion Price shall  
be made which in the opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Fixed Conversion Price to more than 
the Fixed Conversion Price then in effect.                                      

    (f) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Series C Preferred Stock as herein provided, free
from preemptive rights or any other actual contingent purchase rights of persons
other than the Holders of Series C Preferred Stock, such number of shares of    
Common Stock as shall be issuable (taking into account the adjustments and      
restrictions of Section IV(d) and Section IV(e) hereof) upon the conversion of  
the aggregate principal amount of all outstanding Series C Preferred Stock. The 
Company covenants that all shares of Common Stock that shall be so issuable     
shall, upon issue, be duly and validly authorized, issued and fully paid and    
nonassessable.                                                                  

 (g) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up  
to the nearest whole share. If a fractional share interest arises upon any      
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing Holder an additional full share of Common Stock.                     

(h) The issuance of certificates for shares of Common Stock on  
conversion of Series C Preferred Stock shall be made without charge to the      
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificate, provided that the Company shall   
not be required to pay any tax that may be payable in respect of any transfer   
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder and the Company shall not be required to   
issue or deliver such certificates unless or until the person or persons        
requesting the issuance thereof shall have paid to the Company the amount of    
such tax or shall have established to the satisfaction of the Company that such 
tax has been paid.                                                              

 (i) Series C Preferred Stock converted into Common Stock shall be
canceled upon conversion.                                                       

       (j) Each Notice of Conversion shall be given by facsimile to the Escrow
Agent no later than 4:00 pm New York Time. Upon receipt of such Notice of       
Conversion, the Escrow Agent shall forward such Notice of Conversion to the     
Company by facsimile by the end of the Business Day, on which received, assuming
received by 6:00 pm New York Time and if thereafter on the next Business Day, at
the facsimile telephone number and address of the principal place of business of
the Company. Each Company Notice of Conversion shall be given by facsimile      
addressed to each Holder of Series C Preferred Stock at the facsimile telephone 
number and address of such Holder appearing on the books of the Company as      
provided to the Company by such Holder for the purpose of such Company Notice of
Conversion, with a copy to the Escrow Agent. Any such notice shall be deemed    
given and effective upon the transmission of such facsimile at the facsimile    
telephone number specified in this Section IV(j) (with printed confirmation     

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of transmission). In the event that the Escrow Agent receives the Notice of     
Conversion after 4:00 p.m. New York Time, the Conversion Date shall be deemed to
be the next Business Day. In the event that the Company receives the Notice of  
Conversion after the end of the Business Day, notice will be deemed to have been
given the next Business Day.                                                    

 V. EVENTS OF DEFAULT AND REMEDIES

  (a) "Event of Default", wherever used herein, means any one of the
following events:                                                               

     (i) the Company shall fail to observe or perform any material
covenant, agreement or warranty contained in this Series C Preferred Stock      
Certificate of Designation, and such failure shall not have been remedied within
ten (10) Business Days after the date on which written notice of such failure   
shall have been given;                                                          

            (ii) the occurrence of any event or breach or default by the Company
under the Purchase Agreement or any other Transaction Document (as defined in   
the Purchase Agreement) and such failure or breach shall not have been remedied 
within the applicable cure period provided for therein, if any;                 

     (iii) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter in   
effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case 
is commenced against the Company under the Bankruptcy Code and the Company fails
to pursue dismissal of the case within sixty (60) days after commencement of the
case; or the Company commences any other proceeding under any reorganization,   
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or  
liquidation or similar law of any jurisdiction whether now or hereafter in      
effect relating to the Company or there is commenced against the Company any    
such proceeding and the Company fails to pursue dismissal of the case within    
sixty (60) days after commencement of the case; or the Company suffers any      
appointment of any custodian or the like for it or any substantial part of its  
property and the Company fails to pursue dismissal of the custodian within sixty
(60) days after the appointment; or the Company makes a general assignment for  
the benefit of creditors; or any corporate or other action is taken by the      
Company for the purpose of effecting any of the foregoing;                      

           (iv) the Company shall voluntarily have its Common Stock deleted or
delisted, as the case may be, from the OTCBB or other national securities       
exchange or market on which such Common Stock is listed for trading or suspended
from trading thereon, and shall not have its Common Stock relisted or have such 
suspension lifted, as the case may be, within twenty (20) Trading Days of such  
deletion or delisting;                                                          

        (v) notwithstanding anything herein to the contrary, the Company
shall fail to deliver to the Escrow Agent share certificates representing the   
shares of Common Stock to be issued upon conversion of the Series C Preferred   
Stock within ten (10) Business Days pursuant to written notice by the Escrow    
Agent to the Company that additional shares are required in escrow pursuant to  
Section 4.13 of the Purchase Agreement, Article 2 of the Escrow Agreement       
(annexed as Exhibit E to the Purchase Agreement), and Section IV(c) of this     
Series C Preferred Stock Certificate of Designation;                            

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       (vi) the Company shall issue a press release, or otherwise make
publicly known, that it is not honoring properly executed Notice of Conversions 
for any reason whatsoever;                                                      

    (vii) the Registration Statement which is the subject of the
Registration Rights Agreement annexed as Exhibit C to the Purchase Agreement is 
no longer effective as required under the Registration Rights Agreement and the 
Company does not take action to cause such Registration Statement to become     
effective within ten (10) Business Days of not being effective;                 

          (viii) the Company shall issue or enter into an agreement to issue
any equity or equity equivalent security with a floating conversion price       
substantially similar to the Series C Preferred Stock.                          

 (b) If any Event of Default occurs and continues, beyond any cure
period, if any, then so long as such Event of Default shall then be continuing  
any Holder may, by notice to the Company demand redemption of the Shares of     
Series C Preferred Stock at the Redemption Price (as defined herein), whereupon 
the Stated Value and all accrued but unpaid Dividends immediately due and       
payable, and such Holder may immediately and without expiration of any grace    
period enforce any and all of its rights and remedies hereunder and all other   
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by such Holder at any time prior to payment hereunder. No such     
rescission or annulment shall affect any subsequent Event of Default or impair  
any right consequent thereon. This shall include, but not be limited to the     
right to temporary, preliminary and permanent injunctive relief without the     
requirement of posting any bond or undertaking.                                 

       (c) Such Holder may thereupon proceed to protect and enforce its rights
either by suit in equity, or by action at law, or by other appropriate          
proceedings whether for the specific performance (to the extent permitted by    
law) of any covenant or agreement contained in this Series C Preferred Stock    
Certificate of Designation or in aid of the exercise of any power granted in    
this Series C Preferred Stock Certificate of Designation, and proceed to enforce
the redemption of any of the Series C Preferred Stock held by it, and to enforce
any other legal or equitable right of such Holder.                              

        (d) As a non-exclusive remedy, in the Event of a Default, the Holder can
convert the outstanding shares of Series C Preferred Stock at the lesser of the 
Fixed Conversion Price or the Floating Conversion Price upon giving a notice of 
conversion to the Company. The Company shall not have the right to object to the
conversion or the calculation of the applicable Conversion Price, and the Escrow
Agent shall release the shares of Common Stock from escrow upon notifying the   
Company of the conversion.                                                      

    (e) To effectuate the terms and provision of this Series C Preferred
Stock, the Holder may send notice of any default to the Company's               
attorney-in-fact (the "Attorney-in-Fact") as set forth herein and send a copy of
such notice to the Company and its counsel, simultaneously, and request the     
Attorney-in-Fact, to comply with the terms of this Series C Preferred Stock and 
Purchase Agreement and all agreements entered into pursuant to the Purchase     
Agreement on behalf of the Company.                                             

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VI. REDEMPTION

     (a) The shares of Series C Preferred Stock are redeemable at the sole
option of the Company prior to receipt of a Notice of Conversion (as provided in
Article IV hereof) to the extent funds are legally available therefor, at any   
time and from time to time in whole or in part at a redemption price equal to   
150% of the Stated Value of each share of Series C Preferred Stock being        
redeemed plus accrued and unpaid dividends ("Redemption Price"). The Company is 
not obligated to provide for redemption of the Series C Preferred Stock through 
a sinking fund.                                                                 

        (b) The Company shall not optionally redeem the Series C Preferred Stock
or any other Pari Passu Securities in whole or in part without redeeming, on a  
pro rata basis, all outstanding Pari Passu Securities in accordance with the    
relative amounts due the holders of Pari Passu Securities on redemption.        

  (c) Shares of Series C Preferred Stock which have been redeemed or
converted shall be deemed retired pursuant to Section 243 of the DGCL and shall 
thereafter resume the status of authorized and unissued shares of Preferred     
Stock, undesignated as to series, and may be redesignated and reissued as part  
of any new series of Preferred Stock other than Series C Preferred Stock.       

       (d) Notwithstanding the foregoing provisions of this Article VI, unless
the full cumulative dividends on all outstanding shares of Series C Preferred   
Stock shall have been paid or contemporaneously are declared and paid for all   
past dividend periods, none of the Series C Preferred Stock shall be redeemed   
unless all outstanding shares of Series C Preferred Stock are simultaneously    
redeemed.                                                                       

        (e) No redemption shall be made and no sum set aside for such redemption
unless at the time thereof (i) all accrued and unpaid dividends payable on any  
Senior Securities (as defined herein) have been paid in full, (ii) all required 
mandatory redemptions on Senior Securities have been made in full and (iii) all 
optional redemptions of Senior Securities, if any, previously declared, have    
been made in full. No redemption shall be made and no sum set aside for such    
redemption at any time that the terms or provisions of any indenture or         
agreement of the Company, including any agreement relating to indebtedness,     
specifically prohibits such redemption or setting aside or provides that such   
redemption or setting aside would constitute a breach or default thereunder     
(after notice or lapse of time or both), except with the written consent of the 
lender or other parties to said agreement as the case may be.                   

      (f) If any redemption shall at any time be prohibited by the DGCL, the
same shall be deferred until such time as the redemption can occur in full      
compliance with such statute.                                                   

      (g) In the event the Company shall redeem shares of Series C Preferred
Stock notice of such redemption shall be given by first class mail, postage     
prepaid, or by confirmed facsimile transmission, not less than seven (7)        
business days prior to the date fixed by the Board for redemption to each holder
of Series C Preferred Stock at the address that appears on the Company's stock  
record books; provided, however, that no failure to provide such notice nor any 
defect therein shall affect the validity of the redemption proceeding except as 
to the holder to whom the Company has failed to send such notice or whose notice
was defective. Each notice shall state (i) the redemption date, (ii) the number 
of shares of                                                                    

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Series C Preferred Stock to be redeemed; (iii) the Redemption Price; (iv) the   
place or places where certificates for shares of Series C Preferred Stock are to
be surrendered for payment and (v) that dividends on the redeemed shares shall  
cease to accrue on such redemption date. When notice has been provided as       
aforesaid then from and after the redemption date (unless default shall be made 
by the Company in providing money for the payment of the Redemption Price of the
shares called for redemption) dividends on the shares called for redemption     
shall cease to accrue and said shares shall no longer be deemed to be           
outstanding and all rights of the holders thereof shall cease (other than the   
right to receive the Redemption Price). Upon surrender of the certificates for  
Series C Preferred Stock accompanied by appropriate stock powers, the shares    
shall be redeemed by the Company at the Redemption Price. In case fewer than all
shares represented by any such certificate are redeemed, a new certificate      
representing the shares of Series C Preferred Stock not so redeemed shall be    
issued to the holder without cost.                                              

 VII. RANK

       The Series C Preferred Stock shall, as to dividends, redemptions, and
the distribution of assets upon liquidation, dissolution or winding up of the   
Company, rank (i) prior to the Company's Common Stock; (ii) prior to any class  
or series of capital stock of the Company hereafter created that, by its terms, 
ranks junior to the Series C Preferred Stock ("Junior Securities"); (iii) junior
to any class or series of capital stock of the Company hereafter created (with  
the consent of the holders of a majority of the outstanding Series C Preferred  
Stock) which by its terms ranks senior to the Series C Preferred Stock ("Senior 
Securities"); and (iv) pari passu with any other series of preferred stock of   
the Company hereafter created (with the consent of the holders of a majority of 
the outstanding Series C Preferred Stock) which by its terms ranks on a parity  
("Pari Passu Securities") with the Series C Preferred Stock.                    

VIII. LIQUIDATION PREFERENCE

     If the Company shall commence a voluntary case under the U.S. Federal
bankruptcy laws or any other applicable bankruptcy, insolvency or similar law,  
or consent to the entry of an order for relief in an involuntary case under any 
law or to the appointment of a receiver, liquidator, assignee, custodian,       
trustee, sequestrator (or other similar official) of the Company or of any      
substantial part of its property, or make an assignment for the benefit of its  
creditors, or admit in writing its inability to pay its debts generally as they 
become due, or if a decree or order for relief in respect of the Company shall  
be entered by a court having jurisdiction in the premises in an involuntary case
under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,      
insolvency or similar law resulting in the appointment of a receiver,           
liquidator, assignee, custodian, trustee, sequestrator (or other similar        
official) of the Company or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and any such decree or order shall
be unstayed and in effect for a period of 60 consecutive days and, on account of
any such event, the Company shall liquidate, dissolve or wind up, or if the     
Company shall otherwise liquidate, dissolve or wind up, including, but not      
limited to, the sale or transfer of all or substantially all of the Company's   
assets in one transaction or in a series of related transactions (a "Liquidation
Event"), no distribution shall be made to the holders of any shares of capital  
stock of the Company (other than Senior Securities and Pari Passu Securities)   
upon liquidation, dissolution or winding up unless prior thereto the Holders of 
shares of Series C Preferred Stock shall have received the Liquidation          
Preference with respect to each share. If, upon the                             

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occurrence of a Liquidation Event, the assets and funds available for           
distribution among the Holders of the Series C Preferred Stock and Holders of   
Pari Passu Securities shall be insufficient to permit the payment to such       
holders of the preferential amounts payable thereon, then the entire assets and 
funds of the Company legally available for distribution to the Series C         
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation Preference payable  
on each such share bears to the aggregate Liquidation Preference payable on all 
such shares. The purchase or redemption by the Company of stock of any class, in
any manner permitted by law, shall not, for the purposes hereof, be regarded as 
a liquidation, dissolution or winding up of the Company. Neither the            
consolidation or merger of the Company with or into any other entity nor the    
sale or transfer by the Company of less than substantially all of its assets    
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or   
winding up of the Company. The "Liquidation Preference" with respect to a share 
of Series C Preferred Stock means an amount equal to the Stated Value thereof,  
plus the accrued but unpaid dividends thereon through the date of final         
distribution. The Liquidation Preference with respect to any Pari Passu         
Securities shall be as set forth in the Certificate of Designation filed in     
respect thereof.                                                                

 IX. VOTING RIGHTS

The Holders of the Series C Preferred Stock have no voting power
whatsoever, except as otherwise provided by the DGCL. To the extent that under  
the DGCL the vote of the Holders of the Series C Preferred Stock, voting        
separately as a class or series, as applicable, is required to authorize a given
action of the Company, the affirmative vote or consent of the Holders of at     
least a majority of the then outstanding shares of the Series C Preferred Stock 
represented at a duly held meeting at which a quorum is present or by written   
consent of the Holders of at least a majority of the then outstanding shares of 
Series C Preferred Stock (except as otherwise may be required under the DGCL)   
shall constitute the approval of such action by the class. To the extent that   
under the DGCL Holders of the Series C Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series C Preferred Stock shall be entitled to a number of votes equal to the    
number of shares of Common Stock into which it is then convertible (subject to  
the limitations contained in Article IV) using the record date for the taking of
such vote of shareholders as the date as of which the Conversion Price is       
calculated.                                                                     

X. MISCELLANEOUS

       (a) If any shares of Series C Preferred Stock are converted pursuant to
Article IV, the shares so converted shall be canceled, shall return to the      
status of authorized, but unissued preferred stock of no designated series, and 
shall not be issuable by the Company as Series C Preferred Stock.               

   (b) Upon receipt by the Company of (i) evidence of the loss, theft,
destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in 
the case of loss, theft or destruction, of indemnity (without any bond or other 
security) reasonably satisfactory to the Company, or (z) in the case of         
mutilation, upon surrender and cancellation of the Preferred Stock              
certificate(s), the Company shall execute and deliver new Preferred Stock       
certificate(s) of like tenor and date. However, the Company shall not be        

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obligated to reissue such lost or stolen Preferred Stock certificate(s) if the  
Holder contemporaneously requests the Company to convert such Series C Preferred
Stock.                                                                          

     (c) Upon submission of a Notice of Conversion by a Holder of Series C
Preferred Stock, (i) the shares covered thereby shall be deemed converted into  
shares of Common Stock and (ii) the Holder's rights as a Holder of such         
converted shares of Series C Preferred Stock shall cease and terminate,         
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity  
to such Holder because of a failure by the Company to comply with the terms of  
this Certificate of Designation. Notwithstanding the foregoing, if a Holder has 
not received certificates for all shares of Common Stock prior to the tenth     
business day after the expiration of the Delivery Period with respect to a      
conversion of Series C Preferred Stock for any reason, then (unless the Holder  
otherwise elects to retain its status as a holder of Common Stock by so         
notifying the Company within five business days after the expiration of such 10 
business day period) the Holder shall regain the rights of a Holder of Series C 
Preferred Stock with respect to such unconverted shares of Series C Preferred   
Stock and the Company shall, as soon as practicable, return such unconverted    
shares to the Holder. In all cases, the Holder shall retain all of its rights   
and remedies for the Company's failure to convert Series C Preferred Stock.     

     (d) The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this           
Certificate of Designation, at law or in equity (including a decree of specific 
performance and/or other injunctive relief), and nothing herein shall limit a   
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Certificate of Designation. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the  
Holders of Series C Preferred Stock and that the remedy at law for any such     
breach may be inadequate. The Company therefore agrees, in the event of any such
breach or threatened breach, that the Holders of Series C Preferred Stock shall 
be entitled, in addition to all other available remedies, to an injunction      
restraining any breach, without the necessity of showing economic loss and      
without any bond or other security being required.                              

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  IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company this ___ day of _________, 2001.                          

                                       ASIA FIBER HOLDINGS LIMITED

                                              By: ______________________________
                         Name:
                          Title:

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APPENDIX I

NOTICE OF CONVERSION
 AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder                                        
in order to Convert the Series C Preferred Stock)                               

Except as provided by Article IV of the Series C Preferred Stock Certificate of 
Designation, the undersigned hereby irrevocably elects to convert the above     
Series C Preferred Stock certificate number(s) _______________ into shares of   
Common Stock, $.01 par value per share (the "Common Stock"), of Asia Fiber      
Holdings Limited (the "Company") according to the conditions hereof, as of the  
date written below. If shares are to be issued in the name of a person other    
than undersigned, the undersigned will pay all transfer taxes payable with      
respect thereto and is delivering herewith such certificates and opinions as    
reasonably requested by the Company in accordance therewith. No other fees will 
be charged to the Holder, except for such transfer taxes, if any. A fee of $350 
will be charged to the Company for any conversion by the Escrow Agent.          

Conversion calculations:                                                        

              ------------------------------------------------------------------
Date to Effect Conversion                           

              ------------------------------------------------------------------
              Stated Value of Shares of Series C Preferred Stock to be Converted

              ------------------------------------------------------------------
   Applicable Conversion Price (Pursuant to Article IV(d))

              ------------------------------------------------------------------
Number of Shares to be Issued Upon Conversion       

              ------------------------------------------------------------------
Signature                                           

              ------------------------------------------------------------------
Name                                                

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              ------------------------------------------------------------------
Address                                             

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 APPENDIX II

NOTICE OF AUTOMATIC CONVERSION

The undersigned in the name and on behalf of Asia Fiber Holdings Limited (the   
"Company") hereby notifies the addressee hereof that _________ shares of the    
Series C Preferred Stock held by the Holder will be converted into shares of    
Common Stock, par value $.01 per share (the "Common Stock"), of the Company     
according to the terms of the Series C Preferred Stock, as of the date written  
below. No other fees will be charged to the Holder except for such transfer     
taxes, if any which may be incurred by the Company if shares are to be issued in
the name of a person other than the person to whom this notice is addressed. A  
fee of $350.00 will be charged to the Company for any conversion by the Escrow  
Agent.                                                                          

Conversion calculations:                                                        

              ------------------------------------------------------------------
Date to Effect Conversion                           

              ------------------------------------------------------------------
        Number of shares of Series C Preferred Stock to be Converted

              ------------------------------------------------------------------
Applicable Conversion Price                         

              ------------------------------------------------------------------
Number of Shares of Common Stock to be Issued       

              ------------------------------------------------------------------
Signature                                           

              ------------------------------------------------------------------
Name                                                

              ------------------------------------------------------------------
Address                                             

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 EXHIBIT B

VOID AFTER 5:00 P.M., NEW YORK TIME ON _________, 2004
WARRANT TO PURCHASE 1,750,000 SHARES OF COMMON STOCK

WARRANT TO PURCHASE COMMON STOCK

OF

 ASIA FIBER HOLDINGS LIMITED

NEITHER THIS WARRANT NOR THE SECURITIES FOR 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 RULE 506 OF REGULATION D PROMULGATED UNDER THE U.S.          
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR OTHERWISE 
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE    
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE      
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE    
SECURITIES LAWS.                                                                

       FOR VALUE RECEIVED, ASIA FIBER HOLDINGS LIMITED, a Delaware corporation
(the "Company"), grants the following rights to GEM [ENTITY], with an office at 
[ADDRESS] and/or its assigns (the "Holder"):                                    

 ARTICLE 1. DEFINITIONS.

      Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Convertible Preferred Stock Purchase Agreement 
by and between the Company and the Holder and entered into on __________, 2001  
(the "Purchase Agreement"). As used in this Agreement, the following terms shall
have the following meanings:                                                    

"Corporate Office" shall mean the office of the Company (or its 
successor) at which at any particular time its principal business shall be      
administered.                                                                   

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 "Exercise Date" shall mean any date on which the Holder gives the
Company a Notice of Exercise in compliance with the terms of Exhibit D to the   
Purchase Agreement.                                                             

      "Exercise Price" shall mean the Fixed Price per share of Common Stock,
subject to adjustment as provided herein.                                       

       "Expiration Date" shall mean 5:00 p.m. (New York time) on ____________,
2004.                                                                           

"Fixed Price" shall mean US$.01.                                

      "SEC" shall mean the United States Securities and Exchange Commission.

        "Warrant Shares" shall mean the shares of the Common Stock issuable upon
exercise of this Warrant.                                                       

 ARTICLE 2. EXERCISE AND AGREEMENTS.

 2.1 Exercise of Warrant. This Warrant shall entitle the Holder to
purchase, at the Exercise Price, 1,750,000 shares of Common Stock. This Warrant 
shall be exercisable at any time and from time to time from the date hereof and 
prior to the Expiration Date (the "Exercise Period"). This Warrant and the right
to purchase Warrant Shares hereunder shall expire and become void on the        
Expiration Date.                                                                

2.2 Manner of Exercise.                                         

     (a) The Holder may exercise this Warrant at any time and from time to
time during the Exercise Period, in whole or in part (but not in denominations  
of fewer than 10,000 Warrant Shares, except upon an exercise of this Warrant    
with respect to the remaining balance of Warrant Shares purchasable hereunder at
the time of exercise), by delivering to the Escrow Agent pursuant to the Escrow 
Agreement incorporated herein by reference (i) a duly executed Notice of        
Exercise in substantially the form attached as Appendix I hereto, (ii) the      
certificate representing the Warrants, (iii) a bank cashier's or certified check
for the aggregate Exercise Price of the Warrant Shares being purchased, and (iv)
a bank cashier's or certified check or wire transfer of $350 to the Escrow Agent
for the exercise fee pursuant to the Escrow Agreement.                          

 (b) The Holder may, at its option, in lieu of paying cash for the
Warrant Shares, exercise this Warrant by an exchange, in whole or in part (a    
"Warrant Exchange"), by delivery to the Escrow Agent of (i) a duly executed     
Notice of Exercise electing a Warrant Exchange, (ii) the certificate            
representing this Warrant, and (iii) a bank cashier's or certified check or wire
transfer for $350 to the Escrow Agent as and for the exercise fee pursuant to   
the Escrow Agreement. In connection with any Warrant Exchange, the Holder shall 
be deemed to surrender or exchange for the total number of Warrant Shares to be 
issued to it, the quotient obtained by dividing (A) the product of the total    
number of Warrant Shares for which the Warrant is then being exercised and the  
Exercise Price, by (B) the average Per Share Market Value of a share of Common  
Stock for the ten (10) Trading Days ending on the Exercise Date.                

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        2.3 Termination. All rights of the Holder in this Warrant, to the extent
they have not been exercised, shall terminate on the Expiration Date.           

   2.4 No Rights Prior to Exercise. This Warrant shall not entitle the
Holder to any voting or other rights as a stockholder of the Company.           

  2.5 Fractional Shares. No fractional shares shall be issuable upon
exercise of this Warrant, and the number of Warrant Shares to be issued shall be
rounded up to the nearest whole number. If, upon exercise of this Warrant, the  
Holder hereof would be entitled to receive any fractional share, the Company    
shall issue to the Holder one additional share of Common Stock in lieu of such  
fractional share.                                                               

        2.6 Escrow. The Company agrees to enter into the Escrow Agreement and to
deposit with the Escrow Agent thereunder stock certificates registered in the   
name of the Holder and each representing a number of shares of Common Stock (in 
denominations of 10,000 shares) equal, in the aggregate, to the total number of 
Warrant Shares for which this Warrant is exercisable, assuming exercise of this 
Warrant in full on the date hereof. The Company shall deposit additional        
certificates for Warrant Shares upon request by the escrow Agent pursuant to the
Escrow Agreement.                                                               

2.7 Adjustments to Exercise Price and Number of Securities.     

        (a) Computation of Adjusted Exercise Price. In case the Company shall at
any time after the date hereof issue or sell any shares of Common Stock (other  
than the issuances or sales referred to in Section 2.7 (f) hereof), including   
shares held in the Company's treasury and shares of Common Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of Common   
Stock and shares of Common Stock issued upon the direct or indirect conversion  
or exchange of securities for shares of Common Stock (excluding shares of Common
Stock issuable upon exercise of options, warrants or conversion rights granted  
as of the date hereof), for a consideration per share less than the Exercise    
Price on the date immediately prior to the issuance or sale of such shares, or  
without consideration, then forthwith upon such issuance or sale, the Exercise  
Price shall (until another such issuance or sale) be reduced to the price equal 
to the quotient derived by dividing (A) an amount equal to the sum of (X) the   
product of (a) the Exercise Price on the date immediately prior to the issuance 
or sale of such shares, multiplied by (b) the total number of shares of Common  
Stock outstanding immediately prior to such issuance or sale plus, (Y) the      
aggregate of the amount of all consideration, if any, received by the Company   
upon such issuance or sale, by (B) the total number of shares of Common Stock   
outstanding immediately after such issuance or sale; provided, however, that in 
no event shall the Exercise Price be adjusted pursuant to this computation to an
amount in excess of the Exercise Price in effect immediately prior to such      
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 2.7 (c) hereof.                                   

      For the purposes of any computation to be made in accordance with this
Section 2.7(a), the following provisions shall be applicable:                   

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               (i) In case of the issuance or sale of shares of Common Stock for
      a consideration part or all of which shall be cash, the amount of cash
        consideration therefor shall be deemed to be the amount of cash received
 by the Company for such shares (or, if shares of Common Stock are
      offered by the Company for subscription, the subscription price, or if
      either of such securities shall be sold to underwriters or dealers for
   public offering without a subscription offering, the initial public
   offering price) before deducting therefrom any compensation paid or
 discount allowed in the sale, underwriting or purchase thereof by
     underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.                      

       (ii) In case of the issuance or sale (otherwise than as a
        dividend or other distribution on any stock of the Company) of shares of
    Common Stock for a consideration part or all of which shall be other
   than cash, the amount of the consideration therefor other than cash
      shall be deemed to be the value of such consideration as determined in
good faith by the Board of Directors of the Company.            

               (iii) Shares of Common Stock issuable by way of dividend or other
     distribution on any stock of the Company shall be deemed to have been
     issued immediately after the opening of business on the day following
 the record date for the determination of stockholders entitled to
       receive such dividend or other distribution and shall be deemed to have
been issued without consideration.                              

               (iv) The reclassification of securities of the Company other than
     shares of the Common Stock into securities including shares of Common
      Stock shall be deemed to involve the issuance of such shares of Common
        Stock for a consideration other than cash immediately prior to the close
       of business on the date fixed for the determination of security holders
   entitled to receive such shares, and the value of the consideration
        allocable to such shares of Common Stock shall be determined as provided
in subsection (ii) of this Section 2.7(a).                      

      (v) The number of shares of Common Stock at any one time
  outstanding shall include the aggregate number of shares issued or
        issuable (subject to readjustment upon the actual issuance thereof) upon
    the exercise of options, rights, warrants and upon the conversion or
      exchange of convertible or exchangeable securities; provided, however,
   that shares issuable upon the exercise of the Warrants shall not be
included in such calculation.                                   

(b) Options, Rights, Warrants and Convertible and Exchangeable  
Securities. In case the Company shall at any time after the date hereof issue   
options, rights or warrants to subscribe for shares of Common Stock, or issue   
any securities convertible into or exchangeable for shares of Common Stock, for 
a consideration per share less than the Exercise Price immediately prior to the 
issuance of such options, rights or warrants (excluding shares of Common Stock  
issuable upon exercise of options, warrants or conversion rights granted as of  
the date hereof and shares of Common Stock issuable upon exercise of stock      
options at or above the closing market price per share of Common Stock under any
stock option plan of the Company), or such convertible or exchangeable          
securities, or without consideration, the Exercise Price in effect immediately  
prior to the issuance of such options, rights or warrants, or such              

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convertible or exchangeable securities, as the case may be, shall be reduced to 
a price determined by making a computation in accordance with the provision of  
Section 2.7(a) hereof, provided that:                                           

            (i) The aggregate maximum number of shares of Common Stock, as
      the case may be, issuable under such options, rights or warrants shall
       be deemed to be issued and outstanding at the time such options, rights
       or warranties were issued, and for a consideration equal to the minimum
purchase price per share provided for in such options, rights or
       warrants at the time of issuance, plus the consideration (determined in
        the same manner as consideration received on the issue or sale of shares
      in accordance with the terms of the Warrants), if any, received by the
Company for such options, rights or warrants.                   

         (ii) The aggregate maximum number of shares of Common Stock
       issuable upon conversion or exchange of any convertible or exchangeable
      securities shall be deemed to be issued and outstanding at the time of
 issuance of such securities, and for a consideration equal to the
      consideration (determined in the same manner as consideration received
     on the issue or sale of shares of Common Stock in accordance with the
        terms of the Warrants) received by the Company for such securities, plus
     the minimum consideration, if any, receivable by the Company upon the
conversion or exchange thereof.                                 

             (iii) If any change shall occur in the price per share provided
       for in any of the options, rights or warrants referred to in subsection
(a) of this Section 2.7, or in the price per share at which the 
securities referred to in subsection (b) of this Section 2.7 are
convertible or exchangeable, such options, rights or warrants or
     conversion or exchange rights, as the case may be, shall be deemed to
    have expired or terminated on the date when such price change became
     effective in respect of shares not theretofore issued pursuant to the
    exercise or conversion or exchange thereof, and the Company shall be
       deemed to have issued upon such date new options, rights or warrants or
     convertible or exchangeable securities at the new price in respect of
       the number of shares issuable upon the exercise of such options, rights
or warrants or the conversion or exchange of such convertible or
exchangeable securities.                                        

               (iv) If any options, rights or warrants referred to in subsection
      (a) of this Section 2.7, or any convertible or exchangeable securities
      referred to in subsection (b) of this Section 2.7, expire or terminate
     without exercise or conversion, as the case may be, then the Exercise
    Price of the remaining outstanding Warrant shall be readjusted as if
such options, rights or warrants or convertible or exchangeable 
securities, as the case may be, had never been issued.          

      (c) Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price 
shall forthwith be proportionately decreased in the case of subdivision or      
increased in the case of combination.                                           

   (d) Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 2.7, the number of    
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to  
the nearest whole number by multiplying a number equal to the Exercise Price    

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in effect immediately prior to such adjustment by the number of Warrant Shares  
issuable upon exercise of the Warrants immediately prior to such adjustment and 
dividing the product so obtained by the adjusted Exercise Price.                

        (e) Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another     
corporation (other than a consolidation or merger which does not result in any  
reclassification or change of the outstanding Common Stock), the corporation    
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the Holder of each Warrant then   
outstanding or to be outstanding shall have the right thereafter (until the     
expiration of such Warrant) to receive, upon exercise of such Warrant, the kind 
and amount of shares of stock and other securities and property (except in the  
event the property is cash, then the Holder shall have the right to exercise the
Warrant and receive cash in the same manner as other stockholders) receivable   
upon such consolidation or merger, by a holder of the number of shares of Common
Stock of the Company for which such warrant might have been exercised           
immediately prior to such consolidation, merger, sale or transfer. Such         
supplemental warrant agreement shall provide for adjustments which shall be     
identical to the adjustments provided in Section 2.7. The foregoing provisions  
of this paragraph (e) shall similarly apply to successive consolidations or     
mergers.                                                                        

      (f) No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made upon the issuance of Warrant Shares upon       
conversion of the Shares or this Warrant, or upon the exercise of any options,  
rights, or warrants outstanding as of the date of the Purchase Agreement and    
disclosed in Section 3.1(c) therein.                                            

    (g) Dividends and Other Distributions. In the event that the Company
shall at any time prior to the exercise of all Warrants declare a dividend      
(other than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of       
indebtedness, securities (other than shares of Common Stock), whether issued by 
the Company or by another, or any other thing of value, the Holders of the      
unexercised Warrants shall thereafter be entitled, in addition to the shares of 
Common Stock or other securities and property receivable upon the exercise      
thereof, to receive, upon the exercise of such Warrants, the same property,     
assets, rights, evidences of indebtedness, securities or any other thing of     
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such 
dividend or distribution. At the time of any such dividend or distribution, the 
Company shall make appropriate reserves to ensure the timely performance of the 
provisions of this subsection 2.7 (g). Nothing contained herein shall provide   
for the receipt or accrual by a Holder of cash dividends prior to the exercise  
by such Holder of the Warrants.                                                 

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ARTICLE 3. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE COMPANY

      3.1 Representations and Warranties. In addition to the representations
and warranties contained in Article 3.1 of the Purchase Agreement, the Company  
hereby represents and warrants to the Holder as follows:                        

    (a) All shares which may be issued upon the exercise of the purchase
right represented by this Warrant shall, upon issuance, (i) be duly authorized, 
validly issued, fully-paid and non-assessable, (iii) free and clear of all      
liens, claims and encumbrances except for restrictions on transfer provided for 
herein or under applicable federal and state securities laws, and (iii) not be  
subject to any pre-emptive rights.                                              

    (b) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware, and has the full power and authority to
issue this Warrant and to comply with the terms hereof. The execution, delivery 
and performance by the Company of its obligations under this Warrant, including,
without limitation, the issuance of the Warrant Shares upon any exercise of the 
Warrant, have been duly authorized by all necessary corporate action. This      
Warrant has been duly executed and delivered by the Company and is a valid and  
binding obligation of the Company, enforceable in accordance with its terms,    
except (i) as enforcement may be limited by applicable bankruptcy, insolvency,  
reorganization or similar laws affecting enforceability of creditors' rights    
generally and (ii) as the availability of the remedy of specific enforcement,   
injunctive relief or other equitable relief may be subject to the discretion of 
any court before which any proceeding therefor may be brought.                  

  (c) The Company is not subject to or bound by any provision of any
certificate or articles of incorporation or by-laws, mortgage, deed of trust,   
lease, note, bond, indenture, other instrument or agreement, license, permit,   
trust, custodianship, other restriction or any applicable provision of any law, 
statute, rule, regulation, judgment, order, writ, injunction or decree of any   
court, governmental body, administrative agency or arbitrator which could       
prevent or be violated by or under which there would be a default (or right of  
termination) as a result of the execution, delivery and performance by the      
Company of this Warrant.                                                        

      (d) The Company is subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act and is current in the filing of all reports
required to be filed thereunder. The Company is eligible to issue the Warrants  
and the Warrant Shares pursuant to Rule 506 of Regulation D promulgated under   
the Securities Act.                                                             

ARTICLE 4. MISCELLANEOUS

 4.1 Transfer. This Warrant may not be offered, sold, transferred,
pledged, assigned, hypothecated or otherwise disposed of, in whole or in part,  
at any time, except in compliance with applicable federal and state securities  
laws by the transferor and the transferee (including, without limitation, the   
delivery of an investment representation letter and a legal opinion reasonably  
satisfactory to the                                                             

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Company); provided further, that this Warrant may not be transferred or assigned
such that either the Holder or any transferee will, following such transfer or  
assignment, hold a Warrant for the right to purchase less than 10,000 Warrant   
Shares.                                                                         

     4.2 Transfer Procedure. Subject to the provisions of Section 4.1, the
Holder may transfer or assign this Warrant by giving the Company notice setting 
forth the name, address and taxpayer identification number of the transferee or 
assignee, if applicable (the "Transferee"), and surrendering this Warrant to the
Company for reissuance to the Transferee and, in the event of a transfer or     
assignment of this Warrant in part, the Holder. (Each of the persons or entities
in whose name any such new Warrant shall be issued are herein referred to as a  
"Holder").                                                                      

        4.3 Loss, Theft, Destruction or Mutilation. If this Warrant shall become
mutilated or defaced or be destroyed, lost or stolen, the Company shall execute 
and deliver a new Warrant in exchange for and upon surrender and cancellation of
such mutilated or defaced Warrant or, in lieu of and in substitution for such   
Warrant so destroyed, lost or stolen, upon the Holder filing with the Company an
affidavit that such Warrant has been so mutilated, defaced, destroyed, lost or  
stolen. However, the Company shall be entitled, as a condition to the execution 
and delivery of such new Warrant, to demand reasonably acceptable indemnity to  
it and payment of the expenses and charges incurred in connection with the      
delivery of such new Warrant. Any Warrant so surrendered to the Company shall be
canceled.                                                                       

     4.4 Notices. All notices and other communications from the Company to
the Holder or vice versa shall be deemed delivered and effective when given     
personally, by facsimile transmission with confirmation sheet at such address   
and/or facsimile number as may have been furnished to the Company or the Holder,
as the case may be, in writing by the Company or the Holder from time to time.  

       4.5 Waiver. This Warrant and any term hereof may be changed, waived, or
terminated only by an instrument in writing signed by the party against which   
enforcement of such change, waiver, discharge or termination is sought.         

     4.6 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its 
principles regarding conflicts of law. Any action to enforce the terms of this  
Warrant shall be exclusively heard in the county, state and federal Courts of   
New York and Country of the United States of America.                           

 4.7 Signature. In the event that any signature on this Warrant is
delivered by facsimile transmission, such signature shall create a valid and    
binding obligation of the party executing (or on whose behalf such signature is 
executed) the same, with the same force and effect as if such facsimile         
signature page were an original thereof.                                        

   4.8 Legal Fees. In the event any Person commences a legal action or
proceeding to enforce its rights under this Warrant, the non-prevailing party to
such action or proceeding shall pay all reasonable costs and expenses (including
reasonable attorney's fees) incurred in enforcing such rights.                  

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   4.9 Attorney-in-Fact. To effectuate the terms and provisions of the
Purchase Agreement, the Escrow Agreement, the Certificate of Designation and    
this Warrant, the Company hereby agrees to grant a power of attorney to the     
Attorney-in-Fact substantially in the form of Exhibit F to the Purchase         
Agreement (the "Power of Attorney"). All acts done under the Power of Attorney  
are hereby ratified and approved and neither the Attorney-in-Fact nor any       
designee or agent thereof shall be liable for any acts of commission or         
omission, for any error of judgment or for any mistake of fact or law, as long  
as the Attorney-in-Fact is acting within the scope of the Power of Attorney and 
within the scope of, and in accordance with, this Warrant, the Purchase         
Agreement, the Certificate of Designation, and the Escrow Agreement. The Power  
of Attorney, being coupled with an interest, shall be irrevocable while any     
portion of this Warrant remains unexercised, any of the Shares remain           
unconverted or any provision of the Purchase Agreement or the Escrow Agreement  
remains unsatisfied. In addition, the Company shall deliver to the              
Attorney-in-Fact a copy of resolutions duly adopted by the Board of Directors of
the Company, as certified by the President of the Company, (a) authorizing      
future issuances of shares of Common Stock upon exercise of this Warrant and    
conversion of the Shares and (b) stating that such resolutions are irrevocable  
while any of the Shares remain unconverted, any portion of this Warrant remains 
unexercised or any provision of the Purchase Agreement or the Escrow Agreement  
remains unsatisfied.                                                            

Dated:   __________, 2001                                                       

ASIA FIBER HOLDINGS LIMITED                                                     

By: _______________________________                                             
Name:                                                         
Title:                                                        

Attest:                                                                         

___________________________________                                             
Name:                                                                           
Title:                                                                          

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APPENDIX I

NOTICE OF EXERCISE

1.      The undersigned hereby elects (please check the appropriate box and fill
in the blank spaces):                                           

 [ ] to purchase ______ shares of Common Stock, par value $.01 per
      share, of Asia Fiber Holdings Limited at $.01 per share for a total of
      $______ and pursuant to the terms of the attached Warrant, and tenders
       herewith payment of the aggregate Exercise Price of such Warrant Shares
in full; or                                                     

 [ ]to purchase _______ shares of Common Stock, par value $.01 per
       share, of Asia Fiber Holdings Limited pursuant to the cashless exercise
    provision under Section 2.2 (b) of the attached Warrant, and tenders
     herewith the number of Warrant Shares to purchase such Warrant Shares
       based on the average closing bid price of the Common Stock for the (10)
ten Trading Days prior to the date hereof of $____ per share.   

2.      Please issue a certificate or certificates representing said Warrant    
 Shares in the name of the undersigned or in such other name as is
specified below:                                                

Dated:  _______________________________     By: ________________________________

                                            Name: ______________________________

                                            Title: _____________________________

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 EXHIBIT C

 REGISTRATION RIGHTS AGREEMENT

 This Registration Rights Agreement (this "Agreement") is made and
entered into as of ________, 2001, by and between Asia Fiber Holdings Limited, a
Delaware corporation with its principal place of business at Room 2105, 21/F    
West Tower, Shun Tak Centre, 200 Connaught Rd., Sheung Wan, Hong Kong (the      
"Company"), and GEM Global Yield Fund Limited, a company with offices at Hunkins
Waterfront Plaza, P.O. Box 556, Main Street, Nevis, West Indies (the            
"Purchaser").                                                                   

      Simultaneously with the execution of this Agreement, the Purchaser and
the Company have entered into a Convertible Preferred Stock Purchase Agreement, 
dated as of the date hereof (the "Purchase Agreement") and incorporated herein  
by reference, pursuant to which the Purchaser has agreed to purchase the Shares.

The Company and the Purchaser hereby agree as follows:          

       1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement. As used in  
this Agreement, the following terms shall have the following meanings:          

      "Effective Date" shall mean, with respect to a Registration Statement,
the date on which the Registration Statement shall have been declared effective 
by the Commission, which in no event shall be later than one hundred fifty (150)
days after the Execution Date.                                                  

        "Effectiveness Period" shall have the meaning set forth in Section 2(a).

        "Escrow Agreement" means the escrow agreement, by and among the Company,
KGL and the Purchaser, entered into on the date hereof, which is incorporated   
herein by reference.                                                            

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Execution Date" means the day the Purchase Agreement and the other
Transaction Documents are executed by the parties.                              

        "Filing Date" means the day the Registration Statement is filed with the
Commission, which date shall be as soon as practicable, but in no event more    
than 90 days after the Execution Date.                                          

      "Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.                                    

    "Indemnified Party" shall have the meaning set forth in Section 5(c)
hereof.                                                                         

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     "Indemnifying Party" shall have the meaning set forth in Section 5(c)
hereof.                                                                         

     "Inspectors" shall have the meaning set forth in Section 3(m) hereof.

 "Losses" shall have the meaning set forth in Section 5(a) hereof.

  "New York Courts" shall have the meaning set forth in Section 7(g)
hereof.                                                                         

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

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

        "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.      

  "Records" shall have the meaning set forth in Section 3(m) hereof.

    "Registrable Securities" means the Underlying Shares and the Warrant
Shares; provided, however, that in order to account for adjustments in the      
conversion and exercise ratios, Registrable Securities shall include a number of
shares of Common Stock equal to no less than two (2) times the number of shares 
of Common Stock into which (i) the Shares are convertible in full at the        
Conversion Price on the Execution Date and (ii) the Warrant is exercisable in   
full.                                                                           

       "Registration Statement" means the registration statement, contemplated
by Section 2(a) hereof, 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.          

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

       "Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar   
rule or regulation hereafter adopted by the Commission having substantially the 
same effect as such rule.                                                       

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

"Securities Act" means the Securities Act of 1933, as amended.  

        "Underlying Shares" shall mean the shares of Common Stock into which the
Shares are convertible in accordance with the Purchase Agreement and the        
Certificate of Designation.                                                     

"Underwritten Registration" or "Underwritten Offering" means a  
registration in connection with which securities of the Company are sold to an  
underwriter for sale to the public pursuant to an effective registration        
statement.                                                                      

2. Shelf Registration.                                          

            (a) As soon as practicable, but not more than 90 calendar days after
the Execution Date, the Company shall prepare and file with the Commission a    
"Shelf" Registration Statement covering the resale of all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415. The      
Registration Statement shall be on Form S-3 or another appropriate form         
permitting registration of Registrable Securities for resale by the Holders in  
the manner or manners designated by them (including, without limitation, public 
or private sales and one or more Underwritten Offerings). The Company shall (i) 
not permit any securities other than the Registrable Securities to be included  
in the Registration Statement except as provided for in Section 7(b) hereof and 
(ii) use its best efforts to cause the Registration Statement to be declared    
effective under the Securities Act as promptly as practicable after the filing  
thereof, but in any event on or prior to the Effective Date, and to keep such   
Registration Statement continuously effective under the Securities Act until the
date which is five years after the date of this Agreement or such earlier date  
when all Registrable Securities covered by such Registration Statement have been
sold or may be sold pursuant to Rule 144 as determined by the counsel to the    
Company pursuant to a written opinion letter, addressed to the Holders, to such 
effect (the "Effectiveness Period"); provided, however, that the Company shall  
not be deemed to have used its best efforts to keep the Registration Statement  
effective during the Effectiveness Period if it voluntarily takes any action to 
suspend the effectiveness of the Registration Statement under the Securities Act
during the Effectiveness Period, unless the Company, after consultation with its
counsel, determines that such action is required under applicable law or the    
Company has filed a post-effective amendment to the Registration Statement and  
the Commission has not declared it effective. Should the Registration Statement 
not relate to the maximum number of Registrable Securities acquired by (or      
potentially acquirable by) the Holders upon conversion of the Shares or exercise
of the Warrant (because of the indeterminable number of shares of Common Stock  
issuable upon conversion or exercise thereof), the Company shall be required to 
file a separate registration statement (utilizing Rule 462 promulgated under the
Securities Act, where applicable) relating to such Registrable Securities which 
then remain unregistered. The provisions of this Agreement shall relate to such 
separate registration statement as if it were an amendment to such Registration 
Statement.                                                                      

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         (b) If the Holders of a majority of the Registrable Securities so
elect and inform the Company in writing a reasonable time prior to the Filing   
Date, an offering of Registrable Securities pursuant to the Registration        
Statement may be effected in the form of an Underwritten Offering. In such      
event, and if the managing underwriter or the representative of the several     
underwriters (the "Representative") advises the Company and such Holders in     
writing that, in the Representative's opinion, the number of Registrable        
Securities proposed to be sold in such offering exceeds the number of           
Registrable Securities which can be sold in such offering, there shall be       
included in such Underwritten Offering the amount of such Registrable Securities
which, in the opinion of such Representative, can be sold, and such amount shall
be allocated pro rata among the Holders proposing to sell Registrable Securities
in such Underwritten Offering.                                                  

     (c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager  
or managers that will administer the offering will be selected by the Holders of
a majority of the Registrable Securities included in such offering, with the    
approval of the Company, which shall not be unreasonably withheld or delayed. No
Holder may participate in any Underwritten Offering hereunder unless such Holder
(i) agrees to sell its Registrable Securities on the basis provided in any      
underwriting agreements approved by the Persons entitled hereunder to approve   
such arrangements and (ii) completes and executes all questionnaires, powers of 
attorney, indemnities, underwriting agreements and other documents required     
under the terms of such arrangements.                                           

          (d) If the Registration Statement is not filed by the Filing Date,
the Company shall immediately pay the Purchaser a Liquidity Payment (as defined 
below in this Section). If the Registration Statement is not declared effective 
by the Commission by the Effective Date, then the Company shall pay the         
Purchaser a Liquidity Payment, in the amount equal to four percent (4%) per     
annum of the total Purchase Price (a "Liquidity Payment"), on the last day of   
each 30-day period or part thereof following the Effective Date until the       
Registration Statement shall have been declared effective by the Commission.    

3. Registration Procedures. In connection with the Company's    
registration obligations hereunder, the Company shall:                          

           (a) Prepare and file with the Commission within the time period set
forth in Section 2 a Registration Statement on Form S-3 or another appropriate  
form permitting registration of Registrable Securities for issuance to the      
Holders and the resale thereof in accordance with the method or methods of      
distribution thereof as specified by the Holders, and use its best efforts to   
cause the Registration Statement to become effective and remain effective as    
provided herein; provided, however that, subject only to the provision by the   
Holders to the Company in writing of information requested in writing by the    
Company relating to the Holders' proposed method of distribution of Registrable 
Securities and such other information required by law, not less than ten (10)   
days prior to the filing of the Registration Statement or any related Prospectus
or any amendment (pre or post effective) or supplement thereto (including any   
document that would be incorporated or deemed to be incorporated therein by     
reference), the Company shall (i) furnish to the Holders, their counsel and any 
managing underwriters, copies of all such documents 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, their counsel and such
managing underwriters, and                                                      

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(ii) cause its officers and directors, counsel and independent certified public 
accountants to respond to such inquiries as shall be necessary, in the opinion  
of the respective counsel to such Holders and such underwriters, to conduct a   
reasonable investigation within the meaning of the Securities Act. The Holders  
shall have five (5) Business Days after receipt of the Registration Statement or
any related Prospectus or any amendment or supplement thereto to comment on or  
object to the filing of such documents. The Company shall not file the          
Registration Statement or any such Prospectus or any amendments or supplements  
thereto without including any comments reasonably requested by the Holders and  
shall not file any such documents to which the Holders of a majority of the     
Registrable Securities, their counsel, or any managing underwriters, shall      
object; provided, however, that the counting of days for determining whether the
Company has complied with the Filing Date and Effective Date requirements for   
purposes of this Agreement shall not include any days during the period         
commencing with such objection and ending when the Person objecting subsequently
consents to the filing of such documents. On the date of effectiveness of any   
Registration Statement, the Company shall furnish an opinion, dated as of such  
date, from counsel representing the Company addressed to the Holders of the     
Registrable Securities and in form, scope and substance as is customarily given 
in an underwritten public offering. The Company shall also use its best efforts 
to cause to be furnished on the date of effectiveness of any Registration       
Statement, a letter, dated such date, from the Company's independent certified  
public accountants in form and substance as is customarily given by independent 
certified public accountants to underwriters in an underwritten public offering,
addressed to the Holders of the Registrable Securities;                         

     (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be    
necessary to keep the Registration Statement continuously effective for the     
applicable time period; (ii) cause the related Prospectus to be amended or      
supplemented by any required Prospectus supplement, and as so supplemented or   
amended to be filed pursuant to Rule 424 (or any similar provisions then in     
force) promulgated under the Securities Act; (iii) respond as promptly as       
practicable to any comments received from the Commission with respect to the    
Registration Statement or any amendment thereto; and (iv) comply with the       
provisions of the Securities Act and the Exchange Act with respect to the       
registration of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance 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.                               

          (c) Notify the Holders of Registrable Securities to be sold, their
counsel and any managing underwriters immediately (and, in the case of (i)(A)   
below, not less than three (3) Business Days prior to such filing) and (if      
requested by any such Person) confirm such notice in writing no later than one  
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus   
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; and (B) 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 or for
additional information; (iii) of the issuance by the Commission of any stop     
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that 
purpose; (iv) if at any time the Registration Statement becomes stale and is no 
longer effective; (v) of the receipt by the Company of                          

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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; and (vi) of the occurrence of any event that makes 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.                                                           

         (d) Use its 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) If requested by any Representative or the Holders of a majority
of the Registrable Securities to be sold in connection with an Underwritten     
Offering, (i) promptly incorporate in a Prospectus supplement or post-effective 
amendment to the Registration Statement such information as such managing       
underwriters and such Holders reasonably agree should be included therein and   
(ii) make all required filings of such Prospectus supplement or such            
post-effective amendment as soon as practicable after the Company has received  
notification of the matters to be incorporated in such Prospectus supplement or 
post-effective amendment; provided, however, that the Company shall not be      
required to take any action pursuant to this Section 3(e) unless in the opinion 
of counsel for the Company such action is required by applicable law.           

       (f) Furnish to each Holder, its counsel and any Representative,
without charge, at least one complete copy of each Registration Statement and   
each amendment thereto, including financial statements and schedules, all       
documents incorporated or deemed to be incorporated therein by reference, 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;                                                  

 (g) Promptly deliver to each Holder, its counsel, and any
Representative, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus forming part of the effective Registration   
Statement) and each amendment or supplement thereto as such Persons may         
reasonably request; and the Company hereby agrees to respond in writing to a    
written request from the Purchasers with respect to the effectiveness of such   
Prospectus.                                                                     

           (h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling    
Holders, any Representative and their respective counsel in connection with the 
registration or qualification (or exemption from such registration or           
qualification) of such Registrable Securities for offer and sale under the      
securities or Blue Sky laws of such jurisdictions within the United States as   
any Holder, Representative or underwriter requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the     
Effectiveness Period and to do any and all other acts or things necessary or    
advisable to enable the disposition in such jurisdictions of                    

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the Registrable Securities covered by a Registration Statement; provided,       
however, that the Company shall not be required to qualify generally to do      
business in any jurisdiction where it is not then so qualified or to take any   
action that would subject it to general service of process in any such          
jurisdiction where it is not then so subject or subject the Company to any tax  
in any such jurisdiction where it is not then so subject.                       

           (i) Cooperate with the Holders and the Representative to facilitate
the timely preparation and delivery of certificates representing Registrable    
Securities to be sold, which certificates shall be free of all restrictive      
legends, except as required by applicable law, and to enable such Registrable   
Securities to be in such denominations and registered in such names as any such 
Representative or Holders may request at least three (3) Business Days prior to 
any sale of Registrable Securities;                                             

    (j) Upon the occurrence of any event contemplated by Section
3(c)(vi) hereof, as promptly as practicable, 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.                                                                 

    (k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed or quoted on the Nasdaq    
National Market, the Nasdaq SmallCap Market and any other securities exchange,  
market or over-the-counter bulletin board, if any, on which similar securities  
issued by the Company are then listed or quoted to the extent required by the   
rules of such exchange, market or other quotation system.                       

        (l) If the Registrable Securities are included in a Registration
Statement filed in connection with an Underwritten Offering, the Company shall, 
(i) make such representations and warranties to such Holders as it agrees to    
make to the underwriters in such Underwritten Public Offerings, and confirm the 
same if and when requested; (ii) enter into an indemnification agreement which  
shall contain indemnification provisions and procedures no less favorable to the
selling Holders, than those set forth in Section 5 and (iii) deliver such       
documents and certificates as may be reasonably requested by the Holders of a   
majority of the Registrable Securities being sold, their counsel and any        
Representative to evidence the continued validity of the representations and    
warranties made pursuant to clause 3(1)(i).                                     

           (m) Make available for inspection by (i) Holders of the Registrable
Securities, (ii) any underwriter participating in any disposition pursuant to   
the Registration Statement, (iii) one firm of attorneys and one firm of         
accountants or other agents retained by the Holders, and (iv) one firm of       
attorneys retained by all the Holders (collectively, the "Inspectors") all      
pertinent financial and other records, and pertinent corporate documents and    
properties of the Company (collectively, the "Records"), as shall be reasonably 
deemed necessary by each Inspector to enable each Inspector to exercise its due 
diligence responsibility, and cause the Company's officers, directors and       
employees to supply all information which any Inspector may reasonably request  
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of 
any Record or other                                                             

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information which the Company determines in good faith to be confidential, and  
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in  
any Registration Statement, (b) the release of such Records is ordered pursuant 
to a subpoena or other order from a court or government body of competent       
jurisdiction, or (c) the information in such Records has been made generally    
available to the public other than by disclosure in violation of this or any    
other agreement. The Company shall not be required to disclose any confidential 
information in such Records to any Inspector until and unless such Inspector    
shall have entered into confidentiality agreements (in form and substance       
satisfactory to the Company) with the Company with respect thereto,             
substantially in the form of this Section 3(m). Each Holder of Registrable      
Securities agrees that it shall, upon learning that disclosure of such Records  
is sought in or by a court or government body of competent jurisdiction or      
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to    
obtain a protective order for, the Records deemed confidential. Nothing herein  
shall be deemed to limit the Holders' ability to sell Registrable Securities in 
a manner which is otherwise consistent with applicable laws and regulations.    

   (n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning         
statements satisfying the provisions of Section 11(a) of the Securities Act and 
Rule 158 not later than forty-five (45) days after the end of any 12-month      
period (or ninety (90) days after the end of any 12-month period if such period 
is a fiscal year) (i) commencing at the end of any fiscal quarter in which      
Registrable Securities are sold to underwriters in a firm commitment or best    
efforts Underwritten Offering and (ii) if not sold to underwriters in such an   
offering, commencing on the first (1st) day of the first (1st) fiscal quarter of
the Company after the effective date of the Registration Statement.             

        (o) At such time as the Registration Statement has been declared
effective by the Commission covering a resale of any Registrable Securities, the
Company shall cause its legal counsel to deliver to its transfer agent an       
opinion, subject to the holders of any Registrable Securities making such       
representations and warranties to Company counsel as it may require, certifying 
that such Registrable Securities may be sold by the Holders pursuant to such    
Registration Statement with the purchasers thereof receiving share certificates 
without restrictive legend, which opinion shall remain effective so long as such
Registration Statement remains in full force and effect. In the event that, at  
any time, such Registration Statement ceases to be effective, the Company shall 
immediately deliver written notice thereof to its transfer agent and the Holders
stating that the opinion of the Company's legal counsel may no longer be relied 
upon by its transfer agent (unless and until an additional or amended, as       
applicable, Registration Statement is so declared effective (with respect to the
resale of such Registrable Securities)).                                        

            (p) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Registration Statement.                          

          (q) The Company shall take all such other actions as any Holder of
Registrable Securities or the underwriters, if any, may reasonably request in   
order to expedite or facilitate the disposition of the Registration Securities. 

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   The Company may require each selling Holder and the underwriters to
furnish to the Company such information regarding the distribution of such      
Registrable Securities and the Holder as is required by law to be disclosed in  
the Registration Statement and as may otherwise be reasonably requested by the  
Company, including, without limitation, information necessary for the Company to
respond to the comments from the Commission and/or state securities authorities,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a     
reasonable time after receiving such request, and such Holder shall be deemed to
have violated this Registration Rights Agreement for purposes of Section 5.1 of 
the Purchase Agreement.                                                         

       If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the 
right to require (i) the inclusion therein of language, in form and substance   
reasonably satisfactory to such Holder and the Company, to the effect that the  
ownership by such Holder of such securities is not to be construed as a         
recommendation by such Holder of the investment quality of the Company's        
securities covered thereby and that such ownership does not imply that such     
Holder will assist in meeting any future financial requirements of the Company, 
or (ii) if such reference to such Holder by name or otherwise is not required by
the Securities Act or any similar federal statute then in force, the deletion of
the reference to such Holder in any amendment or supplement to the Registration 
Statement filed or prepared subsequent to the time that such reference ceases to
be required.                                                                    

      Each Purchaser covenants and agrees that (i) it will not offer or sell
any Registrable Securities under the Registration Statement until it has        
received copies of the Prospectus as then amended or supplemented as            
contemplated in Section 3(g) hereof and notice from the Company that such       
Registration Statement and any post-effective amendments thereto have become    
effective as contemplated by Section 3(c) hereof and (ii) each Purchaser and its
officers, directors or Affiliates, if any, will comply with the prospectus      
delivery requirements of the Securities Act as applicable to them in connection 
with sales of Registrable Securities pursuant to the Registration Statement.    

    Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a written notice from the Company of the occurrence of any
event of the type described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi) hereof, such Holder will forthwith discontinue disposition of such     
Registrable Securities until such Holder's receipt of copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j)   
hereof, or until it is advised in writing by the Company that the use of the    
applicable Prospectus may be resumed, and, in either case, has received copies  
of any additional or supplemental filings that are incorporated or deemed to be 
incorporated by reference in such Prospectus or Registration Statement.         

4. Registration Expenses.                                       

   (a) 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 the Registration Statement is filed or becomes effective and     
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                                                                

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limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses with respect to filings (A) required to be made with the      
National Association of Securities Dealers, Inc. and (B) in compliance with     
state securities or Blue Sky laws (including, without limitation, fees and      
disbursements of counsel for the underwriters or Holders in connection with Blue
Sky qualifications of the Registrable Securities and determination of the       
eligibility of the Registrable Securities for investment under the laws of such 
jurisdictions as the Representative, if any, or Holders of a majority of        
Registrable Securities may designate)), (ii) printing expenses (including,      
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
Representative, if any, or by the holders of a majority of the Registrable      
Securities included in the Registration Statement), (iii) messenger, telephone  
and delivery expenses, (iv) fees and disbursements of counsel for the Company,  
(v) fees and disbursements of all independent certified public accountants      
referred to in Section 3(a)(ii), (vi) Securities Act liability insurance, if the
Company so desires such insurance, and (vii) 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, the    
fees and expenses incurred in connection with the listing of the Registrable    
Securities on any securities exchange on which similar securities issued by the 
Company are then listed.                                                        

          (b) Notwithstanding anything contained to the contrary herein, the
Holders shall be responsible for the cost of underwriting discounts and         
commissions if any, applicable to the Registrable Securities and the fees and   
expenses of counsel to any of the Holders.                                      

5. Indemnification.                                             

(a) Indemnification by the Company. The Company shall,  
notwithstanding termination of this Agreement and without limitation as to time,
indemnify and hold harmless each Holder, the officers, directors, agents        
(including any underwriters retained by such Holder in connection with the offer
or sale of Registrable Securities), brokers, investment advisors and employees  
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, agents and employees 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,     
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue         
statement of 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, except solely 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 or on behalf of such Holder expressly for
use therein, which information was relied on by the Company for use therein or  
(ii) such information relates to such Holder or such Holder's proposed method of

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distribution of Registrable Securities and was furnished in writing to the      
Company by or on behalf of such Holder expressly for use therein. The Company   
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions    
contemplated by this Agreement.                                                 

           (b) Indemnification by Holders. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing such information 
as the Company reasonably requests for use in connection with the Registration  
Statement or any Prospectus and agrees, severally and not jointly, to indemnify 
and hold harmless the Company, their 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, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a court of     
competent jurisdiction in a final judgment not subject to appeal or review)     
arising solely out of or based solely upon any untrue statement of a material   
fact contained in the Registration Statement, any Prospectus, or any form of    
prospectus, or arising solely out of or based solely upon any omission of a     
material fact required to be stated therein or necessary to make the statements 
therein not misleading solely to the extent, and only to the extent, that (i)   
such untrue statement or omission is contained in any information furnished in  
writing by such Holder to the Company specifically for inclusion in the         
Registration Statement or such Prospectus and such information was relied upon  
by the Company for use in the Registration Statement, such Prospectus or such   
form of prospectus, or (ii) such information relates to such Holder or such     
Holder's proposed method of distribution of Registrable Securities and was      
furnished in writing by or on behalf of such Holder to the Company specifically 
for inclusion in the Registration Statement or such Prospectus and such         
information was relied upon by the Company for use in the Registration          
Statement, such Prospectus or such form of prospectus. In addition, the         
foregoing shall not inure to the benefit of any Holder if a copy of the         
Prospectus (as then amended or supplemented) was furnished by the Company to    
such Holder and was not sent or given by or on behalf of such Holder to such    
Holder's purchaser of Registrable Securities if required by law to have been so 
delivered.                                                                      

           (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 promptly shall notify the Person   
from whom indemnity is sought (the "Indemnifying Party") in writing, and the    
Indemnifying Party shall 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 proximately and materially         
adversely 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 to pay such fees and      
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such                                                                 

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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 such Indemnified Party shall have been advised by       
counsel that a 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 of the claim  
against the Indemnified Party but will retain the right to control the overall  
Proceedings out of which the claim arose, and counsel employed by the           
Indemnified Party shall be at the expense of the Indemnifying Party). 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. 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.                                 

       All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (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 (10) Business Days of written notice 
thereof to the Indemnifying Party;                                              

           (d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party or is insufficient to hold such  
Indemnified Party harmless for any Losses in respect of which this Section would
apply by its terms (other than by reason of exceptions provided in this         
Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party 
as a result of such Losses, (i) in such proportion as is appropriate to reflect 
the relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other from the distribution of the Registrable         
Securities or (ii) if the allocation provided by clause (i) above is not        
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the 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 benefits received by the  
Indemnified Party and the Indemnifying Party, as the case may be, shall be      
deemed to be in the same proportion as the total net proceeds received by the   
Company from the initial sale of the Registrable Securities by the Company to   
the Purchaser pursuant to the Purchase Agreement and the gain, if any, realized 
by the selling Holder upon the resale thereof. 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 Section 5(c), any attorneys' or other fees or expenses incurred by such party
in connection with any Proceeding to the extent such party                      

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would have been indemnified for such fees or expenses if the indemnification    
provided for in this Section was available to such party.                       

   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
proceeds actually received by such Holder from the sale of the Registrable      
Securities 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. No Person guilty of fraudulent misrepresentation (within   
the meaning of Section 11(f) of the Securities Act) shall be entitled to        
contribution from any Person who was not guilty of such fraudulent              
misrepresentation.                                                              

     The indemnity and contribution agreements contained in this Section 5
are in addition to any liability that the Indemnifying Parties may have to the  
Indemnified Parties.                                                            

6. Rule 144.                                                    

           The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any time  
the Company is not required to file such reports, they will, upon the request of
any Holder, make publicly available other information so long as necessary to   
permit sales of its securities pursuant to Rule 144. The Company further        
covenants that it will take such further action as any Holder may reasonably    
request, all to the extent required from time to time to enable such Holder to  
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144. Upon the request of any  
Holder, the Company shall deliver to such Holder a written certification of a   
duly authorized officer as to whether it has complied with such requirements.   

7. 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, after the Closing, to specific performance of its rights under
this Agreement. The Company and each Holder agree that, after the Closing,      
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 waive the defense that a remedy at law would
be adequate.                                                                    

        (b) No Piggyback on Registrations. Except as provided in Section
4.22 of the Purchase Agreement, 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 the Registration Statement other than              

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the Registrable Securities and the Company shall not enter into any agreement   
providing any such right to any of its security holders (other than the Holders 
in such capacity pursuant hereto) with respect to the Registration Statement.   

         (c) Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the     
written consent to such amendment, action or omission to act, of the Holder or  
Holders of 51% or more of the shares of (i) Registrable Securities issued at    
such time plus (ii) Registrable Securities issuable upon conversion of the      
Shares or exercise of the Warrant that have not been fully converted or         
exercised as of the date such consent is sought. Each Holder of any Registrable 
Securities at the time or thereafter outstanding shall be bound by any consent  
authorized by this Section 7(c), whether or not such Registrable Securities     
shall have been marked to indicate such consent.                                

            (d) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been      
received (a) upon hand delivery (receipt acknowledged) or delivery by telex     
(with correct answer back received), telecopy or facsimile (with transmission   
confirmation report) at the address or number designated below (if delivered on 
a business day during normal business hours where such notice is to be          
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be  
received) or (b) on the second (2nd) business day following the date of mailing 
by express courier service, fully prepaid, addressed to such address, or upon   
actual receipt of such mailing, whichever shall first occur. The addresses for  
such communications shall be:                                                   

If to the Company:        Asia Fiber Holdings Limited   
                       Room 2105, 21/F, West Tower
           Shun Tak Centre
             200 Connaught Rd.
                 Sheung Wan, Hong Kong
                        Attn: Mr. Ching Lung Po, CEO
Tel:
Fax:

With copies to:           Loeb & Loeb LLP               
                    10100 Santa Monica Blvd.
      Suite 2200
                          Los Angeles, California  90067
                       Attn:  David Ficksman, Esq.
                Tel:  (310) 282-2350
                Fax:  (310) 282-2192

        If to the Purchaser:      See Schedule 1 - Schedule of Purchaser
                                (attached to the Purchase Agreement)

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   With copies to:           Kaplan Gottbetter & Levenson, LLP
            630 Third Avenue
                   New York, NY 10017-6705
                           Attn:  Adam S. Gottbetter, Esq.
                Tel:  (212) 983-6900
                Fax:  (212) 983-9210

        If to any other Person who is then the registered Holder: to the address
of such Holder as it appears in the stock transfer books of the Company; or such
other address as may be designated in writing hereafter, in the same manner, by 
such person.                                                                    

     (e) 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 its rights or obligations hereunder without the prior written consent of 
each Holder.                                                                    

         (f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original  
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such       
signature shall create a valid binding obligation of the party executing (or on 
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.                       

            (g) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by and construed in accordance with the laws of
the state of New York without regard to principles thereof relating to the      
conflict of laws. Each of the Company and each Holder (including holders of the 
Warrant) hereby irrevocably submits to the jurisdiction of any New York state   
court sitting in the city and county of New York or any federal court sitting in
the city and county of New York (collectively, the "New York Courts") in respect
of any Proceeding arising out of or relating to this Agreement and irrevocably  
accepts for itself and in respect of its property, generally and                
unconditionally, jurisdiction of the New York Courts. Each of the Company and   
each Holder (including holders of the Warrant) irrevocably waives to the fullest
extent it may effectively do so under applicable law any objection that it may  
now or hereafter have to the laying of the venue of any such Proceeding brought 
in any New York Court and any claim that any such Proceeding brought in any New 
York Court has been brought in an inconvenient forum.                           

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

            (i) 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 reasonable efforts to                                    

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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.                                        

           (j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.      

       (k) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable         
Securities is required hereunder, Registrable Securities held by the Company or 
its Affiliates (other than a Purchaser or transferees or successors or assigns  
thereof if such Persons are deemed to be Affiliates solely by reason of their   
holdings of such Registrable Securities) shall not be counted in determining    
whether such consent or approval was given by the Holders of such required      
percentage.                                                                     

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.                                                       

                              Company:

                                                 ASIA FIBER HOLDINGS LIMITED

                                                   By: _________________________
                                   Name:
                                    Title:

                                Purchaser:

                                                   GEM GLOBAL YIELD FUND LIMITED

                                                   By: _________________________
                                   Name:
                                    Title:

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 EXHIBIT D

 CONVERSION AND EXERCISE PROCEDURE

     1. At any time and from time to time during the term of the Shares or
the Warrant, the Holder may deliver to the Escrow Agent written notice (a       
"Notice of Conversion or Notice of Exercise") that it has elected to convert the
Shares or exercise the Warrant registered in the name of such Holder in whole or
in part in accordance with the terms of the Certificate of Designation or the   
Warrant, and the Notice of Conversion or Notice of Exercise shall be in the form
annexed as APPENDIX I to the Certificate of Designation or the Warrant. A fee of
$350 shall accompany every Notice of Conversion or Notice of Exercise delivered 
to the Escrow Agent;                                                            

       2. The Holder shall send by facsimile the executed Notice of Conversion
or Notice of Exercise to the Escrow Agent by 4:00 p.m. New York Time on the     
Conversion Date. The Escrow Agent shall send the Notice of Conversion or Notice 
of Exercise by facsimile to the Company by the end of the Business Day on the   
Conversion Date or the Exercise Date, assuming received by 6:00 p.m. New York   
Time and if thereafter on the next Business Day, at the facsimile telephone     
number and address of the principal place of business of the Company. Each      
Company Notice of Conversion shall be given by facsimile addressed to the Holder
of Shares at the facsimile telephone number and address of such Holder appearing
on the books of the Company as provided to the Company by such Holder for the   
purpose of such Company Notice of Conversion, with a copy to the Escrow Agent.  
Any such notice shall be deemed given and effective upon the transmission of    
such facsimile at the facsimile telephone number specified in this paragraph 2  
(with printed confirmation of transmission). In the event that the Escrow Agent 
receives the Notice of Conversion or Notice of Exercise after 4:00 p.m. New York
Time, the Conversion Date or the Exercise Date shall be deemed to be the next   
Business Day. In the event that the Company receives the Notice of Conversion or
Notice of Exercise after the end of the Business Day, notice will be deemed to  
have been given the next Business Day.                                          

        3. The Company shall have two (2) Business Days from transmission of the
Notice of Conversion or Notice of Exercise by the Escrow Agent to object only to
the calculation of the number of Escrow Shares to be released. If the Company   
fails to object to the calculation of the number of Escrow Shares to be released
within said time, then the Company shall be deemed to have waived any objections
to said calculation and to have directed Escrow Agent to release same. The      
Company's only basis for any objection hereunder shall be to the calculation of 
the number of Escrow Shares to be released. In the event of such an objection,  
the parties shall have one (1) Business Day to agree on the number of Escrow    
Shares to be released pursuant to said Conversion or Exercise. In the event that
the parties cannot agree on the number of Escrow Shares to be released in said  
time, then the Company shall commence a legal action in the appropriate state or
federal court in the state and county of New York, within five (5) Business Days
of the transmittal of the Notice of Conversion or Notice of Exercise by the     
Escrow Agent to the Company. If the Company does not commence such legal action 
within said five (5) Business Days, the Escrow Agent shall release the number of
shares stated in the Notice of Conversion or Notice of Exercise to the Holder   
and the Company's objection shall be deemed withdrawn and waived with prejudice.
If the Escrow Agent does not receive said objection notice within the time      
period set forth above from the Company, the                                    

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Escrow Agent shall release from escrow and deliver to the Holder certificates or
instruments representing the number of Escrow Shares issuable to the Holder in  
accordance with such conversion or exercise on the second Business Day from the 
transmittal to the Company of the Notice of Conversion or Notice of Exercise. In
the event that the certificates evidencing the Escrow Shares held by the Escrow 
Agent are not in denominations appropriate for such delivery to the Holder, the 
Escrow Agent shall request the Company to cause its transfer agent and registrar
to reissue certificates in smaller denominations. The Escrow Agent shall,       
however, immediately release to the requesting Holder certificates representing 
such lesser number of shares as the denominations in its possession will allow  
that is closest to but no more than the actual number to be released to such    
Holder. Upon receipt of the reissued shares in lesser denominations from the    
Company's transfer agent, the Escrow Agent shall release to such Holder the     
balance of the shares due to such Holder;                                       

        4. The Holder shall send the original Shares and Notice of Conversion or
Warrant, Notice of Exercise and Exercise Price to the Escrow Agent via FedEx or 
other commercial overnight courier, along with a fee of $350, instructions      
regarding names and amount of certificates for the issuance of the Underlying   
Shares or Warrant Shares, and , if conversion or exercise is not in full,       
instructions as to the re-issuance of the balance of the Shares or Warrant;     
provided, however, that if the Escrow Agent is holding the Shares or the        
Warrant, then the Notice of Conversion or Notice of Exercise may be faxed and   
the fee and, with respect to the Warrant, the Exercise Price may be transmitted 
via wire transfer to the Escrow Agent. The Escrow Agent shall deliver the       
foregoing to the Company within two (2) Business Days of the Escrow Agent's     
receipt thereof; provided, however, that, with respect to the Warrant, the      
Escrow Agent shall wire the Exercise Price to the Company pursuant to wire      
transfer instructions provided to the Escrow Agent by the Company. In the event 
that the Escrow Agent has custody of the Shares or the Warrant, the Escrow Agent
shall notify the Company and the Holder in writing of the balance of the Shares 
or Warrant remaining and the Company and the Holder shall acknowledge such      
notice in writing, in lieu of issuance of new stock certificate(s) representing 
the Shares or new Warrant for the balance;                                      

     5. If the Company will be issuing new stock certificates representing
the Shares or a new Warrant, it will send such new stock certificate(s) or      
Warrant to the Escrow Agent within five (5) Business Days of its receipt of the 
original Shares and Notice of Conversion or Warrant, Notice of Exercise and     
Exercise Price. The Escrow Agent shall send the Underlying Shares or Warrant    
Shares to the Holder in accordance with Holder's instructions within two (2)    
Business Days of receipt of the Notice of Conversion or Notice of Exercise and  
will send the new stock certificate(s) representing the Shares or new Warrant   
(if any) to the Holder upon receipt;                                            

        6. The Escrow Agent agrees to notify the Company in writing by facsimile
each time the Escrow Agent releases Escrow Shares to the Holder. Until any such 
release and notification are given to the Company, the Escrow Shares shall not  
be deemed to be validly issued and outstanding shares of capital stock of the   
Company. Such notification shall be given when the Escrow Agent delivers the    
Notice of Conversion or Notice of Exercise to the Company; and                  

   7. The Company agrees that, at any time the Conversion Price of the
Shares and Exercise Price of the Warrant are such that the number of Escrow     
Shares is less than 200% of the number of shares                                

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of Common Stock that would be needed to satisfy full conversion of all of the   
Shares given the then current Conversion Price (the "Full Conversion Shares")   
and full exercise of the Warrant given the then current Exercise Price, upon    
five (5) days written notice of such circumstance to the Company by a Holder    
and/or Escrow Agent, it will issue additional share certificates, in the names  
of all Holders and deliver same to the Escrow Agent, such that the new number of
Escrow Shares is equal to 200% of the Full Conversion Shares and Full Exercise  
Shares.                                                                         

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 EXHIBIT E

ESCROW AGREEMENT

          ESCROW AGREEMENT (this "Agreement"), dated as of________, 2001, by
and between Asia Fiber Holdings Limited, a Delaware corporation with its        
principal place of business at Room 2105, 21/F West Tower, Shun Tak Centre, 200 
Connaught Rd., Sheung Wan, Hong Kong (the "Company"); Kaplan Gottbetter &       
Levenson, LLP with its principal place of business at 630 Third Avenue, New     
York, NY 10017 (the "Escrow Agent"); and GEM Global Yield Fund Limited, a       
company with offices at Hunkins Waterfront Plaza, P.O. Box 556, Main Street,    
Nevis, West Indies (the "Purchaser").                                           

RECITALS

   A. Simultaneously with the execution of this Agreement, the
Purchaser and the Company entered into a Convertible Preferred Stock Purchase   
Agreement (the "Purchase Agreement"), dated as of the date hereof and           
incorporated herein by reference, pursuant to which the Company has agreed to   
issue and sell and the Purchaser has agreed to purchase certain of the Company's
preferred stock (the "Preferred Stock") and in connection therewith the Company 
has agreed to issue certain of its warrants (the "Warrants," and together with  
the Preferred Stock, the "Securities"), and the Company has granted the Escrow  
Agent a power of attorney (the "Power of Attorney") with respect to the         
Securities and the Escrow Shares (collectively, the "Escrow Shares").           

         B. The Escrow Agent is willing to act as escrow agent pursuant to
the terms of this Agreement with respect to the purchase of the Preferred Stock.

           C. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.                            

NOW, THEREFORE, IT IS AGREED:                                   

       1. PROCEDURE FOR ESCROW. The procedures of the escrow shall be governed
by the provisions of Article 2 of the Purchase Agreement and Exhibit D thereto. 

        2. TERMS OF ESCROW. The terms of the escrow shall be governed by Article
4 of the Purchase Agreement, Articles 4 and 5 of the Certificate of Designation 
and Article 2 of the Warrant.                                                   

3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.                  

           (a) The parties hereto agree that the duties and obligations of the
Escrow Agent shall be only those obligations herein specifically provided and no
other. The Escrow Agent's duties are those of a depositary only, and the Escrow 
Agent shall incur no liability whatsoever, except as a direct result of its     
willful misconduct or gross negligence in the performance of its duties         
hereunder;                                                                      

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        (b) The Escrow Agent may consult with counsel of its choice, and
shall not be liable for any action taken, suffered or omitted to be taken by it 
in accordance with the advice of such counsel;                                  

          (c) The Escrow Agent shall not be bound in any way by the terms of
any other agreement to which the Purchasers and the Company are parties, whether
or not the Escrow Agent has knowledge thereof, and the Escrow Agent shall not in
any way be required to determine whether or not any other agreement has been    
complied with by the Purchasers and the Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,    
cancellation, rescission or supersession of this Agreement unless the same shall
be in writing and signed jointly by the Purchasers and the Company and agreed to
in writing by the Escrow Agent;                                                 

      (d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its 
opinion, are in conflict with any of the provisions of this Agreement, the      
Escrow Agent shall be entitled to refrain from taking any action other than     
keeping safely the Consideration (as defined below) or taking certain action    
until the Escrow Agent is directed otherwise in writing jointly by the          
Purchasers and the Company or by a final judgment of a court of competent       
jurisdiction;                                                                   

         (e) The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which the Escrow Agent, in good 
faith, believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of      
documents or securities now or hereafter deposited hereunder or of any          
endorsement thereon, or for any lack of endorsement thereon, or for any         
description therein; nor shall the Escrow Agent be responsible or liable in any 
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement;                                                                    

     (f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal           
proceedings which may be instituted against it or in respect of the             
Consideration;                                                                  

          (g) If the Escrow Agent at any time, in its sole discretion, deems
it necessary or advisable to relinquish custody of any of the Securities or     
Escrow Shares (to the extent delivered to the Escrow Agent pursuant hereto, the 
"Consideration"), it may do so by delivering the same to another Person that    
agrees to act as escrow agent hereunder and whose substitution for the Escrow   
Agent is agreed upon in writing by the Purchaser and the Company. If no such    
escrow agent is selected within three (3) days after the Escrow Agent gives     
notice to the Purchasers and the Company of the Escrow Agent's desire to so     
relinquish custody of the Consideration and resign as Escrow Agent, then the    
Escrow Agent may do so by delivering the Consideration to the clerk or other    
proper officer of a state or federal court of competent jurisdiction situate in 
the state and county of New York. The fee of any court officer shall be borne by
the Company. Upon such delivery, the Escrow Agent shall be discharged from any  
and all responsibility or liability with respect to the Consideration and this  
Agreement and each of the Company and the Purchasers shall promptly pay all     
monies it may owe to the Escrow Agent for its services hereunder, including, but
not limited to, reimbursement of its out-of-pocket expenses pursuant to         
paragraph (i) below;                                                            

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            (h) This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to the Purchasers or the Company, nor disqualify the Escrow Agent  
from representing either party hereto in any dispute with the other, including  
any dispute with respect to the Consideration; provided, however, that in the   
event of such dispute, the Escrow Agent shall have the right to commence an     
interpleader action in any court of competent jurisdiction of the state of New  
York or of the United States located in the county and state of New York,       
deposit the Consideration with such court;                                      

      (i) The parties acknowledge and agree that the Escrow Agent is
counsel to the Purchaser. The parties agree to, and agree not to object to, the 
Escrow Agent's engagement as Escrow Agent hereunder;                            

          (j) Upon the performance of this Agreement, the Escrow Agent shall
be deemed released and discharged of any further obligations hereunder.         

4. INDEMNIFICATION.                                             

            (a) The Purchaser hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages         
(including but not limited to reasonable attorney's fees, and amounts paid in   
settlement) resulting from claims asserted by the Company against the Escrow    
Agent with respect to the performance of any of the provisions of this          
Agreement;                                                                      

          (b) The Company hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages         
(including but not limited to reasonable attorney's fees, and amount paid in    
settlement) resulting from claims asserted by the Purchaser against the Escrow  
Agent with respect to the performance of any of the provisions of this          
Agreement;                                                                      

        (c) The Purchaser and the Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all       
losses, damages, taxes, liabilities and expenses that may be incurred by the    
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to  
this Agreement, the Purchase Agreement, the Securities and the Power of         
Attorney, including, but not limited to, all legal costs and expenses of the    
Escrow Agent incurred defending itself against any claim or liability in        
connection with its performance hereunder, provided that the Escrow Agent shall 
not be entitled to any indemnity for any losses, damages, taxes, liabilities or 
expenses that directly result from its willful misconduct or gross negligence in
its performance as Escrow Agent hereunder                                       

           (d) In the event of any legal action or proceeding involving any of
the parties to this Agreement which is brought to enforce or otherwise          
adjudicate any of the rights or obligations of the parties hereunder, the       
non-prevailing party or parties shall pay the legal fees of the prevailing party
or parties and the legal fees, if any, of the Escrow Agent.                     

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5. MISCELLANEOUS.                                               

       (a) All notices, including Notices of Conversion and Notices of
Exercise, objections, requests, demands and other communications sent to any    
party hereunder shall be deemed duly given if (x) in writing and sent by        
facsimile transmission to the Person for whom intended if addressed to such     
Person at its facsimile number set forth below or such other facsimile number as
such Person may designate by notice given pursuant to the terms of this Section 
5 and (y) the sender has confirmation of transmission:                          

  (i)   If to the Company:       Asia Fiber Holdings Limited
                                 Room 2105, 21/F, West Tower
                     Shun Tak Centre
                       200 Connaught Rd.
                           Sheung Wan, Hong Kong
                                  Attn: Mr. Ching Lung Po, CEO
          Tel:
          Fax:

With copies to:          Loeb & Loeb LLP    
                              10100 Santa Monica Blvd.
                Suite 2200
                                    Los Angeles, California  90067
                                 Attn:  David Ficksman, Esq.
                          Tel:  (310) 282-2350
                          Fax:  (310) 282-2192

     (ii)  If to the Purchaser:     To the fax number set forth in
                                           Schedule 1 to the Purchase Agreement.

        (iii) If to the Escrow Agent:  Kaplan Gottbetter & Levenson, LLP
                                 630 Third Avenue, 5th Floor
                                   New York, New York 10017-6705
                                     Attn:  Adam S. Gottbetter, Esq.
                          Tel:  (212) 983-6900
                          Fax:  (212) 983-9210

         (b) This Agreement has been prepared, negotiated and delivered in
the state of New York and shall be governed by and construed and enforced in    
accordance with the laws of the state of New York applicable to contracts       
entered into and performed entirely within New York, without giving effect to   
the principles of New York law relating to the conflict of laws.                

           (c) 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                     

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parties need not sign the same counterpart. In the event that any signature is  
delivered by facsimile transmission, such signature shall create a valid and    
binding obligation of the party executing (or on whose behalf such signature is 
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.                                                  

            (d) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The assignment by a     
party of this Agreement or any rights hereunder shall not affect the obligations
of such party under this Agreement.                                             

       6. TERMINATION OF ESCROW. The term of this Escrow Agreement shall begin
upon the date hereof and shall continue until terminated upon the earlier to    
occur of (i) full conversion of the Shares and exercise of the Warrant, (ii) the
last to occur of the Maturity Date (as defined in the Certificate of            
Designation) of the Shares and the Expiration Date (as defined in the Warrant)  
of the Warrant, and (iii) the written agreement of the parties to terminate this
Agreement. Upon the termination of this Escrow Agreement, the Escrow Agent shall
return any of the Consideration then held by it to the Company pursuant to the  
Purchase Agreement and the other Transaction Documents.                         

[ SIGNATURE PAGE FOLLOWS ]

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            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed the day and year first above written.                                 

Escrow Agent:                             The Company:                          

Kaplan Gottbetter & Levenson, LLP         ASIA FIBER HOLDINGS LIMITED           

By: _____________________________         By: __________________________________
Name:                                     Name:                         
Title:                                    Title:                        

              Purchaser:

                                 GEM GLOBAL YIELD FUND LIMITED

                                          By: __________________________________
                 Name:
                  Title:

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 EXHIBIT F

FORM 26/33-DPOA/S-97                                                            
Power of Attorney; Statutory Short Form, Revised 1/1/97 - (with Affidavit of    
Effectiveness(C)                                                                

CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT -
THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY

 DURABLE GENERAL POWER OF ATTORNEY
 NEW YORK STATUTORY SHORT FORM
 THE POWERS YOU GRANT BELOW CONTINUE TO BE EFFECTIVE
 SHOULD YOU BECOME DISABLED OR INCOMPETENT

CAUTION: THIS IS AN IMPORTANT DOCUMENT IT GIVES THE PERSON WHOM YOU DESIGNATE   
(YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY DURING YOUR LIFETIME WHICH  
MAY INCLUDE POWERS TO MORTGAGE, SELL, OR OTHERWISE DISPOSE OF ANY REAL OR       
PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THESE POWERS
WILL CONTINUE TO EXIST EVEN AFTER YOU BECOME DISABLED OR INCOMPETENT. THESE     
POWERS ARE EXPLAINED MORE FULLY IN NEW YORK GENERAL OBLIGATIONS LAW, ARTICLE 5, 
TITLE 15, SECTION 5-1502A THROUGH 5-1503 WHICH EXPRESSLY PERMIT THE USE OF ANY  
OTHER OR DIFFERENT FORM OF POWER OF ATTORNEY.                                   

THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE    
DECISIONS. YOU MAY EXECUTE A HEALTH CARE PROXY TO DO THIS.                      

(IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK
A LAWYER TO EXPLAIN IT TO YOU.)                                                 

THIS is intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to  
Article 5, Title 15 of the New York General Obligations Law:                    

ASIA FIBER HOLDINGS LIMITED                                                     

does hereby appoint:                              (insert your name and address)
                    ---------------------------   ------------------------------
(If 1 person is to be appointed agent,
insert the name and address of your agent above)

Adam S. Gottbetter residing at 630 Third Avenue, 5th Floor,     
New York, NY 10017-6705                                         

Steven M. Kaplan residing at 630 Third Avenue, 5th Floor,       
New York, NY 10017-6705                                         

Paul R. Levenson residing at 630 Third Avenue, 5th Floor,       
New York, NY 10017-6705                                         

(If 2 or more persons are to be appointed agents
 by you insert their names and addresses above.)

my attorney(s)-in-fact TO ACT (If more than one agent is designated, CHOOSE ONE 
of the following two choices by putting your initials in ONE of the blank spaces
to the left of your choice;)                                                    

(x) Each agent may SEPARATELY act.  
( ) All agents must act TOGETHER.   
(If neither blank space is initialed, the agents
 will be required to act TOGETHER)

IN MY NAME, PLACE AND STEAD in any way which I myself could do, if I were       
personally present, with respect to the following matters as each of them is    
defined in Title 15 of Article 5 of the New York General Obligations Law to the 
extent that I am permitted by law to act through an agent:                      

(DIRECTIONS: INITIAL IN THE BLANK SPACE TO THE LEFT OF YOUR CHOICE ANY ONE OR   
MORE OF THE FOLLOWING LETTERED SUBDIVISIONS AS TO WHICH YOU WANT TO GIVE YOUR   
AGENT AUTHORITY. IF THE BLANK SPACE TO THE LEFT OF ANY PARTICULAR LETTERED      
SUBDIVISION IS NOT INITIALED, NO AUTHORITY WILL BE GRANTED FOR MATTERS THAT ARE 
INCLUDED IN THAT SUBDIVISION. ALTERNATIVELY, THE LETTER CORRESPONDING TO EACH   
POWER YOU WISH TO GRANT MAY BE WRITTEN OR TYPED ON THE BLANK LINE IN SUBDIVISION
"(Q)", AND YOU MAY THEN PUT YOUR INITIALS IN THE BLANK SPACE TO THE LEFT OF     
SUBDIVISION "(Q)" IN ORDER TO GRANT EACH OF THE POWERS SO INDICATED)            

00045857.5 / 0112-073                                                           

(   )   (A)    real estate transactions;                                        
(   )   (B)    chattel and goods transactions;                                  
(   )   (C)    bond, share and commodity transactions;                          
(   )   (D)    banking transactions;                                            
(   )   (E)    business operating transactions;                                 
(   )   (F)    insurance transactions;                                          
(   )   (G)    estate transactions;                                             
(   )   (H)    claims and litigation;                                           
(   )   (I)    personal relationships and affairs;                              
(   )   (J)    benefits from military service;                                  
(   )   (K)    records, reports and statements;                                 
(   )   (L)    retirement benefit transactions;                                 
(   )   (M)    making gifts to my spouse, children and more remote descendants, 
            and parents, not to exceed in the aggregate $10,000 to each of
such persons in any year;                         
(   )   (N)    tax matters;                                                     
(   )   (O)    all other matters;                                               
(   )   (P)    full and unqualified authority to my attorney(s)-in-fact to      
          delegate any or all of the foregoing powers to any person or
persons whom my attorney(s)-in-fact shall select; 
( x )   (Q)    each of the matters identified by the following letters:  C and E

(Special provisions and limitations may be included in the statutory short form 
durable power of attorney only if they conform to the requirements of Section   
5-1503 of the New York General Obligations Law.)                                

--------------------------------------------------------------------------------
SEE ATTACHMENT A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Special Additional Provisions: The powers granted under (A) through (C) above   
shall include the sale of a cooperative housing unit and are enlarged so that   
all fixtures and articles of personal property which at the time of such        
transaction are or which may thereafter be attached to or used in connection    
with the real or personal property may be included in the agreements or other   
instruments to be executed and delivered in connection with any transactions and
which may be described in said instruments with more particularity. This Power  
of Attorney is not subject to question because an instrument executed hereunder 
fails to recite or recites only nominal consideration paid therefore and any    
person dealing with the subject matter of such instrument may do so as if full  
consideration had been expressed therein.                                       

THIS DURABLE POWER OF ATTORNEY SHALL NOT BE AFFECTED BY MY SUBSEQUENT DISABILITY
OR INCOMPETENCE.                                                                
If every agent named above is unable or unwilling to serve, I appoint           

 residing at

(insert name and address of successor)                                          
to be my agent for all purposes hereunder.                               JUD 134

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TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, I HEREBY AGREE THAT ANY THIRD PARTY 
RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT          
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO 
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION 
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND I FOR MYSELF   
AND FOR MY HEIRS, EXECUTORS, LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY AGREE TO 
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL   
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY    
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.                             

THIS DURABLE GENERAL POWER OF ATTORNEY MAY BE REVOKED BY ME AT ANY TIME.        

IN WITNESS WHEREOF I have hereunto signed my name this        day of      , 2001

 ASIA FIBER HOLDINGS LIMITED

             (YOU SIGN HERE:) By:                                      President

                        (Signature of principal)

The statute requires that this instrument be acknowledged by the
principal. No express provision is made for proof by subscribing witness.       

STATE OF               COUNTY OF                     ) SS.:                     

On the   day of                           , 20      ,                           
before me personally came                                                       
--------------------------------------------------------------------------------

to be known to be the individual described in and who executed the foregoing    
instrument and acknowledged that he executed same.                              

STATE OF               COUNTY OF                     ) SS.:                     

On the   day of                           , 20      ,                           
before me personally came                                                       
--------------------------------------------------------------------------------

to be known to be the individual described in and who executed the foregoing    
instrument and acknowledged that he executed same.                              

--------------------------------------------------------------------------------
 AFFIDAVIT OF EFFECTIVENESS(C)
--------------------------------------------------------------------------------
STATE OF               COUNTY OF          ) SS.:                                
                                                                   , residing at

                                                being duly sworn does depose and
say that I am the Attorney-in-Fact under the above Power of Attorney. That said 
Power of Attorney is a valid and subsisting Power which has not been revoked by 
the death of the principal(s) or otherwise; that I have no actual knowledge of a
revocation of the foregoing Power; and, I warrant and represent that I have full
and unqualified authority to execute the                  [Deed, Mortgage, etc.]
knowing that                                                    , will rely upon
the representations made herein as inducement to accept such instrument(s) and  
this Power of Attorney as evidence of my authority to act.                      

                                                                ATTORNEY IN FACT

SWORN AND SUBSCRIBED TO BEFORE ME THIS      DAY OF                     , 2001   

(NOTARY AFFIX STAMP AT RIGHT)                                         
DURABLE GENERAL POWER OF ATTORNEY                                         
REVISED STATUTORY SHORT FORM                                          
TITLE NO.                                                                       
-----------------------------------------                                       
[YOUR TITLE EXPERTS LOGO]                                         

DISTRICT                                                                        
SECTION                                                                         
BLOCK                                                                           
LOT                                                                             
COUNTY OR TOWN                                                                  
RECORDED AT THE REQUEST OF            
RETURN BY MAIL TO:            
------------------------------------------------                                

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

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--------------------------------------------------------------------------------
RESERVED FOR RECORDING OFFICE USE                                               

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

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 DURABLE POWER OF ATTORNEY
 NEW YORK STATUTORY SHORT FORM

DATED________, 2001,

 BY ASIA FIBER HOLDINGS LIMITED ("DESIGNOR")

ATTACHMENT A

     The attached power of attorney is limited by and subject to the terms
and conditions of the Convertible Preferred Stock Purchase Agreement by and     
between Asia Fiber Holdings Limited (the "Company"), and GEM Global Yield Fund  
Limited (the "Purchaser") dated ________, 2001 (the "Purchase Agreement"), the  
Registration Rights Agreement by and between the Company and the Purchaser dated
________, 2001 (the "Registration Rights Agreement"), the Escrow Agreement by   
and among the Company, Kaplan Gottbetter & Levenson, LLP, and the Purchaser     
dated _______, 2001 (the "Escrow Agreement"), and, to be issued upon the closing
of, and in accordance with, the Purchase Agreement, shares of the Company's     
Series C Convertible Preferred Stock for an aggregate purchase price of         
$2,000,000.00 (the "Shares"), a common stock purchase warrant for 1,750,000     
shares of the Company's common stock, par value $.01 per share (the "Common     
Stock"), expiring on _____, 2004 (the "Warrant"), and such power of attorney can
only be acted upon to enforce the rights of the Purchaser and its successors and
assigns under Section 4.14 of the Purchase Agreement, Article IV of the         
Certificate of Designation, and Section 4.9 of the Warrant, and to grant the    
appointed agents the power to issue the opinions of counsel in substantially the
same form as the opinions contained in Exhibit G to the Purchase Agreement, all 
including, but not limited to, the issuance and delivery of shares of Common    
Stock, removing stop transfer orders and restrictions, and replenishing the     
Escrow Shares (as defined in the Escrow Agreement) under the aforementioned     
documents.                                                                      

This power of attorney shall expire upon the full and complete  
satisfaction of all of the Company's obligations under the Stipulation, the     
Purchase Agreement, the Registration Rights Agreement, the Escrow Agreement, and
the Certificate of Designation.                                                 

 IN WITNESS WHEREOF I have hereunto signed my name this ___ day of
______, 2001.                                                                   

                                                   ASIA FIBER HOLDINGS LIMITED

                                                    By: ________________________

___________________________________________________                             
Signed and sworn to before me on ____________, 2001                             

_____________________________                                                   
Notary Public                                                                   

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 EXHIBIT G

________, 2001                                                                  

To the Purchaser Listed in Schedule 1 to the "Purchase Agreement"               

RE: ASIA FIBER HOLDINGS LIMITED                                 

Ladies and Gentlemen:                                                           

   We have acted as counsel to Asia Fiber Holdings Limited, a Delaware
corporation (the "Company"), in connection with the Convertible Preferred Stock 
Purchase Agreement, dated as of ________, 2001, between you and the Company (the
"Purchase Agreement"), and the transactions contemplated thereby. Capitalized   
terms used and not otherwise defined herein shall have the respective meanings  
given to such terms in the Purchase Agreement. The Purchase Agreement, the      
Certificate of Designation, the Warrant, the Registration Rights Agreement, the 
Escrow Agreement and the Power of Attorney are hereinafter referred to          
collectively as the "Transaction Documents."                                    

     In addition to the Transaction Documents, we have examined such other
documents, records and legal matters as in our judgment are necessary or        
appropriate to enable us to render the opinions expressed below, including,     
without limitation, the Company's certificate of incorporation and by- laws,    
each as in effect on the date hereof (the "Certificate of Incorporation" and the
"By-Laws, respectively). We have also relied on the certificates furnished by   
officers of the Company as of the date hereof. We have, without independent     
verification, relied upon and assumed the accuracy of such certificates as to   
factual matters and have not attempted to verify independently the statements   
contained therein; however, nothing has come to our attention that would cause  
us to question the accuracy of such statements.                                 

We have also relied, without independent verification, on the   
representations and warranties as to factual matters of the Company and the     
Purchaser contained in the Purchase Agreement and on certificates of            
governmental officials. In all such examinations, we have assumed: (i) the      
genuineness of signatures of all persons other than the signatures of persons   
signing on behalf of the Company; (ii) the authenticity of all documents        
submitted to us as originals; (iii) the validity of all applicable laws,        
statutes, ordinances, rules and regulations, and the proper indexing and        
accuracy of all records and documents which are public records; and (iv) the    
conformity to authentic original documents of all documents submitted to us as  
certified, conformed or photostatic copies.                                     

     Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of   
the date hereof:                                                                

   (a) Each of the Company and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the       
jurisdiction of its incorporation, with the requisite corporate power and       
authority to own and use its properties and assets and to carry on its business 
as                                                                              

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currently conducted. To our knowledge, the Company has no subsidiaries other    
than the Subsidiaries. Each of the Company and the Subsidiaries is duly         
qualified to do business and is in good standing as a foreign corporation in    
each jurisdiction in which the nature of the business conducted or property     
owned by it makes such qualification necessary, except where the failure to be  
so qualified or in good standing, as the case may be, would not individually or 
in the aggregate have a material adverse effect.                                

        (b) The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Transaction 
Documents, and to otherwise carry out its obligations thereunder. The execution 
and delivery of each of the Transaction Documents by the Company and the        
consummation by it of the transactions contemplated thereby have been duly      
authorized by all necessary action on the part of the Company. Each of the      
Transaction Documents has been duly executed and delivered by the Company and   
constitutes the valid and binding obligation of the Company enforceable against 
the Company in accordance with its terms, except as such enforceability may be  
limited by applicable bankruptcy, insolvency, reorganization, moratorium,       
liquidation or similar laws relating to, or affecting generally the enforcement 
of, creditors' rights or by other equitable principles of general application.  

  (c) The Company has duly authorized and reserved for issuance such
number of shares of its common stock, par value $.01 per share (the "Common     
Stock"), as are issuable upon conversion of the Shares (the "Underlying Shares")
and exercise of the Warrant (the "Warrant Shares"), assuming conversion of the  
Shares and exercise of the Warrant in full on the date hereof, and to the extent
that the number of the Underlying Shares and the Warrant Shares may exceed the  
aggregate number of the Escrow Shares (as defined in the Escrow Agreement)      
deposited in escrow pursuant to the Escrow Agreement (such excess shares, if    
any, the "Excess Shares"), all as required pursuant to the Certificate of       
Designation, the Warrant and the Purchase Agreement. The Shares and the Warrant 
are validly issued, fully paid and non-assessable. The Escrow Shares are validly
issued, fully paid and non-assessable. The Excess Shares, when issued pursuant  
to the terms of the Certificate of Designation, the Warrant and the Purchase    
Agreement will be validly issued, fully paid and non-assessable.                

       (d) The Shares and the Warrant have each been duly authorized and, when
paid for in accordance with the terms of the Purchase Agreement and the other   
Transaction Documents, shall have been validly issued, fully paid and           
non-assessable.                                                                 

       (e) No shares of the Common Stock are entitled to preemptive or similar
rights. To our knowledge, except as specifically disclosed in Schedule 3.1(c) to
the Purchase Agreement, there are no outstanding options, warrants, script      
rights to subscribe to, registration rights, calls or commitments of any        
character whatsoever relating to, or, except as a result of the purchase and    
sale of the Shares and the Warrant, securities, rights or obligations           
convertible into or exchangeable for, or giving any person any right to         
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock, except as otherwise    
provided in the Purchase Agreement.                                             

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    (f) To our knowledge, other than the Required Approvals, neither the
Company nor any Subsidiary is required to obtain any consent, waiver,           
authorization or order of, or make any filing or registration with, any court of
other federal, state, local or other governmental authority or other person in  
connection with the execution, delivery and performance by the Company of the   
Transaction Documents.                                                          

  (g) The execution and delivery of the Transaction Documents by the
Company and its performance of and compliance with the terms of the Transaction 
Documents, including, without limitation, the issuance of the Shares, the       
Warrant and the Escrow Shares do not, and its issuance of Excess Shares, if any,
will not, violate any provision of the Certificate of Incorporation or the By-  
Laws or, to our knowledge, any provision of any applicable federal or state law,
rule or regulation. To our knowledge, except as disclosed in Schedule 3.1(e) to 
the Purchase Agreement, the execution, delivery and performance of and          
compliance with the Transaction Documents, and the issuance of the Shares, the  
Warrant and the Escrow Shares have not resulted, and will not result, nor will  
the issuance of any Excess Shares result, in any violation of, or constitute a  
default under (or an event which with the passage of time or the giving of      
notice or both would constitute a default under), any contract, agreement,      
instrument, judgment or decree binding upon the Company or any Subsidiary and   
known to us which, individually or in the aggregate, would have a material      
adverse effect on the business or financial condition of the Company and its    
Subsidiary. To the best of our knowledge, the business of the Company and its   
Subsidiaries is not being conducted in violation of any law, ordinance or       
regulation of any governmental authority the result of which would have a       
material adverse effect on the business of the Company and its Subsidiaries.    

      (h) To our knowledge, the Company has filed all reports required to be
filed by it under the Securities Exchange Act of 1934, as amended ("the Exchange
Act"), including Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file  
such material) (collectively, the "Disclosure Documents") on a timely basis, or 
has received a valid extension of such time of filing, except as otherwise      
described in the Purchase Agreement. To the best of our knowledge, as of their  
respective dates, the Disclosure Documents complied in all material respects    
with the requirements of the Securities Act and the Exchange Act and the rules  
and regulations of the Securities and Exchange Commission promulgated           
thereunder.                                                                     

      (i) Assuming the accuracy of the representations and warranties of the
Company set forth in Section 3.1 of the Purchase Agreement and of the Purchaser 
set forth in Section 3.2 of the Purchase Agreement, the offer, issuance and sale
of the Shares and the Warrant and the offer and issuance of the Escrow Shares   
pursuant to the Purchase Agreement are and the sale of the Escrow Shares and the
offer, issuance and sale of the Excess Shares, if any, will be, exempt from the 
registration requirements of the Securities Act of 1933, as amended (the        
"Securities Act"), by reason of Rule 506 of Regulation D promulgated under      
Section 4(2) of the Securities Act.                                             

     These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for   
any other purpose or by any other person.                                       

       The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:                                     

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 (a) We have assumed that the Purchaser subscribing to the
Transaction Documents has the legal right, capacity and power to enter into and 
perform all of its obligations under each of the Transaction Documents.         
Furthermore, we have assumed the due authorization by the Purchaser of all      
requisite action and the due execution and delivery of the Transaction          
Documents, and that the Transaction Documents are the valid and binding         
agreements of the Purchaser enforceable against it in accordance with their     
respective terms, except as such enforceability may be limited by applicable    
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws 
relating to, or affecting generally the enforcement of, creditors' rights or by 
other equitable principles of general application.                              

        (b) Our opinions on the binding effect and enforceability of any
obligation are subject to limitations resulting from the effects of (i)         
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent    
conveyance, arrangement and assignment for the benefit of creditors laws and    
similar laws or judicially developed doctrines, and (ii) general principles of  
equity, whether applied by a court of law or equity.                            

            (c) We disclaim any opinion as to (i) the validity or enforceability
under federal securities laws of any indemnification and contribution provisions
of the Registration Rights Agreement or any other documents, (ii) any provisions
in any documents which purport to waive any procedural due process rights, and  
(iii) any provisions relating to choice of governing law, which choice may      
depend upon factual circumstances and the laws of other jurisdictions.          

          (d) Enforcement of your rights and remedies may be limited by laws
and judicial decisions which have imposed duties and standards of conduct       
(including, without limitation, obligations of good faith, fair dealing and     
reasonableness), and in this regard we have assumed that you will exercise your 
rights and remedies under the Transaction Documents, to the extent required by  
such laws and judicial decisions, in good faith and in circumstances and a      
manner which are commercially reasonable.                                       

         (e) Requirements set forth in any of the Transaction Documents to
the effect that any provision thereof may be waived only in writing may not be  
valid, binding or enforceable to the extent that an oral agreement or an implied
agreement by practice or course of conduct modifying such requirements has been 
or may be created.                                                              

          (f) We express no opinion as to the enforceability of any remedies
provided for under any of the Transaction Documents to the extent such remedies 
would have the effect of compensating the party entitled to the benefit of such 
remedies in amounts in excess of the actual loss suffered by such party.        

            (g) Whenever our opinion with respect to the existence or absence of
facts is indicated to be based on our knowledge, we are referring to the actual 
current knowledge of partners and associates of Loeb & Loeb LLP who have had    
substantive involvement in the representation of the Company in connection with 
this transaction. We have not undertaken any independent investigation to       
determine the existence or absence of such facts (and have not caused to be made
any review of any court files or indices) and no inferences as to our knowledge 
concerning such facts should be drawn from the fact that such representation has
been undertaken by us.                                                          

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       (h) Our opinions are limited to the matters expressly set forth
herein and to laws and facts existing on the date hereof an no opinion is to be 
implied or inferred beyond the matters expressly so stated.                     

          (i) Our examination of law relevant to the matters covered by this
opinion is limited to the laws of the state of New York, the General Corporation
Law of the state of Delaware and the federal law of the United States, and we   
express no opinion as to the effect on the matters covered by this opinion of   
the laws of any other jurisdiction. To the extent that the governing law with   
respect to any matters covered by this opinion is the law of any jurisdiction   
other than the states of New York or Delaware or federal law of the United      
States, we have assumed that the law of such other jurisdiction is identical to 
New York or Delaware law. We express no opinion as to the effect on the         
transactions described herein, in the Transaction Documents and in the other    
agreements and materials referred to herein of the laws of any jurisdiction     
other than the states of New York or Delaware and the federal law of the United 
States. As members of the bar of the state of New York, we do not purport to be 
experts on the law of any other state of the United States or the jurisdiction  
of any foreign country.                                                         

            (j) In furnishing the opinion regarding the valid existence and good
standing of the Company and its Subsidiaries and the qualification of the       
Company and its Subsidiaries to do business, we have relied solely upon the good
standing certificates attached to this letter.                                  

       This opinion is given as of the date hereof and we assume no obligation
to update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter  
occur.                                                                          

                                           Very truly yours,

                                         Loeb & Loeb LLP

                                               By:__________________

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 EXHIBIT H

VOID AFTER 5:00 P.M., NEW YORK TIME ON________, 2004
WARRANT TO PURCHASE 500,000 SHARES OF COMMON STOCK

TERMINATION WARRANT TO PURCHASE COMMON STOCK

OF

 ASIA FIBER HOLDINGS LIMITED

NEITHER THIS TERMINATION WARRANT (THIS "WARRANT" OR "TERMINATION WARRANT") NOR  
THE SECURITIES FOR 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 RULE 506 OF REGULATION D  
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,        
ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE     
EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN     
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.                               

       FOR VALUE RECEIVED, ASIA FIBER HOLDINGS LIMITED, a Delaware corporation
(the "Company"), grants the following rights to GEM Global Yield Fund Limited, a
company with offices at Hunkins Waterfront Plaza, P.O. Box 556, Main Street,    
Nevis, West Indies and/or its assigns ("Holder"):                               

 ARTICLE 1. DEFINITIONS.

      Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Convertible Preferred Stock Purchase Agreement 
by and between the Company and the Holder dated as of_________, 2001 (the       
"Purchase Agreement"). As used in this Agreement, the following terms shall have
the following meanings:                                                         

"Corporate Office" shall mean the office of the Company (or its 
successor) at which at any particular time its principal business is            
administered.                                                                   

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      "Escrow Agent" shall mean Kaplan Gottbetter & Levenson, LLP, 630 Third
Avenue, 5th Floor, New York, NY 10017, as the Company's escrow agent, or its    
authorized successor, as such.                                                  

       "Escrow Agreement" means the escrow agreement by and among the Company,
the Holder and Kaplan Gottbetter & Levenson, LLP, annexed as Exhibit I to the   
Purchase Agreement.                                                             

 "Exercise Date" shall mean the date on which the Holder gives the
Company a Notice of Exercise pursuant to Appendix II hereto.                    

      "Exercise Price" shall mean the Fixed Price per share of Common Stock,
subject to adjustment as provided herein.                                       

   "Expiration Date" shall mean 5:00 p.m. (New York time) on ________,
2004.                                                                           

"Fixed Price" shall mean US$.01.                                

      "SEC" shall mean the United States Securities and Exchange Commission.

 "Termination Warrant" shall mean this Termination Warrant and any
warrant or warrants issued in exchange for, or upon transfer or assignment of   
this Termination Warrant (in compliance with the provisions hereof).            

  "Termination Warrant Escrow Shares" shall mean Termination Warrant
Shares deposited in escrow with the Escrow Agent as of the date hereof pursuant 
to the terms of the Escrow Agreement and the Purchase Agreement.                

  "Termination Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of this Warrant set forth in Section 2.1 hereof.         

"Warrant" or "Warrants" shall mean the Termination Warrant.     

 ARTICLE 2. EXERCISE AND AGREEMENTS.

 2.1 Exercise of Warrant. This Warrant shall entitle the Holder to
purchase, at the Exercise Price, 500,000 shares of Common Stock, subject to     
adjustment as provided herein (the "Termination Warrant Shares"). This Warrant  
shall be exercisable at any time and from time to time from the date hereof and 
prior to the Expiration Date (the "Exercise Period"). This Warrant and the right
to purchase Termination Warrant Shares hereunder shall expire and become void on
the Expiration Date.                                                            

2.2 Manner of Exercise.                                         

      (a) Holder may exercise this Warrant at any time and from time to time
during the Exercise Period, in whole or in part (but not in denominations of    
fewer than 10,000 Termination Warrant Shares,                                   

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except upon an exercise of this Warrant with respect to the remaining balance of
Termination Warrant Shares purchasable hereunder at the time of exercise), by   
delivering to the Escrow Agent (as defined in the Escrow Agreement, which is    
incorporated herein by reference) (i) a duly executed Notice of Exercise in     
substantially the form attached as Appendix I hereto, (ii) the Warrant          
Certificate representing this Warrant, (iii) a bank cashier's or certified check
for the aggregate Exercise Price of the Termination Warrant Shares being        
purchased, and (iv) a bank cashier's or certified check or wire transfer of $350
to the Escrow Agent for the exercise fee. In the event of any discrepancy       
between the exercise procedures set forth in this Section 2.2 and the provisions
of Appendix II, the provisions of Appendix II shall govern the exercise of this 
Warrant.                                                                        

 (b) The Holder may, at its option, in lieu of paying cash for the
Termination Warrant Shares, exercise this Warrant by an exchange, in whole or in
part (a "Warrant Exchange"), by delivery to the Escrow Agent of (i) a duly      
executed Notice of Exercise electing a Warrant Exchange, (ii) the Warrant       
Certificate representing this Warrant, and (iii) a bank cashier's or certified  
check or wire transfer for $350 to the Escrow Agent for the exercise fee. In    
connection with any Warrant Exchange, the Holder shall be deemed to surrender or
exchange for the total number of Termination Warrant Shares to be issued to it, 
the quotient obtained by dividing (A) the product of the total number of Warrant
Shares for which the Warrant is then being exercised and the Exercise Price, by 
(B) the average Per Share Market Value of a share of Common Stock for the ten   
(10) Trading Days ending on the Exercise Date.                                  

        2.3 Termination. All rights of the Holder in this Warrant, to the extent
they have not been exercised, shall terminate on the Expiration Date.           

   2.4 No Rights Prior to Exercise. This Warrant shall not entitle the
Holder to any voting or other rights as a stockholder of the Company.           

  2.5 Fractional Shares. No fractional shares shall be issuable upon
exercise of this Warrant, and the number of Termination Warrant Shares to be    
issued shall be rounded up to the nearest whole Share. If, upon exercise of this
Warrant, the Holder hereof would be entitled to receive any fractional share,   
the Company shall issue to the Holder one additional share of Common Stock in   
lieu of such fractional share.                                                  

        2.6 Escrow. The Company agrees to enter into the Escrow Agreement and to
deposit with the Escrow Agent thereunder stock certificates to be held by the   
Escrow Agent (as defined in the Escrow Agreement) registered in the name of the 
Holder and each representing a number of shares of Common Stock (in             
denominations of 10,000 shares) equal to the number of Termination Warrant      
Shares issuable upon exercise of this Warrant in full on the date hereof. The   
Company shall deposit additional stock certificates for Termination Warrant     
Shares upon request by the Escrow Agent pursuant to the Escrow Agreement.       

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2.7 Adjustments to Exercise Price and Number of Securities.     

        (a) Computation of Adjusted Exercise Price. In case the Company shall at
any time after the date hereof issue or sell any shares of Common Stock (other  
than the issuances or sales referred to in Section 2.7 (g) hereof), including   
shares held in the Company's treasury and shares of Common Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of Common   
Stock and shares of Common Stock issued upon the direct or indirect conversion  
or exchange of securities for shares of Common Stock (excluding shares of Common
Stock issuable upon exercise of options, warrants or conversion rights granted  
as of the date hereof), for a consideration per share less than Exercise Price  
on the date immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon such issuance or sale, the Exercise Price    
shall (until another such issuance or sale) be reduced to the price equal to the
quotient derived by dividing (A) an amount equal to the sum of (X) the product  
of (a) the Exercise Price on the date immediately prior to the issuance or sale 
of such shares, multiplied by (b) the total number of shares of Common Stock    
outstanding immediately prior to such issuance or sale plus, (Y) the aggregate  
of the amount of all consideration, if any, received by the Company upon such   
issuance or sale, by (B) the total number of shares of Common Stock outstanding 
immediately after such issuance or sale; provided, however, that in no event    
shall the Exercise Price be adjusted pursuant to this computation to an amount  
in excess of the Exercise Price in effect immediately prior to such computation,
except in the case of a combination of outstanding shares of Common Stock, as   
provided by Section 2.7 (c) hereof.                                             

      For the purposes of any computation to be made in accordance with this
Section 2.7(a), the following provisions shall be applicable:                   

               (i) In case of the issuance or sale of shares of Common Stock for
      a consideration part or all of which shall be cash, the amount of cash
        consideration therefor shall be deemed to be the amount of cash received
 by the Company for such shares (or, if shares of Common Stock are
      offered by the Company for subscription, the subscription price, or if
      either of such securities shall be sold to underwriters or dealers for
   public offering without a subscription offering, the initial public
   offering price) before deducting therefrom any compensation paid or
 discount allowed in the sale, underwriting or purchase thereof by
     underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.                      

       (ii) In case of the issuance or sale (otherwise than as a
        dividend or other distribution on any stock of the Company) of shares of
    Common Stock for a consideration part or all of which shall be other
   than cash, the amount of the consideration therefor other than cash
      shall be deemed to be the value of such consideration as determined in
good faith by the Board of Directors of the Company.            

               (iii) Shares of Common Stock issuable by way of dividend or other
    distribution on any class or series of stock of the Company shall be
       deemed to have been issued immediately after the opening of business on
       the day following the record date for the determination of stockholders

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    entitled to receive such dividend or other distribution and shall be
deemed to have been issued without consideration.               

               (iv) The reclassification of securities of the Company other than
     shares of the Common Stock into securities including shares of Common
      Stock shall be deemed to involve the issuance of such shares of Common
        Stock for a consideration other than cash immediately prior to the close
       of business on the date fixed for the determination of security holders
   entitled to receive such shares, and the value of the consideration
        allocable to such shares of Common Stock shall be determined as provided
in subsection (ii) of this Section 2.7(a).                      

      (v) The number of shares of Common Stock at any one time
  outstanding shall include the aggregate number of shares issued or
        issuable (subject to readjustment upon the actual issuance thereof) upon
    the exercise of options, rights, warrants and upon the conversion or
      exchange of convertible or exchangeable securities; provided, however,
   that shares issuable upon the exercise of the Warrants shall not be
included in such calculation.                                   

(b) Options, Rights, Warrants and Convertible and Exchangeable  
Securities. In case the Company shall at any time after the date hereof issue   
options, rights or warrants to subscribe for shares of Common Stock, or issue   
any securities convertible into or exchangeable for shares of Common Stock, for 
a consideration per share less than the Exercise Price immediately prior to the 
issuance of such options, rights or warrants (excluding shares of Common Stock  
issuable upon exercise of options, warrants or conversion rights granted as of  
the date hereof and shares of Common Stock issuable upon exercise of stock      
options at or above the closing market price per share of Common Stock under any
stock option plan of the Company), or such convertible or exchangeable          
securities, or without consideration, the Exercise Price in effect immediately  
prior to the issuance of such options, rights or warrants, or such convertible  
or exchangeable securities, as the case may be, shall be reduced to a price     
determined by making a computation in accordance with the provision of Section  
2.7(a) hereof, provided that:                                                   

            (i) The aggregate maximum number of shares of Common Stock, as
      the case may be, issuable under such options, rights or warrants shall
       be deemed to be issued and outstanding at the time such options, rights
       or warranties were issued, and for a consideration equal to the minimum
purchase price per share provided for in such options, rights or
       warrants at the time of issuance, plus the consideration (determined in
        the same manner as consideration received on the issue or sale of shares
      in accordance with the terms of the Warrants), if any, received by the
Company for such options, rights or warrants.                   

         (ii) The aggregate maximum number of shares of Common Stock
       issuable upon conversion or exchange of any convertible or exchangeable
      securities shall be deemed to be issued and outstanding at the time of
 issuance of such securities, and for a consideration equal to the
      consideration (determined in the same manner as consideration received
     on the issue or sale of shares of Common Stock in accordance with the
        terms of the Warrants) received by the Company for such securities, plus
     the minimum consideration, if any, receivable by the Company upon the
conversion or exchange thereof.                                 

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             (iii) If any change shall occur in the price per share provided
       for in any of the options, rights or warrants referred to in subsection
(a) of this Section 2.7, or in the price per share at which the 
securities referred to in subsection (b) of this Section 2.7 are
convertible or exchangeable, such options, rights or warrants or
     conversion or exchange rights, as the case may be, shall be deemed to
    have expired or terminated on the date when such price change became
     effective in respect of shares not theretofore issued pursuant to the
    exercise or conversion or exchange thereof, and the Company shall be
       deemed to have issued upon such date new options, rights or warrants or
     convertible or exchangeable securities at the new price in respect of
       the number of shares issuable upon the exercise of such options, rights
or warrants or the conversion or exchange of such convertible or
exchangeable securities.                                        

               (iv) If any options, rights or warrants referred to in subsection
      (a) of this Section 2.7, or any convertible or exchangeable securities
      referred to in subsection (b) of this Section 2.7, expire or terminate
     without exercise or conversion, as the case may be, then the Exercise
    Price of the remaining outstanding Warrant shall be readjusted as if
such options, rights or warrants or convertible or exchangeable 
securities, as the case may be, had never been issued.          

      (c) Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price 
shall forthwith be proportionately decreased in the case of subdivision or      
increased in the case of combination.                                           

   (d) Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 2.7, the number of    
Warrant Shares issuable upon the exercise of the Warrant shall be adjusted to   
the nearest whole number by multiplying a number equal to the Exercise Price in 
effect immediately prior to such adjustment by the number of Warrant Shares     
issuable upon exercise of the Warrants immediately prior to such adjustment and 
dividing the product so obtained by the adjusted Exercise Price.                

        (e) Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another     
corporation (other than a consolidation or merger which does not result in any  
reclassification or change of the outstanding Common Stock), the corporation    
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the Holder of the Warrant then    
outstanding or to be outstanding shall have the right thereafter (until the     
expiration of such Warrant) to receive, upon exercise of such Warrant, the kind 
and number of shares of stock and other securities and property (except in the  
event the property is cash, then the Holder shall have the right to exercise the
Warrant and receive cash in the same manner as other stockholders) receivable   
upon such consolidation or merger, by a holder of the number of shares of Common
Stock of the Company for which such Warrant might have been exercised           
immediately prior to such consolidation, merger, sale or transfer. Such         
supplemental warrant agreement shall provide for adjustments which shall be     
identical to the adjustments provided in Section 2.7. The foregoing provisions  
of this paragraph (e) shall similarly apply to successive consolidations or     
mergers.                                                                        

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      (f) No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made upon the issuance of the Termination Warrant   
Shares or upon the exercise of any options, rights, or warrants outstanding as  
of the date of the Purchase Agreement and disclosed in Section 3.1(c) therein.  

    (g) Dividends and Other Distributions. In the event that the Company
shall at any time prior to the exercise of the Warrant declare a dividend (other
than a dividend consisting solely of shares of Common Stock) or otherwise       
distribute to its stockholders any assets, property, rights, evidences of       
indebtedness, securities (other than shares of Common Stock), whether issued by 
the Company or by another, or any other thing of value, the Holder of the       
unexercised Termination Warrant shall thereafter be entitled, in addition to the
shares of Common Stock or other securities and property receivable upon the     
exercise thereof, to receive, upon the exercise of such Warrant, the same       
property, assets, rights, evidences of indebtedness, securities or any other    
thing of value that they would have been entitled to receive at the time of such
dividend or distribution as if the Warrant had been exercised immediately prior 
to such dividend or distribution. At the time of any such dividend or           
distribution, the Company shall make appropriate reserves to ensure the timely  
performance of the provisions of this subsection 2.7 (g). Nothing contained     
herein shall provide for the receipt or accrual by a Holder of cash dividends   
prior to the exercise by such Holder of the Warrant.                            

ARTICLE 3. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE COMPANY

      3.1 Representations and Warranties. In addition to the representations
and warranties contained in Article 3.1 of the Purchase Agreement, the Company  
hereby represents and warrants to the Holder as follows:                        

    (a) All shares which may be issued upon the exercise of the purchase
right represented by this Termination Warrant shall, upon issuance, (i) be duly 
authorized, validly issued, fully-paid and non-assessable, (iii) free and clear 
of all liens, claims and encumbrances except for restrictions on transfer       
provided for herein or under applicable federal and state securities laws, and  
(iii) not be subject to any pre-emptive rights. All Termination Warrant Escrow  
Shares, upon issuance and delivery to the Escrow Agent pursuant to the terms of 
the Purchase Agreement and the Escrow Agreement, shall be duly authorized and   
validly issued, and when the Exercise Price thereof shall have been paid        
therefor, fully paid and non-assessable.                                        

    (b) The Company is a corporation duly organized and validly existing
under the laws of the state of Delaware, and has the full power and authority to
issue this Warrant and to comply with the terms hereof. The execution, delivery 
and performance by the Company of its obligations under this Warrant, including,
without limitation, the issuance of the Termination Warrant Shares upon any     
exercise of the Warrant, have been duly authorized by all necessary corporate   
action. This Warrant has been duly executed and delivered by the Company and is 
a valid and binding obligation of the Company, enforceable in accordance with   
its terms, except (i) as such enforcement may be limited by applicable          
bankruptcy, insolvency, reorganization or similar laws affecting enforceability 
of creditors' rights generally and (ii) as the                                  

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availability of the remedy of specific enforcement, injunctive relief or other  
equitable relief may be subject to the discretion of any court before which any 
proceeding therefor may be brought.                                             

 (c) Neither the Company, any of its Subsidiaries nor any of there
respective assets or properties is subject to or bound by any provision of any  
certificate or articles of incorporation or by-laws, mortgage, deed of trust,   
lease, note, bond, indenture, other instrument or agreement, license, permit,   
trust, custodianship, other restriction or any applicable provision of any law, 
statute, rule, regulation, judgment, order, writ, injunction or decree of any   
court, governmental body, administrative agency or arbitrator which could       
prevent or be violated by or under which there would be a default (or right of  
termination) as a result of the execution, delivery and performance by the      
Company of this Termination Warrant.                                            

      (d) The Company is subject to the reporting requirements of Section 13
or Section 15(d) of the Securities Exchange Act of 1934, as amended, and is     
current in the filing of all reports required to be filed thereunder. The       
Company is eligible to issue this Warrant and the Termination Warrant Shares,   
including, without limitation, the Termination Warrant Escrow Shares, pursuant  
to Section 4(2) of the Securities Act.                                          

ARTICLE 4. MISCELLANEOUS

4.1 Transfer. This Termination Warrant may not be offered, sold,
transferred, pledged, assigned, hypothecated or otherwise disposed of, in whole 
or in part, at any time, except in compliance with applicable federal and state 
securities laws by the transferor and the transferee (including, without        
limitation, the delivery of an investment representation letter and a legal     
opinion reasonably satisfactory to the Company); provided further, that this    
Warrant may not be transferred or assigned in a manner that would result in the 
Holder's or any transferee's holding, following such transfer or assignment, a  
Termination Warrant for the right to purchase less than 10,000 Termination      
Warrant Shares.                                                                 

        4.2 Transfer Procedure. Subject to the provisions of Section 4.1 hereof,
the Holder may transfer or assign this Warrant by giving the Company notice     
setting forth the name, address and taxpayer identification number of the       
transferee or assignee, if applicable (the "Transferee"), and surrendering this 
Warrant to the Company for reissuance to the Transferee and, in the event of a  
transfer or assignment of this Warrant in part, the Holder. (Each of the Persons
in whose name any such new Warrant may be issued is herein referred to as a     
"Holder").                                                                      

        4.3 Loss, Theft, Destruction or Mutilation. If this Warrant shall become
mutilated or defaced or be destroyed, lost or stolen, the Company shall execute 
and deliver a new Warrant in exchange for and upon surrender and cancellation of
such mutilated or defaced Warrant or, in lieu of and in substitution for such   
Warrant so destroyed, lost or stolen, upon the Holder filing with the Company an
affidavit that such Warrant has been so mutilated, defaced, destroyed, lost or  
stolen. However, the Company shall be entitled, as a condition to the execution 
and delivery of such new Warrant, to demand reasonably acceptable indemnity to  
it and payment of the expenses and charges incurred in connection with the      
delivery of such new Warrant. Any Warrant so surrendered to the Company shall be
canceled.                                                                       

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     4.4 Notices. All notices and other communications from the Company to
the Holder or vice versa shall be deemed delivered and effective when given     
personally, by facsimile transmission with confirmation sheet at such address   
and/or facsimile number as may have been furnished to the Company or the Holder,
as the case may be, in writing by the Company or the Holder from time to time.  

       4.5 Waiver. This Warrant and any term hereof may be changed, waived, or
terminated only by an instrument in writing signed by the party against which   
enforcement of such change, waiver, discharge or termination is sought.         

     4.6 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the state of New York, without giving effect to the 
principles thereof relating to the conflict of laws. Any action to enforce the  
terms of this Warrant shall be exclusively heard in the state and federal courts
situate in the county and state of New York, in the United States of America.   

 4.7 Signature. In the event that any signature on this Warrant is
delivered by facsimile transmission, such signature shall create a valid and    
binding obligation of the party executing (or on whose behalf such signature is 
executed) the same, with the same force and effect as if such facsimile         
signature page were an original thereof.                                        

       4.8 Legal Fees. In the event that the Company or any Holder commences a
legal action to enforce its rights under this Warrant, the non-prevailing party 
to such action or proceeding shall pay all reasonable costs and expenses        
(including reasonable attorney's fees) incurred in enforcing such rights.       

    4.9 Attorney-in-Fact. To effectuate the terms and provisions of this
Termination Warrant and of the Purchase Agreement with respect to this          
Termination Warrant, the Company hereby agrees to grant a power of attorney     
substantially in the form of by Exhibit K to the Purchase Agreement (the "Power 
of Attorney"). All acts done under such power of attorney are hereby ratified   
and approved and neither the attorney-in-fact named therein (the                
"Attorney-in-Fact") nor any designee or agent thereof shall be liable for any   
acts of commission or omission, for any error of judgment or for any mistake of 
fact or law, as long as the Attorney-in-Fact is acting within the scope of the  
Power of Attorney and within the scope of, and in accordance with, this Warrant,
the Purchase Agreement, and/or the Escrow Agreement. The Power of Attorney,     
being coupled with an interest, shall be irrevocable while any portion of this  
Warrant remains unexercised or any provision of the Purchase Agreement or the   
Escrow Agreement remains unsatisfied. In addition, the Company shall deliver to 
the Attorney-in-Fact a copy of resolutions duly adopted by the                  

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Board of Directors of the Company, as certified by the President of the Company,
authorizing future issuances of shares of Common Stock if required, upon the    
exercise of this Warrant.                                                       

Dated: __________, 2001                                                         

ASIA FIBER HOLDINGS LIMITED                                                     

By: ______________________________                                              
Name:                                                                   
Title:                                                                  

Attest:                                                                         

__________________________________                                              
Name:                                                                           
Title:                                                                          

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APPENDIX I

NOTICE OF EXERCISE

1.      The undersigned hereby elects (please check the appropriate box and fill
in the blank spaces):                                           

        [ ] to purchase ______ shares of Common Stock, par value $.01 per share,
of Asia Fiber Holdings Limited at $.01 per share for a total of 
 $_________ and pursuant to the terms of the attached Warrant, and
  tenders herewith payment of the Exercise Price of such Termination
Warrant Shares in full; or                                      

  [ ] to purchase _______ shares of Common Stock, par value $.01 per
       share, of Asia Fiber Holdings Limited pursuant to the cashless exercise
    provision under Section 2.2 (b) of the attached Warrant, and tenders
  herewith the number of Termination Warrant Shares to purchase such
        Termination Warrant Shares based on the average closing bid price of the
 Common Stock for the ten Trading Days prior to the date hereof of
$_______ per share.                                             

2.      Please issue a certificate or certificates representing said Termination
      Warrant Shares in the name of the undersigned or in such other name as
is specified below:                                             

Dated: __________________________           By: ________________________________

                                            Name: ______________________________

                                            Title: _____________________________

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 APPENDIX II

EXERCISE PROCEDURE

       1. At any time and from time to time during the term of this Agreement,
the Holder may deliver to the Escrow Agent written notice (a "Notice of         
Exercise") that it has elected to exercise the Warrant registered in the name of
such Holder in whole or in part in accordance with the terms of the Warrant, and
the Notice of Exercise shall be in the form annexed as APPENDIX I to the        
Warrant. A fee of $350 shall accompany every Notice of Exercise delivered to the
Escrow Agent;                                                                   

      2. The Holder shall send by fax the executed Notice of Exercise to the
Escrow Agent by 4:00 p.m. New York Time on the Exercise Date. The Escrow Agent  
shall send the Notice of Exercise by facsimile to the Company by the end of the 
Business Day on the Exercise Date;                                              

        3. The Company shall have two (2) Business Days from transmission of the
Notice of Exercise by the Escrow Agent to object only to the calculation of the 
number of Warrant Escrow Shares to be released. If the Company fails to object  
to the calculation of the number of Warrant Escrow Shares to be released within 
said time, then the Company shall be deemed to have waived any objections to    
said calculation and to have directed Escrow Agent to release same. The         
Company's only basis for any objection hereunder shall be to the calculation of 
the number of Warrant Escrow Shares to be released. In the event of such an     
objection, the parties shall have one (1) Business Day to agree on the number of
Warrant Escrow Shares to be released pursuant to said Exercise. In the event    
that the parties cannot agree on the number of Warrant Escrow Shares to be      
released in said time, then the Company shall commence a legal action in the    
appropriate state or federal court in the state and county of New York, within  
five (5) Business Days of the transmittal of the Notice of Exercise by the      
Escrow Agent to the Company. If the Company does not commence such legal action 
within said five (5) Business Days, the Escrow Agent shall release the number of
shares stated in the Notice of Exercise to the Holder and the Company's         
objection shall be deemed withdrawn and waived with prejudice. If the Escrow    
Agent does not receive said objection notice within the time period set forth   
above from the Company, the Escrow Agent shall release from escrow and deliver  
to the Holder certificates or instruments representing the number of Warrant    
Escrow Shares issuable to the Holder in accordance with such exercise on the    
second Business Day from the transmittal to the Company of the Notice of        
Exercise. In the event that the certificates evidencing the Warrant Escrow      
Shares held by the Escrow Agent are not in denominations appropriate for such   
delivery to the Holder, the Escrow Agent shall request the Company to cause its 
transfer agent and registrar to reissue certificates in smaller denominations.  
The Escrow Agent shall, however, immediately release to the requesting Holder   
certificates representing such lesser number of shares as the denominations in  
its possession will allow that is closest to but no more than the actual number 
to be released to such Holder. Upon receipt of the reissued shares in lesser    
denominations from the Company's transfer agent, the Escrow Agent shall release 
to such Holder the balance of the shares due to such Holder;                    

     4. The Holder shall send the original Warrant, Notice of Exercise and
Exercise Price to the Escrow Agent via FedEx or other commercial overnight      
courier, along with a fee of $350, instructions regarding names and amount of   
certificates for the issuance of the Warrant Shares, and, if exercise is not    

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in full, instructions as to the re-issuance of the balance of the Warrant;      
provided, however, that if the Escrow Agent is holding the Warrant, then the    
Notice of Exercise may be faxed and the fee and the Exercise Price may be       
transmitted via wire transfer to the Escrow Agent. The Escrow Agent shall       
deliver the foregoing to the Company within two (2) Business Days of the Escrow 
Agent's receipt thereof; provided, however, that the Escrow Agent shall wire the
Exercise Price to the Company pursuant to wire transfer instructions provided to
the Escrow Agent by the Company. In the event that the Escrow Agent has custody 
of the Warrant, the Escrow Agent shall notify the Company and the Holder in     
writing of the balance of the Warrant remaining and the Company and the Holder  
shall acknowledge such notice in writing, in lieu of issuance of a new Warrant  
for the balance;                                                                

      5. If the Company will be issuing a new Warrant, it will send such new
Warrant to the Escrow Agent by overnight courier within five (5) Business Days  
of its receipt of the original Warrant, Notice of Exercise and Exercise Price.  
The Escrow Agent shall send the Warrant Shares to the Holder in accordance with 
Holder's instructions within two (2) Business Days of receipt of the Notice of  
Exercise and will send the new Warrant (if any) to the Holder upon receipt; and 

        6. The Escrow Agent agrees to notify the Company in writing by facsimile
each time the Escrow Agent releases Warrant Escrow Shares to the Holder. Until  
any such release and notification are given to the Company, the Warrant Escrow  
Shares shall not be deemed to be validly issued and outstanding shares of       
capital stock of the Company. Such notification shall be given when the Escrow  
Agent delivers the Notice of Exercise to the Company.                           

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 EXHIBIT I

 SPECIAL WARRANT SHARES ESCROW AGREEMENT

            SPECIAL WARRANT SHARES ESCROW AGREEMENT (this "Agreement"), dated as
of December 19, 2000, by and among ASIA FIBER HOLDINGS LIMITED, a Delaware      
corporation with its principal place of business at Room 2105, 21/F West Tower, 
Shun Tak Centre, 200 Connaught Rd., Sheung Wan, Hong Kong (the "Company");      
Kaplan Gottbetter & Levenson, LLP with its principal place of business at 630   
Third Avenue, New York, NY 10017 (the "Escrow Agent"); and GEM Global Yield Fund
Limited, a company with offices at Hunkins Waterfront Plaza, P.O. Box 556, Main 
Street, Nevis, West Indies ( the "Purchaser").                                  

RECITALS

   A. Simultaneously with the execution of this Agreement, the
Purchaser and the Company entered into a Convertible Preferred Stock Purchase   
Agreement, dated as of the date hereof (the "Purchase Agreement"), which        
Purchase Agreement is incorporated herein by reference, and pursuant to which   
the Company is issuing a certain warrant (the "Termination Warrant") and the    
Termination Warrant Escrow Shares as of the date hereof, and the Company has    
granted the Escrow Agent a power of attorney (the "Special Power of Attorney"); 

         B. The Escrow Agent is willing to act as escrow agent pursuant to
the terms of this Agreement with respect to the exercise of the Termination     
Warrant;                                                                        

           C. All capitalized terms used but not defined herein shall have the
respective meanings ascribed to them in the Purchase Agreement.                 

NOW, THEREFORE, IT IS AGREED:                           

      1. PROCEDURE FOR ESCROW. The procedures of the escrow shall be
governed by Appendix II to the Termination Warrant (the "Appendix");            

        2. TERMS OF ESCROW. The terms of the escrow shall be governed by
Article 2 of the Purchase Agreement and Article 2 of the Termination Warrant and
the Appendices thereto.                                                         

3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.          

               (a) The parties hereto agree that the duties and obligations of
the Escrow Agent shall be only those obligations herein specifically provided   
and no other. The Escrow Agent's duties are those of a depositary only, and the 
Escrow Agent shall incur no liability whatsoever, except as a direct            

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result of its willful misconduct in violation of this Agreement or gross        
negligence in its performance hereunder.                                        

                (b) The Escrow Agent may consult with counsel of its choice, and
shall not be liable for any action taken, suffered or omitted to be taken by it 
in accordance with the advice of such counsel.                                  

               (c) The Escrow Agent shall not be bound in any way by the terms
of any other agreement to which the Purchaser and the Company are parties,      
whether or not the Escrow Agent has knowledge thereof, and the Escrow Agent     
shall not in any way be required to determine whether or not any other agreement
has been complied with by the Purchaser, the Company, or any other party        
thereto. The Escrow Agent shall not be bound by any modification, amendment,    
termination, cancellation, rescission or supersession of this Agreement unless  
the same shall be in writing and signed jointly by the Purchasers and the       
Company and agreed to in writing by the Escrow Agent.                           

               (d) If the Escrow Agent at any time becomes uncertain as to its
duties or rights hereunder or receives instructions, claims or demands which, in
its opinion, are in conflict with any of the provisions of this Agreement, the  
Escrow Agent shall be entitled to refrain from taking any action other than     
keeping safely the Consideration (as defined below) held in escrow hereunder or 
taking certain action until the Escrow Agent is directed otherwise in writing   
jointly by the Purchaser and the Company or by a final judgment of a court of   
competent jurisdiction.                                                         

             (e) The Escrow Agent shall be fully protected in relying upon
any written notice, demand, certificate or document which the Escrow Agent, in  
good faith, believes to be genuine. The Escrow Agent shall not be responsible   
for the sufficiency or accuracy of the form, execution, validity or genuineness 
of documents or securities now or hereafter deposited hereunder or of any       
endorsement thereon, or for any lack of endorsement thereon, or for any         
description therein; nor shall the Escrow Agent be responsible or liable in any 
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.                                                                    

             (f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal           
proceedings which may be instituted against it or in respect of the             
Consideration.                                                                  

            (g) If the Escrow Agent at any time, in its sole discretion,
deems it necessary or advisable to relinquish custody of the Termination Warrant
and the Termination Warrant Shares (to the extent that the same is delivered to 
it (collectively, the "Consideration"), the Escrow Agent may do so by delivering
the same to another Person that agrees to act as the escrow agent and whose     
substitution for the Escrow Agent is agreed to in writing by the Purchaser and  
the Company. If no such escrow agent is selected within three (3) days after the
Escrow Agent gives notice to the Purchaser and the Company of the Escrow Agent's
desire to so relinquish custody of the Consideration and resign as Escrow Agent,
then the Escrow Agent may do so by delivering the Consideration to the clerk or 
other proper officer of a state or federal court of competent jurisdiction      
situate in the county and state of New York. The fee of any court               

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officer shall be borne by the Company. Upon such delivery, the Escrow Agent     
shall be discharged from any and all responsibility or liability with respect to
the Consideration and this Agreement, and each of the Company and the Purchaser 
shall promptly pay all monies it may owe to the Escrow Agent for its services   
hereunder, including, but not limited to, reimbursement of its out-of-pocket    
expenses pursuant to paragraph (i) below.                                       

             (h) This Agreement shall not create any fiduciary duty on the
part of the Escrow Agent to the Purchaser or the Company, nor disqualify the    
Escrow Agent from acting as counsel to either party hereto in any dispute with  
the other, including any dispute with respect to the Consideration; provided,   
however, that in the event of such dispute, the Escrow Agent shall have the     
right to commence an interpleader action in any court of competent jurisdiction 
of the state of New York or of the United States located in the county and state
of New York, deposit the consideration with such court.                         

              (i) The parties acknowledge and agree that the Escrow Agent is
counsel to the Purchaser. The parties hereby accept, and agree not to object to,
the Escrow Agent's engagement as Escrow Agent hereunder.                        

            (j) Upon the performance of this Agreement, the Escrow Agent
shall be deemed released and discharged of any further obligations hereunder.   

4. INDEMNIFICATION.                                     

                (a) The Purchaser hereby indemnifies and holds free and harmless
the Escrow Agent from any and all losses, expenses, liabilities and damages     
(including but not limited to reasonable attorney's fees, and amounts paid in   
settlement) resulting from claims asserted by the Company against the Escrow    
Agent with respect to the performance of any of the provisions of this          
Agreement;                                                                      

              (b) The Company hereby indemnifies and holds free and harmless
the Escrow Agent from any and all losses, expenses, liabilities and damages     
(including but not limited to reasonable attorney's fees, and any amounts paid  
in settlement) resulting from claims asserted by the Purchaser against the      
Escrow Agent with respect to the performance of any of the provisions of this   
Agreement;                                                                      

                (c) The Purchaser and the Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all       
losses, damages, taxes, liabilities and expenses that may be incurred by the    
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to  
this Agreement, the Purchase Agreement, the Termination Warrants and the Special
Power of Attorney, including, but not limited to, all legal costs and expenses  
of the Escrow Agent incurred defending itself against any claim or liability in 
connection with its performance hereunder, provided that the Escrow Agent shall 
not be entitled to any indemnity for any losses, damages, taxes, liabilities or 
expenses that directly result from its willful misconduct or gross negligence in
its performance as Escrow Agent under this Agreement;                           

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                (d) In the event of any legal action or proceeding involving any
of the parties to this Agreement, which is brought to enforce or otherwise      
adjudicate any of the rights or obligations of the parties hereunder or any of  
its terms, the non-prevailing party or parties shall pay the legal fees of the  
prevailing party or parties and the legal fees, if any, of the Escrow Agent;    

5. MISCELLANEOUS.                                       

          (a) All notices, including, without limitation, Notices of
Exercise, objections, requests, demands and other communications sent to any    
Person hereunder shall be deemed duly given if (x) in writing and sent by       
facsimile transmission to the facsimile number for such Person set forth below  
or such other facsimile numbers as such Person may designate by notice given    
pursuant to the terms of this Section 5 and (y) the sender has confirmation of  
transmission:                                                                   

      (i)     If to the Company:         Asia Fiber Holdings Limited
                                         Room 2105, 21/F, West Tower
                             Shun Tak Centre
                               200 Connaught Rd.
                                   Sheung Wan, Hong Kong
                                          Attn: Mr. Ching Lung Po, CEO
                  Tel:
                  Fax:

  With copies to:            Loeb & Loeb LLP
                                      10100 Santa Monica Blvd.
                        Suite 2200
                                           Los Angeles, California 90067
                                         Attn:  David Ficksman, Esq.
                                  Tel:  (310) 282-2350
                                  Fax:  (310) 282-2192

         (ii)    If to the Purchaser:       To the fax number set forth in
                                        Schedule 1 to the Purchase
                        Agreement.

                    With copies to:            Kaplan Gottbetter & Levenson, LLP
                                         630 Third Avenue, 5th Floor
                                           New York, New York 10017-6705
                                            Attn: Adam S. Gottbetter, Esq.
                                  Tel:  (212) 983-6900
                                  Fax:  (212) 983-9210

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            (iii)   If to the Escrow Agent:    Kaplan Gottbetter & Levenson, LLP
                                         630 Third Avenue, 5th Floor
                                           New York, New York 10017-6705
                                             Attn:  Adam S. Gottbetter, Esq.
                                  Tel:  (212) 983-6900
                                  Fax:  (212) 983-9210

              (b) This Agreement has been prepared, negotiated and delivered
in the state of New York and shall be governed by and construed and enforced in 
accordance with the laws of the state of New York applicable to contracts       
entered into and performed entirely within New York, without giving effect to   
the principles of New York law relating to the conflict of laws;                

               (c) 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, such signature shall create a valid and binding         
obligation of the party executing (or on whose behalf such signature is         
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.;                                                 

         (d) This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The          
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.                             

         6. TERMINATION OF ESCROW. The term of this Escrow Agreement shall
begin upon the date hereof and shall continue until terminated upon the earlier 
to occur of:(i) the first to occur of the expiration date of the Termination    
Warrant and earlier exercise of the Termination Warrant in full; and (ii) the   
written agreement of the parties to terminate this Agreement. Upon the          
termination of this Escrow Agreement, the Escrow Agent shall return any         
Termination Warrant Escrow Shares then remaining in its possession to the       
Company or otherwise as instructed in writing by all parties.                   

[ SIGNATURE PAGE FOLLOWS ]

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       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.                                    

Escrow Agent:                   The Company:                                    

KAPLAN GOTTBETTER &                       ASIA FIBER HOLDINGS LIMITED           
LEVENSON, LLP                                                           

By: _________________________             By: ____________________________      
Name:                                     Name:                         
Title:                                    Title:                        

              Purchaser:

                                 GEM GLOBAL YIELD FUND LIMITED

                                    By: ____________________________
                 Name:
                  Title:

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 EXHIBIT J

 SPECIAL REGISTRATION RIGHTS AGREEMENT

      This Special Registration Rights Agreement (this "Agreement") dated as
of______, 2001, by and between ASIA FIBER HOLDINGS LIMITED, a Delaware          
corporation with its principal place of business at Room 2105, 21/F West Tower, 
Shun Tak Centre, 200 Connaught Rd., Sheung Wan, Hong Kong (the "Company"), and  
GEM Global Yield Fund Limited, a company with offices at Hunkins Waterfront     
Plaza, P.O. Box 556, Main Street, Nevis, West Indies (the "Purchaser").         

     Simultaneously with the execution and delivery of this Agreement, the
Purchaser and the Company have entered into a Convertible Preferred Stock       
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),     
which Purchase Agreement is incorporated herein by reference, and pursuant to   
which the Purchaser has agreed to purchase shares of preferred stock (the       
"Shares") and a certain warrant (the "Warrant") of the Company, and the Company 
has agreed to issue a certain other warrant (the "Termination Warrant") to the  
Purchaser upon termination of the Purchase Agreement as more particularly       
provided therein.                                                               

The Company and the Holder hereby agree as follows:             

       1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in the Purchase Agreement. As used  
in this Agreement, the following terms shall have the following meanings:       

    "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition only, the term "control," when 
used with respect to any Person, means the possession, direct or indirect, of   
the power to direct or cause the direction of the management and policies of    
such Person, whether through the ownership of voting securities, by contract or 
otherwise; and the terms "affiliated," "controlling" and "controlled" have      
meanings correlative to the foregoing.                                          

      "Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of 
New York are authorized or required by law or other government actions to close 
between the hours of 9:30 a.m. and 5:00 p.m. New York Time.                     

        "Commission" means the United States Securities and Exchange Commission.

   "Common Stock" means the Company's common stock, par value $.01 per
share.                                                                          

"Event" shall have the meaning set forth in Section 7 hereof.   

  "Event Date" shall have the meaning set forth in Section 7 hereof.

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"Escrow Agent" means Kaplan Gottbetter & Levenson, LLP.         

        "Escrow Agreement" means the Special Warrant Shares Escrow Agreement, by
and among the Company, the Escrow Agent and the Purchaser, dated as of the date 
hereof, which Agreement is incorporated herein by reference.                    

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 "Holder" or "Holders" means the Purchaser and any other holder or
holders, as the case may be, from time to time of Registrable Securities.       

    "Indemnified Party" shall have the meaning set forth in Section 6(c)
hereof.                                                                         

     "Indemnifying Party" shall have the meaning set forth in Section 6(c)
hereof.                                                                         

   "Inspectors" shall have the meaning set forth in Section 5(a)(viii)
hereof.                                                                         

 "Losses" shall have the meaning set forth in Section 6(a) hereof.

   "New York Courts" shall have the meaning set forth in Section 10(e)
hereof.                                                                         

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

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

      "Prospectus" means the prospectus included in a 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 such    
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.      

"Registrable Securities" means the Termination Warrant Shares,  
including, without limitation, the Termination Warrant Escrow Shares, and any   
other shares of Common Stock issued as (or issuable upon the conversion or      
exercise of any warrant, right, or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of, 
such Termination Warrant Shares or Termination Warrant Escrow Shares, excluding 
in all cases, however, any Registrable Securities sold by a Person in a         
transaction in which the seller's rights under this Agreement are not assigned. 

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       "Registration" shall have the meaning set forth in Section 3(a) hereof.

    "Registration Expenses" means all expenses incurred in effecting any
registration pursuant to this Agreement, including, without limitation, all     
registration, qualification, and filing fees, printing expenses, escrow fees,   
fees and disbursements of counsel for the Company, blue sky fees and expenses,  
and expenses of any regular or special audits incident to or required by any    
such registration, but shall not include Selling Expenses, fees and             
disbursements of counsel for the Holders and the compensation of regular        
employees of the Company, which shall be paid in any event by the Company.      

        "Registration Statement" means each registration statement, contemplated
by Section 3(a) hereof, 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.          

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

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

     "Rule 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any       
similar successor rule that may be promulgated by the Commission.               

       "Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar   
rule or regulation hereafter adopted by the Commission having substantially the 
same effect as such rule.                                                       

"Securities Act" means the Securities Act of 1933, as amended.  

       "Selling Holders" means each Holder any of whose Registrable Securities
are being registered pursuant to a Registration Statement.                      

       "Special Power of Attorney" means that certain power of attorney, dated
the date hereof, given by the Company to the Escrow Agent.                      

    "Termination Warrant Escrow Shares" means the shares of Common Stock
issued by the Company and deposited with the Escrow Agent pursuant to the Escrow
Agreement on the date hereof.                                                   

       "Termination Warrant Shares" means the shares of Common Stock for which
the Warrants are exercisable.                                                   

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    "Termination Warrant" means the common stock purchase warrant of the
Company issued in accordance with the terms of Section 2.1 of the Purchase      
Agreement.                                                                      

"Underwritten Registration" or "Underwritten Offering" means a  
registration in connection with which securities of the Company are sold to an  
underwriter for sale to the public pursuant to an effective registration        
statement.                                                                      

2. Restrictions on Transfer.                                    

            (a) Each Holder agrees not to offer, sell, transfer, pledge, assign,
hypothecate or otherwise dispose of all or any portion of its Registrable       
Securities unless and until the transferee has agreed in writing for the benefit
of the Company to be bound by the terms of this Agreement and;                  

            (i) There is then in effect a registration statement under the
      Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or      

         (ii) Such Holder shall have (A) notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
      disposition, and (B) furnished the Company with an opinion of counsel,
      reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act.   

           (b) Each certificate representing Registrable Securities shall bear
the following legend:                                                           

   THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN
           REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
         OR APPLICABLE STATE "BLUE SKY" OR SECURITIES LAWS ("STATE LAWS"),
     AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
  HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL (i)
      REGISTERED UNDER THE ACT AND APPLICABLE STATE LAWS OR (ii) THE
            COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
           SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED.                                        

         (c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have      
obtained an opinion of counsel at such Holder's expense (which counsel may be   
counsel to the Company) reasonably acceptable to the Company to the effect that 
the securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend;                                          

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       (d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such   
securities shall be removed upon receipt by the Company of an order of the      
appropriate blue sky authority authorizing such removal.                        

3. "Piggy-back" Registrations.                                  

         (a) If the Company decides to register any of its Common Stock or
securities convertible into or exchangeable for Common Stock under the          
Securities Act (a "Registration") on a form that is suitable for an offering of 
shares of Common Stock by the Company or by third parties and that is not a     
registration solely to implement an employee benefit plan, a registration       
statement on Form S-4 (or successor form) or a transaction to which Rule 145 or 
any other similar rule of the Commission is applicable (such form, a            
"Registration Statement"), the Company shall give written notice to the Holders 
and the Escrow Agent of its intention to effect such a Registration. Subject to 
Section 3(b) below, the Company shall use all reasonable efforts to effect      
Registration under the Securities Act of all Registrable Securities that the    
Holders request be included in such Registration by a written notice delivered  
to the Company within fifteen (15) days after the notice given by the Company.  
Each of the Holders agrees that any Registrable Securities which such Holder    
requests to be included in a Registration pursuant to this Section 3 shall be   
included by the Company on the same form of Registration Statement as selected  
for the Registration;                                                           

            (b) If a Registration involves an underwritten offering, the Company
shall not be required to register securities in excess of the amount that the   
principal underwriter reasonably and in good faith recommends in writing for    
inclusion in such offering (a "Cutback"), a copy of which recommendation, and   
supporting reasoning, shall be delivered to each Holder. If such a Cutback      
occurs, the number of shares that are entitled to be included in the            
Registration and underwriting shall be allocated in the following manner: (i)   
first, to the Company for any securities it proposes to sell for its own        
account, (ii) second, to any Person with demand registration rights requiring   
such registration, and (iii) third, to the Holders and other holders of Company 
securities with piggy-back registration rights requesting inclusion in the      
Registration, pro rata among the respective holders thereof on the basis of the 
number of shares for which each such requesting holder has requested            
registration;                                                                   

           (c) If the Registration of which the Company gives notice is for an
underwritten public offering, the Company shall so advise the Holders as a part 
of the written notice given pursuant to Section 3(a). In such event, the right  
of any Holder to have its Registrable Securities included in the Registration   
pursuant to this Section 3 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities  
in the underwriting to the extent provided herein. All Holders proposing to     
distribute their securities through such underwriting shall (together with the  
Company and its other security holders with registration rights to participate  
therein distributing their securities through such underwriting) enter into an  
underwriting agreement in customary form with the representative of the         
underwriters or the managing underwriter selected by the Company;               

       (d) If the Company elects to terminate any Registration after a
Registration Statement for such Registration shall have been filed, the Company 
will have no obligation to register the Registrable                             

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Securities that the Holders sought to have included in such Registration. The   
Company shall bear all Registration Expenses of the Holders in connection with  
any Registration.                                                               

4. Representations and Warranties                               

      (a) The Company hereby makes the following representations and
warranties to the Purchaser:                                                    

               (i) The Company has the requisite corporate power and authority
to enter into, execute and deliver this Agreement, the Termination Warrant, the 
Escrow Agreement and the Special Power of Attorney and to consummate the        
transactions contemplated hereby and thereby and to carry out its obligations   
hereunder and thereunder. The execution and delivery of this Agreement, the     
Termination Warrant, the Escrow Agreement and the Special Power of Attorney by  
the Company and the consummation by it of the transactions contemplated hereby  
and thereby have been duly authorized by all necessary action on the part of the
Company. This Agreement, the Termination Warrant, the Escrow Agreement and the  
Special Power of Attorney have been duly executed and delivered by the Company  
and constitute the valid and binding obligations of the Company enforceable     
against the Company in accordance with their respective terms, except as such   
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent  
transfer, reorganization, moratorium, liquidation or similar laws relating to,  
or affecting generally the enforcement of, creditors' rights or by other        
equitable principles of general application;                                    

           (ii) The Termination Warrant has been validly issued and is
fully paid and non-assessable. The Termination Warrant Escrow Shares are validly
issued, and when the exercise price thereof is paid pursuant to the terms of the
Termination Warrant, the Termination Warrant Escrow Shares will be fully paid   
and non-assessable. The Termination Warrant Shares have been duly authorized for
issuance, offer and sale pursuant to this Agreement and, when issued and        
delivered as provided in, and against payment in accordance with, the terms of  
the Termination Warrant, they shall be the valid and binding obligations of the 
Company enforceable in accordance with their respective terms;                  

            (iii) The Company has and at all times while the Termination
Warrant is outstanding has and will continue to maintain an adequate reserve of 
shares of Common Stock to enable it to perform its obligations under this       
Agreement, the Termination Warrant and the Escrow Agreement;                    

               (iv) The execution, delivery and performance of this Agreement,
the Termination Warrant, the Escrow Agreement and the Power of Attorney by the  
Company and the consummation by the Company of the transactions contemplated    
hereby and thereby do not and will not (I) conflict with or violate any         
provision of its or any Subsidiary's articles of incorporation, resolutions or  
bylaws or (ii) require the consent of any third party, conflict with, or        
constitute a default (or an event which with notice or lapse of time or both    
would become a default) under, or give to others any rights of termination,     
amendment, acceleration or cancellation of, any agreement, indenture or         
instrument to which the Company is a party, or (iii) result in a violation of   
any law, rule, regulation, order, judgment, injunction, decree or other         
restriction of any court or governmental authority to which the Company is      
subject                                                                         

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(including federal and state securities laws and regulations), or by which any  
property or asset of the Company or any of its Subsidiaries is bound or         
affected, except in the case of each of clauses (ii) and (iii), such conflicts, 
defaults, terminations, amendments, accelerations, cancellations and violations 
as would not, individually or in the aggregate, have a Material Adverse Effect  
(as defined in the Purchase Agreement);                                         

                (v) Neither the Company nor any Subsidiary is required to obtain
any consent, permit, waiver, authorization or order of, or make any filing or   
registration with, any court or other federal, state, local or other            
governmental authority or other Person in connection with the execution,        
delivery and performance by the Company of this Agreement, the Termination      
Warrant, the Escrow Agreement or the Power of Attorney;                         

             (vi) Neither the Company nor any Subsidiary (I) is in default
under or in violation of any indenture, loan or credit agreement or any other   
agreement or instrument to which it is a party or by which it or any of its     
properties is bound, except such conflicts or defaults as do not have a Material
Adverse Effect, (ii) is in violation of any order of any court, arbitrator or   
governmental body, except for such violations as do not have a Material Adverse 
Effect, or (iii) is in violation of any statute, rule or regulation of any      
governmental authority which could (individually or in the aggregate) (x)       
adversely affect the legality, validity or enforceability of this Agreement, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability or 
obligation to perform fully on a timely basis its obligations under this        
Agreement;                                                                      

          (b) The Purchaser hereby represents and warrants to the Company as
follows:                                                                        

         (i) Such Purchaser is a corporation duly incorporated and
validly existing and in good standing under the laws of the jurisdiction of its 
incorporation.                                                                  

         (ii) Such Purchaser has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated hereby  
and under the Escrow Agreement and otherwise to carry out its obligations       
hereunder and thereunder. The execution and delivery of this Agreement and the  
Escrow Agreement have been duly authorized by all necessary corporate action on 
the part of such Purchaser. This Agreement and the Escrow Agreement have been   
duly executed and delivered by such Purchaser or on its behalf and constitutes  
the valid and legally binding obligation of such Purchaser, enforceable against 
it in accordance with its terms; except as such enforceability may be limited by
applicable bankruptcy, insolvency, liquidation, fraudulent transfer,            
reorganization, moratorium laws and remedies or by other equitable principles of
general application or similar laws relating to or affecting generally the      
enforcement of creditors' rights.                                               

             (iii) Such Purchaser is acquiring the Termination Warrant for
its own account for investment purposes only and without a view toward the      
resale or distribution thereof, without prejudice, however, to the Purchaser's  
right, subject to the provisions of this Agreement, at all times to sell or     
otherwise dispose of all or any part of such Termination Warrant or Warrant     
Shares in compliance with applicable federal and state securities laws.         

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           (iv) At the time such Purchaser was offered the Termination
Warrant, it was, and at the date hereof, it is, and at the Closing Date, it will
be, an "accredited investor" as defined in Rule 501(a) under the Securities Act.

     (v) Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business  
and financial matters so as to be capable of evaluating the merits and risks of 
the prospective investment in the Termination Warrant, and has so evaluated the 
merits and risks of such investment.                                            

           (vi) Such Purchaser is able to bear the economic risk of an
investment in the Termination Warrant and, at the present time, is able to      
afford a complete loss of such investment.                                      

           (vii) Such Purchaser acknowledges receipt of the Disclosure
Documents (as defined in the Purchase Agreement) and further acknowledges that  
it has been afforded (A) the opportunity to ask such questions as it has deemed 
necessary of, and to receive answers from, representatives of the Company       
concerning the terms and conditions of the offering of the Termination Warrant  
and the merits and risks of investing in therein; (B) access to information     
about the Company and the Company's financial condition, results of operations, 
business, properties, management and prospects sufficient to enable it to       
evaluate its investment in the Termination Warrant; and (C) the opportunity to  
obtain such additional information which the Company possesses or can acquire   
which is necessary to make an informed investment decision with respect to the  
Termination Warrant.                                                            

               (viii) Such Purchaser understands and acknowledges that (A) the
Termination Warrant is being offered and sold, and that the Termination Warrant 
Shares are being offered, to it without registration under the Securities Act in
a transaction that is exempt from the registration provisions of the Securities 
Act and (B) the availability of such exemption, depends in part upon, and the   
Company will rely upon, the accuracy and truthfulness of, the foregoing         
representations, and such Purchaser hereby consents to such reliance.           

5. Procedures for Registration.                                 

    (a) Whenever the Company is required to register Registrable
Securities under this Agreement, it agrees to do the following at its sole cost 
and expense:                                                                    

              (i) advise the underwriter(s), if any, and the Selling Holders
promptly and, if requested by such Persons, to confirm such advice in writing:  
(A) when the prospectus, or any prospectus supplement or post-effective         
amendment has been filed, and, with respect to the Registration Statement or any
post-effective amendment thereto, when the same has become effective; (B) of any
request by the Commission for amendments to the Registration Statement or       
amendments or supplements to the prospectus or for additional information       
relating thereto; (C) of the issuance by the Commission of any stop order       
suspending the effectiveness of the Registration Statement under the Securities 
Act or of the suspension by any state securities commission of the qualification
of the Registrable Securities for qualification, offering or sale in any        
jurisdiction, or the initiation of any Proceeding for any of the preceding      

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purposes; and (D) of the existence of any fact or the happening of any event    
that makes any statement of a material fact made in the Registration Statement, 
the prospectus, any amendment or supplement thereto, or any document            
incorporated by reference therein untrue, or that requires the making of any    
additions to or changes in the Registration Statement or the prospectus in order
to make the statements therein not misleading. If, at any time, the Commission  
issues any stop order suspending the effectiveness of the Registration Statement
or any state securities commission or other regulatory authority issues an order
suspending the qualification or exemption from qualification of any Registrable 
Securities under state securities or Blue Sky laws, the Company shall use its   
best efforts to obtain the withdrawal or lifting of such order at the earliest  
possible time;                                                                  

              (ii) if requested by any Selling Holder or the underwriter(s),
if any, incorporate in the Registration Statement or prospectus, pursuant to a  
supplement or post-effective amendment if necessary, such information as such   
Selling Holder and the underwriter(s), if any, may reasonably request to have   
included therein, with respect to the number of Registrable Securities, if any, 
being sold to such underwriter(s), the purchase price being paid therefor and   
any other terms of the offering of the Registrable Securities to be sold in such
offering, and the Company shall make all required filings of such prospectus    
supplement or post-effective amendment as soon as practicable after the Company 
is notified of the matters to be incorporated in such prospectus supplement or  
post-effective amendment;                                                       

    (iii) furnish to the Selling Holders and each of the
underwriter(s), if any, without charge, before filing with the Commission, at   
least one copy of the Registration Statement, as first filed with the           
Commission, and of each amendment thereto, including the prospectus and all     
documents incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);                                             

                (iv) consult with the Selling Holders and the underwriter(s), if
any, prior to the filing of such Registration Statement or prospectus;          

              (v) deliver to each of the Selling Holders and underwriter(s),
if any, without charge, as many copies of the prospectus (including each        
preliminary prospectus) and any amendment or supplement thereto as such Persons 
may reasonably request, the Company hereby consenting to the use of the         
prospectus and any amendment or supplement thereto by each of the Selling       
Holders and each of the underwriter(s), if any, in connection with the offering 
and the sale of any Registrable Securities covered by the prospectus or any     
amendment or supplement thereto;                                                

          (vi) use its best efforts, prior to any public offering of
Registrable Securities, to register or qualify the Registrable Securities under 
the securities or blue sky laws of such jurisdictions as the Holder or          
underwriter(s), if any, may reasonably request and do any and all other acts or 
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; provided,     
however, that the Company shall not be required to register or qualify as a     
foreign corporation where it is not now so qualified or to take any action that 
would subject it to the service of process in suits or to taxation, other than  
as to matters and transactions relating to the Registration Statement, in any   
jurisdiction where it is not now so subject;                                    

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                (vii) cooperate with the Selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates       
representing Registrable Securities covered by a Registration Statement and not 
bearing any restrictive legends, except as required by law, and enable such     
Registrable Securities to be in such denominations and registered in such names 
as the Holders may request prior to any sale of Registrable Securities made by  
the underwriter(s), if any;                                                     

            (viii) in connection with the preparation and filing of each
Registration Statement under the Securities Act pursuant to this Agreement, the 
Company shall give Selling Holders, their underwriters, if any, and one counsel 
or firm of counsel and one accountant or firm of accountants representing all   
Selling Holders the opportunity to participate in the preparation of such       
Registration Statement, each prospectus included therein or filed with the      
Commission, and each amendment thereof or supplement thereto.                   

              (ix) make available for inspection by the Selling Holders, any
underwriter participating in any disposition pursuant to a Registration         
Statement, and any attorney, accountant or other agent retained by any Holder or
underwriter (collectively, the "Inspectors"), all financial and other records,  
pertinent corporate documents and properties of the Company necessary to enable 
them to exercise their due diligence responsibility, and cause the Company's    
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such Registration Statement;           

             (x) notify each seller of Registrable Securities covered by a
Registration Statement at any time when a prospectus relating thereto is        
required to be delivered under the Securities Act of the happening of any event 
as a result of which the prospectus included in the Registration Statement, as  
then in effect, includes and untrue statement of a material fact or omits to    
state a material fact required to be stated therein or necessary to make the    
statements therein not misleading or incomplete in the light of the             
circumstances then existing, and, at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to be an   
amendment of such prospectus as may be necessary so that, as thereafter         
delivered to the purchasers of any Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material  
fact required to be stated therein or necessary to make the statements therein  
not misleading or incomplete in the light of the circumstances then existing;   

         (xi) keep such registration effective for a period of one
hundred eighty (180) days or until the Selling Holders have completed the       
distribution described in any Registration Statement relating thereto, whichever
first occurs; provided, however, that (A) such 180-day period shall be extended 
for a period of time equal to the longer of (1) the period the Holder refrains  
from selling any securities included in such registration at the request of an  
underwriter of securities of the Company and (2) the period ending on the date  
on which Rule 144(k) first becomes available for transfers of Registrable       
Securities and (B) in the case of any Registration of Registrable Securities on 
Form S-3 which are intended to be offered on a continuous or delayed basis, such
180-day period shall be extended, if necessary, to keep the Registration        
Statement effective until all such Registrable Securities are sold, however in  
no event longer than one year from the Effective Date of the Registration       
Statement and provided that Rule 145 permits an offering on a continuous or     
delayed basis;                                                                  

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                (xii) cause all such Registrable Securities registered hereunder
to be listed on each securities exchange on which similar securities issued by  
the Company are then listed;                                                    

     (xiii) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to a Registration Statement and a    
CUSIP number for all such Registrable Securities, in each case not later than   
the effective date of such Registration Statement;                              

       (xiv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its   
security holders, as soon as reasonably practicable, an earnings statement      
covering the period of at least twelve months, but not more than eighteen       
months, beginning with the first month after the effective date of the          
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and                                        

               (xv) at such time as a Registration Statement covering a resale
of any Registrable Securities has been declared effective by the Commission,    
cause its counsel to deliver to the transfer agent for the Common Stock an      
opinion, subject to the making by Selling Holders of such representations and   
warranties to Company counsel as it may reasonably require, certifying that such
Registrable Securities may be sold by the Selling Holders pursuant to such      
Registration Statement with the purchasers thereof receiving share certificates 
without restrictive legend, which opinion shall remain effective so long as such
Registration Statement remains in full force and effect;                        

      (b) Each Selling Holder shall, upon receipt of notice from the
Company of the occurrence of any event of the kind described in Section 4(a)(i),
forthwith discontinue disposition of Registrable Securities following the       
effective date of a Registration Statement covering Registrable Securities until
such Holder's receipt of copies of the prospectus supplement and/or post-       
effective amendment or until it is advised in writing by the Company that the   
use of the applicable prospectus may be resumed and, in either case, has        
received copies of any additional or supplemental filings that are incorporated 
or deemed to be incorporated by reference in such prospectus or Registration    
Statement.                                                                      

          (c) Each Holder covenants and agrees that (i) it will not offer or
sell any Registrable Securities being registered pursuant to any Registration   
Statement until such Holder shall have received copies of the related prospectus
and notice from the Company that such Registration Statement has become         
effective and (ii) such Holder and its officers, directors and Affiliates, if   
any, will comply with the prospectus delivery requirements of the Securities Act
as applicable to them in connection with sales of Registrable Securities        
pursuant to any Registration Statement.                                         

6. Indemnification.                                             

(a) Indemnification by the Company. The Company shall,  
notwithstanding termination of this Agreement and without limitation as to time,
indemnify and hold harmless each Holder, the officers, directors, agents        
(including any underwriters retained by the Holders in connection with the offer
or sale of Registrable Securities), brokers, investment advisors and employees  
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                           

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Exchange Act) and the officers, directors, agents and employees of each such    
controlling Person, from and against any and all losses, claims, damages,       
liabilities, costs (including, without limitation, costs of preparation and     
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact     
contained in such 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      
amendment or supplement thereto, in light of the circumstances under which they 
were made) not misleading, except solely 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 or on behalf of such Holder expressly for
use therein, which information was relied on by the Company for use therein or  
(ii) such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was furnished in writing to the      
Company by or on behalf of such Holder expressly for use therein. The Company   
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions    
contemplated by this Agreement.                                                 

            (b) Indemnification by Holders. In connection with each Registration
Statement, each Selling Holder shall furnish to the Company in writing such     
information as the Company reasonably requests for use in connection with such  
Registration Statement or the related prospectus and agrees, severally and not  
jointly, to indemnify and hold harmless the Company, their 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, to the    
fullest extent permitted by applicable law, from and against all Losses (as     
determined by a court of competent jurisdiction in a final judgment not subject 
to appeal or review) arising solely out of or based solely upon any untrue      
statement of a material fact contained in such Registration Statement, such     
prospectus, or any form of prospectus, or arising solely out of or based solely 
upon any omission of a material fact required to be stated therein or necessary 
to make the statements therein not misleading solely to the extent that (I) such
untrue statement or omission is contained in any information furnished in       
writing by such Holder to the Company specifically for inclusion in such        
Registration Statement or such prospectus and such information was relied upon  
by the Company for use in such Registration Statement, such prospectus or such  
form of prospectus, or (ii) such information relates to such Holder or such     
Holder's proposed method of distribution of Registrable Securities and was      
furnished in writing by or on behalf of such Holder to the Company specifically 
for inclusion in such Registration Statement or such prospectus and such        
information was relied upon by the Company for use in such Registration         
Statement, such prospectus or such form of prospectus; provided, however, that  
anything contained herein to the contrary notwithstanding, no Holder shall be   
liable for any claims hereunder in an amount in excess of the net proceeds      
received by such Holder from the sale of its Registrable Securities pursuant to 
a Registration Statement. In addition, the foregoing shall not inure to the     
benefit of any Holder if a copy of such prospectus (as then amended or          
supplemented) was furnished by the Company to such Holder and was not sent or   
given by or on behalf of such Holder to such Holder's purchaser of Registrable  
Securities if required by law to have been so delivered.                        

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        (c) Conduct of Indemnification Proceedings. If any Proceeding is
brought or asserted against any Person entitled to indemnity hereunder (an      
"Indemnified Party"), such Indemnified Party promptly shall notify the Person   
from whom indemnity is sought (the "Indemnifying Party") in writing, and the    
Indemnifying Party shall 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 is finally determined by a court of     
competent jurisdiction (which determination is not subject to appeal or further 
review) that such failure shall have proximately and materially adversely       
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: (I) the Indemnifying Party has agreed to pay such fees and      
expenses; or (ii) the Indemnifying Party shall have failed to assume promptly   
the defense of such Proceeding and to employ counsel reasonably satisfactory to 
such Indemnified Party in such Proceeding; or (iii) the named parties to any    
such Proceeding (including any impleaded parties) include both such Indemnified 
Party and the Indemnifying Party, and such Indemnified Party shall have been    
advised by counsel that a 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 of 
the claim against the Indemnified Party but shall retain the right to control   
the overall Proceedings out of which the claim arose, and counsel employed by   
the Indemnified Party shall be at the expense of the Indemnifying Party). 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. 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.                                 

       All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (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 (10) Business Days after the         
Indemnified Party gives written notice thereof to the Indemnifying Party.       

           (d) Contribution. If a claim for indemnification under Section 6(a)
or 6(b) of this Agreement is unavailable to an Indemnified Party or is          
insufficient to hold such Indemnified Party harmless for any Losses in respect  
of which this Section would apply by its terms (other than by reason of         
exceptions provided in this Section), then each Indemnifying Party, in lieu of  
indemnifying such Indemnified Party, shall contribute to the amount paid or     
payable by such Indemnified Party as a result of such Losses, (i) in such       
proportion as is appropriate to reflect the relative benefits received by the   
Indemnifying Party on the one hand and the Indemnified Party on the other from  
the distribution of the Registrable Securities or (ii) if the                   

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allocation provided by clause (i) above in this paragraph is not permitted by   
applicable law, in such proportion as is appropriate to reflect not only the    
relative benefits referred to in such clause (i) but also the relative fault of 
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 Section 6(c) hereof, any 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.                                    

   The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(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 6(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of its 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. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)   
shall be entitled to contribution from any Person who was not guilty of such    
fraudulent misrepresentation.                                                   

       (e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company set forth in    
this Agreement shall remain operative and in full force and effect, regardless  
of any investigation made by or on behalf of any Holder or any Person           
controlling Holder, the Company, its directors or officers or any Person        
controlling the Company.                                                        

          (f) No Indemnifying Party shall, without the prior written consent
of the Indemnified Party, effect any settlement of any pending or threatened    
action, suit or proceeding in respect of which any Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such        
Indemnified Party, unless such settlement includes an unconditional release of  
such Indemnified Party from all liability on claims that are the subject matter 
of such action, suit or proceeding.                                             

       (g) 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.                                                     

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       7. Rule 144. The Company shall file the reports required to be filed by
it under the Securities Act and the Exchange Act in a timely manner and, if at  
any time the Company is not required to file such reports, it will, upon the    
request of any Holder, make publicly available other information for as long as 
necessary to permit sales of its securities pursuant to Rule 144. The Company   
further covenants that it will take such further action as any Holder may       
reasonably request, all to the extent required from time to time to enable such 
Holder to sell Registrable Securities without registration under the Securities 
Act within the limitation of the exemptions provided by Rule 144. Upon the      
request of any Holder, the Company shall deliver to such Holder a written       
certification of a duly authorized officer as to whether it has complied with   
such requirements.                                                              

      8. Rule 144A. The Company agrees that, upon the request of a Holder or
any prospective purchaser of Registrable Securities designated by a Holder, the 
Company shall promptly provide (but in any case within fifteen (15) days of a   
request) to such Holder or potential purchaser, the following information:      

          (a) a brief statement of the nature of the business of the Company
and any subsidiaries and the products and services each of them offers;         

      (b) the most recent consolidated balance sheets and profit and
losses and retained earnings statements, and similar financial statements of the
Company for the two (2) most recent fiscal years (such financial information    
shall be audited, to the extent reasonably available); and                      

           (c) such other information about the Company, any subsidiaries, and
their business, financial condition and results of operations as such Holder or 
purchaser of such Registrable Securities shall request in order to comply with  
Rule 144A, as amended, and in connection therewith the anti-fraud provisions of 
the federal and state securities laws.                                          

 The Company hereby represents and warrants to the Holders and any
prospective purchaser of Registrable Securities from a Holder that the          
information provided by the Company pursuant to this Section 8 will, as of the  
dates of such information, not contain any untrue statement of a material fact  
or omit to state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading.       

  9. Consent to be Bound; Assignability of Registration Rights. Each
subsequent holder of Registrable Securities must consent in writing to be bound 
by the terms and conditions of this Agreement in order to acquire the rights    
granted pursuant to this Agreement. Subject to the foregoing sentence, the      
registration rights set forth in this Agreement are assignable to each assignee 
of Registrable Securities conveyed in accordance herewith who agrees in writing 
to be bound by the terms and conditions of this Agreement.                      

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10. Miscellaneous.                                              

           (a) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless made in a writing signed by the Company and 
all of the Persons who are then Holders of Registrable Securities;              

        (b) The Company and the Holders agree that the rights created by
this Agreement are unique, and that the loss of any such right is not           
susceptible to monetary quantification. Consequently, the parties agree that an 
action for specific performance (including for temporary and/or permanent       
injunctive relief) of the obligations created by this Agreement is a proper     
remedy for the breach of the provisions of this Agreement, without the necessity
of proving actual damages. If the parties hereto are forced to institute legal  
proceedings to enforce their rights in accordance with the provisions of this   
Agreement, the prevailing party shall be entitled to recover its reasonable     
expenses, including attorneys' fees, in connection with any such action;        

          (c) Except as otherwise specifically provided herein, all notices,
requests, demands and other communications provided for hereunder shall be in   
writing and shall be deemed duly given to the Person for whom intended (i) upon 
receipt when personally delivered, (ii) one (1) day after being sent by a       
nationally recognized overnight courier for next day delivery or telecopy       
providing confirmation or receipt of delivery, or (iii) three (3) days after    
being sent by certified or registered mail, postage and certified or registered 
mail fees prepaid, return receipt requested, if sent to such Person at the      
address for such Person indicated below or to such other address as may be      
designated by such Person in writing sent by such Person in the manner required 
by this Section:                                                                

If to the Company:        Asia Fiber Holdings Limited   
                       Room 2105, 21/F, West Tower
           Shun Tak Centre
             200 Connaught Rd.
                 Sheung Wan, Hong Kong
                        Attn: Mr. Ching Lung Po, CEO
Tel:
Fax:

With copies to:           Loeb & Loeb LLP               
                      10100 Santa Monica Blvd.
        Suite 2200
                            Los Angeles, California  90067
                         Attn:  David Ficksman, Esq.
                  Tel:  (310) 282-2350
                  Fax:  (310) 282-2192

          If to the Holders:        To the address of each such Holder as it
                                    appears in the stock transfer records of
       the Company

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   With copies to:           Kaplan Gottbetter & Levenson, LLP
            630 Third Avenue
                   New York, NY 10017-6705
                           Attn:  Adam S. Gottbetter, Esq.
                Tel:  (212) 983-6900
                Fax:  (212) 983-9210

         (d) This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of    
which taken together shall constitute one and the same Agreement. In the event  
that any signature is delivered by facsimile transmission, such signature shall 
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such  
facsimile signature were the original thereof;                                  

           (e) This Agreement shall be governed by and construed in accordance
with the laws of the state of New York without regard to principles thereof     
relating to the conflict of laws. Each of the Company and each Holder hereby    
irrevocably submits to the jurisdiction of any New York state court or any      
federal court sitting in the city and county of New York (collectively, the "New
York Courts") in respect of any Proceeding arising out of or relating to this   
Agreement and irrevocably accepts for itself and in respect of its property,    
generally and unconditionally, jurisdiction of the New York Courts. Each of the 
Company and each Holder irrevocably waives, to the fullest extent it may        
effectively do so under applicable law, any objection that it may now or        
hereafter have to the laying of the venue of any such Proceeding brought in any 
New York Court and any claim that any such Proceeding brought in any New York   
Court has been brought in an inconvenient forum;                                

            (f) The remedies provided herein are cumulative and not exclusive of
one another or of any remedies provided by law;                                 

   (g) 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 reasonable efforts to find and employ an alternative means to achieve the 
same or substantially the same result as that contemplated by such term,        
provision, covenant or restriction. It is hereby stipulated and declared to be  
the intention of the parties that they would have executed the remaining terms, 
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.                     

           (h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.                

[Signatures on following page]

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      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.                                                       

                Company:

                                   ASIA FIBER HOLDINGS LIMITED

                                            By: ________________________________
                     Name:
                      Title:

               Holder:

                                     GEM GLOBAL YIELD FUND LIMITED

                                            By: ________________________________
                     Name:
                      Title:

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 EXHIBIT K

FORM 26/33-DPOA/S-97                                                            
Power of Attorney; Statutory Short Form, Revised 1/1/97 - (with Affidavit of    
Effectiveness (C)                                                               

CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT -
THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY

 DURABLE GENERAL POWER OF ATTORNEY
 NEW YORK STATUTORY SHORT FORM
 THE POWERS YOU GRANT BELOW CONTINUE TO BE EFFECTIVE
 SHOULD YOU BECOME DISABLED OR INCOMPETENT

CAUTION: THIS IS AN IMPORTANT DOCUMENT IT GIVES THE PERSON WHOM YOU DESIGNATE   
(YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY DURING YOUR LIFETIME WHICH  
MAY INCLUDE POWERS TO MORTGAGE, SELL, OR OTHERWISE DISPOSE OF ANY REAL OR       
PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THESE POWERS
WILL CONTINUE TO EXIST EVEN AFTER YOU BECOME DISABLED OR INCOMPETENT. THESE     
POWERS ARE EXPLAINED MORE FULLY IN NEW YORK GENERAL OBLIGATIONS LAW, ARTICLE 5, 
TITLE 15, SECTION 5-1502A THROUGH 5-1503 WHICH EXPRESSLY PERMIT THE USE OF ANY  
OTHER OR DIFFERENT FORM OF POWER OF ATTORNEY.                                   

THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE    
DECISIONS. YOU MAY EXECUTE A HEALTH CARE PROXY TO DO THIS.                      

(IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK
A LAWYER TO EXPLAIN IT TO YOU.)                                                 

THIS is intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to  
Article 5, Title 15 of the New York General Obligations Law:                    

ASIA FIBER HOLDINGS LIMITED                                                     

does hereby appoint:                              (insert your name and address)
                    ---------------------------   ------------------------------
(If 1 person is to be appointed agent,
insert the name and address of your agent above)

Adam S. Gottbetter residing at 630 Third Avenue, 5th Floor,     
New York, NY 10017-6705                                         

Steven M. Kaplan residing at 630 Third Avenue, 5th Floor,       
New York, NY 10017-6705                                         

Paul R. Levenson residing at 630 Third Avenue, 5th Floor,       
New York, NY 10017-6705                                         

(If 2 or more persons are to be appointed agents
 by you insert their names and addresses above.)

my attorney(s)-in-fact TO ACT (If more than one agent is designated, CHOOSE ONE 
of the following two choices by putting your initials in ONE of the blank spaces
to the left of your choice;)                                                    

(x) Each agent may SEPARATELY act.  
( ) All agents must act TOGETHER.   
(If neither blank space is initialed, the agents
 will be required to act TOGETHER)

IN MY NAME, PLACE AND STEAD in any way which I myself could do, if I were       
personally present, with respect to the following matters as each of them is    
defined in Title 15 of Article 5 of the New York General Obligations Law to the 
extent that I am permitted by law to act through an agent:                      

(DIRECTIONS: INITIAL IN THE BLANK SPACE TO THE LEFT OF YOUR CHOICE ANY ONE OR   
MORE OF THE FOLLOWING LETTERED SUBDIVISIONS AS TO WHICH YOU WANT TO GIVE YOUR   
AGENT AUTHORITY. IF THE BLANK SPACE TO THE LEFT OF ANY PARTICULAR LETTERED      
SUBDIVISION IS NOT INITIALED, NO AUTHORITY WILL BE GRANTED FOR MATTERS THAT ARE 
INCLUDED IN THAT SUBDIVISION. ALTERNATIVELY, THE LETTER CORRESPONDING TO EACH   
POWER YOU WISH TO GRANT MAY BE WRITTEN OR TYPED ON THE BLANK LINE IN SUBDIVISION
"(Q)", AND YOU MAY THEN PUT YOUR INITIALS IN THE BLANK SPACE TO THE LEFT OF     
SUBDIVISION "(Q)" IN ORDER TO GRANT EACH OF THE POWERS SO INDICATED)            

00045857.5 / 0112-073                                                           

(   )   (A)    real estate transactions;                                        
(   )   (B)    chattel and goods transactions;                                  
(   )   (C)    bond, share and commodity transactions;                          
(   )   (D)    banking transactions;                                            
(   )   (E)    business operating transactions;                                 
(   )   (F)    insurance transactions;                                          
(   )   (G)    estate transactions;                                             
(   )   (H)    claims and litigation;                                           
(   )   (I)    personal relationships and affairs;                              
(   )   (J)    benefits from military service;                                  
(   )   (K)    records, reports and statements;                                 
(   )   (L)    retirement benefit transactions;                                 
(   )   (M)    making gifts to my spouse, children and more remote descendants, 
            and parents, not to exceed in the aggregate $10,000 to each of
such persons in any year;                         
(   )   (N)    tax matters;                                                     
(   )   (O)    all other matters;                                               
(   )   (P)    full and unqualified authority to my attorney(s)-in-fact to      
          delegate any or all of the foregoing powers to any person or
persons whom my attorney(s)-in-fact shall select; 
( x )   (Q)    each of the matters identified by the following letters:  C and E

(Special provisions and limitations may be included in the statutory short form 
durable power of attorney only if they conform to the requirements of Section   
5-1503 of the New York General Obligations Law.)                                

--------------------------------------------------------------------------------
SEE ATTACHMENT A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Special Additional Provisions: The powers granted under (A) through (C) above   
shall include the sale of a cooperative housing unit and are enlarged so that   
all fixtures and articles of personal property which at the time of such        
transaction are or which may thereafter be attached to or used in connection    
with the real or personal property may be included in the agreements or other   
instruments to be executed and delivered in connection with any transactions and
which may be described in said instruments with more particularity. This Power  
of Attorney is not subject to question because an instrument executed hereunder 
fails to recite or recites only nominal consideration paid therefore and any    
person dealing with the subject matter of such instrument may do so as if full  
consideration had been expressed therein.                                       

THIS DURABLE POWER OF ATTORNEY SHALL NOT BE AFFECTED BY MY SUBSEQUENT DISABILITY
OR INCOMPETENCE.                                                                
If every agent named above is unable or unwilling to serve, I appoint           

 residing at

(insert name and address of successor)                                          
to be my agent for all purposes hereunder.                               JUD 134

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TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, I HEREBY AGREE THAT ANY THIRD PARTY 
RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT          
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO 
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION 
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND I FOR MYSELF   
AND FOR MY HEIRS, EXECUTORS, LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY AGREE TO 
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL   
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY    
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.                             

THIS DURABLE GENERAL POWER OF ATTORNEY MAY BE REVOKED BY ME AT ANY TIME.        

IN WITNESS WHEREOF I have hereunto signed my name this        day of      , 2001

 ASIA FIBER HOLDINGS LIMITED

             (YOU SIGN HERE:) By:                                      President

                        (Signature of principal)

The statute requires that this instrument be acknowledged by the
principal. No express provision is made for proof by subscribing witness.       

STATE OF               COUNTY OF                     ) SS.:                     

On the   day of                           , 20      ,                           
before me personally came                                                       
--------------------------------------------------------------------------------

to be known to be the individual described in and who executed the foregoing    
instrument and acknowledged that he executed same.                              

STATE OF               COUNTY OF                     ) SS.:                     

On the   day of                           , 20      ,                           
before me personally came                                                       
--------------------------------------------------------------------------------

to be known to be the individual described in and who executed the foregoing    
instrument and acknowledged that he executed same.                              

--------------------------------------------------------------------------------
 AFFIDAVIT OF EFFECTIVENESS(C)
--------------------------------------------------------------------------------
STATE OF               COUNTY OF          ) SS.:                   , residing at

                                                being duly sworn does depose and
say that I am the Attorney-in-Fact under the above Power of Attorney. That said 
Power of Attorney is a valid and subsisting Power which has not been revoked by 
the death of the principal(s) or otherwise; that I have no actual knowledge of a
revocation of the foregoing Power; and, I warrant and represent that I have full
and unqualified authority to execute the [Deed, Mortgage, etc.] knowing that ,  
will rely upon the representations made herein as inducement to accept such     
instrument(s) and this Power of Attorney as evidence of my authority to act.    

ATTORNEY IN FACT                                                                

SWORN AND SUBSCRIBED TO BEFORE ME THIS      DAY OF                     , 2001   

(NOTARY AFFIX STAMP AT RIGHT)                                         
DURABLE GENERAL POWER OF ATTORNEY                                         
REVISED STATUTORY SHORT FORM                                          
TITLE NO.                                                                       
-----------------------------------------                                       
[LOGO]                                        

DISTRICT                                                                        
SECTION                                                                         
BLOCK                                                                           
LOT                                                                             
COUNTY OR TOWN                                                                  
RECORDED AT THE REQUEST OF            
RETURN BY MAIL TO:            
------------------------------------------------                                

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

--------------------------------------------------------------------------------
RESERVED FOR RECORDING OFFICE USE                                               

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

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 DURABLE POWER OF ATTORNEY
 NEW YORK STATUTORY SHORT FORM

DATED________, 2001,

 BY ASIA FIBER HOLDINGS LIMITED ("DESIGNOR")

ATTACHMENT A

     The attached power of attorney is limited by and subject to the terms
and conditions of the Convertible Preferred Stock Purchase Agreement by and     
between Asia Fiber Holdings Limited (the "Company"), and GEM Global Yield Fund  
Limited (the "Purchaser") dated ________, 2001 (the "Purchase Agreement"), the  
Special Registration Rights Agreement by and between the Company and the        
Purchaser dated ________, 2001 (the "Registration Rights Agreement"), the       
Special Warrant Shares Escrow Agreement by and among the Company, Kaplan        
Gottbetter & Levenson, LLP, and the Purchaser dated _______, 2001 (the "Escrow  
Agreement"), and, to be issued in accordance with the Purchase Agreement, a     
common stock purchase warrant expiring on _________, 2004 for the Termination   
Warrant Shares (as defined in the Purchase Agreement)(the "Termination          
Warrant"), and such power of attorney can only be acted upon to enforce the     
rights of the Purchaser and its successors and assigns under Section 4.9 of the 
Termination Warrant, and to grant the appointed agents the power to issue the   
opinions of counsel in substantially the same form as the opinions contained in 
Exhibit L to the Purchase Agreement, all including, but not limited to, the     
issuance and delivery of the Termination Warrant Shares, removing stop transfer 
orders and restrictions, and replenishing the Termination Warrant Escrow Shares 
(as defined in the Purchase Agreement) under the aforementioned documents. under
the aforementioned documents.                                                   

        This power of attorney shall expire upon the earlier to occur of (a) the
Closing and (b) full and complete satisfaction of all of the Company's          
obligations under the Registration Rights Agreement, the Escrow Agreement, and  
the Termination Warrant.                                                        

 IN WITNESS WHEREOF I have hereunto signed my name this ___ day of
______, 2001.                                                                   

                                                   ASIA FIBER HOLDINGS LIMITED

                                                    By: ________________________
_______________________________________________                                 
Signed and sworn to before me on         , 2001                                 

_______________________________________                                         
Notary Public                                           

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EXHIBIT L 

__________, 2001                                                                

To the Purchaser Listed in Schedule 1 to the "Purchase Agreement"               

RE: ASIA FIBER HOLDINGS LIMITED                                 

Ladies and Gentlemen:                                                           

   We have acted as counsel to Asia Fiber Holdings Limited, a Delaware
corporation (the "Company"), in connection with the Convertible Preferred Stock 
Purchase Agreement, dated as of______, 2001, between you and the Company (the   
"Purchase Agreement"), and the transactions contemplated thereby. Capitalized   
terms used and not otherwise defined herein shall have the respective meanings  
given to such terms in the Purchase Agreement. The Purchase Agreement, the      
Termination Warrant, the Special Registration Rights Agreement, the Special     
Escrow Agreement and the Special Power of Attorney are hereinafter referred to  
collectively as the "Operative Documents."                                      

   In addition to the Operative Documents, we have examined such other
documents, records and legal matters as in our judgment are necessary or        
appropriate to enable us to render the opinions expressed below, including,     
without limitation, the Company's certificate of incorporation, as in effect on 
the date hereof (the "Certificate of Incorporation") and the Company's by-laws, 
as in effect on the date hereof (the "By-Laws"). We have also relied on certain 
certificates furnished by officers of the Company as of the date hereof. We     
have, without any independent verification, relied upon and assumed the accuracy
of such certificates as to factual matters and have not attempted to verify     
independently the statements contained therein; however, nothing has come to our
attention that would cause us to question the accuracy of such statements.      

We have also relied, without independent verification, on the   
representations and warranties as to factual matters of the Company and the     
Purchaser contained in the Purchase Agreement and on certificates of            
governmental officials. In all such examinations, we have assumed: (i) the      
genuineness of signatures of all persons other than the signatures of persons   
signing on behalf of the Company; (ii) the authenticity of all documents        
submitted to us as originals; (iii) the validity of all applicable laws,        
statutes, ordinances, rules and regulations, and the proper indexing and        
accuracy of all records and documents which are public records; and (iv) the    
conformity to authentic original documents of all documents submitted to us as  
certified, conformed or photostatic copies.                                     

     Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of   
the date hereof:                                                                

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   (a) Each of the Company and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the       
jurisdiction of its incorporation, with the requisite corporate power and       
authority to own and use its properties and assets and to carry on its business 
as currently conducted. To our knowledge, the Company has no subsidiaries other 
than the Subsidiaries. Each of the Company and the Subsidiaries is duly         
qualified to do business and is in good standing as a foreign corporation in    
each jurisdiction in which the nature of the business conducted or property     
owned by it makes such qualification necessary, except where the failure to be  
so qualified or in good standing, as the case may be, would not individually or 
in the aggregate have a material adverse effect.                                

        (b) The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Operative   
Documents, and to otherwise to carry out its obligations thereunder. The        
execution and delivery of each of the Operative Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly      
authorized by all necessary action on the part of the Company. Each of the      
Operative Documents has been duly executed and delivered by the Company and     
constitutes the valid and binding obligation of the Company enforceable against 
the Company in accordance with its terms, except as such enforceability may be  
limited by applicable bankruptcy, insolvency, reorganization, moratorium,       
liquidation or similar laws relating to, or affecting generally the enforcement 
of, creditors' rights and remedies or by other equitable principles of general  
application.                                                                    

  (c) The Company has duly authorized and reserved for issuance such
number of shares of its common stock, par value $.01 per share (the "Common     
Stock"), as are issuable upon exercise of the Termination Warrant (the          
"Termination Warrant Shares"), assuming exercise of the Termination Warrant as  
of the date hereof, to the extent that the number of Termination Warrant Shares 
may exceed the number of Termination Warrant Escrow Shares (such excess shares, 
the "Termination Warrant Excess Shares"). The Termination Warrant is validly    
issued, fully paid and non-assessable. The Termination Warrant Escrow Shares are
validly issued, and when the exercise price thereof is paid pursuant to the     
terms of the Termination Warrant, will be fully paid and non-assessable.        

       (d) The Termination Warrant Excess Shares, when issued and the exercise
price thereof is paid pursuant to the terms of the Termination Warrant, will be 
validly issued, fully paid and non-assessable.                                  

       (e) No shares of the Common Stock are entitled to preemptive or similar
rights. To our knowledge, except as specifically disclosed in Schedule 3.1(c) to
the Purchase Agreement, there are no outstanding options, warrants, script      
rights to subscribe to, registration rights, calls or commitments of any        
character whatsoever relating to, or, except as a result of the purchase and    
sale of the Shares, the Warrant and the Termination Warrant, securities, rights 
or obligations convertible into or exchangeable for, or giving any person any   
right to subscribe for or acquire, any shares of Common Stock, or contracts,    
commitments, understandings, or arrangements by which the Company or any        
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock,   
except as otherwise provided in the Purchase Agreement.                         

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    (f) To our knowledge, other than the Required Approvals, neither the
Company nor any Subsidiary is required to obtain any consent, waiver,           
authorization or order of, or make any filing or registration with, any court of
other federal, state, local or other governmental authority or other person in  
connection with the execution, delivery and performance by the Company of the   
Operative Documents.                                                            

        (g) The execution and delivery of the Operative Documents by the Company
and its performance of and compliance with the terms of the Operative Documents 
including, without limitation, the issuance of the Termination Warrant and the  
Termination Warrant Escrow Shares, do not violate any provision of the          
Certificate of Incorporation or the By-Laws or, to our knowledge, any provision 
of any applicable federal or state law, rule or regulation. To our knowledge,   
except as disclosed in Schedule 3.1(e) to the Purchase Agreement, the execution,
delivery and performance of and compliance with the Operative Documents and the 
issuance of the Termination Warrant and the Termination Warrant Escrow Shares   
have not resulted, and will not result, in any violation of, or constitute a    
default under (or an event which with the passage of time or the giving of      
notice or both would constitute a default under), any contract, agreement,      
instrument, judgment or decree binding upon the Company or any Subsidiary and   
known to us which, individually or in the aggregate, would have a material      
adverse effect on the business or financial condition of the Company. To the    
best of our knowledge, the business of the Company is not being conducted in    
violation of any law, ordinance or regulation of any governmental authority the 
result of which would have a material adverse effect on the business of the     
Company.                                                                        

      (h) To our knowledge, the Company has filed all reports required to be
filed by it under the Securities Exchange Act of 1934, as amended ("the Exchange
Act"), including pursuant to Section 13(a) or 15(d) thereof, for the two years  
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (collectively, the "Disclosure Documents") on a      
timely basis, or has received a valid extension of such time of filing, except  
as otherwise described in the Disclosure Schedule to the Purchase Agreement. To 
the best of our knowledge, as of their respective dates, the Disclosure         
Documents complied in all material respects with the requirements of the        
Securities Act and the Exchange Act and the rules and regulations of the        
Securities and Exchange Commission promulgated thereunder.                      

      (i) Assuming the accuracy of the representations and warranties of the
Company set forth in Section 3.1 of the Purchase Agreement and of the Purchasers
set forth in Section 4(b) of the Special Registration Rights Agreement, the     
offer, issuance and sale of the Termination Warrant, and the offer and issuance 
of the Termination Warrant Shares pursuant to the Purchase Agreement and the    
Termination Warrant are exempt from the registration requirements of the        
Securities Act by reason of Section 4(2) thereof.                               

     These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for   
any other purpose or by any other person.                                       

       The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:                                     

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           (a) We have assumed that the Purchaser subscribing to the Operative
Documents has the legal right, capacity and power to enter into and perform all 
of its obligations under each of the Operative Documents. Furthermore, we have  
assumed the due authorization by the Purchaser of all requisite action and the  
due execution and delivery of the Operative Documents by the Purchaser, and that
the Operative Documents are the valid and binding agreements of the Purchaser   
enforceable against it in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,             
reorganization, moratorium, liquidation or similar laws relating to, or         
affecting generally the enforcement of, creditors' rights and remedies or by    
other equitable principles of general application.                              

        (b) Our opinions on the binding effect and enforceability of any
obligation are subject to limitations resulting from the effects of (i)         
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent    
conveyance, arrangement and assignment for the benefit of creditors laws and    
similar laws or judicially developed doctrines, and (ii) general principles of  
equity, whether applied by a court of law or equity.                            

            (c) We disclaim any opinion as to (i) the validity or enforceability
under federal securities laws of any indemnification and contribution provisions
of the Special Registration Rights Agreement or any other documents, (ii) any   
provisions in any documents which purport to waive any procedural due process   
rights, and (iii) any provisions relating to choice of governing law, which     
choice may depend upon factual circumstances and the laws of other              
jurisdictions.                                                                  

          (d) Enforcement of your rights and remedies may be limited by laws
and judicial decisions which have imposed duties and standards of conduct       
(including, without limitation, obligations of good faith, fair dealing and     
reasonableness), and in this regard we have assumed that you will exercise your 
rights and remedies under the Operative Documents, to the extent required by    
such laws and judicial decisions, in good faith and under circumstances and a   
manner which are commercially reasonable.                                       

           (e) Requirements set forth in any of the Operative Documents to the
effect that any provision thereof may be waived only in writing may not be      
valid, binding or enforceable to the extent that an oral agreement or an implied
agreement by practice or course of conduct modifying such requirements has been 
or may be created.                                                              

          (f) We express no opinion as to the enforceability of any remedies
provided for under any of the Operative Documents to the extent such remedies   
would have the effect of compensating the party entitled to the benefit of such 
remedies in amounts in excess of the actual loss suffered by such party.        

            (g) Whenever our opinion with respect to the existence or absence of
facts is indicated to be based on our knowledge, we are referring to the actual 
current knowledge of partners and associates of Loeb & Loeb LLP who have had    
substantive involvement in the representation of the Company in connection with 
this transaction. We have not undertaken any independent investigation to       
determine the existence or absence of such facts (and have not caused to be made
any review of any court files or                                                

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indices) and no inferences as to our knowledge concerning such facts should be  
drawn from the fact that such representation has been undertaken by us.         

       (h) Our opinions are limited to the matters expressly set forth
herein and to laws and facts existing on the date hereof an no opinion is to be 
implied or inferred beyond the matters expressly so stated.                     

          (i) Our examination of law relevant to the matters covered by this
opinion is limited to the laws of the state of New York, the General Corporation
Law of the state of Delaware and the federal law of the United States, and we   
express no opinion as to the effect on the matters covered by this opinion of   
the laws of any other jurisdiction. To the extent that the governing law with   
respect to any matters covered by this opinion is the law of any jurisdiction   
other than the states of New York or Delaware or federal law of the United      
States, we have assumed that the law of such other jurisdiction is identical to 
New York or Delaware law. We express no opinion as to the effect on the         
transactions described herein, in the Operative Documents or the other          
agreements and materials referred to herein, of the laws of any jurisdiction    
other than the states of New York or Delaware and the federal law of the United 
States. As members of the bar of the state of New York, we do not purport to be 
experts on the law of any other state of the United States or the jurisdiction  
of any foreign country.                                                         

            (j) In furnishing the opinion regarding the valid existence and good
standing of the Company and its Subsidiaries and the Company's and its          
Subsidiaries' qualification to do business, we have relied solely upon the good 
standing certificates attached to this letter.                                  

       This opinion is given as of the date hereof and we assume no obligation
to update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter  
occur.                                                                          

                                                   Very truly yours,

                                                 Loeb & Loeb LLP

                                                         By:____________________

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