S-1/A

As filed with the Securities and Exchange Commission on         Registration No.  333-167029

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1/A 2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

KEYUAN PETROCHEMICALS, INC.

(Exact name of Registrant as specified in its charter)

Nevada	1311	45-0538522
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

Qingshi Industrial Park

Ningbo Economic & Technological Development Zone

Ningbo, Zhejiang Province

P.R. China 315803

(86) 574-8623-2955

 (Address, including zip code, and telephone number,

including area code, of Registrant’s principal executive offices)

Copies to:

Louis E. Taubman, Esq.

Leser, Hunter, Taubman & Taubman

17 State Street, Suite 2000

New York, New York 10004

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x   

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.  o

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.  o

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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.   See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be Registered(1)		Proposed maximum offering  price per share(2)		Proposed maximum aggregate offering  price		Amount of registration fee
Shares of Common Stock Underlying Preferred Stock		6,738,336 (3)	$	4.30	$	28974844.80	$	2065.91
Shares of Common Stock		984,704 (4)	$	4.30	$	4234227.20	$	301.90
Shares of Common Stock Underlying Warrants		748,704 (5)	$	4.30	$	3219427.20	$	229.55
Shares of Common Stock Underlying Warrants		748,704 (6)	$	4.30	$	3219427.20	$	229.55
Shares of Common Stock Underlying Placement Agent Warrants		598,963(7)	$	4.30	$	2575540.90	$	183.64
Shares of Common Stock Underlying Placement Agent Series A Warrants		59,896(8)	$	4.30	$	257552.80	$	18.36
Shares of Common Stock Underlying Placement Agent Series B Warrants		59,896(9)	$	4.30	$	257552.80	$	18.36
Total		9,939,203			$	42738572.90	$	3047.26

(1)	Pursuant to Rule 416 under the Securities Act of 1933, this registration statement includes an indeterminate number of additional shares as may be issuable as a result of stock splits or stock dividends which occur during this continuous offering.
(2)	Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended based upon the average of the bid and asked price of the Registrant's common stock as quoted on the OTC Bulletin Board of $4.30 on May 20, 2010.
(3)	Represents shares of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, convertible into the same number of shares of the company’s common stock, par value $0.001 per share the Company issued pursuant to the financings that the Company consummated in April and May, 2010.
(4)	Includes 748,704 shares of the Company’s common stock, par value $0.001 per share, issued pursuant to the financings that the Company consummated in April and May, 2010, 186,000 shares of common stock issued to various consultants pursuant to consulting agreements with the Company, and 50,000 shares of common stock held by a shareholder prior to the share exchange the Company completed on April 22, 2010, which we agreed to register.
(5)	Represents shares of common stock underlying Series A Warrants at an exercise price of $4.50 per share that the Company issued pursuant to the financings they consummated in April and May, 2010.
(6)	Represents shares of common stock underlying Series B Warrants at an exercise price of $5.25 per share that the Company issued pursuant to the financings they consummated in April and May, 2010.
(7)	Represents shares of common stock underlying Placement Agent Warrants at an exercise price of $3.50 per share that the Company issued to the placement agent in connection with the financings they consummated in April and May, 2010, including 539,067 shares of common stock underlying the Placement Agent’s Warrants to purchase that same number of shares of Series A Preferred Stock.
(8)	Represents shares of common stock underlying Placement Agent Warrants at an exercise price of $4.50 per share that the Company issued to the placement agent in connection with the financings they consummated in April and May, 2010.
(9)	Represents shares of common stock underlying Placement Agent Warrants at an exercise price of $5.25 per share that the Company issued to the placement agent in connection with the financings they consummated in April and May, 2010.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective 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 of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.  THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES PUBLICLY UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS 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.

SUBJECT TO COMPLETION, DATED 

PROSPECTUS

KEYUAN PETROCHEMICALS, INC.

9,939,203 Shares of Common Stock

This prospectus relates to the resale of up to 9,939,203 shares of our common stock, $0.001 par value, including 984,704 shares of our Common Stock that are currently issued and outstanding, 6,738,336 shares of our Common Stock (the “Conversion Shares”) issuable upon the conversion of our Series A Preferred Stock, and 2,216,163shares of our Common Stock issuable upon exercise of warrants (the “Warrant Shares”). The Warrant Shares are comprised of (i) 748,704 shares of Common Stock issuable upon exercise of Series A Warrants to purchase our Common Stock, (ii) 748,704 shares of Common Stock issuable upon exercise of Series B Warrants to purchase our Common Stock and (iii) 718,755 shares of Common Stock issuable upon exercise of Placement Agent Warrants, Placement Agent Series A Warrants and Placement Agent S eries B Warrants  to purchase our Common Stock issued to TriPoint Global Equities, LLC , as placement agent in connection with the Private Placement, and certain of its designees as set forth in this prospectus. The selling stockholders named herein may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price, at prices related to such prevailing market price, in negotiated transactions or a combination of such methods of sale. We will not receive any proceeds from the sales by the selling stockholders.

Our Common Stock is quoted on the Over-the-Counter Bulletin Board under the symbol “KYNP” and has very limited trading. The closing price for our Common Stock on the OTC Bulletin Board on August 31, 2010 was $4.01 per share.

The selling stockholders, and any broker-dealer executing sell orders on behalf of the selling stockholders, may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended.  Commissions received by any broker-dealer may be deemed underwriting commissions under the Securities Act of 1933, as amended.

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.  SEE “RISK FACTORS” BEGINNING ON PAGE 6 FOR A DISCUSSION OF RISKS APPLICABLE TO US AND AN INVESTMENT IN OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is September 1 , 2010.

TABLE OF CONTENTS

Item 3. Summary	1
Item 4. Use of Proceeds	20
Item 5. Determination of Offering Price	20
Item 6. Dilution	20
Item 7. Selling Security Holders	20
Item 8. Plan of Distribution	34
Item 9. Description of Securities	36
Item 10. Interests of Named Experts and Counsel	38
Item 11. Information with respect to the Registrant	39
Item 11A. Material Changes	118
Item 12. Incorporation of Certain Information by Reference	118
Item 12A. Disclosure of Commission Position on Indemnification for Securities Act Liabilities	118
Part II
Item 13. Other Expenses of Issuances and Distribution	119
Item 14. Indemnification of Directors and Officers	119
Item 15. Recent Sales of Unregistered Securities	119
Item 16. Exhibits and Financial Statement Schedule	120
Item 17. Undertakings	121

We have not authorized any person to give you any supplemental information or to make any representations for us. You should not rely upon any information about us that is not contained in this prospectus or in one of our public reports filed with the Securities and Exchange Commission (“SEC”) and incorporated into this prospectus. Information contained in this prospectus or in our public reports may become stale. You should not assume that the information contained in this prospectus, any prospectus supplement or the documents incorporated by reference are accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus or of any sale of the shares. Our business, financial condition, results of operations and prospects may have changed since those dates. The selling sto ckholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted.

In this prospectus the “company,” “we,” “us,” and “our” refer to KEYUAN PETROCHEMICALS, INC., a Nevada corporation and its subsidiaries, after giving effect to the Share Exchange that the Company completed on April 22, 2010.

Until [  ], all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.  This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters.

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ITEM 3. SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHANGES

This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our common stock, especially the risks of investing in our common stock, which we discuss later in “Risk Factors,” and our financial statements and related notes beginning on page 6 and 51, respectively. Unless the context requires otherwise, the words “we,” “us” and “our” refer to KEYUAN PETROCHEMICALS, INC. and our s ubsidiaries, and the word “Keyuan Petrochemicals” refers only to KEYUAN PETROCHEMICALS, INC. All market and industry data provided in this prospectus represents information that  is generally available to the public and was not prepared for us for a fee. We did not fund nor were  we otherwise affiliated with these sources and we are not attempting to incorporate the information on external web sites into this prospectus. We are only providing textual reference of the information of market and industry data and the web addresses provided in this prospectus are not intended to be hyperlinks and we do not assure that those external web sites will remain active and current.

Our Company

Prior to the consummation of the share exchange transaction described below, we were a shell company with nominal operations and nominal assets. Currently, we are a holding companyoperating through our wholly-owned subsidiary, Keyuan Plastics, located in Ningbo, China. We are a manufacturer and supplier of various petrochemical products in China. Through Keyuan Plastics, our operations include (i) an annual petrochemical manufacturing capacity of 550,000 metric tons (MT) of a variety of petrochemical products, (ii) facilities for the storage and loading of raw materials and finished goods, (iii) a manufacturing technology that can support our manufacturing process with low raw material costs and high utilization and yields, (iv) a strong management team consisting of petrochemical experts with proven track records from some of China’s largest state-owned enterprises in the petrochemical industry.

Due to China’s growing demand for refined petrochemical products, which is mainly attributable to China’s significant economic growth and under-developed domestic supply capacity, our customer request orders for the year 2010 has exceeded our current annual production capacity. In order to increase our production capacity to meet the increasing market demands, our management team plans to expand our manufacturing capacity to include a raw material pre-treatment facility, additional storage capacity and an asphalt production facility.

Asphalt is used as building material for highways, roads, airport pavement or as raw material for emulsified, diluted and modified asphalt. Ranked second in the world in length of highways at 75,000 km (46,603 miles) (data source: www.chinahighway.com which is founded by China Highway Society), China’s demand for asphalt has exceeded the domestic supply capacity in the past five years, which resulted in the import of 13.5 million MT of asphalt  in the aggregate from 2005 to 2008 (data source: http://ccn.mofcom.gov.cn which is established by Ministry of Commerce of China). Maintenance and expansion of the highway system is expected to continue. (data source: www.stats.g ov.cn which is set up by State Statistical Bureau)

In order to expand our facility, we need to acquire use rights of additional land. In China, the government is responsible for overall land planning and they will often select a target company to maximize the benefits of land use for a particular area. We have been in regular communications with the Ningbo Municipal Government about the land use rights for approximately 1.2 million square feet of land adjacent to our current production facility. We submitted our application to the local government for a land bidding process slated on July 13, 2010 which is a necessary legal proceeding to acquire the land use rights in China. We were the only bidder in this process because the land is well integrated with our existing site. The bidding process was completed on August 13, 2010 and we entered into land use right transfer agreements with the local government on August 18, 2010.

Share Exchange

On April 22, 2010, Silver Pearl entered into a Share Exchange Agreement, by and among Keyuan International Group Limited (“Keyuan International”), a company organized under the laws of the British Virgin Islands, Delight Reward Limited, the sole shareholder of Keyuan International and a company organized under the laws of the British Virgin Islands (the “Keyuan International Shareholder”), and Denise D. Smith, our former principal stockholder (“Smith”). Pursuant to the terms of the Exchange Agreement, the Keyuan International Shareholder transferred to us all of the issued and outstanding ordinary shares of Keyuan International (the “Keyuan International Shares”) in exchange for the issuance of 47,658 shares of our Series M preferred stock, par value $0.001 per share (the “Series M Preferred Stock”) (such transaction is sometimes referred to herein as the “Share Exchange”). The Series M shares vote with the common stock on an as converted basis and are convertible into 47,658,000 shares of common stock upon the Company’s shareholders approving an increase in authorized common stock to at least 100,000,000 shares. As a result of the Share Exchange, we are now the holding company of Keyuan Plastics Co., Ltd., the operating subsidiary of Keyuan International organized in the People’s Republic of China (“China” or the “PRC”) and engaged in manufacturing and supplying various petrochemical products in China.

Immediately prior to the Share Exchange, 3,264,000 shares of our common stock, par value $0.001 (the “Common Stock”) then outstanding were cancelled and retired.

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April – May 2010 Private Financing

Following the Share Exchange, we entered into a securities purchase agreement with 122 accredited investors for the issuance and sale of 748,704 Units  at a purchase price of $35 per Unit, consisting of, in the aggregate, (a) 6,738,336 shares of Series A convertible preferred stock, par value $0.001 per share convertible into the same number of shares of Common Stock, (b) 748,704 shares of Common Stock, (c) three-year Series A Warrants to purchase up to 748,704 shares of Common Stock, at an exercise price of $4.50 per, and (d) three-year Series B Warrants to purchase up to 748,704 shares of Common Stock, at an exercise price of $5.25 per share, for aggregate gross proceeds of approximately $26,204,640  million.

In connection with the Private Placement, we also entered into a registration rights agreement  with the investors, in which we agreed to file this registration statement  with the SEC to register for resale the Shares, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares, within 30 calendar days of April 22, 2010 and to have this registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If we do not comply with the foregoing obligations under the Registration Rights Agreement, we will be required to pay cash liq uidated damages to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which we are not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

A copy of the Exchange Agreement, the Purchase Agreement and the Registration Rights Agreement are incorporated herein by reference and are filed as Exhibits 10.1 and 10.2, respectively. The description of the transactions contemplated by such agreements set forth herein do not purport to be complete and is qualified in its entirety by reference to the full text of the exhibits filed herewith and incorporated herein by reference.

Short Form Merger and Name Change

On May 12, 2010, we caused to be formed a corporation under the laws of the State of Nevada called Keyuan Petrochemicals, Inc. and on the same day, acquired one hundred (100) shares (95%) of this entity’s stock for cash. As such, this entity became our wholly-owned subsidiary (the “Merger Subsidiary”).

Effective as of May 17, 2010, the merger subsidiary was merged with and into us. As a result of the merger, our corporate name was changed to “Keyuan Petrochemicals, Inc.”  Prior to the merger, the merger subsidiary had no liabilities and nominal assets and, as a result of the merger, the separate existence of the merger subsidiary ceased.  We are the surviving corporation in the merger and, except for the name change provided for in the Agreement and Plan of Merger, there was no change in our directors, officers, capital structure or business.

A copy of the Agreement and Plan of Merger and a copy of the Articles of Merger are incorporated herein by reference and filed as Exhibits 2.2 and 3.1, respectively.

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Our Organizational Structure

Below is a chart of our structure after the closing of the Share Exchange:

Principal Executive Office

Our principal executive offices are located at Ningbo Industrial Park, Ningbo Economic & Technological Development Zone, Ningbo, China 315803, Tel: (86) 574-8623-2955.

Risk Factors

The securities offered by this prospectus are speculative and involve a high degree of risks associated with our business.  For more discussion of these and other risk factors affecting us and our business, see the “Risk Factors” section beginning on page 6 of this prospectus.

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The Offering

Common Stock being offered by Selling Stockholders	Up to 9,939,203 shares(1)
Common Stock outstanding	3,181,504shares as of the date of this Prospectus
Common Stock outstanding after the Offering	12,136,003 (2)
Use of Proceeds	We will not receive any proceeds from the sale of shares by the Selling Stockholders, although we may receive additional proceeds of up to $9,980,220.5 if all of the Warrants are exercised for cash. We will not receive any additional proceeds to the extent that the Warrants are exercised by cashless exercise.
OTC Bulletin Board Symbol	KYNP
Risk Factors	The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 6.

(1) This prospectus relates to the resale by the Selling Stockholders of up to 9,939,203 shares of our Common Stock, including 984,704 shares of our Common Stock that are currently issued and outstanding, 6,738,336 shares of our Common Stock (the “Conversion Shares”) issuable upon the conversion of our Series A Preferred Stock, and 2,216,163shares of our Common Stock issuable upon exercise of Warrants. The Warrant Shares are comprised of (i) 748,704 shares of Common Stock issuable upon exercise of Series A Warrants to purchase our Common Stock, (ii) 748,704 shares of Common Stock issuable upon exercise of Series B Warrants to purchase our Common Stock and (iii) 718,755 shares of Common Stock issuable upon exercise of placement agent Warrants to purchase our Common Stock issued to TriPoint Global Equities, LLC, as placement agent in connection with the Private Placement, and certain of its designees as set forth in this prospectus.

(2) Assumes issuance of all Conversion Shares and Warrant Shares.

Summary Financial Information

The following summary financial data for the fiscal years ended December 31, 2009 and 2008, were derived from the consolidated financial statements of our recently acquired subsidiary, Keyuan International Group Ltd., and the interim financial data for the period ending June 30 , 2010 for Keyuan International Group Ltd.. This information is only a summary and does not provide all of the information contained in our financial statements and related notes. You should read the “Management’s Discussion and Analysis or Plan of Operation” beginning on page 89 of this prospectus and our financial statements and related notes included elsewhere in this prospectus.

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Statement of Operations Data:  

	For the Years Ended  December 31,						For the Quarter ended June 30 ,
	2009			2008			2010
Sales	$	68,653,603		$	--		$	131,997,217
Cost of sales		75,311,595			-			123,351,375
Gross profit		(6,657,992	)		-			8,645,842
Operating expenses
Selling expenses		24,836			-			258,901
General and administrative expenses		2,714,093			1,839,253			1,088,256
Total operating expenses		2,738,929			1,839,253			1,347,157
Gain (loss) from operations		(9,396,921	)		(1,839,253	)		7,298,685
Other income (expenses):
Interest expense, net		(2,031,983	)		(64,584	)		(1,589,937	)
Non-operating expenses		(348,515	)		(39,885	)		118,802
Total other expenses		(2,380,498	)		(104,469	)		(1,471,135	)
Income (loss) before provision for income tax		(11,777,419	)		(1,943,722	)		5,827,550
Provision(benefit) for income tax		(2,944,350	)		(441,794	)		903,546-
Income (net) loss		(8,833,069	)		(1,501,928	)		4,924,004
Other comprehensive income
Foreign currency translation adjustment		15,991			649,089			196,958
Comprehensive income (loss)	$	(8,817,078	)	$	(852,839	)	$	5,120,962

Balance Sheet Data:   

	As of December 31, 2009		As of December 31, 2008		As of June 30, 2010
Cash and cash equivalents	$	14,030,655	$	9,094,537	$	5,522,675
Restricted cash		6,012,690		-		33,808,001
Trade notes receivable		400,491		-		10,338,534
Inventory		32,595,045		333,187		67,500,925
Advanced payments		7,417,202		17,849,208		13,663,490
Property and equipment, net		131,824,617		32,351,840		130,367,038
Total assets		219,060,334		67,154,129		296,218,952
Accounts payable – trade and accrued expenses		2,888,860		45,000		60,422,125
Trade notes payable		13,719,134		-		19,001,700
Short term bank loans		82,885,500		-		83,961,000
Total liabilities		208,432,375		57,409,089		251,604,372
Shareholders’ equity		10,627,959		9,745,040		44,614,580

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RISK FACTORS

An investment in our Common Stock is speculative and involves a high degree of risk and uncertainty. You should carefully consider the risks described below, together with the other information contained in this prospectus, including the consolidated financial statements and notes thereto, before deciding to invest in our Common Stock. If any of the following risks occur, our business, financial condition and results of operations and the value of our Common Stock could be materially and adversely affected.

THE FOLLOWING MATTERS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR STATEMENTS.

Risks Related to Our Business

Our limited operating history makes evaluation of our business difficult.

We have a limited operating history and have encountered and expect to continue to encounter many of the difficulties and uncertainties often faced by early stage companies. Our limited operating history makes it difficult to evaluate our future prospects, including our ability to develop a wide customer and distribution network for our services, to expand our operations to include additional services and to control raw material costs, all of which are critical to our success. An investor must consider our business and our prospects in light of the risks, uncertainties and difficulties common to early stage companies. We may encounter unanticipated problems, expenses and delays in developing and marketing our services and securing additional blending and storage facilities. We may not be able to successfully address these risks. If we are unable to address these risks, our business may not grow, our stock price may suffer, and we may be unable to stay in business.

As of December 31, 2009, we had not yet generated any net income from our operations.

We have incurred net operating losses since our inception. Our net loss was approximately $8,800,000 and $1,500,000 for the years ended December 31, 2009 and 2008, respectively. As of December 31, 2009, we had an accumulated net loss of $10,664,819. Although we anticipate that we will cease to incur operating losses commencing this year, there is no assurance that we will be able to generate net income in the near future or in such amount that meets our anticipation.

Key employees are essential to growing our business.

Chunfeng Tao, Jingtao Ma, Shifa Wang, Weifeng Xue and Mingliang Liu are essential to our ability to continue to grow our business. They have established relationships with customers and suppliers within the industries in which we operate. If one or more of these key employees were to leave us, our relationships with our customers and suppliers may become strained, and our growth strategy might be hindered, which could limit our ability to increase revenue.

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In addition, although we are located in an area with good supply of skilled labor, we still face competition from other companies located in the same area for attracting skilled personnel. If we fail to attract and retain qualified personnel to meet current and future needs, this could slow our ability to grow our business, which could result in a decrease in market share.

We need additional capital to expand our manufacturing facility and we may not be able to obtain it at acceptable terms, or at all, which could adversely affect our ability to increase our production capacity and expand our business.

The estimated cost of our facility expansion and the addition of asphalt development is approximately $ 93.3 million including $ 5.8 million for purchasing land, $20 million for facility construction, $40 million for new equipment, $17.5 million for SBS project and $10 million for working capital for the whole business.  We received gross proceeds of $26.2 million from the Private Placement among with original plans to use $20 million of the net proceeds for the purchase of the land.. Due to the decrease of the estimated cost of land purchase, we were able to allocate a greater percentage of the net proceeds received toward raw material purchases in the second quarter. We cu rrently plan to use cash from operations and other sources to fund the purchase of the land use rights. However, we still need additional cash resources to expand our manufacturing facility to include a raw material pre-treatment facility, additional storage capacity and an asphalt production facility. We plan to be funded through short-term borrowings, cash from operations and potential equity financing. However, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including, but not limited to:

· investors’ perception of, and demand for, securities of petrochemical manufacturing and supply companies;

· conditions of the U.S. and other capital markets in which we may seek to raise funds;

· our future results of operations, financial condition and cash flow;

· PRC governmental regulation of foreign investment in petrochemical manufacturing companies in China;

· economic, political and other conditions in China; and

· PRC governmental policies relating to foreign currency borrowings.

Our operations may be adversely affected by the cyclical nature of the petroleum and petrochemical market and by the volatility of prices of petrochemical products.

All of our revenues are attributable to petrochemical products, which have historically been cyclical and sensitive to the availability and price of raw materials and general economic conditions. Markets for many of our products are sensitive to changes in industry capacity and output levels, cyclical changes in regional and global economic conditions, the price and availability of substitute products and changes in consumer demand, which from time to time have had a significant impact on product prices in the regional and global markets. Historically, the markets for these products have experienced alternating periods of tight supply, causing prices and margins to increase, followed by periods of capacity additions, finally resulting in oversupply and declining prices and margins. As tariffs and other import restrictions are reduced a nd the control of product pricing is relaxed in China, the markets for many of our products have become increasingly subject to the cyclicality of regional and global markets.

Our manufacturing processes could expose us to substantial production liability claims which will negatively impact our profitability.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in adverse side effects. Side effects or marketing or manufacturing problems pertaining to any of our products could result in product liability claims or adverse publicity. These risks will exist for those products in clinical development and with respect to those products that have received regulatory approval for commercial sale. To date, we have not experienced any product liability claims. However, that does not mean that we will not have any such claims with respect to our products in the future which will negatively impact our profitability.

In the past several years we have derived a significant portion of our revenues from a small group of customers and we have purchased raw material from a small group of suppliers. If we are to remain dependent upon only a few customers and a few raw material suppliers, such dependency could negatively impact our business, operating results and financial condition.

For the years ended December 31, 2009, our five largest customers accounted for 70% of our total revenue, and the single largest customer accounted for 26% of our total sales. For the six months ended June 30 , 2010, our five largest customers accounted for 46.89 %of our total sales ,. As our customer base may change from year-to-year, during such years that the customer base is highly concentrated, the loss of, or reduction of our sales to, any of such major customers could have a material adverse effect on our business, operating results and financial condition.

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For the years ended December 31, 2009, our five largest suppliers  accounted for approximately 70% of our raw material purchases. For the six months ended June 30 , 2010, our five largest suppliers  accounted for 78.55 % of our total raw material purchase. As our supplier base may change from year-to-year, during such years that the supplier base is highly concentrated, the loss of, or reduction of our raw material supply from, any of such major suppliers could have a material adverse effect on our business, operating results and financial condition.

We may be exposed to risks relating to our disclosure controls and our internal controls and may need to incur significant costs to comply with applicable requirements.

During the fiscal years ended December 31, 2009 and 2008, and subsequent interim period ended June 30 , 2010 and through the date of dismissal, we did not experience any reportable events, except that in its letter to us in 2009 pursuant to “Statement on Auditing Standards (SAS) 112: Communicating Internal Control Related Matters,” Hall, our former auditor,  identified the following material weakness of our internal controls, which constitute a reportable event under Item 304(a)(1)(v) of Regulation S-K:

● Reliance on financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions;

● Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

On April 22, 2010, Silver Pearl entered into a Share Exchange Agreement, by and among Keyuan International Group Limited (“Keyuan International”), a company organized under the laws of the British Virgin Islands, Delight Reward Limited, the sole shareholder of Keyuan International and a company organized under the laws of the British Virgin Islands (the “Keyuan International Shareholder”), and Denise D. Smith, our former principal stockholder (“Smith”). Pursuant to the terms of the Exchange Agreement, the Keyuan International Shareholder transferred to us all of the issued and outstanding ordinary shares of Keyuan International (the “Keyuan International Shares”) in exchange for the issuance of 47,658 shares of our Series M preferred stock, par value $0.001 per share (the “Series M Preferred Stock”) (such transaction is sometimes referred to herein as the “Share Exchange”). The Series M shares vote with t he common stock on an as converted basis and are convertible into 47,658,000 shares of common stock upon the Company’s shareholders approving an increase in authorized common stock to at least 100,000,000 shares. As a result of the Share Exchange, we are now the holding company of Keyuan Plastics Co., Ltd., the operating subsidiary of Keyuan International organized in the People’s Republic of China (“China” or the “PRC”) and engaged in manufacturing and supplying various petrochemical products in China.

The Share Exchange resulted in a change-in-control of Silver Pearl as the Company’s shareholders have acquired the majority ownership of the combined entity. As a result, the accounting staff of our operating entity in China became the primary accounting staff of our company. In order to remedy our accounting staff’s lack of knowledge of U.S. accounting standards and requirements, we hired a CFO with significant U.S. accounting and finance experience. Our CFO and our accounting staff are working on documenting our internal controls and we expect such documentation to be complete in 2010. Testing of internal controls will be conducted thereafter. If our market capitalization exceeds $75 million in 2011, we will be required to be in compliance with the Sarbanes-Oxley Act Section 404 in the fiscal year of 2011. However our CFO and accounting staff have already taken actions to start our Sarbanes-Oxley A ction 404 compliance project. We expect this compliance project will enhance the Company’s internal controls significantly. We are also looking to fill additional financial staff positions. Specifically, we believe that one or more accounting staff trained in U.S. GAAP would improve our controls and procedures, specifically with regard to the preparation of our financial statements. Finally, we have recently appointed an audit committee comprised of independent members of our board of directors, including an audit committee chairman, whom we believe to meet the SEC’s definition of a “financial expert” in the Sarbanes-Oxley Act Section 406 and 407. We believe that the increased oversight and experience provided by the audit committee will assist us in the establishment and oversight of our controls and procedures. Although we believe that these corrective steps will remediate the material weaknesses discussed above when all of the additional financial staff positions are filled, we can not assure you that this will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in our internal control. We cannot make assurances that we will not identify additional material weaknesses in our internal control over financial reporting in the future.

Insurance coverage for some of our operations may be insufficient to cover losses.

The insurance industry in China is still at an early stage of its development. Insurance companies in China offer limited business insurance products or offer them at a high price. We do not maintain insurance coverage for various risks, including environmental claims. A significant uninsured claim against us would have a material adverse effect on our financial position and results of operations.

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Failure to comply with environmental laws and regulations may have a material adverse effect on our business and results of operations.

We are subject to various environmental laws and regulations that require us to obtain environmental permits for our operations. If we fail to obtain all required environmental permits for our operations, or comply with the provisions of our permit, we could be subject to fines, criminal charges or other sanctions by regulators, including the suspension or termination of our operations. We are required to comply with extensive and complex environmental laws and regulations at various levels in the PRC relating to, among other things:

• the handling of petrochemical products;

• the operation of petrochemical product storage facilities;

• workplace safety;

• environmental damage; and

• hazardous waste disposal.

If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of environmental laws or regulations, we could be subject to liabilities that could have a material adverse effect on our business, financial condition and results of operations. If we should fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability. We cannot assure you that at all times we will be in compliance with environmental laws and regulations or our environmental permits or that we will not be required to expend significant funds to comply with, or discharge liabilities arising under, environmental laws, regulations and permits.

Our failure to protect our technologies could have a negative impact on our business.

Our manufacturing technologies and process, which have not been patented or registered as our property, are key components of our competitive advantage and our growth strategy. We rely on confidentiality and license agreements with certain of our employees, customers and others to protect the confidentiality of our technologies. If we are unable to adequately protect the confidentiality of these technologies, our business, results of operations, financial condition and prospects could be materially and adversely affected.

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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As a public company, we will have significant additional requirements for enhanced financial reporting and internal controls. We are aware of that smaller reporting companies (market cap less than $75,000,000) are exempted from the requirements of the Sarbanes-Oxley Act Section 404  pursuant to  the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was adopted on July 21, 2010. However, with the current development pace of the Company, we anticipate that we may exceed the market cap of $75,000,000 soon.  Therefore, we plan to continue our  efforts to design and implement effective internal controls. The process of designing and implementing effective internal controls is a continuous effort that requi res us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures before we exceed the market cap of $75,000,000, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confide nce in our reported financial information and have a negative effect on the market price for shares of our Common Stock.

We will incur increased costs as a result of being a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by the SEC, has required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.  Additionally, if we are unable to comply with the Sarbanes - -Oxley Act’s internal controls requirements, we may not be able to obtain the independent auditor certifications that Sarbanes-Oxley Act requires publicly-traded companies to obtain.

Risks Relating to Regulation of Our Business

Uncertainties with respect to the governing regulations could have a material and adverse effect on us.

There are substantial uncertainties regarding the interpretation and application of the PRC laws and regulations, including, but not limited to, the laws and regulations governing our business and our ownership of equity interest in Keyuan Plastics, a wholly foreign owned enterprise under the PRC laws. These laws and regulations are relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.

The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business permits and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to the PRC subsidiary by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. In addition, any litigation in China may be protra cted and result in substantial costs and diversion of resources and management attention. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

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Keyuan Plastics will be subject to restrictions on dividend payments.

Though currently we have not received any dividends from Keyuan Plastics, in the future, w e may rely on dividends and other distributions from Keyuan Plastics to provide us with cash flow and to meet our other obligations. Current regulations in the PRC would permit the PRC subsidiary to pay dividends to us only out of its accumulated distributable profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, Keyuan Plastics will be required to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of its accumulated profits each year. Such cash reserve may not be distributed as cash dividends. In addition, if the PRC subsidiary incurs debt on its own behalf in the future, th e instruments governing the debt may restrict its ability to pay dividends or make other payments to us.

PRC regulations on loans and direct investments by overseas holding companies in PRC entities may delay or prevent us to make overseas loans or additional capital contributions to our PRC subsidiary.

Under the PRC laws, foreign investors may make loans to their PRC subsidiaries or foreign investors may make additional capital contributions to their PRC subsidiaries. Any loans to such PRC subsidiaries are subject to the PRC regulations and foreign exchange loan registrations, i.e. loans by foreign investors to their PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange (the “SAFE”), or its local branch. Foreign investors may also decide to finance their PRC subsidiaries by means of additional capital contributions. These capital contributions must be examined and approved by the Ministry of Commerce of the People’s Republic of China (the “MOFCOM”), or its local branch in advance.

Under the PRC Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China, and such classification would likely result in unfavorable tax consequences to us and our non-PRC stockholders.

On March 16, 2007, the National People’s Congress (the “NPC”), approved and promulgated the PRC Enterprise Income Tax Law  (herein referred as the “New EIT Law”). The New EIT Law took effect on January 1, 2008. Under the New EIT Law, Foreign Investment Enterprises ( “FIEs”), and domestic companies are subject to a uniform tax rate of 25%. In addition, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise” which means that we may be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The New EIT Law provides a five-yea r transition period starting from its effective date for those enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential lower tax rate under the then-effective tax laws or regulations. However, since we were established after the promulgation date of the NEW EIT law, the five-year transition period will not be applicable to us if the PRC tax authorities determine that we are  a “resident enterprise” for PRC enterprise income purposes.

On December 26, 2007, the State Council issued a Notice on Implementing Transitional Measures for Enterprise Income Tax, or the Notice, providing that the enterprises that have been approved to enjoy a low tax rate prior to the promulgation of the New EIT Law will be eligible for a five-year transition period since January 1, 2008, during which time the tax rate will be increased step by step to the 25% unified tax rate set out in the New EIT Law. From January 1, 2008, for the enterprises whose applicable tax rate was 15% before the promulgation of the New EIT Law , the tax rate will be increased to 18% for year 2008, 20% for year 2009, 22% for year 2010, 24% for year 2011 and 25% for year 2012. For the enterprises whose applicable tax rate was 24%, the tax rate will be changed t o 25% from January 1, 2008.

Under the New EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Because the New EIT Law and its implementing rules are new, no official interpretation or application of this new “resident enterprise” classification is available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

If the PRC tax authorities determine that we are “resident enterprises” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding t ax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders from transferring our shares. We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.

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If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be credited against our U.S. tax.

If we receive any dividends from Keyuan Plastics in the future, the dividends may be subject to PRC withholding tax.

The New EIT Law and the Implementation Rules of the New EIT Law provides that an income tax rate of 10% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises”, which (i) do not have an establishment or place of business in the PRC, or (ii) have such establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject to withholding at the income source, with the payer acting as the obligatory withholder under the New EIT Law, and therefore such income taxes are generally called withholding tax in practice. It is currently unclear in what circumstances a source will be considered as located within the PRC. We are an offshore holding company. Thus, if we are considered as a “non-resident enterprise” under the New EIT Law and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividends may be subject to a 10% withholding tax. Currently, w e have not received any dividends paid by our subsidiary in the PRC. Furthermore, since we intend to reinvest its earnings to further expand its businesses in mainland China, our subsidiary in the PRC does not intend to declare dividends to their immediate foreign holding companies in the foreseeable future.

In January 2009, the State Administration of Taxation, or SAT, promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”), pursuant to which, the entities which have the direct obligation to make the following payment to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise, and such payment includes: incomes from equity investment (including dividends and other return on investment), interests, rents, royalties, and incomes from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Further, the Measures provides that in case of equity transfer between two non-resident enterprises which occurs outside China, the non-resident en terprise which receives the equity transfer payment shall, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. However, it is unclear whether the Measures refer to the equity transfer by a non-resident enterprise which is a direct or an indirect shareholder of the said PRC company. Given these Measures, there is a possibility that Keyuan Plastics may have an obligation to withhold income tax in respect of the dividends paid to non-resident enterprise investors.

The new tax law provides only a framework of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and specific applications of various provisions unclear and unspecified. Any increase in the combined company’s tax rate in the future could have a material adverse effect on its financial conditions and results of operations.

 We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises' Share Transfer (Circular 698 that was released in December 2009 with retroactive effect from January 1, 2008.)

The Chinese State Administration of Taxation released a circular (“Circular 698”) on December 10, 2009 that addresses the transfer of shares by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. Pursuant to Circular 698, where the withholding agent does not withhold in accordance with laws or can’t perform the withholding obligation, the non-resident enterprises shall file tax declaration with the PRC tax authority located at place of the resident enterprise whose equity has been transferred, within seven days since the date of equity transfer provided under the contracts.

Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in ac cordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes.

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There is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are no formal declarations with regard to how to decide abuse of form of organization and reasonable commercial purpose, which can be utilized by us to balance if our company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

Keyuan Plastics is obligated to withhold and pay PRC individual income tax on behalf of our employees who are subject to PRC individual income tax. If we fail to withhold or pay such individual income tax in accordance with applicable PRC regulations, we may be subject to certain sanctions and other penalties and may become subject to liability under PRC laws.

Under PRC laws, Keyuan Plastics is obligated to withhold and pay individual income tax on behalf of our employees who are subject to PRC individual income tax. If the PRC subsidiary fails to withhold and/or pay such individual income tax in accordance with PRC laws, it may be subject to certain sanctions and other penalties and may become subject to liability under PRC laws.

In addition, the SAT has issued several circulars concerning employee stock options. Under these circulars, our employees working in the PRC (which could include both PRC employees and expatriate employees subject to PRC individual income tax) who exercise stock options will be subject to PRC individual income tax. Our PRC subsidiary has obligations to file documents related to employee stock options with relevant tax authorities and withhold and pay individual income taxes for those employees who exercise their stock options. While tax authorities may advise us that our policy is compliant, they may change their policy, and we could be subject to sanctions.

Regulation of foreign currency’s conversion into RMB and investment by FIEs may adversely affect our PRC subsidiary’s direct investment in China

On August 29, 2008, SAFE issued a Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises or Notice 142, to further regulate the foreign exchange of FIEs. According to the Notice 142, FIEs shall obtain a verification report from a local accounting firm before converting its registered capital of foreign currency into Renminbi, and the converted Renminbi shall be used for the business within its permitted business scope. The Notice 142 explicitly prohibits FIEs from using RMB converted from foreign capital to make equity investments in the PRC, unless the domestic equity investm ent is within the approved business scope of the FIE and has been approved by SAFE in advance. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of Notice 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules.

Regulations of Overseas Investments and Listings may increase the administrative burden we face and create regulatory uncertainties.

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the China Securities Regulatory Commission (the “CSRC”), the State Asset Supervision and Administration Commission (the “SASAC”), the State Administration of Taxation (the “SAT”), the State Administration for Industry and Commerce (the “SAIC”) and the SAFE, amended and released the New M&A Rule, which took effect as of September 8, 2006. This regulation, among other things, includes provisions that purport to require that an offshore company formed for purposes of overseas listing of equity interest in PRC companies and controlled directly or indirectly by PRC companies or individuals (an “SPV”) obtain the approval of CSRC prior to the listing and trading of such SPV’s securities on an overseas sto ck exchange.

On September 21, 2006, CSRC published on its official website procedures regarding its approval of overseas listings by SPVs. CSRC approval procedures require the filing of a number of documents with CSRC and it would take several months to complete the approval process.

The application of the New M&A Rule with respect to overseas listings of SPVs remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope of the applicability of CSRC approval requirement.

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It is not clear whether the provisions in the new regulation regarding the offshore listing and trading of the securities of a SPV apply to an offshore company such as us which owns equity interest in Keyuan Plastics. We believe that the M&A Rules and CSRC approval are not required in the context of the share exchange under our transaction because (i) such share exchange is a purely foreign related transaction governed by foreign laws, not subject to the jurisdiction of PRC laws and regulations; (ii) we are not a SPV formed or controlled by PRC companies or PRC individuals; (iii) Keyuan Plastics was established as a foreign investment enterprise by means of direct investment rather than by merger or acquisition of an existing PRC domestic company and it is not owned or controlled by PRC individuals or entities; (iv) we are owned or substantively controlled by foreigners; and (v) there is no clear requirement in the New M&A Rule that would require an application to be submitted to the MOFCOM or CSRC for the approval of the listing and trading of our common stock on the U.S. security market. However, we cannot be certain that the relevant PRC government agencies, including CSRC, would reach the same conclusion, and we still cannot rule out the possibility that CSRC may deem that the transactions effected by the share exchange circumvented the M&A Rules, the PRC Securities Law and other rules and notices.

If CSRC or another PRC regulatory agency subsequently determines that CSRC’s approval is required for the transaction, we may face sanctions by CSRC or another PRC regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from this Offering into the PRC, restrict or prohibit payment or remittance of dividends to us or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our shares. CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to delay or cancel the transaction.

The M&A Rules, along with foreign exchange regulations discussed in the above subsection, will be interpreted or implemented by the relevant government authorities in connection with our future offshore financings or acquisitions, and we cannot predict how they will affect our business development strategy.

Failure to comply with PRC laws and regulations relating to the environmental protection and safety in production requirements in China may result in severe penalties and liabilities.

The Chinese government has been adopting increasingly stringent regulations relating to the safety and environmental protection, and our business depends upon compliance with the aforesaid regulations and requirements. We are in the process of conducting as-build acceptance inspection and we must obtain relevant safety production permits and approvals from a variety of government authorities upon completion of aforesaid inspection.  The as-build inspection is conducted by the local government to make sure that a company meets all the conditions for normal production.  We have already obtained all the necessary permits and approvals including environmental protection, fire fighting and safety production before our trial production and submitted the application for as-build acceptance inspection at the end of 200 9. The as-build acceptance inspection needs to be conduced within 12 months after the submission of application and we believe we will receive the complete set of permits and approvals from relevant government authorities by the end of 2010. However, there is no assurance that we will obtain or renew all such permits or approvals, which are subject to our fulfillment of the standards and requirements set out by the regulatory authorities. If we fail to pass the as-build acceptance inspection, we may be subject to fines, penalties or legal proceedings. Our operations at our production facilities are subject to periodic checks by the relevant authorities in the PRC and they have the power to take action against us, impose fines, withdraw or suspend our relevant licenses or activities or impose other penalties if we fail to comply with relevant regulations, in the event of which our business operations may be adversely affected. In addition, any change in the scope or application of these laws and regulations m ay limit our production capacity or increase our cost of operation and could therefore have an adverse effect on our business operations, financial condition and operating results. Our failure to comply with these laws and regulations could result in fines, penalties or legal proceedings. There can be no assurance that the Chinese government will not impose additional or stricter laws or regulations, compliance with which may cause us to incur significant capital expenditures, which it may not be able to pass on to our customers.

Risks Associated With Doing Business in China

There are substantial risks associated with doing business in China, as set forth in the following risk factors.

Our operations and assets in China are subject to significant political and economic uncertainties.

Changes in PRC laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

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We derive a substantial portion of ours sales from China.

Substantially all of our sales are generated from China. We anticipate that sales of our products in China will continue to represent a substantial proportion of our total sales in the near future. Any significant decline in the condition of the PRC economy could adversely affect consumer demand of our products, among other things, which in turn would have a material adverse effect on our business and financial condition.

Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S. dollar terms.

Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the Chinese government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under th e new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. As a result of this policy change, Chinese Renminbi appreciated approximately 0.09% against the U.S. dollar in 2009 and 3.35% in 2008. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.

The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions could result in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions could result in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.

Although Chinese governmental policies were introduced in 1996 to allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approva ls or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations

We may have limited legal recourse under PRC laws if disputes arise under our contracts with third parties.

The Chinese government has enacted laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our new business ventures are unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions, or, may hinder or prevent us from accessing important information regarding the financial and business operations of these acquired companies. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese g overnment, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

15

Because our funds are held in banks in uninsured PRC bank accounts, the failure of any bank in which we deposit our funds could affect our ability to continue our business.

Funds on deposit at banks and other financial institutions in the PRC are often uninsured. A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.

Our business could be severely harmed if the Chinese government changes its policies, laws, regulations, tax structure or its current interpretations of its laws, rules and regulations, relating to our operations in China.

Our business is located in Ningbo, China and virtually all of our assets are located in China. We generate our sales revenue only from customers located in China. Our results of operations, financial state of affairs and future growth are, to a significant degree, subject to China’s economic, political and legal development and related uncertainties. Our operations and results could be materially affected by a number of factors, including, but not limited to

● Changes in policies by the Chinese government resulting in changes in laws or regulations or the interpretation of laws or regulations,

● changes in taxation,

● changes in employment restrictions,

● import duties, and

● currency revaluation.

Over the past several years, the Chinese government has pursued economic reform policies including the encouragement of private economic activities and greater economic decentralization. If the Chinese government does not continue to pursue its present policies that encourage foreign investment and operations in China, or if these policies are either not successful or are significantly altered, then our business could be harmed. Following the Chinese government’s policy of privatizing many state-owned enterprises, the Chinese government has attempted to augment its revenues through increased tax collection. 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. Continued efforts to increase tax revenues could result in increased taxation expenses being incurred by us. Economic development may be limited as well by the imposition of austerity measures intended to reduce inflation, the inadequate development of infrastructure and the potential unavailability of adequate power and water supplies, transportation and communications. In addition, the Chinese government continues to play a significant role in regulating industry by imposing industrial policies.

Failure to comply with the U.S. foreign corrupt practices act and Chinese anti-corruption laws could subject us to penalties and other adverse consequences.

Our executive officers, employees and other agents may violate applicable law in connection with the marketing or sale of our products, including China’s anti-corruption laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials. However, corruption, extortion, bribery, pay-off s, theft and other fraudulent practices occur from time-to-time in the PRC.

While we intend to implement measures to ensure compliance with the FCPA and China’s anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation, our sales activities or our stock price could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees or other agents.

16

Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.

The Renminbi is not a freely convertible currency currently, and the restrictions on currency exchanges may limit our ability to use revenues generated in Renminbi to fund our business activities outside the PRC or to make dividends or other payments in United States dollars. The PRC government strictly regulates conversion of Renminbi into foreign currencies. Over the years, foreign exchange regulations in the PRC have significantly reduced the government’s control over routine foreign exchange transactions under current accounts. In the PRC, SAFE regulates the conversion of the Renminbi into foreign currencies. Pursuant to applicable PRC laws and regulations, foreign invested enterprises incorporated in the PRC are required to apply for “Foreign Exchange Registration Certificates.” Currently, conversion within the s cope of the “current account” (e.g. remittance of foreign currencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans, securities, etc.) still requires the approval of SAFE.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China only recently has permitted provincial and local economic autonomy and private economic activities, and, as a result, we are dependent on our relationship with the local government in the province in which we operate our business. Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations o f existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

The implementation of the new PRC employment contract law and increase in the labor costs in China may hurt our business and profitability.

A new employment contract law became effective on January 1, 2008 in China. It imposes more stringent requirements on employers in relation to entry into fixed-term employment contracts, recruitment of temporary employees and dismissal of employees. In addition, under the newly promulgated Regulations on Paid Annual Leave for Employees, which also became effective on January 1, 2008, employees who have worked continuously for more than one year are entitled to a paid vacation ranging from 5 to 15 days, depending on the length of the employee’s service. Employees who waive such vacation entitlements at the request of the employer will be compensated for three times their normal daily salaries for each vacation day so waived. As a result of the new law and regulations, our labor costs may increase. There is no assurance that d isputes, work stoppages or strikes will not arise in the future. Increases in the labor costs or future disputes with our employees could damage our business, financial condition or operating results.

According to PRC labor laws, the employer shall be responsible to deal with and pay social insurances and housing fund for all of its employees based on the actual salary of the employees. In addition, as required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC laws to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Membe rs of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date. There is no guarantee that we and our subsidiaries will be able to comply with the relevant requirements. Failure to comply with the various PRC Labor Laws and regulation requirements described above could result in liability under PRC law.

Future inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

We may have difficulty establishing adequate management, legal and financial controls in the PRC.

We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. We may have difficulty establishing adequate management, legal and financial controls in the PRC.

17

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management.

We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, some of our directors and executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon some of our directors and senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. It would also be difficult for investors to bring an original lawsuit against us or our directors or executive officers before a Chinese court based on U.S. federal securities laws or otherwise. Moreover, China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.

Because Chinese laws will govern almost all of our business’ material agreements, we may not be able to enforce our rights within the PRC or elsewhere, which could result in a significant loss of business, business opportunities or capital.

The Chinese legal system is similar to a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. Although legislation in the PRC over the past 25 years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements in the PRC, these laws, regulations and legal requirements are relatively new. Due to the limited volume of published judicial decisions, their non-binding nature, the short history since their enactments, the discrete understanding of the judges or government agencies of the same legal provision, inconsistent professional abilities of the judicators, and the inclination to protect local interest in the court rooms, interpretation and enforcement of PRC laws and regulations involv e uncertainties, which could limit the legal protection available to us, and foreign investors, including you. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital and could have a material adverse impact on our business, prospects, financial condition, and results of operations. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in the PRC, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention.

Risks Related to our Securities

Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur.

Mr. Tao, our chief executive officer and sole director holds 47,658 shares of our Series M Preferred Stock, that are convertible into 47,658,000 shares of our common stock, representing approximately 93.74% of our Common Stock after giving effect to the conversion of the Series M Preferred Shares after we amend our Articles of Incorporation to increase our authorized Common Stock to one hundred million (100,000,000) shares. Accordingly, Mr. Tao is able to control all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.

There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities.

There is currently only a limited public market for our Common Stock and there can be no assurance that a trading market will develop further or be maintained in the future.

The market price of our Common Stock may be volatile.

The market price of our Common Stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our Common Stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our Common Stock. These factors may materially adversely affect the market price of our Common Stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the spe cific companies. These broad market fluctuations may adversely affect the market price of our Common Stock.

18

Because we are becoming public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.

Since we became public through a “reverse merger,” the newly-issued common shares issued in connection with the “reverse merger” and the Private Placement are restricted shares.  As a result, our common stock will continue to be very thinly traded after the reverse merger, until a considerable number of such shares are registered in an effective registration statement or become sellable under Rule 144if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale. Therefore, securities analysts of major brokerage firms may not provide coverage of our Company since there is little incentive to brokerage firms to recommend the purchase of our Common Stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.

When this registration statement becomes effective, there will be a significant number of shares of Common Stock eligible for sale, which could depress the market price of such stock.

Once this registration statement is effective, a large number of shares of Common Stock will become available for sale in the public market, which could harm the market price of the stock. Further, shares may be offered from time to time in the open market pursuant to Rule 144 if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, and these sales may have a depressive effect as well. In general, a non-affiliate who has held restricted securities for a period of six (6) months may sell such securities into the market and an “affiliate” who has held restricted shares for a period of six (6) months may, upon filing a notification with the SEC on Form 144, sell Common Stock into the market in an amount equal to one percent (1%) of the outstanding shares.

Any market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions, which could impair liquidity and make trading difficult.  

SEC Rule 15g-9, as amended, establishes the definition of a "penny stock" as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions. The market price of our Common Stock is currently less than $5.00 per share and therefore may be a “penny stock.” This classification severely and adversely affects the market liquidity for our common stock.

For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. To approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market which, in highlight form, sets forth:

· the basis on which the broker or dealer made the suitability determination, and

· that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about: (a) the risks of investing in penny stock in both public offerings and in secondary trading; (b) commissions payable to both the broker-dealer and the registered representative, (c) current quotations for the securities, and (d) the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if and when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, fin d it difficult to sell their securities.

19

The market for penny stocks has experienced numerous frauds and abuses which could adversely impact investors in our stock.

OTCBB securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the stock exchanges or NASDAQ.

Patterns of fraud and abuse include:

· Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

· Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

· “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

· Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

· Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future and any return on investment may be limited to the value of our Common Stock. We plan to retain any future earning to finance growth.

ITEM 4.  USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the Shares being offered by the Selling Stockholders, although we may receive additional proceeds of up to approximately $9,980,000 if all of the Warrants are exercised for cash. We will not receive any additional proceeds to the extent that the Warrants are exercised by cashless exercise. We expect to use the proceeds received from the exercise of the Warrants, if any, for general working capital purposes. We cannot assure you however that any of the Warrants will ever be exercised.

ITEM 5.  DETERMINATION OF OFFERING PRICE

Not applicable.

ITEM 6.  DILUTION

Not applicable.

ITEM 7.  SELLING STOCKHOLDERS

We are registering for resale shares of our Common Stock that are issued and outstanding, and shares of Common Stock underlying our Series A Preferred Stock and Warrants held by the Selling Stockholders identified below. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder. We are registering the shares to permit the Selling Stockholders and their pledgees, donees, transferees and other successors-in-interest that receive their shares from a Selling Stockholder as a gift, partnership distribution or other non-sale related transfer after the d ate of this prospectus to resell the shares when and as they deem appropriate in the manner described in the “Plan of Distribution.”  As of the date of this prospectus there are 3,181,504 shares of Common Stock issued and outstanding.

20

The following table sets forth:

· the name of the Selling Stockholders,

· the number of shares of our Common Stock that the Selling Stockholders beneficially owned prior to the offering for resale of the shares under this prospectus,

· the maximum number of shares of our Common Stock that may be offered for resale for the account of the Selling Stockholders under this prospectus, and

· the number and percentage of shares of our Common Stock beneficially owned by the Selling Stockholders after the offering of the shares (assuming all of the offered shares are sold by the Selling Stockholders).

Except for Denise D. Smith, none of the Selling Stockholders has been an officer or director of the Company or an officer or director of any of our predecessors or affiliates within the last three years.

Except for Hayden Communications International Inc. Chesapeake Group, Inc., and Hampton Growth, each of which has been engaged by us as an investor relations firm, and TriPoint Global Equities, LLC, our financial advisor and placement agent in the Private Placement, we have not had a material relationship with any of the Selling Stockholders within the last three years.

 Each of Hayden Communications International Inc. Chesapeake Group, Inc., and Hampton Growth were issued the shares registered herein in exchange for services provided to us pursuant to separate investor relations agreements dated April 19, 2010 between us and such entities. Other than Denise Smith, Hayden Communications International Inc. Chesapeake Group, Inc., and Hampton Growth all of the Selling Stockholders named below received their shares in connection with the Private Placement.

We entered into a placement agent agreement with TriPoint Global on March 18, 2009whereby we paid a cash fee to TriPoint Global equal to 6% of the gross proceeds received by us in connection with the Private Placement and we issued to TriPoint Global and its designees (i) Warrants to purchase 59,896 shares of Common Stock, (ii) Warrants to purchase 539,067 shares of Series A Preferred Stock, (iii) Series A Warrants to purchase 59,896 shares of Common Stock and (iv) Series B Warrants to purchase 59,896 shares of Common Stock.

Except for TriPoint Global, Syndicated Capital, Inc., Brill Securities, Meyer Associates LP and SHP Securities, LLC, none of the Selling Stockholders is a broker dealer.

Except for Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey, none of the Selling Stockholders is an affiliate of a broker dealer. However, Each of Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey   confirmed to us that it or he bought the securities in the ordinary course of business and at the time of purchase , it or he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. None of the Selling Stockholders has any agreement or understanding to distribute any of the Shares being registered.

Each Selling Stockholder may offer for sale all or part of the Shares from time to time. The table below assumes that the Selling Stockholders will sell all of the Shares offered for sale. A Selling Stockholder is under no obligation, however, to sell any Shares pursuant to this prospectus.

21

Name of Selling Stockholder	Shares of Common Stock Beneficially Owned Prior to Offering (1)	Maximum Number of Shares of Common Stock to be Sold (2)	Number of Shares of Common Stock Owned After Offering (3)	Percentage Ownership After Offering (4)
Paul Calvin Hickey (5)	36,000	36,000	0	*
The Gary Reed Hawkins Family Trust (6)	36,000	36,000	0	*
Gary Reed Hawkins (7)	27,600	27,600	0	*
Hawkins-Smith General Partnership (8)	36,000	36,000	0	*
Greg Freihofner (9)	24,000	24,000	0	*
Lawrence Kaplan (10)	48,000	48,000	0	*
IRA FBO Ronald M. Lazar, Pershing LLC as Custodian(11)	8,580	8,580	0	*
RL Capital Partners(12)	17,160	17,160	0	*
Steve Strasser(13)	48,000	48,000	0	*
Far East Wind LLC.(14)	17,148	17,148	0	*
Trading Systems, LLC(15)	36,000	36,000	0	*
Stanley A. Kaplan(16)	12,000	12,000	0	*
Anthony G. Polak(17)	12,000	12,000	0	*
Michael Miller(18)	36,000	36,000	0	*
Futurtec, L.P.(19)	36,000	36,000	0	*
Burt Stangarone(20)	60,000	60,000	0	*
Alan Kenneth Mercer (21)	34,320	34,320	0	*
Philip Leeton Gregory(22)	36,000	36,000	0	*
Kenneth Walter Chad(23)	25,704	25,704	0	*
Dennis Jason Wong, Sole Trustee of the Dennis and Shannon Wong Family Trust(24)	72,000	72,000	0	*
SPI Hawaii Investments, LP(25)	48,000	48,000	0	*
Dynacap Global Capital Fund II LP(26)	86,400	86,400	0	*
Silver Rock II, LTD.(27)	156,000	156,000	0	*
Lennox Capital Partners, LP(28)	222,852	222,852	0	*
Squires Family LP(29)	120,000	120,000	0	*
Tangiers Investors, LP(30)	8,580	8,580	0	*
Taylor International Fund, Ltd(31)	857,136	857,136	0	*
William Paul Haus(32)	18,000	18,000	0	*
JW Partners, LP(33)	68,568	68,568	0	*

22

Charles M Ognar(34)	120,000	120,000	0	*
John C Kleinert(35)	9,000	9,000	0	*
Westpark Capital, L.P.(36)	120,000	120,000	0	*
Ancora Greater China Fund LP(37)	171,432	171,432	0	*
Jayhawk Private Equity Fund II, L.P.(38)	684,000	684,000	0	*
Trillion Growth China LP(39)	108,000	108,000	0	*
Marion Lynton(40)	14,400	14,400	0	*
Ardsley Offshore Fund, Ltd.(41)	56,400	56,400	0	*
Ardsley Partners Institutional Fund, L.P.(42)	349,200	349,200	0	*
Ardsley Partners Fund II, L.P.(43)	438,000	438,000	0	*
Eric E. Shear(44)	8,580	8,580	0	*
BBS Capital Fund, LP(45)	102,864	102,864	0	*
Edward Kovary Jr.(46)	14,400	14,400	0	*
Straus Partners L.P.(47)	257,136	257,136	0	*
Daybreak Special Situations Master Fund Ltd.(48)	85,704	85,704	0	*
Hua-Mei 21st Century Partners, LP(49)	445,716	445,716	0	*
Guerrilla Partners LP(50)	240,000	240,000	0	*
Vision Opportunity China, LP(51)	685,704	685,704	0	*
Saugatuck Energy LLC(52)	342,864	342,864	0	*
Laszlo Bodak(53)	16,800	16,800	0	*
U&M Desai, Ltd(54)	34,284	34,284	0	*
Strassburg & Company(55)	17,136	17,136	0	*
Michael Maximillian Lipman(56)	4,800	4,800	0	*
John R. Duffy, Lorrain Duffy(57)	12,000	12,000	0	*
Jeffry D.K. Johnson(58)	1,800	1,800	0	*
Gary Andreasen(59)	2,400	2,400	0	*
Jeffrey A. Grossman(60)	36,000	36,000	0	*
Steven Gianniotis(61)	3,600	3,600	0	*
Joseph Maida/Angela LaRosa(62)	43,200	43,200	0	*
Cubs Capital Corp.(63)	5,400	5,400	0	*
Michael J. Leone(64)	1,800	1,800	0	*
Russell Wimberley (65)	12,000	12,000	0	*
Richard Bartlett Tranter(66)	2,400	2,400	0	*
Martin Joseph Legge(67)	12,000	12,000	0	*
Stephan Huwer(68)	1,200	1,200	0	*
Ray and Orla Wiley(69)	1,200	1,200	0	*
Zion Amsalem(70)	4,800	4,800	0	*
Avi Shandi, Simon Teyer(71)	4,800	4,800	0	*
Giles Bulmer(72)	2,400	2,400	0	*
Robert Kammann(73)	5,400	5,400	0	*
Martin George Findlay(74)	6,000	6,000	0	*

23

Meir Duke(75)	51,420	51,420	0	*
Gerard Michael Penfold(76)	7,800	7,800	0	*
Merrill Lynch Custodian for Carling Bassett-Seguso IRA (77)	72,000	72,000	0	*
Steve Davidson(78)	2,040	2,040	0	*
Harry S. Rust Residuary Trust (79)	4,800	4,800	0	*
Hampton Investment Group(80)	1,800	1,800	0	*
Terry D. Smith IRA(81)	1,200	1,200	0	*
Paul Silansky(82)	2,400	2,400	0	*
Joseph Myers(83)	36,000	36,000	0	*
Ashar Qureshi(84)	24,000	24,000	0	*
Steve Levin(85)	6,000	6,000	0	*
Alma Rust Trust(86)	4,800	4,800	0	*
CT Partnership(87)	1,500	1,500	0	*
Robert Leng(88)	5,400	5,400	0	*
Rodney A. Omanoff(89)	12,000	12,000	0	*
Charles Barovian(90)	1,200	1,200	0	*
Humminah Limited Partnership(91)	12,000	12,000	0	*
Brett Maas(92)	3,600	3,600	0	*
Mike Slinger(93)	1,200	1,200	0	*
Martin Feinberg(94)	36,000	36,000	0	*
Robert Converse(95)	2,400	2,400	0	*
Paul E. Triulzi IRA(96)	2,400	2,400	0	*
William Rooney(97)	2,400	2,400	0	*
Arnold & Linda Wieland(98)	1,200	1,200	0	*
Lutz Engineering PSP Robert E. Lutz(99)	12,000	12,000	0	*
Barbara Mishan(100)	3,420	3,420	0	*
Robert Snavely(101)	2,400	2,400	0	*
A.E.J. Doyer(102)	8,400	8,400	0	*
Bruce Meyers(103)	12,000	12,000	0	*
David Salomon(104)	34,284	34,284	0	*
Todd Taricco(105)	24,000	24,000	0	*
Tim Schmidt(106)	12,000	12,000	0	*
Yocca Venture Investment Partnership II(107)	2,400	2,400	0	*
Chestnut Ridge Partners, LP(108)	102,852	102,852	0	*
Alpha Capital Anstalt(109)	86,400	86,400	0	*
Whalehaven Capital Fund Limited(110)	137,136	137,136	0	*
Excalibur Special Opportunities LP(111)	171,420	171,420	0	*
Martin Feinberg(112)	18,000	18,000	0	*
Cranshire Capital LP(113)	34,284	34,284	0	*
Compact Poolen Modehuset AB(114)	12,000	12,000	0	*
Peter Stellan Ekberg(115)	5,136	5,136	0	*

24

Kari Ekholm(116)	12,000	12,000	0	*
Exsultat AB(117)	17,100	17,100	0	*
Enebybergs Revisionsbyra AB(118)	24,000	24,000	0	*
Garolf AB(119)	36,000	36,000	0	*
Ulf Ivarsson(120)	28,800	28,800	0	*
David Sandgren(121)	34,284	34,284	0	*
PK Solutions AB(122)	24,000	24,000	0	*
Robin Whaite(123)	24,000	24,000	0	*
Leonard L. Goldberg(124)	36,000	36,000	0	*
Robert and Christi Kaplan (125)	17,136	17,136	0	*
China Reinv Partners, L.P. (126)	1,028,568	1,028,568	0	*
Denise Smith(127)	50,000	50,000	0	*
Hayden Communications International(128)	88,000	88,000	0	*
Chesapeake Group, Inc.(129)	48,000	48,000	0	*
Hampton Growth Resources, LLC(130)	50,000	50,000	0	*
TriPoint Global Equities, LLC (131)	718,755	718,755	0	*

* Represents beneficial ownership of less than one percent of our outstanding shares.

1)   Unless otherwise noted, the Selling Stockholder became one of our shareholders pursuant to the Private Placement.  Accordingly, prior to the Offering, the Selling Stockholder only owned shares of common stock underlying the Notes and Warrants received in the Private Placement (the “Securities”); however, based upon the terms of the both the preferred stock and the Warrants, holders may not convert the preferred stock and/or exercise the warrants, if on any date, such holder would be deemed the beneficial owner of more than 9.9%, depending upon their agreement, of the then outstanding shares of our common stock; however, a holder may elect to waive the cap upon 61 days notice to us, except that during the 61 day period prior to the expiration date of their warrants, they can waive the cap at any time, but a waiver d uring such period will not be effective until the expiration date of the warrant. Therefore, unless otherwise noted, this number represents the number of Securities the Selling Stockholder received in the Private Placement that he/she can own based upon the ownership cap, assuming the ownership cap is not waived. Additionally, the shares of preferred stock are subject to certain anti-dilution provisions, which would be triggered if we were to sell securities at a price below the price at which we sold the Notes. See “Prospectus Summary – Recent Developments - Financing” and “Description of Securities.”

2)  This number represents all of the Securities that the Selling Stockholder received in the Private Placement, which we agreed to register in this Registration Statement pursuant to the Registration Rights Agreement we entered into in connection with the Private Placement.

3)  Since we do not have the ability to control how many, if any, of their shares each of the selling shareholders listed above will sell, we have assumed that the selling shareholders will sell all of the shares offered herein for purposes of determining how many shares they will own after the Offering and their percentage of ownership following the offering.

4) All Percentages have been rounded up to the nearest one hundredth of one percent.

5)  Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

25

6) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Gary Reed Hawkins Family Trust is R. Gail Hawkins. The address for Gary Reed Hawkins Family Trust is 855 W. Broad St., Suite 300, Boise, ID 83702-7153.

7) Consists of 2,300 shares of common stock, 20,700 shares underlying Series A Preferred Stock, 2,300 shares underlying Series A Warrants and 2,300 shares underlying Series B Warrants.

8) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Hawkins-Smith General Partnership is Gary Reed Hawkins. The address for Hawkins-Smith General Partnership is 855 W. Broad St., Suite 300, Boise, ID 83702-7153.

9) Consists of 2,000 shares of common stock, 18,000 shares underlying Series A Preferred Stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

10) Consists of 4,000 shares of common stock, 36,000 shares underlying Series A Preferred Stock, 4,000 shares underlying Series A Warrants and 4,000 shares underlying Series B Warrants.

11) Consists of 715 shares of common stock, 6,435 shares underlying Series A Preferred Stock, 715 shares underlying Series A Warrants and 715 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over IRA FBO Ronald M. Lazar is Ronald Lazar and Pershing LLC acts as Custodian. The address for IRA FBO Ronald M. Lazar is 200 Winston Drive, #3109, Cliffside Park, NJ 07010.

12) Consists of 1,430 shares of common stock, 12,870 shares underlying Series A Preferred Stock, 1,430 shares underlying Series A Warrants and 1,430 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over RL Capital Partners are Ronald Lazar and Anthony Polak. The address for RL Capital Partners is 405 Lexington Avenue; 2nd Floor, New York, NY 10174.

13) Consists of 4,000 shares of common stock, 36,000 shares underlying Series A Preferred Stock, 4,000 shares underlying Series A Warrants and 4,000 shares underlying Series B Warrants.

14)  Consists of 1,429 shares of common stock, 12,861 shares underlying Series A Preferred Stock, 1,429 shares underlying Series A Warrants and 1,429 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Far East Wind LLC. is Edwin R. Thurston. The address for Far East Wind LLC. is P.O. Box 1841 Rancho Santa Fe, CA 92067.

15) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Trading Systems, LLC is Gary J McAdam. The address for Trading Systems, LLC is 14 Red Tail Drive, Highlands Ranch, CO 80126.

16) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

17) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

18) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

19) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Futurtec, L.P. is Ido Klear. The address for Futurtec, L.P. is 111 Great Neck Rd. Suite 301, Great Neck, NY 11021.

20) Consists of 5,000 shares of common stock, 45,000 shares underlying Series A Preferred Stock, 5,000 shares underlying Series A Warrants and 5,000 shares underlying Series B Warrants.

26

21) Consists of 2,860 shares of common stock, 25,740 shares underlying Series A Preferred Stock, 2,860 shares underlying Series A Warrants and 2,860 shares underlying Series B Warrants.

22) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

23) Consists of 2,142 shares of common stock, 19,278 shares underlying Series A Preferred Stock, 2,142 shares underlying Series A Warrants and 2,142 shares underlying Series B Warrants.

24) Consists of 6,000 shares of common stock, 54,000 shares underlying Series A Preferred Stock, 6,000 shares underlying Series A Warrants and 6,000 shares underlying Series B Warrants. Mr. Dennis Jason Wong has voting and dispositive power over the shares held by Dennis Jason Wong, Sole Trustee of the Dennis and Sharon Wong Family Trust.  Mr. Wong may be deemed to beneficially own the shares of Common Stock held by Dennis Jason Wong, Sole Trustee of the Dennis and Sharon Wong Family Trust. Mr. Wong disclaims beneficial ownership of such shares. The address for Dennis Jason Wong, Sole Trustee of the Dennis and Sharon Wong Family Trust is 88 Kearny Street, Suite 1818, San Francisco, CA 94108.

25) Consists of 4,000 shares of common stock, 36,000 shares underlying Series A Preferred Stock, 4,000 shares underlying Series A Warrants and 4,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over SPI Hawaii Investments, LP is Dennis Jason Wong. The address for SPI Hawaii Investments, LP is 88 Kearny Street, Suite 1818, San Francisco, CA 94108.

26) Consists of 7,200 shares of common stock, 64,800 shares underlying Series A Preferred Stock, 7,200 shares underlying Series A Warrants and 7,200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Dynacap Global Capital Fund II LP is Charles Smith. The address for Dynacap Global Capital Fund II LP is 1541 E. Interstate 30, Suite 140, Rockwall TX 75087.

27) Consists of 13,000 shares of common stock, 117,000 shares underlying Series A Preferred Stock, 13,000 shares underlying Series A Warrants and 13,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Silver Rock II, LTD. is Ezzat Jallad. The address for Silver Rock II, LTD. is P.O. Box 213994, Dubai, UAE.

28) Consists of 18,571 shares of common stock, 167,139 shares underlying Series A Preferred Stock, 18,571 shares underlying Series A Warrants and 18,571 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Lennox Capital Partners, LP is Richard D. Squires. The address for Lennox Capital Partners, LP is 2101 Cedar Springs Road, Suite 1230, Dallas, TX 75201.

29) Consists of 10,000 shares of common stock, 90,000 shares underlying Series A Preferred Stock, 10,000 shares underlying Series A Warrants and 10,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Squires Family LP is Richard D. Squires. The address for Squires Family LP is 2101 Cedar Springs Road, Suite 1230, Dallas, TX 75201.

30) Consists of 715 shares of common stock, 6,435 shares underlying Series A Preferred Stock, 715 shares underlying Series A Warrants and 715 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Tangiers Investors, LP is Michael Sobeck. The address for Tangiers Investors, LP is 402 W. Broadway, Suite 400, San Diego, CA 92101.

31) Consists of 71,428 shares of common stock, 642,852 shares underlying Series A Preferred Stock, 71,428 shares underlying Series A Warrants and 71,428 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Taylor International Fund, Ltd is Stephen S. Taylor. The address for Taylor International Fund, Ltd is 714 S. Dearborn St., Second Floor, Chicago, IL 60605.

32) Consists of 1,500 shares of common stock, 13,500 shares underlying Series A Preferred Stock, 1,500 shares underlying Series A Warrants and 1,500 shares underlying Series B Warrants.

33) Consists of 5,714 shares of common stock, 51,426 shares underlying Series A Preferred Stock, 5,714 shares underlying Series A Warrants and 5,714 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over JW Partners, LP is Jason Wild. The address for JW Partners, LP is 900 Third Ave, Suite 1401, New York, NY 10022.

27

34) Consists of 10,000 shares of common stock, 90,000 shares underlying Series A Preferred Stock, 10,000 shares underlying Series A Warrants and 10,000 shares underlying Series B Warrants.

35) Consists of 750 shares of common stock, 6,750 shares underlying Series A Preferred Stock, 750 shares underlying Series A Warrants and 750 shares underlying Series B Warrants.

36) Consists of 10,000 shares of common stock, 90,000 shares underlying Series A Preferred Stock, 10,000 shares underlying Series A Warrants and 10,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Westpark Capital, L.P. is Patrick J, Brosnahan. The address for Westpark Capital, L.P. is 520 Madison Avenue, 12th Floor, New York, NY 10022.

37) Consists of 14,286 shares of common stock, 128,574 shares underlying Series A Preferred Stock, 14,286 shares underlying Series A Warrants and 14,286 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ancora Greater China Fund LP is John P. Micklitsch. The address for Ancora Greater China Fund LP is 2000 Auburn Dr, #300, Cleveland, OH 44122.

38) Consists of 57,000 shares of common stock, 513,000 shares underlying Series A Preferred Stock, 57,000 shares underlying Series A Warrants and 57,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Jayhawk Private Entity Fund II, L.P. is Kent C. McCarthy. The address for Jayhawk Private Equity Fund II, L.P. is 930 Tahoe Blvd, 802-281, Incline Village, NV 89451.

39) Consists of 9,000 shares of common stock, 81,000 shares underlying Series A Preferred Stock, 9,000 shares underlying Series A Warrants and 9,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Trillion Growth China LP is Corey Mitchell. The address for Trillion Growth China LP is 1000, 888-3rd St. S.W, Calgary, AB, T2P 5C5, Canada.

40) Consists of 1,200 shares of common stock, 10,800 shares underlying Series A Preferred Stock, 1,200 shares underlying Series A Warrants and 1,200 shares underlying Series B Warrants.

41) Consists of 4,700 shares of common stock, 42,300 shares underlying Series A Preferred Stock, 4,700 shares underlying Series A Warrants and 4,700 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ardsley Offshore Fund, Ltd. is Philip J. Hempleman. The address for Ardsley Offshore Fund, Ltd. is 262 Harbor Drive, 4th floor, Stamford, CT 06902.

42) Consists of 29,100 shares of common stock, 261,900 shares underlying Series A Preferred Stock, 29,100 shares underlying Series A Warrants and 29,100 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ardsley Partners Institutional Fund L.P. is Philip J. Hempleman. The address for Ardsley Partners Institutional Fund L.P. is 262 Harbor Drive, 4th floor, Stamford, CT 06902.

43) Consists of 36,500 shares of common stock, 328,500 shares underlying Series A Preferred Stock, 36,500 shares underlying Series A Warrants and 36,500 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ardsley Partners Institutional Fund II L.P. is Philip J. Hempleman. The address for Ardsley Partners Institutional Fund II L.P. is 262 Harbor Drive, 4th floor, Stamford, CT 06902.

44) Consists of 715 shares of common stock, 6,435 shares underlying Series A Preferred Stock, 715 shares underlying Series A Warrants and 715 shares underlying Series B Warrants.

45) Consists of 8,572 shares of common stock, 77,148 shares underlying Series A Preferred Stock, 8,572 shares underlying Series A Warrants and 8,572 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over BBS Capital Fund, LP is Berke Bakay. The address for BBS Capital Fund, LP is 520 Madison Avenue, 12th Floor, NY, NY 10022.

46) Consists of 1,200 shares of common stock, 10,800 shares underlying Series A Preferred Stock, 1,200 shares underlying Series A Warrants and 1,200 shares underlying Series B Warrants.

47) Consists of 21,428 shares of common stock, 192,852 shares underlying Series A Preferred Stock, 21,428 shares underlying Series A Warrants and 21,428 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Straus Partners L.P. is Melville Straus. The address for Straus Partners L.P. is 767 3rd Ave 21st, New York, NY, 10017.

28

48) Consists of 7,142 shares of common stock, 64,278 shares underlying Series A Preferred Stock, 7,142 shares underlying Series A Warrants and 7,142 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Daybreak Special Situations Master Fund Ltd. is Larry Butz or John Prinz. The address for Daybreak Special Situations Master Fund Ltd. is 100 E. Cook Avenue, Suite 100, Libertyville, IL 60048.

49) Consists of 37,143 shares of common stock, 334,287 shares underlying Series A Preferred Stock, 37,143 shares underlying Series A Warrants and 37,143 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over Hua-Mei 21st Century Partners are Peter Siris and Leigh S. Curry. The address for Hua-Mei 21st Century Partners, LP is 237 Park Avenue, 9th Floor, New York, NY 10017.

50) Consists of 37,143 shares of common stock, 334,287 shares underlying Series A Preferred Stock, 37,143 shares underlying Series A Warrants and 37,143 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over Guerrilla Partners LP are Peter Siris and Leigh S. Curry. The address for Guerrilla Partners LP is 237 Park Ave., 9th Floor, New York, NY 10017.

51) Consists of 57,142 shares of common stock, 514,278 shares underlying Series A Preferred Stock, 57,142 shares underlying Series A Warrants and 57,142 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Vision Opportunity China LP is Adam Benowitz. The address for Vision Opportunity China, LP is c/o Praxis Fund Services Limited, Suites 13 and 15, Sarnia House, Le Truchot, St. Peter Port, Guernsey, GY1 4NA.

52) Consists of 28,572 shares of common stock, 257,148 shares underlying Series A Preferred Stock, 28,572 shares underlying Series A Warrants and 28,572 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Saugatuck Energy LLC is David B. Murphy. The address for Saugatuck Energy LLC is 354 Pequot Avenue, P.O. Box 1032, Southport, CT 06890.

53) Consists of 1,400 shares of common stock, 12,600 shares underlying Series A Preferred Stock, 1,400 shares underlying Series A Warrants and 1,400 shares underlying Series B Warrants.

54) Consists of 2,857 shares of common stock, 25,713 shares underlying Series A Preferred Stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over U&M Desai, Ltd are Mounang Desai and Urmi Desai. The address for U&M Desai, Ltd is 6003 Isla Vista Court, Houston, TX, 77041.

55) Consists of 1,428 shares of common stock, 12,852 shares underlying Series A Preferred Stock, 1,428 shares underlying Series A Warrants and 1,428 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Strassburg & Company is Randy C. Strassburg. The address for Strassburg & Company is 1223 N. Rock Road, Suite J100, Wichita, KS 67206.

56) Consists of 400 shares of common stock, 3,600 shares underlying Series A Preferred Stock, 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants.

57) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

58) Consists of 150 shares of common stock, 1,350 shares underlying Series A Preferred Stock, 150 shares underlying Series A Warrants and 150 shares underlying Series B Warrants.

59) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

60) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

61) Consists of 300 shares of common stock, 2,700 shares underlying Series A Preferred Stock, 300 shares underlying Series A Warrants and 300 shares underlying Series B Warrants.

29

62) Consists of 3,600 shares of common stock, 32,400 shares underlying Series A Preferred Stock, 3,600 shares underlying Series A Warrants and 3,600 shares underlying Series B Warrants.

63) Consists of 450 shares of common stock, 4,050 shares underlying Series A Preferred Stock, 450 shares underlying Series A Warrants and 450 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Cubs Capital Corp. is Morris Resner. The address for Cubs Capital Corp. , c/o Meyers Associates L.P., is 45 Broadway, New York, NY 10006.

64) Consists of 150 shares of common stock, 1,350 shares underlying Series A Preferred Stock, 150 shares underlying Series A Warrants and 150 shares underlying Series B Warrants.

65)  Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

66) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

67) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

68) Consists of 100 shares of common stock, 900 shares underlying Series A Preferred Stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

69) Consists of 100 shares of common stock, 900 shares underlying Series A Preferred Stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

70) Consists of 400 shares of common stock, 3,600 shares underlying Series A Preferred Stock, 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants.

71) Consists of 400 shares of common stock, 3,600 shares underlying Series A Preferred Stock, 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants.

72) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

73) Consists of 450 shares of common stock, 4,050 shares underlying Series A Preferred Stock, 450 shares underlying Series A Warrants and 450 shares underlying Series B Warrants.

74) Consists of 500 shares of common stock, 4,500 shares underlying Series A Preferred Stock, 500 shares underlying Series A Warrants and 500 shares underlying Series B Warrants.

75) Consists of 4,285 shares of common stock, 38,565 shares underlying Series A Preferred Stock, 4,285 shares underlying Series A Warrants and 4,285 shares underlying Series B Warrants.

76) Consists of 650 shares of common stock, 5,850 shares underlying Series A Preferred Stock, 650 shares underlying Series A Warrants and 650 shares underlying Series B Warrants.

77) Consists of 6,000 shares of common stock, 54,000 shares underlying Series A Preferred Stock, 6,000 shares underlying Series A Warrants and 6,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Merrill Lynch Custodian for Carling Bassett Seguso IRA is Carling Bassett-Seguso.  The address for Merrill Lynch Custodian for Carling Bassett Seguso IRA, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

78) Consists of 170 shares of common stock, 1,530 shares underlying Series A Preferred Stock, 170 shares underlying Series A Warrants and 170 shares underlying Series B Warrants.

79) Consists of 400 shares of common stock, 3,600 shares underlying Series A Preferred Stock, 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Harry S. Rust Residuary Trust is Ron Rust TTTE. The address for Harry S. Rust Residuary Trust, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

30

80) Consists of 150 shares of common stock, 1,350 shares underlying Series A Preferred Stock, 150 shares underlying Series A Warrants and 150 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Hampton Investment Group is Ron Rust TTTE. The address for Hampton Investment Group, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

81) Consists of 100 shares of common stock, 900 shares underlying Series A Preferred Stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Terry D. Smith IRA is Terry D. Smith. The address for Terry D. Smith IRA, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

82) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

83) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

84) Consists of 2,000 shares of common stock, 18,000 shares underlying Series A Preferred Stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

85) Consists of 500 shares of common stock, 4,500 shares underlying Series A Preferred Stock, 500 shares underlying Series A Warrants and 500 shares underlying Series B Warrants.

86) Consists of 400 shares of common stock, 3,600 shares underlying Series A Preferred Stock, 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Alma Rust Trust is Ron Rust TTTE. The address for Alma Rust Trust, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

87) Consists of 125 shares of common stock, 1,125 shares underlying Series A Preferred Stock, 125 shares underlying Series A Warrants and 125 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over CT Partnership is Ronald Rust. The address for CT Partnership, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

88) Consists of 450 shares of common stock, 4,050 shares underlying Series A Preferred Stock, 450 shares underlying Series A Warrants and 125 shares underlying Series B Warrants.

89) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

90) Consists of 100 shares of common stock, 900 shares underlying Series A Preferred Stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

91) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Humminah Limited Partnership is Ethan Woods. The address for Humminah Limited Partnership, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

92) Consists of 300 shares of common stock, 2,700 shares underlying Series A Preferred Stock, 300 shares underlying Series A Warrants and 300 shares underlying Series B Warrants.

93) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

94) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

95) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

96) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

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97) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

98) Consists of 100 shares of common stock, 900 shares underlying Series A Preferred Stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

99) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

100) Consists of 285 shares of common stock, 2,565 shares underlying Series A Preferred Stock, 285 shares underlying Series A Warrants and 285 shares underlying Series B Warrants.

101) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

102) Consists of 700 shares of common stock, 6,300 shares underlying Series A Preferred Stock, 700 shares underlying Series A Warrants and 700 shares underlying Series B Warrants.

103) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

104) Consists of 2,857 shares of common stock, 25,713 shares underlying Series A Preferred Stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants.

105) Consists of 2,000 shares of common stock, 18,000 shares underlying Series A Preferred Stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

106) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

107) Consists of 200 shares of common stock, 1,800 shares underlying Series A Preferred Stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Yocca Venture Investment Partnership II is Nick Yocca. The address for Yocca Venture Investment Partnership II , c/o Meyers Associates is 45 Broadway, New York, NY 10006.

108) Consists of 8,571 shares of common stock, 77,139 shares underlying Series A Preferred Stock, 8,571 shares underlying Series A Warrants and 8,571 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Chestnut Ridge Partners, LP is Kenneth Pasternak. The address for Chestnut Ridge Partners, LP is 10 Forest Avenue, Paramus, NJ 07652.

109) Consists of 7,200 shares of common stock, 64,800 shares underlying Series A Preferred Stock, 7,200 shares underlying Series A Warrants and 7,200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Alpha Capital Anstalt is Konrad Ackemann. The address for Alpha Capital Anstalt is Pradafent 7 9490 Furstentuns, Vaduz, Liechenstien.

110) Consists of 11,428 shares of common stock, 102,852 shares underlying Series A Preferred Stock, 11,428 shares underlying Series A Warrants and 11,428 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over Whalehaven Capital Fund Ltd. are Michael Finkelstein and Eric Weisblum. The address for Whalehaven Capital Fund Ltd. is 560 Sylvan Avenue, Third Floor, Englewood Cliffs, NJ 07632.

111) Consists of 14,285 shares of common stock, 128,565 shares underlying Series A Preferred Stock, 14,285 shares underlying Series A Warrants and 14,285 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Excalibur Special Opportunities LP is William Hechter. The address for Excalibur Special Opportunities LP is 150 Bloor Street West, Suite 14, Toronto ON M552X9, Canada.

112) Consists of 1,500 shares of common stock, 13,500 shares underlying Series A Preferred Stock, 1,500 shares underlying Series A Warrants and 1,500 shares underlying Series B Warrants.

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113) Consists of 2,857 shares of common stock, 25,713 shares underlying Series A Preferred Stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants.  Downsview Capital, Inc. (“Downsview”) is the general partner of Cranshire Capital, L.P. (“ Cranshire”) and consequently has voting control and investment discretion over securities held by Cranshire. Mitchell P. Kopin (“Mr. Kopin”), President of Downsview, has voting control over Downsview. As a result of the foregoing, each of Mr. Kopin and Downsview may be deemed to have beneficiary ownership ( as determined under Section 13 (d) of the Securities Exchange Act of 1934, as amended) of the shares of common stock beneficially owned by Cranshire. The address for Cranshire is 3100 Dundee Road, Suite 703, Northbrook, IL 60062.

114) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Compact Poolen Modehuset AB, c/o Syndicated Capital is Mr. Bjorn Torstonson. The address for Compact Poolen Modehuset AB, c/o Syndicated Capital is 1299 Ocean Ave, Suite 210, Santa Monica, CA 90401.

115) Consists of 428 shares of common stock, 3,852 shares underlying Series A Preferred Stock, 428 shares underlying Series A Warrants and 428 shares underlying Series B Warrants.

116) Consists of 1,000 shares of common stock, 9,000 shares underlying Series A Preferred Stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

117) Consists of 1,425 shares of common stock, 12,825 shares underlying Series A Preferred Stock, 1,425 shares underlying Series A Warrants and 1,425 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Exsultat AB is Ulf Luarsson. The address for Exsultat AB, Ulf Luarsson, c/o Syndicated Capital is 1299 Ocean Ave, Suite 210, Santa Monica, CA 90401.

118) Consists of 2,000 shares of common stock, 18,000 shares underlying Series A Preferred Stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Enebybergs Revisionsbyra AB  is Lars Krister Svantemark. The address for Enebybergs Revisionsbyra AB, c/o Syndicated Capital is 1299 Ocean Ave, Suite 210, Santa Monica, CA 90401.

119) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Garolf AB c/o Syndicated Capital, Inc. is Tommy Martensson. The address for Garolf AB, c/o Syndicated Capital, Inc. is , 1299 Ocean Avenue, Suite 210, Santa Monica, CA 90401.

120) Consists of 2,400 shares of common stock, 21,600 shares underlying Series A Preferred Stock, 2,400 shares underlying Series A Warrants and 2,400 shares underlying Series B Warrants.

121) Consists of 2,857 shares of common stock, 25,713 shares underlying Series A Preferred Stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants.

122) Consists of 2,000 shares of common stock, 18,000 shares underlying Series A Preferred Stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over PK Solutions AB is Peter Gustafson. The address for PK Solution AB c/o Syndicated Capital is 1299 Ocean Avenue, Suite 120, Santa Monica, CA 90401.

123) Consists of 2,000 shares of common stock, 18,000 shares underlying Series A Preferred Stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

124) Consists of 3,000 shares of common stock, 27,000 shares underlying Series A Preferred Stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

125) Consists of 1,428 shares of common stock, 12,852 shares underlying Series A Preferred Stock, 1,428 shares underlying Series A Warrants and 1,428 shares underlying Series B Warrants.

126) Consists of 85,714 shares of common stock, 771,426 shares underlying Series A Preferred Stock, 85,714 shares underlying Series A Warrants and 85,714 shares underlying Series B Warrants. By virtue of such relation, Hawkland may be deemed to have dispositive power over the shares owned by China Reinv. Hawkland disclaims such beneficial ownership of such shares of Common Stock.  Messrs. Stephen John Kelly and Damian Jones Calderbank have delegated authority from the members of Hawkland with respect to the shares of Common Stock owned by China Reinv. Messrs. Kelly and Calderbank may be deemed to share dispositive power over the shares of Common Stock held by China Reinv and each disclaim such beneficial ownership of such shares of Common Stock, and neither person has any legal right to maintain such delegated authority. The address for China Reinv Partners, L.P.is China Reinv Partners, L.P., Hawkland Investments Limited of Akara Bldg, 24 De Castro Street Wickhams Cay 1 PO Box 3136, Road Town, Tortola, BVA.

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127) Reflects 50,000 shares of common stock beneficially owned by the stockholder.

128)  Reflects 88,000 shares of common stock beneficially owned by the stockholder. Hayden Communications International Inc. has been engaged as our investor relations firm.  Mr. Matt Hayden has voting and dispositive power over the shares held by Hayden Communications International Inc. Mr. Hayden may be deemed to beneficially own the shares of common stock held by Hayden Communications International Inc. The address for Hayden Communications International Inc. is 2975 Highway A1A, Melbourne Beach, FL 32951.

129) Reflects 48,000 shares of common stock beneficially owned by the stockholder. Chesapeake Group has been engaged as our investor relations firm.  Kevin Holmes has voting and dispositive power over the shares held by Chesapeake Group. Mr. Holmes may be deemed to beneficially own the shares of common stock held by Chesapeake Group. The address for Chesapeake Group is 17 W. Pennsylvania Avenue, Towson, MD 21024.

130) Reflects 50,000 shares of common stock beneficially owned by the stockholder. Hampton Growth Resources, LLC has been engaged as our investor relations firm. Andrew Hag has voting and dispositive power over the shares held by Hampton Growth.. The address for Hampton Growth is 520 Broadway Suite 350 #111, Santa Monica, CA 90401.

131) Consists of  539,067 shares of Common Stock underlying shares of the Company’s Series A Preferred Stock underlying a placement agent Warrant to purchase same, 59,896 shares of common stock underlying a placement agent warrant to purchase same, 59,896 shares of common stock underlying placement agent Series A Warrant and 59,896 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above. Mark Elenowitz and Michael Boswell share voting and dispositive power over the securities held by TriPoint Global Equities, LLC. The address for TriPoint Global Equities, LLC is 17 State St reet, 20th Floor, New York, NY 10004.

ITEM 8.  PLAN OF DISTRIBUTION

The Selling Stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their Shares on any stock exchange, market or trading facility on which the Shares are traded or quoted or in private transactions. These sales may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling Shares:

· ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors;

· 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 account;

· an exchange distribution in accordance with the rules of the applicable exchange;

· privately negotiated transactions;

· to cover short sales made after the date that this registration statement is declared effective by the SEC;

· broker-dealers may agree with the Selling Stockholders to sell a specified number of such Shares at a stipulated price per share;

· through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

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· a combination of any such methods of sale; and

· any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell Shares under Rule 144 under the Securities Act, if  all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, rather than under this prospectus.

In connection with the sale of the Common Stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the Common Stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of Shares offered by this prospectus, which shares such broke r-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

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

The Selling Stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the amendment or supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933  will be filed amending the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this prospectus and the pledgees or secured parties may offer and sell shares of Common Stock from time to time under the supplement or  amendment to this prospectus.

The Selling Stockholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. 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 deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Shares will be paid by the Selling Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such Selling Stockholder’s business and, at the time of its purchase of such securities such Selling Stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

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TriPoint Global Equities, LLC (“TriPoint Global”) is a registered broker dealer and FINRA member firm and listed as a Selling Stockholder in this prospectus. TriPoint Global served as placement agent for our Private Placement, which was completed on May 17, 2010.  

We entered into a placement agent agreement with TriPoint Global on March 18, 2009 whereby we paid a cash fee to TriPoint Global equal to 6% of the gross proceeds received by us in connection with the Private Placement and we issued to TriPoint Global and its designees (i) Warrants to purchase 59,896 shares of Common Stock, (ii) three-year Warrants to purchase 539,067 shares of our Series A Preferred Stock, (iii) Series A Warrants to purchase 59,896 shares of Common Stock and (iv) Series B Warrants to purchase 59,896 shares of Common Stock. The registration statement of which this prospectus forms a part includes the shares of Common Stock underlying Warrants granted to TriPoint Global and its designees. The shares of Common Stock issuable upon exercise of placement agent Warrants received by TriPoint Global are transferable within Tr iPoint Global or to its assigns or designees, at the discretion of TriPoint Global, and in accordance with the Securities Act of 1933, as amended.

TriPoint Global does not have an underwriting agreement with us and/or the Selling Stockholders and no Selling Stockholders are required to execute transactions through TriPoint Global. Further, other than any existing brokerage relationship as customers with TriPoint Global, no Selling Stockholders has any pre-arranged agreement, written or otherwise, with TriPoint Global to sell their securities through TriPoint Global.

FINRA Rule 5110 requires FINRA member firms (unless an exemption applies) to satisfy the filing requirements of Rule 5110 in connection with the resale, on behalf of Selling Stockholders, of the securities on a principal or agency basis. NASD Notice to Members 88-101 states that in the event a Selling Stockholder intends to sell any of the shares registered for resale in this prospectus through a member of FINRA participating in a distribution of our securities, such member is responsible for insuring that a timely filing, if required, is first made with the Corporate Finance Department of FINRA and disclosing to FINRA the following:

· it intends to take possession of the registered securities or to facilitate the transfer of such certificates;

· the complete details of how the selling shareholders’ shares are and will be held, including location of the particular accounts;

· whether the member firm or any direct or indirect affiliates thereof have entered into, will facilitate or otherwise participate in any type of payment transaction with the selling shareholders, including details regarding any such transactions; and

· in the event any of the securities offered by the selling shareholders are sold, transferred, assigned or hypothecated by any selling shareholder in a transaction that directly or indirectly involves a member firm of FINRA or any affiliates thereof, that prior to or at the time of said transaction the member firm will timely file all relevant documents with respect to such transaction(s) with the Corporate Finance Department of FINRA for review.

No FINRA member firm may receive compensation in excess of that allowable under FINRA rules, including Rule 2710, in connection with the resale of the securities by the selling shareholders, which total compensation may not exceed 8%.

We have advised each Selling Stockholder that it may not use Shares registered on this registration statement to cover short sales of Common Stock made prior to the date on which this registration statement shall have been declared effective by the Commission. If a Selling Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with resales of their respective Shares under this registration statement.

We are required to pay all fees and expenses incident to the registration of the Shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

ITEM 9.  DESCRIPTION OF SECURITIES TO BE REGISTERED

Authorized Capital Stock

We have 70,000,000 shares of authorized capital stock, consisting of 50,000,000 shares of Common Stock, par value $0.001, and 20,000,000 shares of the Company’s Preferred Stock, par value $0.001, 11,000,000 of which are designated as Series A Convertible Preferred Stock and 47,658 shares are designated as Series M Convertible Preferred Stock.

Common Stock

As of the date hereof, 3,181,504 shares of our Common Stock are issued and outstanding. Holders of Common Stock are entitled to cast one vote for each share on all matters submitted to a vote of shareholders, including the election of directors. The holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board out of funds legally available therefore. See “Dividend Policy.” Such holders do not have any preemptive or other rights to subscribe for additional shares. All holders of Common Stock are entitled to share ratably in any assets for distribution to shareholders upon the liquidation, dissolution or winding up of the Company. There are no conversion, redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully pai d and nonassessable.

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Preferred Stock

The Board is authorized, without further action by the shareholders, to issue, from time to time, up to 20,000,000 shares of preferred stock in one or more classes or series. Similarly, the Board will be authorized to fix or alter the designations, powers, preferences, and the number of shares which constitute each such class or series of preferred stock. Such designations, powers or preferences may include, without limitation, dividend rights (and whether dividends are cumulative), conversion rights, if any, voting rights (including the number of votes, if any, per share), redemption rights (including sinking fund provisions, if any), and liquidation preferences of any unissued shares or wholly unissued series of preferred stock. As of the date hereof, the Board has designated two classes of Preferred Stock, consisting of Series M Pre ferred Stock and Series A Preferred Stock and does not have any current intention to designate any other class of preferred stock.

Series A Preferred Stock

As of the date hereof, we have 6,738,336 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Shares by its principal terms:

(a)	pay a cumulative dividend at an annual rate of 6%, payable quarterly, at our option, in cash or in shares of Common Stock;
(b)	have a preference over the Common Stock on liquidation, dissolution or winding up of the Company equal to the original purchase price per Series A Preferred Share;

(c)

be convertible at any time after issuance, at the option of the holder, into shares of Common Stock, without the payment of additional consideration, at an initial conversion ratio of one-to-one (subject to anti-dilution adjustment);

(d)

automatically convert into shares of Common Stock at $3.50 per share, at the earlier to occur of the following: (i) the twenty four (24) month anniversary of the Closing of the Private Placement, and (ii) such time that the Volume Weighted Average Price (“VWAP”) of the Common Stock is no less than $5.00 for a period of ten (10) consecutive trading days with the daily volume of the Common Stock equal to at least 50,000 shares per day;

(e)	the conversion price and the number of common shares underlying the Series A Preferred Stock are subject to customary adjustments, including weighted average broad-based anti-dilution protection for a period of twelve (12) months after the effective date of this registration statement; and
(f)	requires that we, prior to taking certain corporate actions (including certain issuances or redemptions of its securities or changes in its organizational documents), obtain the approval of more than 50% of the Series A Preferred Shares then issued and outstanding, voting as a group.

Series M Preferred Stock

As of the date hereof, we have 47,658 shares of Series M Preferred Stock issued and outstanding. Each share of Series M Preferred Stock by its principal terms:

(a)	converts into one thousand (1,000) shares of Common Stock immediately following the amendment to the Articles of Incorporation of the Company to increase the number of authorized shares of Common Stock to one hundred million (100,000,000);
(b)	have the same voting rights as holders of Common Stock on an as-converted basis for any matters that are subject to shareholder vote;

(c)	is not be entitled to any dividends; and
(d)	is treated pari passu with the Common Stock on liquidation, dissolution or winding up of the Company.

Copies of the Series A Preferred Stock Certificate of Designations and Series M Preferred Stock Certificate of Designations are attached hereto as Exhibits 4.1 and 4.2, respectively.

The Series A Warrants

As of the date hereof, there are 808,600 Series A Warrants issued and outstanding, including 59,896warrants issued to the placement agent in the Private Placement. The Series A Warrants will, by its principal terms,

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(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after the consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series A Warrants;

(c)	be exercisable, in whole or in part, at an exercise price of $4.50 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which a registration statement covering such shares is not effective); and

(e)  be callable at $0.01 by us following the date that the VWAP of the Common Stock equals or exceeds $9.00 for fifteen (15) consecutive trading days with the average daily trading volume of no less than 75,000 shares.

The Series B Warrants

As of the date hereof, there are 808,600 Series B Warrants issued and outstanding, including 59,896 warrants issued to the placement agent in the Private Placement. The Series B Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series B Warrants;

(c)	be exercisable, in whole or in part, at an exercise price of $5.25 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which registration statement covering such shares is not effective); and

(e) be callable at $0.01 by us following the date that the VWAP of the Common Stock equals or exceeds $10.50 for fifteen (15) consecutive trading days with the average daily trading volume of no less than 75,000 shares.

Copies of the Series A Warrant and Series B Warrant are attached hereto as Exhibits 10.5 and 10.6, respectively.

The Placement Agent Warrants

The warrants issued to the placement agent contain the same terms and conditions as those issued to the Investors.  However, the Placement Agent received warrants to purchase up to 539,067 shares of the Company’s Series A Preferred Stock, at an exercise price of $3.50 per share and warrants to purchase up to 59,896 shares of the Company’s Common Stock at an exercise price of $3.50 per share.

Registration Rights

Pursuant to the Registration Rights Agreement we entered into with the investors of the Private Placement, we agreed to register all of the shares of common stock and the shares underlying the Series A Preferred Stock and the Warrants, as well as any shares we believe may be issued pursuant to the final conversion price or exercise price of the Series A Preferred Stock or Warrants, respectively, and pursuant to an adjustment in such price as per the terms of the Series A Preferred Stock and Warrants.

Transfer Agent

The transfer agent for our common stock and preferred stock is Signature Stock Transfer, Inc., 2632 Coachlight Court, Plano, Texas 75093. Tel: (972) 612-4120

Item 10.  Interest of Named Experts and Counsel

Legal Matters

Certain legal matters with respect to the shares of common stock offered hereby will be passed upon for us by Leser, Hunter, Taubman & Taubman, New York, New York 10004.

Experts

The financial statements for the fiscal years ended December 31, 2009 and 2008 included in this prospectus have been audited by Patrizio & Zhao, LLC, independent auditors, as stated in its report appearing in this prospectus and elsewhere in the registration statement of which this prospectus forms a part, and have been so included in reliance upon the reports of such firm given upon its authority as experts in accounting and auditing.

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Item 11.  Information with Respect to the Registrant

Our Products

We manufacture and supply a variety of petrochemical products, including BTX aromatics, propylene, styrene, liquid petroleum gas (LPG), MTBE and other petrochemicals, each of which is described below:

· BTX Aromatics: consists of benzene, toluene, xylene and other chemical components used for further processing into oil resin, gasoline and solvent materials widely used in paint, ink, construction coating and pesticide;

· Propylene: a chemical intermediate which is one of the building blocks for an array of chemical and plastic products that are commonly used to produce polypropylene, acrylonitrile, oxo chemicals, propylene oxide, cumene, isopropyl alcohol, acrylic acid and other chemicals for paints, household detergents, automotive brake fluids, indoor/outdoor carpeting, textile, insulating materials, auto parts and electrical appliances;

· Styrene: a precursor to polystyrene and several copolymers widely used for packaging materials, construction materials, electronic parts, home appliances, household goods, home furnishings, toys, sporting goods and other products;

· LPG: a mixture of hydrocarbon gases used as fuel in heating appliances and vehicles. A replacement for chlorofluorocarbons as an aerosol propellant and a refrigerant which reduces damage to the ozone layer; and

· MTBE & Other Chemicals: MTBE, oil slurry, sulphur and others which are used for a variety of applications including fuel components, refrigeration systems, fertilizers, insecticides and fungicides.

Production Capacity and Expansion

The following chart depicts our current production capacity:

                   

Current Capacity Breakdown (MT)

In order to develop our business to meet the increasing customer purchase orders, our management team plans to expand our manufacturing capacity to include a raw material pre-treatment facility, additional storage capacity, an asphalt production facility and a new Styrene-Butadiene-Styrene (“SBS”) production facility .  The addition of the pre-treatment equipment will greatly enhance our capability to handle tougher raw materials and reduce raw material cost. The pre-treatment equipment will be utilized prior to the catalytic pyrolysis processing. After pre-treatment, the “better” raw materials will go to the catalytic pyrolysis process and the “poorer” raw materials will go to the asphalt production facility. To be more specific, the raw materials coming from storage tanks will go through heat exchanging process and will be mixed with solvent in the mixer before going to the two level extractors for separating process. Through different levels of separation, the higher quality raw material will go to catalytic pyrolysis process and the lower quality raw material will be generated into asphalt products through the modifying process. Asphalt production allows us to introduce an even lower grade heavy oil which ultimately lowers raw material costs.

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We believe developing asphalt production capability fits into our overall business: first, there is a huge market demand in China due to China’s focus on building infrastructure to support further economic growth and the under-developed domestic supply; second, asphalt production can provide a better use of our production residuals and the lower quality materials. Currently, our production residuals are sold as scrap, however, with our expanded asphalt production, we can use those residuals to produce asphalt which can be sold at a much higher price. The increased revenue and net profit from asphalt production will contribute significantly to our overall success; third, our management teamhas in-depth knowledge and expertise in designing, building and managing an asphalt production facility. Our CEO, Mr. Chunfeng Tao had suc cessfully built and managed Ningbo Daxie Liwan Petrochemical Co.(later purchased by China National Offshore Oil company) to an annual production of 500,000 metric tons of high grade asphalt.  We plan to produce high-grade pavement asphalt which is the building material for highways and various grades of roads including urban fast roads and trunk roads with heavy traffic flow. High-grade pavement asphalt can also be used as raw materials for emulsified asphalt, diluted asphalt and modified asphalt.

In addition, we are currently working on building new facility for producing Styrene-Butadience-Styrene (the “SBS”), one of the Styreneic Block Copolymers.  SBS is a product with high product margin with major application for footwear, adhesive, polymer modification and modified asphalt industries. The SBS facility will be built on the 1.2 million square feet land that we just received written confirmation for reservation from local government on August 13, 2010.  The construction may start in September, 2010 and will take approximately12 months to complete. The designed capacity of SBS will be 70,000 metric ton a year. China’s current domestic production capacity of SBS is approximately 600,000 tons a year with an estima ted domestic demand of 750,000 tons (data source: http://www.cpi360.com/docpage/c419/200906/0603_419_546403.aspx which is set up by Eastern-China International P&C Net). The total investment of the SBS facility is estimated to be $17.5 million.  We expect to start the trial run in the forth quarter of 2010 and commence the production in late 2010 or early 2011.  The SBS facility will generate approximately $107 million in sales and $10million in profit annually at full capacity.

In order to expand our facilities, we need to acquire use rights of additional land. In China, the government is responsible for overall land planning and they will often select a target company to maximize the benefits of land use for a particular area. We have been in regular communications with the Ningbo Municipal Government about the land use rights for approximately 1.2 million square feet of land adjacent to our current production facility. We submitted our application to the local government for a land bidding process slated on July 13, 2010 which is a necessary legal proceeding to acquire the land use rights in China. We were the only bidder in this process because the land is well integrated with our existing site. The bidding process was completed on August 13, 2010 and we entered into land use right transfer agreements with the local government on August 18, 2010.

The following chart depicts our production capacity assuming the completion of the asphalt facility:

                   

Capacity Breakdown with Asphalt Facility (MT)

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Petrochemical Manufacturing Process

The following chart illustrates our petrochemical manufacturing process:

Petrochemical Market in China

China has the world’s second largest petrochemical market after the U.S. in terms of production and consumption. China’s petrochemical output value grew from RMB 1,240 billion in 2000 to 6,584 billion in 2008, representing a Compound Annual Growth Rate (CAGR) of 23.2%. China Petrol and Chemical Industry Association (CPCIA) expects that the total profits in petrochemical industry will increase between 8% and 10% in 2010. (Source: http://english.people daily.com.cn)

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China’s Petrochemical Market Size from 2000-2008 (RMB billions)

China’s Monthly Imports of Petrochemicals in 2009 (Thousand tons)

 Note: Does not include crude oil.

Source: customs.gov.cn

China’s increasing domestic demand for petrochemical products has exceeded the domestic supply in the past several years:

· China’s benzene supply grew from 2.13 million MT in 2002 to 4.06 million MT in 2007 representing a CAGR of 13.8%. China’s benzene demand increased from 2.08 million MT in 2002 to 4.25 million MT in 2007, representing a CAGR of 15.4%. ( data source: www.stats.gov.cn ) (China Petrochemical Industry Association)  

· China’s toluene supply grew from 697,000 MT in 2002 to 1.52 million MT in 2007, representing a CAGR of 16.9%. China’s toluene demand increased from 1.56 million MT in 2002 to 1.96 million MT in 2007, representing a CAGR of 4.7%.(data source: www.stats.gov.cn ) (www.chem99.com)

· China’s xylene supply grew from 820,000 MT in 2002 to 1.62 million MT in 2007, representing a CAGR of 14.6%. China’s xylene demand increased from 1.1 million MT in 2002 to 1.99 million MT in 2007, representing a CAGR of 12.6%.(data source: www.stats.gov.cn ) (www.chem99.com)

· China’s propylene supply has grown from 3.78 million MT in 2000 to 9.35 million MT in 2006, representing a CAGR of 16.3%. China’s propylene demand has risen from 4.39 million MT in 2000 to 14.43 million MT in 2006, representing a CAGR of 21.9%.(data source: www.stats.gov.cn) (www.baiinfo.com)

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· China’s styrene supply has grown from 0.89 million MT in 2002 to 2.25 million MT in 2006, representing a CAGR of 26.1%. China’s Styrene demand has increased from 2.69 million MT in 2002 to 4.58 million MT in 2006, representing a CAGR of 14.2%.(data source:www.stats.gov.cn) (www.baiinfo.com)

· China’s LPG supply has grown from 12.56 million MT in 2003 to 17.8 million MT in 2007, representing a CAGR of 9.1%. China’s LPG demand has increased from 18.77 million MT in 2003 to 22 million MT in 2007, representing a CAGR of 4.05%.(data source: www.stats.gov.cn ) ( www.chinaccm.com)

As a result, China has imported petrochemical products to meet the domestic demand, which is expected to continue for a number of years (source: Publication by Business Monitor International Ltd.: China Petrochemicals Report, Includes 5 Year Forecast to 2014; Q2 2010):

· China imported 480,000 MT of benzene between 2003 and 2007 averaging 96,000 MT a year; (data source: www.stats.gov.cn )(China Petrochemical Industry Association)

· China imported 863,000 MT of toluene in 2002 and 445,000 MT in 2007, averaging 746,000 MT per year; (data source: www.stats.gov.cn ) (www.chem99.com)

· China imported 271,000 MT of xylene in 2002 and 420,000 MT in 2007, averaging 430,000 MT a  year; (data source: www.stats.gov.cn ) (www.chem99.com)

· China’s import of propylene has increased from 210,000 MT in 2004 to 920,000 MT in 2008; ( data source:www.stats.gov.cn) (www.baiinfo.com)

· China’s import of styrene has risen from 1.79 million MT in 2002 to 2.81 million MT in 2008, averaging 2.63 million MT a year; ( data source:www.stats.gov.cn) (www.baiinfo.com)

· China’s import of LPG was 6.21 million MT in 2003 and 4.2 million MT in 2007, averaging 5.63 million MT of LPG imported per year. (data source: www.stats.gov.cn ) (www.chem99.com)  ( www.chinaccm.com)

Asphalt Market in China and Pretreatment & Asphalt Process

In addition to its use as raw materials for emulsified, diluted and modified asphalt-based products, asphalt is widely used for highways, roads and airport pavements. Currently the length of China’s highways has reached 75,000 km (46,603 miles) in the aggregate, which made China rank the second in the world in terms of the length of its highway system. According to the PRC government plan, the length of China's highways will reach 100,000 km (62,137 miles) by 2020. In November 2008, Ministry of Communication issued RMB 5 trillion investment plan and according to this plan, the average annual investment for construction of highways in the next five years will be RMB 980 billion, among which 60% will be used for construction of expressways, 20% for provincial highways and 20% for highways in the countryside.

To ensure the high-quality condition of roads and highways, the PRC government requires regular pavement maintenance every five years. In the past five years, the domestic demand for asphalt in China has exceeded supply with total imports of approximately 3.3 million MT in 2009.

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Source: www.chem99.com

The following chart depicts the pretreatment and asphalt process:

Environmental Protection and Safety Measures

We are committed to environmental protection, facility safety and quality control throughout the design, maintenance and growth of our operation facilities and manufacturing process.

Environmental Protection

We have taken various measures to meet national standards and ensure our environmental compliance. For example, we recycle the water for cooling in our production process and large amounts of water can be saved through recycling. Sulfureted hydrogen generated in production will be sent to the facility for sulfur recovery. The waste water and waste gas will be treated by our sewage water treatment station and emission control facility to meet the national standards before discharge. The industrial residue and garbage will be sent to qualified companies for safe treatment.

Safety Measures

Our safety control measures include:

1.	Distribution control system;
2.	Emergency shutdown mechanism;

3.	Automatic interlocking system;
4.	Detection & alarm system for flammable and toxic gas;

5.	Fire detection & automatic sprinkler system; and
6.	Real-time system and process monitoring system

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Quality Control

With our commitment to quality control, our petrochemical products have met all national standards of petrochemical products set by the General Administration of Quality Supervision, the Inspection and Quarantine of the PRC, and National Standardization Committee.

Our Competitive Strengths

As an  independent petrochemical manufacturer and supplier, our competitive strengths include:

Technology Advantage

We have proprietary manufacturing technologies that allow for better use of raw materials, higher yield rate and enhanced operational efficiency.

Specifically, we possess the technology to use heavy oil, instead of naphtha which is a commonly used component in the petrochemical production industry. Heavy oil is approximately RMB 1,000 cheaper per ton and more readily available than naphtha, which provides us with competitive advantage in the selection of raw materials. In addition, we use proprietary catalytic pyrolysis with higher reaction temperature, which results in 15% higher yield rate than conventional fluidized cracking processes. Finally, we use enhanced technologies in our production process that allow for lower capital investment and enhanced operations efficiency.

Also, our yield rate for our entire production line indicates a yield rate of 91.15% for the finished products. Yield rate represents the percent of finished product produced from input of raw material and net input of unfinished products and is calculated by dividing the sum of crude oil and net unfinished input into the individual net production of finished products. A yield rate of 91.15% means, for instance, 100 tons of heavy oil can generate approximately 91 tons of finished products.

In addition, we use enhanced technologies in our production process that allow for lower capital investment and enhanced operations efficiency. Our proprietary catalytic pyrolysis process uses a set of dual risers for one precipitator and one regenerator, while the commonly-used fluidized catalytic cracking process uses one riser for one precipitator and one regenerator respectively. The dual riser, one precipitator and one regenerator are integrated into one complete process which provides for ease of operation, higher operation efficiency and higher reaction temperature. It ultimately generates a 15% higher yield rate than that of the fluidized catalytic cracking process.

Finally, catalytic pyrolysis process with high temperature can produce more olefin hydrocarbon based products compared with other equipment using low temperature for the same product. In other words, the cost has been reduced while producing the same amount of the product and it is estimated that RMB 1,000 (about USD $146.5) can be saved per one metric ton of raw material.

Though our manufacturing technologies and process have not been patented or registered as our property, we rely on confidentiality and license agreements with certain of our employees, customers and others to protect the confidentiality of our technologies. Our management considers our manufacturing technologies and manufacturing design critical to our business, and has taken steps to protect these technologies. On May 17, 2010, we have filed two patent applications with the National Intellectual Property Bureau in China, which is located at  No. 6 Xitucheng Road, Jimenqiao, Haidian District, Beijing City, China.

Research & Development Advantage

Armed with a team of experienced engineers and technicians with state-of-the-art research and laboratory facilities, we are confident in our strong research and development capacities. To further enhance our research capacities, we have building our research team under the lead of Mr. Chunfeng Tao.

Elite Workforce

Our management team, composed of seasoned petrochemical experts with proven track records from China’s largest state-owned enterprises, provides us with excellent operating management and technical administration. In addition, we have allied with many industry-renowned technology experts and advisors assisting us to achieve consistent technological improvement.

Ideal Location

Our operation and storage facilities are in close proximity to raw material suppliers and downstream manufacturers which provides us with readily available access to raw materials. In addition, being located in Qingshi Chemical Park in Ningbo provides us with access to skilled labor and industry resources.

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Sales and Pricing

Sales

In selling our products, approximately 90% of our customers pay cash payment in advance. With respect to core customers with excellent credit history, we may make an exception by conducting credit sales as part of our strategy to maintain core customer loyalty.

In order to meet customers’ demand, we have improved our manufacturing technologies and streamlined our transactional process to achieve a 30 days’ raw material-to-sales cycle.

Currently, our customer request orders for our products have exceeded our production capacity. The following chart sets forth the comparison between our annual production capacity and the size of customer requests for the listed products below:

Product Line	Annual Capacity (MT)	Customer Requests (MT)	Requests/Capacity
BTX Aromatics	345,000	480,000	1.39x
Propylene	51,500	90,000	1.75x
Styrene	36,000	48,000	1.33x
LPG	77,500	93,000	1.20x

Note: The actual quantities sold are based on Keyuan’s capacity to satisfy the order as well as customer demand. On an order-to-order basis, Keyuan and customers agree to a minimum and maximum quantity amount, of which Keyuan commits to fulfill the minimum order

Pricing

China’s raw material price fluctuations are primarily attributable to international oil prices and market effects of supply and demand. We set our selling prices based upon benchmark prices published by national petrochemical companies, and/or through individually negotiated prices with customers. Specifically, BTX aromatic prices are influenced by benchmark prices set by the National Development and Reform Commission, or NDRC.

Major Customers

Our target customers are component manufacturers located in the Yangtze River Delta and Pearl River Delta. 80% of our sales are direct sales to petrochemical companies that use our products as raw materials for their own products such as polystyrene, isoprene, dicyclopentadiene, acrylic acid, oil fule products and other chemical products. And the remaining 20% of our sales are via distributors. In order to estimate the total orders for a year, we conduct investigations with our major customers to obtain their preliminary orders for the next one or two years and update the information annually. We enter into purchase contracts with customers on an order-to-order basis. In each con tract, price is determined based on market price and the quantity is specified based on (1) the customer demand for a particular order and (2) our capability to satisfy that particular order. For the year ended December 31, 2009, our five largest customers accounted for 70% of our total revenue, and the single largest customer accounted for 26% of our total sales. For the six months ended June 30 , 2010, our five largest customers amounted to $116.94 million and accounted for approximately 46.89% of the Company's total sales . As our customer base may change from year-to-year, during such years that the customer base is highly concentrated, the loss of, or reduction of our sales to, any of such major customers could have a material adverse effect on our business, operating results and financial condition.

Intellectual Property

We have a pending trademark application for the company logo of Keyuan Plastics with the State Administration for Industry and Commerce, Trademark Office. Our management considers our manufacturing technologies and manufacturing design critical to our business, and intends to take steps to protect these technologies.

Government Regulation

This section sets forth a summary of the most significant China regulations or requirements that may affect our business activities operated in China or our shareholders’ right to receive dividends and other distributions of profits from the PRC subsidiary.

Foreign Investment in PRC Operating Companies

The Foreign Investment Industrial Catalogue jointly issued by the China's Ministry of Commerce (MOFCOM) and the NDRC in 2007 classified various industries/businesses into three different categories: (i) encouraged for foreign investment; (ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by any of these three categories, they will be deemed industries/businesses permitted for foreign investment. Except for those expressly provided with restrictions, encouraged and permitted industries/businesses are usually 100% open to foreign investment and ownership. With regard to those industries/businesses restricted to or prohibited from foreign investment, there is always a limitation on foreign investment and ownersh ip. The PRC subsidiary’s business does not fall under the industry categories that are restricted to, or prohibited from foreign investment and is not subject to limitation on foreign investment and ownership.

Regulation of Foreign Currency Exchange

Foreign currency exchange in the PRC is governed by a series of regulations, including the Foreign Currency Administrative Rules (1996), as amended, and the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), as amended. Under these regulations, the Renminbi is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments in securities outside the PRC without the prior approval of State Administration of Foreign Exchange (SAFE). Pursuant to the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), foreign investment en terprises, or FIEs may purchase foreign exchange without the approval of SAFE for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange, subject to a cap approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant Chinese government authorities may limit or eliminate the ability of FIEs to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside the PRC are still subject to limitations and require approvals from SAFE.

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Regulation of FIEs’ Dividend Distribution

The principal laws and regulations in the PRC governing distribution of dividends by FIEs include:

(i)   The Sino-foreign Equity Joint Venture Law (1979), as amended, and the Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

(ii)   The Sino-foreign Cooperative Enterprise Law (1988), as amended, and the Detailed Rules for the Implementation of the Sino-foreign Cooperative Enterprise Law (1995), as amended;

(iii)   The Foreign Investment Enterprise Law (1986), as amended, and the Regulations of Implementation of the Foreign Investment Enterprise Law (1990), as amended.

Under these regulations, FIEs in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the wholly owned foreign enterprises in the PRC are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

Regulation of a Foreign Currency’s Conversion into RMB and Investment by FIEs

On August 29, 2008, SAFE issued a Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises or Notice 142, to further regulate the foreign exchange of FIEs. According to Notice 142, FIEs shall obtain verification report from a local accounting firm before converting its registered capital of foreign currency into Renminbi, and the converted Renminbi shall be used for the business within its permitted business scope. The Notice 142 explicitly prohibits FIEs from using RMB converted from foreign capital to make equity investments in the PRC, unless the domestic equity investment is with in the approved business scope of the FIE and has been approved by SAFE in advance. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of Notice 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

In October 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Notice 75, which became effective as of November 1, 2005. SAFE Notice 75 requires PRC residents (including both corporate entities and natural persons) to register with SAFE or its competent local branch before establishing or controlling any company outside of China referred to as an “offshore special purpose company” for the purpose of raising fund from overseas to acquire assets of, or equity interests in, PRC companies. Under SAFE Notice 75, a “special purpose vehicle”, or SPV, refers to an offshore entity established or controlled, directly or indirectly, by PRC residents for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents in onshore companies. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend his or her SAFE registration with the SAFE or its competent local branch, with respect to that offshore special purpose company in connection with any of its increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. The SAFE regulations require retroactive approval and registration of direct or indirect investments previously made by PRC residents in offshore special purpose companies. To further clarify the implementation of SAFE Notice 75, SAFE issued Circular 106 in May, 2007. Under Circular 106, PRC subsidiaries of an offshore special purpose company are required to coordinate and supervise the fili ng of SAFE registrations by the offshore holding company’s shareholders who are PRC residents in a timely manner. In the event that a PRC resident shareholder with a direct or indirect investment in an offshore parent company fails to obtain the required SAFE approval and make the required registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various SAFE approval and registration requirements described above, as currently drafted, could result in liability under PRC law for foreign exchange evasion.

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There still remains uncertainties as to how certain procedures and requirements under the aforesaid SAFE regulations will be enforced, and it remains unclear how these existing regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We will attempt to comply, and attempt to ensure that all of our shareholders subject to these rules comply with the relevant requirements. We cannot, however, assure the compliance of all of our China-resident shareholders. Any failure to comply with the relevant requirements could subject us to fines or sanctions imposed by the Chinese government, including restrictions on certain of our subsidiaries’ ability to pay dividends or hinder our investment in those subsidiaries or affect our ownership structure, which could adversely affect our business and prospects.

Government Regulations Relating to Taxation

On March 16, 2007, the National People’s Congress or NPC, approved and promulgated the PRC Enterprise Income Tax Law, which we refer to as the New EIT Law. The New EIT Law took effect on January 1, 2008. Under the New EIT Law, FIEs and domestic companies are subject to a uniform tax rate of 25%. The New EIT Law provides a five-year transition period starting from its effective date for those enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential lower tax rate under the then-effective tax laws or regulations.

 On December 26, 2007, the State Council issued a Notice on Implementing Transitional Measures for Enterprise Income Tax, or the Notice, providing that the enterprises that have been approved to enjoy a low tax rate prior to the promulgation of the New EIT Law will be eligible for a five-year transition period since January 1, 2008, during which time the tax rate will be increased step by step to the 25% unified tax rate set out in the New EIT Law. From January 1, 2008, for the enterprises whose applicable tax rate was 15% before the promulgation of the New EIT Law , the tax rate will be increased to 18% for year 2008, 20% for year 2009, 22% for year 2010, 24% for year 2011, 25% for year 2012. For the enterprises whose applicable tax rate was 24%, the tax rate will be change d to 25% from January 1, 2008.

The New EIT Law and Implementation Rules of the New EIT Law provide that an income tax rate of 10% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises”, which (i) do not have an establishment or place of business in the PRC, or (ii) have such establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject to withholding at the income source, with the payor acting as the obligatory withholder under the New EIT Law, and therefor such income taxes generally called withholding tax in practice. It is currently unclear in what circumstances a source will be considered as located w ithin the PRC. We are a U.S. holding company and substantially all of our income is derived from dividends we receive from our subsidiaries located in the PRC. Thus, if we are considered as a “non-resident enterprise” under the New EIT Law and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividends may be subject to a 10% withholding tax.

Such income tax may be exempted or reduced by the State Council of the PRC or pursuant to a tax treaty between the PRC and the jurisdictions in which our non-PRC shareholders reside. For example, the 10% withholding tax is reduced to 5% pursuant to the Double Tax Avoidance Agreement Between Hong Kong and Mainland China if the beneficial owner in Hong Kong owns more than 25% of the registered capital in a company in the PRC.

The new tax law provides only a framework of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and specific applications of various provisions unclear and unspecified. Any increase in the combined company’s tax rate in the future could have a material adverse effect on its financial conditions and results of operations.

For the year ended 2009, the Company incurred a loss and was subject to the 25% tax rate. In order to support the growth of certain local enterprises, the local government granted Keyuan Plastics Co., a preferential tax treatment. In the first two profitable years, the local government will credit back to the Company the entire local portion of the income tax which equals to 40% of the whole Enterprise Income Tax the Company paid applying the 25% tax rate, resulting in an effective tax rate of 15%; in the subsequent three profitable years, the local government will credit back 50% of the local income tax the Company paid under the 25% tax rate resulting in an effective tax rate of 20%.

Regulations of Overseas Investments and Listings

On August 8, 2006, six PRC regulatory agencies, including MOFCOM, the China Securities Regulatory Commission or the CSRC, the State Asset Supervision and Administration Commission or the SASAC, the State Administration of Taxation or the SAT, the State Administration for Industry and Commerce or the SAIC and SAFE, jointly amended and released the M&A Rules, which became effective on September 8, 2006. This regulation, among other things, includes provisions that purport to require that an offshore SPV formed for purposes of overseas listing of equity interest in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange.

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On September 21, 2006, CSRC published on its official website procedures regarding its approval of overseas listings by SPVs. CSRC approval procedures require the filing of a number of documents with CSRC and it would take several months to complete the approval process. The application of the M&A Rules with respect to overseas listings of SPVs remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope of the applicability of CSRC approval requirement.

Regulations on Work Safety

On June 29, 2002, the Work Safety Law (“WSL”) of the PRC was adopted by the Standing Committee of the 9th National People’s Congress and came into effect on November 1, 2002, as amended on August 27, 2009. The WSL provides general work safety requirements for entities engaging in manufacturing and business activities within the PRC. Additionally, Regulation on Work Safety Licenses (“RWSL”), as adopted by the State Council on January 7, 2004 effective on January 13, 2004, requires enterprises engaging in the manufacture of dangerous chemicals to obtain a work safety license with a term of three years. If a work safety license needs to be extended, the enterprise must go through extension procedures with authorities three months prior to its expiration. In addition, on May 17, 2004, the Measures for Implemen tation of Work Safety Licenses of Dangerous Chemicals Production was promulgated as implementing measures to the Regulation on Work Safety Licenses which provides that entities producing dangerous chemicals are required to obtain work safety licenses pursuant to specific requirements. Without work safety licenses, no entity may engage in the formal manufacture of dangerous chemicals.

The Regulations on the Safety Administration of Dangerous Chemicals (“RSADC”) was promulgated by the State Council on January 26, 2002, effective as of March 15, 2002. It sets forth general requirements for manufacturing and storage of dangerous chemicals in China. The RSADC requires that companies manufacturing dangerous chemicals establish and strengthen their internal regulations and rules on safety control and fulfill the national standards and other relevant provisions of the State. In addition, according to the RSADC, companies that manufacture, store, transport or use dangerous chemicals shall be required to obtain corresponding approvals or licenses with the State Administration of Work Safety and its local branches and other proper authorities. Companies that manufacture or store dangerous chemicals without approva l or registration with the proper authorities can be shut down, ordered to stop manufacturing or ordered to destroy the dangerous chemicals. Such companies can also be subject to fines. If criminal law is violated, the persons chiefly liable, along with other personnel directly responsible for such impropriety, shall be subject to relevant criminal liability.

The Company has put work place safety as one of the top priorities for our work. In order to comply with the aforementioned rules and regulations, we have made considerable investment for major equipment with a total estimated amount of RMB 23 million (about USD 3.37 million). We have installed distribution control system (DCS), emergency shutdown system, electric explosion protection, automatic interlocking system, detecting & alarming system for inflammable & toxic gas, fire fighting & fire detecting system, auto-sprinkling system, pressure release and control system.

Regulations on Environmental Protection

According to the Prevention and Control of Water Pollution Law, as adopted by the Standing Committee of the 10th National People’s Congress on February 28, 2008 and effective on June 1, 2008, China adopted a licensing system for pollutant discharge. Companies directly or indirectly responsible for discharge of industrial waste water or medical sewage to waters are required to obtain a pollutant discharge license. All companies are prohibited from discharging wastewater and sewage to waters without the license or in violation of the terms of the pollutant discharge license.

The Regulations on the Administration of Construction Projects Environmental Protection (“RACPEP”), as adopted by the State Council on November 18, 1998 and effective on November 29, 1998, governs construction projects and the impact such projects will have on the environment. Pursuant to the RACPEP, the governing body is responsible for supervising the implementation of a three tiered system that includes (i) reviewing and approving a construction project, (ii) overseeing the construction project and (iii) to inspect the finished construction project and ensure that all harmful pollutants are disposed of correctly. Manufacturing companies are required to apply for inspection with environmental protection authorities upon completion of a construction project.

In order to meet the above mentioned requirements of environmental protection, we have invested about RMB 28 million (about USD 4.1 million) and built some of the major facilities including a sewage treatment facitility, sulphur recovery facility, sea water desulphurization facility, flue gas treatment facility and real-time monitoring system for environmental protection. With these facilities, we believe we are able to meet all the environmental protection standards set by the government.

Research and Development

Research and development costs are expensed as incurred. Research and development costs for the year ended December 31, 2009 were about RMB 3 million (approximately USD$ 0.44 million) for procurement of testing and analyzing instruments for our lab. There was no expense incurred for the year ended December 31, 2008 since we mainly focused on the construction of our facility.

Description of Property

We have acquired the state-granted use rights to land set forth in the table below. Currently, we are not leasing any property from third parties.

Item	Address	Size	Leased/Owned/ Granted	Function
1.	Qingshi Industrial Park, Beilun District, Ningbo, Zhejiang, China	119,093.50 Square meters	Granted use rights	Plant land
2.	No.8 Lianhe Road 239 Block, Qijiashan Neighborhood, Beilun District, Ningbo, Zhejiang, China	4,948.17 Square meters	Owned	Dormitory Building

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Employees

Currently, we have 355 full-time employees, including 1 executive officer and 10 other senior management, 21 engineers, 9 sales people, 6 researchers and developers and 37 administrative staff. The remaining 271 full-time employees are production facility manufacturers. All of the employees have signed labor contracts with the Company and have received monthly salaries as well as other social benefits including pension insurance, jobless insurance, accidental insurance, medical insurance and housing funds, etc. We do not have any other employees in addition to our full-time employees.

We are compliant with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees.

As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC laws to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date.

On May 1, 2007, Keyuan Plastics entered into a non-fixed term employment agreement with Mr. Chunfeng Tao, pursuant to which, Keyuan Plastics hired Mr. Tao as its general manager effective May 1, 2007. The compensation in connection with this employment shall be commensurate with Mr. Tao’s duties and responsibility as the general manager and is subject to mutual agreement between Mr. Tao and Keyuan Plastics.

On May 1, 2007, Keyuan Plastics also entered into a confidentiality and non-compete agreement with Mr. Tao, pursuant to which, Mr. Tao agrees, among others, (i) that he will keep in confidence all Keyuan Plastics confidential information obtained in connection with such employment; (ii) that Keyuan Plastics has the sole ownership right to all Keyuan Plastics intellectual properties, either developed by Mr. Tao individually or collectively with other parties during his employment term or within one (1) year following the termination of his employment; and (iii) that within two (2) years following the termination of his employment, he will not, directly or indirectly, engage in any business or other activities related to Keyuan Plastics confidential information that he obtained during his last five (5) years of employment (or such less t erm) with Keyuan Plastics.

Copies of the employment agreements and confidentiality and non-compete agreements are included herein as Exhibit 10.12 and 10.19.

Executive Offices

Our offices are located at Qingshi Industrial Park, Ningbo Economic & Technological Development Zone, Ningbo, Zhejiang Province, P.R. China 315803.

Legal Proceedings

We are currently not a party to any material legal or administrative proceedings and are not aware of any pending legal or administrative proceedings against us. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

50

MARKET FOR OUR COMMON STOCK, DIVIDENDS AND

RELATED STOCKHOLDER INFORMATION

Our Common Stock is quoted on the Over-the-Counter Bulletin Board under the symbol “KYNP” and has very limited trading. No public market currently exists for shares of our Common Stock and there can be no assurance that an active market will develop.

The OTC Bulletin Board is an unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than NASDAQ, and quotes for stocks included on the OTC Bulletin Board are not listed in the financial sections of newspapers, as are those for the NASDAQ Stock Market.

Set forth in the following table are the high and low closing prices for the years ended December 31, 2008 and 2009, and for the quarter ended June 30 , 2010 for our common stock.

Quarter Ended	High		Low
March 31, 2008	$	0.25	$	0.25
June 30, 2008	$	0.25	$	0.25
September 30, 2008	$	0.25	$	0.25
December 31, 2008	$	0.25	$	0.25

Quarter Ended	High		Low
March 31, 2009	$	0.25	$	0.25
June 30, 2009	$	0.25	$	0.25
September 30, 2009	$	0.25	$	0.25
December 31, 2009	$	0.25	$	0.25
March 31, 2010	$	0.25	$	0.25
June 30, 2010	$	0.25	$	5.20

As of August 31 , 2010, the closing bid price of the common stock was $ 4.01 and we had approximately  198 record holders of our common stock,  122 record holders of our Series A Preferred Stock, and 1 record holders of our Series M Preferred Stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.

As of  August 31 , 2010, there are (i) three-year Series A Warrants to purchase up to 808,600 shares of Common Stock, at an exercise price of $4.50 per share; and (ii) three-year Series B Warrants to purchase up to 808,600 shares of Common Stock, at an exercise price of $5.25 per share.

Effective August 11, 1993, the SEC adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the pe rson; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transac tions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

51

Dividend Policy

We have not paid cash dividends on any class of common equity since formation and we do not anticipate paying any dividends on our outstanding Common Stock in the foreseeable future. We plan to retain any earnings to finance the development of the business and for general corporate purposes.

Future cash dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors as our board of directors may deem relevant. We can pay dividends only out of our profits or other distributable reserves and dividends or distribution will only be paid or made if we are able to pay our debts as they fall due in the ordinary course of business.

Description of Equity Compensation Plans Approved By Shareholders

We do not have any equity compensation plans. Our Board of Directors may adopt one or more equity compensation plans in the future.

Financial Statements

52

  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Keyuan Petrochemicals, Inc.

We have reviewed the accompanying consolidated balance sheet of Keyuan Petrochemicals, Inc. (the “Company”) as of June 30, 2010, and the related consolidated statements of operations and comprehensive income (loss) for the three months and six months ended June 30, 2010 and 2009, and the consolidated statements of cash flows for the six months ended June 30, 2010 and 2009. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

/s/ PATRIZIO & ZHAO, LLC

Parsippany, New Jersey

August 6, 2010

53

Keyuan International Group Ltd.

Consolidated Balance Sheets

	June 30,		December 31,
	2010		2009
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	5,522,675	$	14,030,655
Restricted cash		33,808,001		6,012,690
Trade notes receivable		10,338,534		400,491
Inventories		67,500,925		32,595,045
Advance payments		13,663,490		7,417,202
Prepaid taxes		26,555,299		15,263,949
Due from unrelated parties		-		1,068,741
Deferred tax assets		1,578,274		3,486,922
Other current assets		476,672		581,706
Total current assets		159,443,870		80,857,401
Property, plant and equipment, net		130,367,038		131,824,617
Other assets
Intangibles, net		6,408,044		6,378,316
Total assets	$	296,218,952	$	219,060,334
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable – trade and accrued expenses	$	60,422,125	$	2,888,860
Accounts payable – construction related		30,633,675		45,374,656
Short-term bank loans		83,961,000		82,885,500
Current portion of long-term debt		20,180,100		7,628,400
Trade notes payable		19,001,700		13,719,134
Advance from customers		13,526,054		16,549,644
Due to former shareholder		-		733,500
Due to unrelated parties		-		953,550
Other current liabilities		311,718		290,631
Total current liabilities		228,036,372		171,023,875
Long-term debt		23,568,000		37,408,500
Total liabilities		251,604,372		208,432,375

Stockholders’ equity:
Series A preferred stock, $0.001 par value, 20,000,000 shares
authorized, 6,738,336 shares issued and outstanding at
June 30, 2010		6,738			-
Series M preferred stock, $0.001 par value, 47,658 shares
authorized, issued and outstanding at June 30, 2010		48			48
Common stock, $0.001 par value, 50,000,000 shares authorized,
3,181,504 issued and outstanding at June 30,2010		3,182			-
Additional paid-in capital		43,352,118			20,229,949
Accumulated deficit		(9,543	)		(10,664,819	)
Accumulated other comprehensive income		1,262,037			1,062,781
Total stockholders’ equity		44,614,580			10,627,959
Total liabilities and stockholders' equity	$	296,218,952		$	219,060,334

54

Keyuan International Group Ltd.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	For The Three Months Ended June 30,
	2010			2009
Sales	$	131,997,217		$	-
Cost of sales		123,351,375			-
Gross profit		8,645,842			-
Operating expenses
Selling expenses		258,901			-
General and administrative expenses		1,088,256			709,161
Total operating expenses		1,347,157			709,161
Income (loss) from operations		7,298,685			(709,161	)
Other income (expenses):
Interest income (expense), net		(1,589,937	)		(274,460)
Non-operating expenses		118,802			(138,257	)
Total other income (expenses)		(1,471,135	)		(412,717)
Income (loss) before provision income taxes		5,827,550			(1,121,878	)
Provision income taxes
Current tax provision		903,546			(280,470)
Deferred tax benefit		--			-
Total		903,546			(280,470	)
Net Income (loss)		4,924,004			(841,408	)
Other comprehensive income
Foreign currency translation adjustment		196,958			9,160
.1
Comprehensive Income (loss)	$	5,120,962		$	(832,248	)

Basic earnings (loss) per common share	$	2,06	$	-
Diluted earnings (loss) per common share	$	0.11	$	-
Weighted average number of common shares
outstanding
Basic		2,387,451		-
Diluted		43,408,945		-

55

Keyuan International Group Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	10,655,276		$	(1,223,008	)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		4,204,754			177,867
Deferred tax assets		1,914,946			(407,669	)
Changes in current assets and current liabilities:
Trade notes receivable		(9,895,257	)		(14,657	)
Inventories		(34,628,566	)		(10,531,710	)
Advance payments for raw materials		(6,190,211	)		-
Prepaid taxes		(11,182,419	)		(4,121,387	)
Other current assets		106,766			(557,250	)
Accounts payable – trade and accrued expenses		57,283,692			(44,988	)
Trade notes payable		5,204,811			7,328,500
Advances from customers		(3,078,476	)		-
Other current liabilities		19,826			3,978,757
Total adjustments		3,759,866			(4,192,535	)
Net cash provided by (used in) operating activities		14,415,142			(5,415,543	)
Cash flows from investing activities:
Advance payments for construction in progress		-			(817,846	)
Due from unrelated parties		1,068,668			-
Additions to property and equipment		(2,076,103	)		(24,250,885	)
Additions to intangible assets		(143,806	)		(51,300	)
Accounts payable – construction related		(14,864,749	)		(650,608	)
Net cash used in investing activities		(16,015,990	)		(25,770,639	)
Cash flows from financing activities:
Restricted cash		(27,655,715	)		(2,543,491	)
Proceeds from short-term bank loans		733,450			29,314,000
Due to former shareholder		(733,450	)		4,236,529
Due to unrelated parties		(953,485	)		-
Repayment of long-term bank loans		(1,466,900	)		-
Additional paid in capital		23,132,089			9,650,000
Net cash provided by (used in) financing activities		(6,944,011	)		40,657,038
Effect of foreign currency translation on cash		36,879			(4,090	)
Net increase (decrease) in cash and cash equivalents		(8,507,980	)		9,466,766
Cash and cash equivalents – beginning of period		14,030,655			9,094,537
Cash and cash equivalents – ending of period	$	5,522,675		$	18,561,303

56

  Note 1 – Organization and Description of Business

Keyuan Petrochemicals, Inc, formerly known as Silver Pearl Enterprises, Inc. (“Silver Pearl”), a public shell company as defined in Rule 12b-2 of the Exchange Act of 1934, as amended, was established under the laws of Texas on May 4, 2004. The accompanying consolidated financial statements include the financial statements of Keyuan Petrochemicals, Inc. and its subsidiaries (the “Company” or “We”). The Company’s primary business involves researching, manufacturing, and selling petrochemical products.

On April 22, 2010, Silver Pearl entered into a Share Exchange Agreement, by and among Keyuan International Group Limited (“Keyuan International”), a company organized under the laws of the British Virgin Islands on June 11, 2009, Delight Reward Limited, the sole shareholder of Keyuan International and a company organized under the laws of the British Virgin Islands (the “Keyuan International Shareholder”), and Denise D. Smith, the Company’s former principal stockholder (“Smith”). Pursuant to the terms of the Exchange Agreement, Keyuan International Shareholder transferred to Silver Pearl all of the issued and outstanding ordinary shares of Keyuan International (the “Keyuan International Shares”) in exchange for the issuance of 47,658 shares of Silver Pearl’s Series M preferr ed stock, par value $0.001 per share (the “Series M Preferred Stock”) (such transaction is sometimes referred to herein as the “Share Exchange”). The Series M shares vote with the common stock on an as converted basis and are convertible into 47,658,000 shares of common stock upon the Company’s shareholders approving an increase in authorized common stock to at least 100,000,000 shares. The acquisition was accounted for as a reverse acquisition under the purchase method for business combinations.

As a result of the Share Exchange, we are now the holding company of Ningbo Keyuan Plastics Co., Ltd. (“Ningbo Keyuan”), the operating subsidiary of Keyuan International organized in the People’s Republic of China (“China” or the “PRC”) and engaged in manufacturing and supplying various petrochemical products in China.  Ningbo Keyuan was established on April 26, 2007 under the corporate laws of the People’s Republic of China (“PRC”). On November 16, 2009 Ningbo Keyuan was acquired by Keyuan Group Limited, a wholly owned subsidiary of Keyuan International. The business of Keyuan International is conducted through the operations at Ningbo Keyuan.

On May 12, 2010, we caused to be formed a corporation under the laws of the State of Nevada called Keyuan Petrochemicals, Inc. and on the same day, acquired one hundred (100) shares (95%) of this entity’s stock for cash. As such, this entity became our wholly-owned subsidiary (the “Merger Subsidiary”).

Effective as of May 17, 2010, the merger subsidiary was merged with and into us. As a result of the merger, our corporate name was changed to “Keyuan Petrochemicals, Inc.”  Prior to the merger, the merger subsidiary had no liabilities and nominal assets and, as a result of the merger, the separate existence of the merger subsidiary ceased.  We are the surviving corporation in the merger and, except for the name change provided for in the Agreement and Plan of Merger, there was no change in our directors, officers, capital structure or business.

Note 2– Summary of Significant Accounting Policies

Basis Of Presentation

The Company’s unaudited consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of t he financial position and the results of operations and cash flows for the interim periods have been included.

57

In preparing the accompanying unaudited consolidated financial statements, the Company evaluated the period from June 30, 2010 through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. Event identified for this period is described in Note 24.

Interim Financial Statements

These interim financial statements should be read in conjunction with the audited financial statements for the years ended December 31, 2009 and 2008, as not all disclosures required by generally accepted accounting principles (“GAAP”) for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the years ended December 31, 2009 and 2008.

Reclassification

Certain amounts as of December 31, 2009 were reclassified to conform to current period presentation.

Note 3– Restricted Cash

As of June 30, 2010 and December 31, 2009, the Company had restricted cash of $33,808,001 and $6,012,690, respectively. These restricted cash balances are reserved for settlement of trade notes payable and open letter of credit in connection with inventory purchases. The cash held in custody by bank issuing the trade notes payable and letter of credit is restricted as to withdrawal or use, and is currently earning interest.

Note 4 – Inventories

Inventories at June 30, 2010 and December 31, 2009 consist of the following:

	June 30, 2010		December 31, 2009
Raw materials	$	30,403,055	$	14,740,077
Work in process		2,987,649		1,558,588
Finished goods		34,110,221		16,296,380
Total	$	67,500,925	$	32,595,045

58

Note 5 – Advance Payments

The Company makes advances to certain vendors for purchase of raw materials. The advances for the purchase of raw materials amounted to $13,663,490 and $7,417,202 as of June 30, 2010 and December 31, 2009, respectively.

Note 6 – Prepaid Taxes

Prepaid taxes at June 30, 2010 and December 31, 2009 consist of the following:

	June 30, 2010		December 31, 2009
Value-added taxes (VAT)	$	16,946,090	$	15,263,949
Customs duties		9,609,209		-
Total	$	26,555,299	$	15,263,949

Note 7 – Deferred Tax Assets

Significant components of the Company’s deferred tax assets are as follows:

	June 30, 2010		December 31, 2009
	(unaudited)
Net operating loss carryforwards	$	1,578,274	$	3,486,922
Total	$	1,578,274	$	3,486,922

At June 30, 2010, the Company has available unused net operating losses carryforwards that may be applied against future taxable income and expire as follows:

	Net operating losses
Year of Expiration	carryforwards
2014	$	1,578,274
Total	$	1,578,274

59

Note 8 – Property, PLANT and Equipment

Property, plant and equipment at June 30, 2010 and December 31, 2009 consists of the following:

	June 30, 2010		December 31, 2009
Buildings	$	1,517,190	$	1,511,010
Machinery and equipment		132,428,875		130,044,758
Vehicles		533,874		305,536
Office equipment and furniture		126,271		120,367
Subtotal		134,606,210		131,981,671
Less: accumulated depreciation		4,239,172		157,054
Total	$	130,367,038	$	131,824,617

Depreciation expense for the three months ended June 30, 2010 and 2009 were $2,035,099 and $21,935, respectively. Depreciation expenses for the six months ended June 30, 2010 and 2009 were $4,064,573 and $41,199, respectively.

Note 9 – Intangible Assets

Intangible assets at June 30, 2010 (unaudited) and December 31, 2009 consist of the following:

	June 30, 2010		December 31, 2009
Land use rights	$	5,636,145	$	5,613,187
Software		148,087		3,668
Technology		1,399,350		1,393,650
Subtotal		7,183,582		7,010,505
Less: accumulated amortization		775,538		632,189
Total	$	6,408,044	$	6,378,316

Amortization expense for the three months ended June 30, 2010 and 2009 were $70,665 and $68,362, respectively. Amortization expense for the six months ended June 30, 2010 (unaudited) and 2009 were $140,181 and $136,668, respectively.

Note 10 – Accounts Payable – Trade and Accrued Expenses

Accounts payable and accrued expenses as at June 30, 2010 and December 31, 2009 consist of the following:

	June 30, 2010		December 31, 2009
Accounts payable	$	60,263,557	$	2,838,860
Accrued expenses		158,568		50,000
Total	$	60,422,125	$	2,888,860

The carrying value of accounts payable and accrued expenses approximates their fair value due to the short-term nature of these obligations.

60

Note 11 – Accounts Payable -  Construction Related

As of June 30, 2010 and December 31, 2009, the Company had construction payables of $30,633,675 and $45,374,656, respectively. Construction related account payable represent the cost of additions of manufacturing facilities.

Note 12 – Short-Term Bank Loans

Short-term bank loans as at June 30, 2010 and December 31, 2009 consist of the following:

	June 30,		December 31,
	2010		2009
On January 12, 2009, the Company obtained a loan from Bank of China,
of which the principal was repaid in full by January 11, 2010.The interest
was calculated using an annual fixed interest rate of 5.31% and paid quarterly.
The loan was guaranteed by a third party entity and an individual person.	$	-	$	5,868,000
On April 28, 2009, the Company obtained a loan from Bank of China,
of which the principal was repaid in full by April 27, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.		-		5,868,000
On April 28, 2009, the Company obtained a loan from Agricultural Bank of
China, of which the principal was repaid in full by April 27, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid monthly.
The loan is guaranteed by a third party entity and two individual persons.		-		5,868,000
On May 11, 2009, the Company obtained a loan from Agricultural Bank of
China, of which the principal was repaid in full by May 10, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid monthly.
The loan is guaranteed by a third party entity and two individual persons.		-		8,802,000
On July 15, 2009, the Company obtained a loan from Industrial and
Commercial Bank of China, of which the principal is to be repaid in full by
July 14, 2010.The interest is calculated using an annual fixed interest rate of
5.31% and paid monthly. The loan is guaranteed by a third party entity.		1,473,000		1,467,000
On July 21, 2009, the Company obtained a loan from Industrial Bank Co., Ltd.,
of which the principal is to be repaid in full by July 20, 2010. The interest is
calculated using an annual fixed interest rate of 5.31% and paid quarterly.
The loan is guaranteed by a third party entity.		-		6,601,500
On August 12, 2009, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by August 11, 2010.The interest
is calculated using an annual fixed interest rate of 4.779% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.		8,838,000		8,802,000
On September 1, 2009, the Company obtained a loan from Industrial and
Commercial Bank of China, of which the principal is to be repaid in full by
August 20, 2010. The interest is calculated using an annual fixed interest rate
of 5.31% and paid monthly. The loan is guaranteed by a third party entity.		1,473,000		1,467,000
On September 22, 2009, the Company obtained a loan from China
Construction Bank, of which the principal is to be repaid in full by September 21,
2010.The interest is calculated using an annual fixed interest rate of 4.779%
and paid monthly. The loan is guaranteed by a third party entity.		11,784,000		11,736,000

61

Note 12 – Short-Term Bank Loans (continued)

	June 30,		December 31,
	2010		2009
On September 23, 2009, the Company obtained a loan from Huaxia Bank,
of which the principal is to be repaid in full by September 22, 2010.The interest
is calculated using an annual fixed interest rate of 4.779% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.		7,365,000		7,335,000
On October 29, 2009, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal is to be repaid in full by April 28,
2010.The interest is calculated using an annual fixed interest rate of 4.86%
and paid quarterly. The loan is guaranteed by a third party entity.		-		3,667,500
On November 18, 2009, the Company obtained a loan from China Merchants
Bank, of which the principal is to be repaid in full by November 2, 2010.The
interest is calculated using an annual fixed interest rate of 5.31% and paid
monthly. The loan is guaranteed by a third party entity and an individual
person.		2,946,000		2,934,000
On December 1, 2009, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal is to be repaid in full by May 30,
2010.The interest is calculated using an annual fixed interest rate of 4.86%
and paid quarterly. The loan is secured by a lien on the Company’s rights to use
sea areas.		-		3,667,500
On December 1, 2009, the Company obtained a loan from China Merchants
Bank, of which the principal is to be repaid in full by November 2, 2010.The
interest is calculated using an annual fixed interest rate of 5.31% and paid
monthly. The loan is guaranteed by a third party entity and an individual
person.		5,892,000		5,868,000
On December 31, 2009, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by December 30, 2010.The interest
is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.
The loan is guaranteed by a third party entity.		2,946,000		2,934,000
On January 5, 2010, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by January 4, 2011.The interest
is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.
The loan is guaranteed by a third party entity.		5,892,000		-
On January 12, 2010, the Company obtained a loan from Shenzhen
Development bank, of which the principal is to be repaid in full by January 11,
2011.The interest is calculated using an annual fixed interest rate of 5.31%
and paid monthly. The loan is guaranteed by a third party entity and an
individual person.		4,419,000		-
On February 3, 2010, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by February 2, 2011.The interest
is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.
The loan is guaranteed by a third party entity.		736,500		-

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Note 12 – Short-Term Bank Loans (continued)

	June 30,		December 31,
	2010		2009
On April 15, 2010, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by April 14, 2011.The interest
is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.		5,155,500		-
On April 19, 2010, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal is to be repaid in full by October 18,
2010.The interest is calculated using an annual fixed interest rate of 4.86%
and paid quarterly. The loan is guaranteed by a third party entity		3,682,500		-
On April 21, 2010, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be repaid in full by April 20, 2011.The interest
is calculated using an annual fixed interest rate of 5.31% and paid monthly.
The loan is guaranteed by a third party entity.		5,892,000		-
On May 5, 2010, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be repaid in full by May 4, 2011.The interest
is calculated using an annual fixed interest rate of 5.31% and paid monthly.
The loan is guaranteed by a third party entity.		8,838,000		-

On May 27, 2010, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal is to be repaid in full by November 26,
2010.The interest is calculated using an annual fixed interest rate of 4.86%
and paid quarterly. The loan is secured by a lien on the Company’s rights to use
sea areas.		3,682,500		-
On June 28, 2010, the Company obtained a loan from Bank of  Hangzhou,
of which the principal is to be repaid in full by December 28, 2010.
The interest is calculated using an annual fixed interest rate of 4.455% and
Paid quarterly. The loan is guaranteed by a third party entity and  an
individual person.	$	2,946,000	$	-
Total short-term bank loans	$	83,961,000	$	82,885,500

Note 13 – Trade Notes Payable

Trade notes payable consist of non-collateralized non-interest bearing promissory notes issued in connection with the acquisition of certain inventory and equipment. Balances outstanding under the notes as of June 30, 2010 and December 31, 2009 were $19,001,700 and $13,719,134, respectively.

Note 14 – Advances from Customers

At June 30, 2010 and December 31, 2009, the Company had advances from customers of $13,562,054 and $16,549,644, respectively. As a common business practice, the Company requires certain customers to make advance payments for sales. Such advances are interest-free and unsecured.

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Note 15 – Long-Term debt

The Company obtained long-term bank loans for plant construction. The balances as at June 30, 2010 (unaudited) and December 31, 2009 are as follows:

	June 30,		December 31,
	2010		2009
On February 5, 2008, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by February 4, 2011. The interest
is calculated using floating interest rate and paid quarterly. For the quarter
ended June 30, 2010, the current interest rate is 5.4%. The loan is
guaranteed by a third party entity and an individual person.	$	7,365,000	$	7,335,000
On April 18, 2008, the Company obtained a loan from Bank of China, of which
the principal is to be repaid in full by January 18, 2011. The interest is calculated
using floating interest rate and paid quarterly. For the quarter ended June 30,
2010, the current interest rate is 5.4%. The loan is guaranteed by a third party
entity and an individual person.		2,946,000		2,934,000
On May 20, 2008, the Company obtained a loan from Industrial and
Commercial Bank of China, of which the principal is to be repaid in full by
December 15, 2011. The interest is calculated using floating interest rate and
paid quarterly. For the quarter ended June 30, 2010, the current interest rate
is 6.048%. The loan is guaranteed by a third party entity.		4,419,000		4,401,000
On August 15, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be repaid in full by August 14, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is
guaranteed by a third party entity and an individual person.		4,419,000		4,401,000
On September 5, 2008, the Company obtained a loan from Bank of China, of
which the principal is to be repaid in full by January 4, 2011. The interest is
calculated using floating interest rate and paid quarterly. For the quarter ended
June 30, 2010, the current interest rate is 5.4%. The loan is guaranteed by
a third party entity and an individual person.		2,209,500		2,200,500
On October 14, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be repaid in full by October 12, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is
guaranteed by a third party entity.		10,752,900		10,709,100

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Note 15 – Long-Term debt (continued)

	June 30,		December 31,
	2010		2009
On October 14, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be repaid in full by October 12, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is
guaranteed by a third party entity.		883,800		880,200
On October 15, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be repaid in full by September 28, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is
secured by a lien on the Company’s property and equipment.		3,093,300		3,080,700
On October 15, 2008, the Company obtained a loan from Industrial and
Commercial Bank of China in the amount of $6,894,900, $5,427,900 of which
is to be repaid in full by October 15, 2010, and $1,467,000 of which is to be repaid
in full by November 15, 2011. The interest is calculated using floating interest
rate and paid quarterly. For the quarter ended June 30, 2010, the current
average interest rate is 5.76%. The loan is secured by a lien on the Company’s
property and equipment and guaranteed by a third party entity.		5,450,100		6,894,900
On November 21, 2008, the Company obtained a loan from Bank of China,
of which the principal is to be repaid in full by December 20, 2010. The interest
is calculated using floating interest rate and paid quarterly. For the quarter
ended June 30, 2010, the current interest rate is 5.4%. The loan is
guaranteed by a third party entity and an individual person.		2,209,500		2,200,500
Total	$	43,748,100	$	45,036,900
Less: Current portion		20,180,100		7,628,400
Total long-term bank loans	$	23,568,000	$	37,408,500

Note 16 – Income Taxes

The Company is a Nevada corporation and conducts all of its business through its Chinese subsidiary and its affiliated Chinese operating companies. All business is conducted in PRC. As the U.S. holding company has not recorded any income for the six months ended June 30, 2010 and 2009, there was no provision or benefit for U.S. income tax purpose.

Keyuan International was incorporated in the British Virgin Islands. Under the laws of British Virgin Islands, the Company is not subject to tax on income or capital gain.

The Company’s Chinese subsidiary and affiliated operating companies based in China are governed by the Income Tax Law of the PRC concerning the privately-run enterprises, which are subject to a statutory tax rate of 25% and were, until January 2008, subject to a statutory tax rate of 33% (30% state income tax plus 3% local income tax) on income reported in the statutory statements after appropriate adjustments for tax purposes.

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Note 16 – Income Taxes (continued)

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the PRC (the New CIT Law), which became effective on January 1, 2008. Under the new law, the applicable corporate income tax rate to all Companies, both domestic and foreign-invested companies, is 25% replacing the previous applicable tax rate of 33%.

For the year ended 2009, the Company incurred a loss and was subject to the 25% tax rate. In order to support the growth of certain local enterprises, the local government granted Keyuan Plastics Co., a preferential tax treatment. In the first two profitable years, the local government will credit back to the Company the entire local portion of the income tax which equals to 40% of the whole Enterprise Income Tax the Company paid applying the 25% tax rate, resulting in an effective tax rate of 15%; in the subsequent three profitable years, the local government will credit back 50% of the local income tax the Company paid under the 25% tax rate resulting in an effective tax rate of 20%. A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory rate and the local preferential tax tre atment is as follows:

	For the Six Months Ended June 30,
	2010			2009
Computed tax at statutory rate	(Unaudited)
	$	3,142,556		$	(407,670	)
Non taxable loss		49,022			-
Tax credit from local government		(1,276,632	)		-
Total provision for income taxes	$	1,914,946		$	(407,670	)
Effective tax rate		15	%		(25	%)

On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a Foreign Invested Enterprise (“FIE”) prior to January 1, 2008 to foreign investor(s) in 2008 or after will be exempt from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT. Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its FIEs do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future.

Note 17 – Risk Factors

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC.  The Company's business may also be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Note 18 – Concentrations of Credit Risk

For the six months ended June 30, 2010, five vendors accounted for approximately 78.55% of the Company’s raw materials purchase. Purchases from these vendors amounted to $184.25 million. The sales to the Company’s top five customers amounted to $116.94 million and accounted for approximately 46.89% of the Company's total sales.

Financial instruments which potentially subject the Company to credit risk consist principally of cash on deposit with financial institutions. Management believes that minimal credit risk exists with respect to these investments as management believes that the financial institutions that hold the Company’s cash and cash equivalents and restricted cash are financially sound.

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Note 19 – Supplemental Cash Flow Disclosures

	For the Six Months Ended June 30,
	2010		2009
Cash paid for interest	$	2,725,817	$	286,665
Cash paid for income taxes	$	-	$	-

Note 20 – Earnings Per Share

The Company presents earnings per share (“EPS”) on a basic and diluted basis. Basic earnings per share have been computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share have been computed by dividing income available to common shareholders by the weighted average number of shares outstanding including the dilutive effect of equity securities. All share and per share data have been adjusted retroactively to reflect the recapitalization of the Company pursuant to the Securities Exchange Agreement with Silver Pearl.

	For the Three Months Ended June 30,
	2010		2009
Net income (loss)	$	4,924,004	$	(841,408	)
Weighted average common shares
(denominator for basic earnings per share)		2,387,451		-
Effect of dilutive securities:
Convertible preferred stock		41,021,494		-
Weighted average common shares
(denominator for diluted earnings per share)		43,408,945		-
Basic earnings (loss) per share	$	2.06	$	-
Diluted earnings (loss) per share	$	0.11	$	-

	For the Six Months Ended June 30,
	2010		2009
Net income (loss)	$	10,655,276	$	(1,223,008	)
Weighted average common shares
(denominator for basic earnings per share)		1,200,321		-
Effect of dilutive securities:
Convertible preferred stock		20,624,066		-
Weighted average common shares
(denominator for diluted earnings per share)		21,824,387		-
Basic earnings (loss) per share	$	8.88	$	-
Diluted earnings (loss) per share	$	0.49	$	-

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Note 21 – Share Exchange and Private Financing

Share Exchange

On April 22, 2010, the Company (formerly known as “Silver Pearl”) entered into a Share Exchange Agreement (the “Exchange Agreement”) with Keyuan International ( a company organized under the laws of the British Virgin Islands) and shareholders of the Company and Keyuan International. Pursuant to the terms of the Exchange Agreement, the Keyuan International’s shareholders transferred to the Company all of the issued and outstanding shares of Keyuan International in exchange for the issuance of 47,658 shares of the Company’s Series M preferred stock (the “Series M Preferred Stock”), par value $0.001 per share (the “Share Exchange”).

Prior to the Share Exchange, Silver Pearl had 5,696,800 shares of common stock issued and outstanding. Immediately prior to the Share Exchange, 3,264,000 shares of Silver Pearl’s common stock then outstanding were cancelled and retired, so that immediately after the Share Exchange Silver Pearl had 2,432,800 common shares and 47,658 Series M shares issued and outstanding. The Series M shares vote with the common stock on an as converted basis and are convertible into 47,658,000 shares of common stock upon the Company’s shareholders approving an increase in authorized common stock to at least 100,000,000 shares.  The Company also deposited $400,000 into an escrow account which amount was paid to an owner of the cancelled shares of Silver Pearl, as a result of the Share Exchange having been consummated.

The Share Exchange resulted in a change-in-control of Silver Pearl as the Company’s shareholders have acquired the majority ownership of the combined entity.

In accordance with the Accounting and Financial Reporting Interpretations and Guidance issued by the staff of the U.S. Securities and Exchange Commission (the “SEC”), the Share Exchange will be accounted for as a reverse acquisition whereby Silver Pearl (the legal acquirer) is considered the accounting acquiree and the Keyuan International (the legal acquiree) is considered the accounting acquirer. The consolidated financial statements of the combined entity will be in substance those of the Keyuan International’s, with the assets and liabilities, and revenues and expenses, of Silver Pearl being included effective from the date of consummation of the Share Exchange. Silver Pearl will be deemed to be a continuation of the Company’s business. The outstanding stock of Silver Pearl prior to the Share Exchange will be accounted for at their net book value with no goodwill being recognized.

April --May Private Placement

On April 22, 2010, immediately following the Share Exchange mentioned above,  and on May 18, 2010, the Company completed a private placement transactions (the “Private Placement”) pursuant to a securities purchase agreement with certain investors (collectively, the “Investors”) and sold 748,704 units (the “Units”) at a purchase price of $35 per Unit, consisting of, in the aggregate, (a) 6,738,336 shares of Series A convertible preferred stock, par value $0.001 per share (the “Series A Preferred Stock”) convertible into the same number of shares of Common Stock, (b) 748,704 shares of Common Stock (the “Issued Common Shares”), (c) three-year Series A Warrants (the “Series A Warrants”) to purchase up to 748,704 shares of Common Stock, at an exercise price of $4.50 per share (the “Series A Warrant Shares”) for a three-year period, and (d) three-year Series B Warrants (the “Series B Warrants” and, together with the Series A Warrants, the “Warrants”) to purchase up to 748,704 shares of Common Stock, at an exercise price of $5.25 per share (the “Series B Warrant Shares” and, together with the Series A Warrant Shares, the “Warrant Shares”) for a three-year period. The Company received aggregate gross proceeds of approximately $26.2 million from the Private Placement (the “Private Placement”, or sometimes is referred herein as the “Offering”).

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Note 21 – Share Exchange and Private Financing (continued)

The Company raised aggregate gross proceeds of approximately $26.2 million in the Offering.  

In conjunction with the Private Placement, the Company also entered into the following agreements:

·   A registration rights agreement (the “Registration Rights Agreement”) with the investors, in which we agreed to file this registration statement (the “Registration Statement”) with the SEC to register for resale the Shares, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares, within 30 calendar days of the Closing Date, and to have this registration statement declared effective within 150 calendar days of the Closing Date or within 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC.

·   A securities escrow agreement with the Investors (the “Securities Escrow Agreement”), pursuant to which, we delivered into an escrow account 5,000 shares of our Series M Preferred Stock convertible into 5,000,000 shares of Common Stock to be used as escrow shares (the “Escrow Shares”) after we amend our Articles of Incorporation to increase our authorized Common Stock to one hundred million (100,000,000) shares. With respect to the 2010 performance year, if we achieve less than 95% of the 2010 performance threshold, then the Escrow Shares for such year will be delivered to the investors in the amount of 500,000 shares of Common Stock.

·   Stock for each full percentage point by which such threshold was not achieved up to a maximum of 5,000,000 shares of Common Stock.

·   On the Closing Date, we and the Keyuan International Shareholder, entered into a lock-up agreement whereby Keyuan International is prohibited from selling our securities until six (6) months after the effective date of the registration statement required to be filed under the Registration Rights Agreement. For one (1) year thereafter, it will be permitted to sell up to 1/12 of its initial holdings every month.

Note 22 – Accounting for Series A Financing

Private Placement

Please refer to description of April-May Private Placement in Note 21 above.

Preferred Stock

The Board is authorized, without further action by the shareholders, to issue, from time to time, up to 20,000,000 shares of preferred stock in one or more classes or series. Similarly, the Board will be authorized to fix or alter the designations, powers, preferences, and the number of shares which constitute each such class or series of preferred stock. Such designations, powers or preferences mayinclude, without limitation, dividend rights (and whether dividends are cumulative), conversion rights, if any, voting rights (including the number of votes, if any, per share), redemption rights (including sinking fund provisions, if any), and liquidation preferences of any unissued shares or wholly unissued series of preferred stock. As of the date hereof, the Board has designated two classes of Preferred Stock, consisting of Series M Pr eferred Stock and Series A Preferred Stock and does not have any current intention to designate any other class of preferred stock.

Series A Preferred Stock

As of the date hereof, we have 6,738,336 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Shares by its principal terms:

(a)	pay a cumulative dividend at an annual rate of 6%, payable quarterly, at our option, in cash or in shares of Common Stock;
(b)	have a preference over the Common Stock on liquidation, dissolution or winding up of the Company equal to the original purchase price per Series A Preferred Share;
(c)	be convertible at any time after issuance, at the option of the holder, into shares of Common Stock, without the payment of additional consideration, at an initial conversion ratio of one-to-one (subject to anti-dilution adjustment);
(d)	automatically convert into shares of Common Stock at $3.50 per share, at the earlier to occur of the following: (i) the twenty four (24) month anniversary of the Closing of the Private Placement, and (ii) at such time that the Volume Weighted Average Price (“VWAP”) of the Common Stock is no less than $5.00 for a period of ten (10) consecutive trading days with the daily volume of the Common Stock equal to at least 50,000 shares per day;

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(e)	the conversion price and the number of common shares underlying the Series A Preferred Stock are subject to customary adjustments, including weighted average broad-based anti-dilution protection for a period of twelve (12) months after the effective date of this registration statement; and
(f)	requires that we, prior to taking certain corporate actions (including certain issuances or redemptions of its securities or changes in its organizational documents), obtain the approval of more than 50% of the Series A Preferred Shares then issued and outstanding, voting as a group.

The Series A Warrants

As of the date hereof, there are 808,600 Series A Warrants issued and outstanding, including 59,896 warrants issued to the placement agent in the Private Placement. The Series A Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after the consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series A Warrants;
(c)	be exercisable, in whole or in part, at an exercise price of $4.50 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which a registration statement covering such shares is not effective); and
(e)	be callable at $0.01 by us following the date that the VWAP of the Common Stock equals or exceeds $9.00 for fifteen (15) consecutive trading days with the average daily trading volume of no less than 75,000 shares.

The Series B Warrants

As of the date hereof, there are 808,600 Series B Warrants issued and outstanding, including 59,896 warrants issued to the placement agent in the Private Placement. The Series B Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series B Warrants;
(c)	be exercisable, in whole or in part, at an exercise price of $5.25 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which registration statement covering such shares is not effective); and
(e)	be callable at $0.01 by us following the date that the VWAP of the Common Stock equals or exceeds $10.50 for fifteen (15) consecutive trading days with the average daily trading volume of no less than 75,000 shares.

Registration Rights Agreement

In connection with the Private Placement, we also entered into a registration rights agreement  with the investors, in which we agreed to file this registration statement  with the SEC to register for resale the Shares, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares, within 30 calendar days of April 22, 2010 and to have this registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC (the “PRA”). If we do not comply with the foregoing obligations under the Registration Rights Agreement, we will be required to pay cash liquidated damages to each investor, at the rate of 1% of t he applicable subscription amount for each 30 day period in which we are not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

The Company evaluated the contingent obligation related to the RRA liquidated damages in accordance to “ASC Topic 825 “Financial Instruments” subtopic 20” (formerly Financial Accounting Standards Board Staff Position No. EITF 00-19-2“Accounting for Registration Payment Arrangements”), which required the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement be separately recognized and measured in accordance with “ASC Topic 450” “Contingencies” (formerly SFAS No. 5, “Accounting for Contingencies”).  The Company concluded that such obligation was not probable to incur based on the best information and facts available as of June 30, 2010. Therefore, no contingent obligation related to the RRA liquidated damages was recognized as of June 30, 2010.

Escrowed Shares Arrangement

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In conjunction with the Private Placement, the Company also entered into a make good escrow agreement with the Investors (the “Securities Escrow Agreement”), pursuant to which Keyuan Plastics Co, Ltd, delivered into an escrow account 5,000 shares of Series M Perferred Stock that are convertible into 5,000,000 shares of Common Stock (the “Escrow Shares”)  to be used as a share escrow for the achievement of a Fiscal Year 2010 net income performance threshold of $33.0 million. With respect to the 2010 performance year, if the Company achieves less than 95% of the 2010 performance threshold, then the Escrow Shares for such year will be delivered to the Investors in the amount of 500,000 common shares (rounded up to the nearest whole share and pro rata based on the number of shares of Series A Preferred S tock owned by such Investor at such date) for each full percentage point by which such threshold was not achieved up to a maximum of 5,000,000 common shares. Any Escrow Shares not delivered to any Investor because such Investor no longer holds shares of Series A Preferred Stock or Conversion Shares, or because the 2010 performance threshold was met, shall be returned to the Principal Stockholder.

For the purposes of the Securities Escrow Agreement, net income is defined in accordance with US GAAP and reported by the Company in the audited financial statements for fiscal year ended 2010; provided, however, that net income for fiscal year ended 2010 shall be increased by any non-cash charges incurred (i) as a result of the Private Placement, including without limitation, as a result of the issuance and/or conversion of the Series A Preferred Stock, and the issuance and/or exercise of the Warrants, (ii) as a result of the release of the Escrow Shares to the Principal Stockholder and/or the Investors, as applicable, pursuant to the terms of the Securities Escrow Agreement, (iii) as a result of the issuance of ordinary shares of the Principal Stockholder to its PRC shareholders, upon the exercise of options granted to such PRC sha reholders by the Principal Stockholder, as of the date of the Securities Escrow Agreement, (iv) as a result of the issuance of Warrants to any placement agent and its designees in connection with the Private Placement, (v) the exercise of any Warrants to purchase Common Stock outstanding and (vi) the issuance under any performance based equity incentive plan that the Company adopt. Net income will also be increased to adjust for any cash or non-cash charges resulting from the payment of dividends on the Series A Preferred Stock in connection with the Private Placement.

The Company has evaluated the terms of the Securities Escrow Agreement based on the guidance provided in ASC 718-10-S99. The Company concluded that because the escrowed shares would be released to the Company’s principal stockholder or distributed to the investors without regard to the continued employment of any of the Company’s directors of officers, the Securities Escrow Agreement is in substance an inducement to facilitate the private placement, rather than as compensatory arrangement. As such, the Securities Escrow Agreement has accounted for the escrowed share arrangement according to its nature and reflected it as a reduction of the proceeds allocated to the newly issued securities in the Private Placement, based on the aggregate fair value of 5,000,000 shares of common stock at April 22, 2010.

Allocation of Proceeds in the Private Placement

In accordance with the guidance provided in ASC 470-20-30, the Company has first allocated the proceeds from the Private Placement between the Issued Common Shares, the Series A Preferred Stock and Series A and B Warrants proportionately based on their estimated fair values as of the closing date of the Private Placement.  Then the guidance provided in ASC 470-20-30-5 has been applied to the amount allocated to the convertible Series A Preferred Stock, and the effective conversion price has been used, to measure the intrinsic value, if any, of the embedded conversion option.

The Company’s common stock was not publicly traded before and as of the closing date of the Private Placement and traded infrequently before the second closing on May 18, 2010.  In general, fair value is based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial instruments trade infrequently or are non-marketable securities, they may not have readily determinable fair values. The Company estimated the fair value of the Warrants, Series A preferred stock and restricted common stock using various pricing models and available information that management deems most relevant. Among the factors considered in determining the fair value of financial instruments are discounted anticipated cash flows, the cost, terms and liquidity of the instrument, the financial condi tion, operating results and credit ratings of the issuer or underlying company, the quoted market price of similar traded securities, and other factors generally pertinent to the valuation of financial instruments.

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The following table sets out the allocation of the proceeds from the April 22, 2010 Private Placement:

Cash proceeds of the Private Placement (net of fees and expenses)	$	19,867,774
Reduction for escrowed share arrangement		(11,900,000	)
Net proceeds allocated to securities issued in the Private Placement	$	7,967,774
Allocated to:
Issued Common Shares	$	542,917
Series A Preferred Stock		7,314,219
Series A Warrants		66,133
Series B Warrants		44,506
	$	7,967,774

The following table sets out the allocation of the proceeds from the May 18, 2010 Private Placement:

Cash proceeds of the Private Placement (net of fees and expenses)	$	3,044,315
Reduction for escrowed share arrangement		-
Net proceeds allocated to securities issued in the Private Placement	$	3,044,315
Allocated to:
Issued Common Shares	$	242,611
Series A Preferred Stock		2,732,642
Series A Warrants		40,490
Series B Warrants		28,572
	$	3,044,315

Accounting for the Series A Preferred Stock

The Series A preferred stock has been classified as permanent equity as there was no redemption provision at the option of the holders that is not within the control the Company on or after an agreed upon date. The Company evaluated the embedded conversion feature in its Series A preferred stock to determine if there was an embedded derivative requiring bifurcation. The Company concluded that the embedded conversion feature of the Series A preferred stock does not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument.

Equity instruments that contain a beneficial conversion feature are recorded as a deemed dividend to the holders of the convertible equity instruments. The deemed dividend associated with the beneficial conversion is calculated as the difference between the fair value of the underlying common stock less the proceeds that have been received for the equity instrument limited to the value received. The beneficial conversion amount is recorded as a reduction on the carrying value of the equity instrument and an increase to additional paid-in-capital.

The intrinsic value of the embedded conversion feature has been calculated by comparing the effective conversion price determined based on the proceeds from the Private Placement allocated to the Series A Preferred Stock, and the fair value of the Company’s common stock at the commitment date. The effective conversion price of the Series A Preferred Stock was determined to be higher than the fair value of the common stock at April 22 and May 18, 2010. Accordingly, the embedded conversion feature did not have an intrinsic value at each closing.

Accounting for the Series A and Series B Warrants

72

The Company has evaluated the terms of the Series A and B Warrants issued in the Private Placement with reference to the guidance provided in ASC 815-40-15. The Company has concluded that the Series A and B Warrants are indexed to the Company’s own stock, because the warrants have no contingent exercise provision and have fixed strike prices which are only subject to adjustments in the event of stock split, combinations, dividends, mergers or other customary corporate events. Therefore, the Series A and B Warrants have been classified as equity.

Accounting for Placement Agent Warrants

In accordance with ASC Topic 340 subtopic 10 section S99-1 (formerly Staff Accounting Bulletin Topic 5.A: “Miscellaneous Accounting-Expenses of Offering”), “specific incremental costs directly attributable to a proposed or actual offering of securities may properly be deferred and charged against the gross proceeds of the offering.” In accordance with the SEC accounting and reporting manual “cost of issuing equity securities are charged directly to equity as deduction of the fair value assigned to share issued.” Accordingly, the Company concluded that the warrants issued to the placement agents are directly attributable to the August 2009 financing. If the Company had not issued the warrants to the placement agent, the Company would have had to pay the same amount of cash as the fair value. Therefo re, the Company deducted the total fair value of the Placement agent warrants as of the Commitment Date which was approximately US$291,000 and $58,000 for the April 22nd and May 18th private placements as a deduction of the fair value assigned to the Series A preferred stock for each respectively closing.

Note 23 – Stock Options and Warrants

On June 30, 2010, the Company granted 3,000,000 five-year options to its 56 CEO, CFO and various members of senior management to purchase in the aggregate 3,000,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. 2,810,000 of these 3,000,000 options shall vest according to the following vesting schedule: 30% of the Options shall vest immediately after one year of the issuance, 40% of the Options shall vest immediately after two years of the issuance, 30% of the Options shall vest immediately after three years of the issuance.  The remaining 190, 000 options shall vest according to the following vesting schedule:  40% of the Options shall vest immediately after one year of the issuance and 60% of the Options shall vest immediately after two years of the issuance.

The grant date fair value of these options was US$2.492 million.  The related compensation expenses will be recognized over their vesting periods.  The cost of these options that the Company recognized for the three months ended June 30, 2010 was US$0. The cost of these options will be expensed as they vest and will be recorded in general and administrative expenses as share-based compensation expenses in future periods.  Share-based compensation expenses relating to these options will be approximately $381,500 for the year ending December 31, 2010, $895,000 for the year ending December 31, 2011, $864,000 for the year ending December 31, 2012 and $350,000 for the year ending December 31, 2013, respectively.

The Company estimates the fair value of these options using the Black-Scholes option pricing model with the following assumptions: an expected life equal to the contractual term of the options (five), underlying stock price of $3.21 per share, no dividends, a risk free rate of 1.79%, which is a five-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 37%. The expected volatility is calculated using historical data obtained from comparable public companies due to lack of liquidity of the Company’s underlying stock.  Exercise price of the option is the contractual exercise price of the option.

Stock option activity during the period ending June 30, 2010 (unaudited), was as follows:

73

	Number of options		Weighted Average Exercise Price
Outstanding, December 31, 2010		-		-
Granted		3,000,000	$	4.20
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding, June 30, 2010		3,000,000	$	4.20
Exercisable, June 30, 2010		-	$	-

At June 30, 2010, none of the options were exercisable and all 3,000,000 shares will expire on June 29, 2015.

Warrant activity during the period ending June 30, 2010 was as follows:

	Number of Warrants		Weighted Average Exercise Price
Outstanding, December 31, 2010		--		--
Granted		2,216,163		4.50
Exercised		--		--
Forfeited		--		--
Expired		--		--
Outstanding, June 30, 2010		2,216,163	$	4.50
Exercisable, June 30, 2010		2,216,163	$	4.50

Note 24 – Subsequent Events

(a)   On July 1, 2010, the Company granted 80,000 five-year options to two outside directors to purchase up to 80,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, 40,000 of the options shall vest immediately after one year of the issuance and the remaining 40,000 of the options shall vest immediately after two years of the issuance, provided that the optionee is re-elected for successive one year terms at the end of 12 months of the issuance.

These options were valued at US$68,000 which represents the grant date fair value of these options.  The related compensation expenses will be recognized over its vesting period.  Going forward the cost of these options will be expensed as they vest and will be recorded in general and administrative expenses as share-based compensation expenses.  Pursuant to these options, we will incur approximately $34,000 of expenses on July 1, 2011 and remaining balance of roughly $38,000 on July 1, 2012.

The Company estimates the fair value of these options using the Black-Scholes option pricing model with the following assumptions: an expected life equal to the contractual term of the options (five years), underlying stock price of $3.25 per share, no dividends, a risk free rate of 1.80%, which is five-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 37%. The expected volatility is calculated using historical data obtained from comparable public companies due to lack of liquidity of the Company’s underlying stock.  Exercise price of the option is the contractual exercise price of the option.

(b)   On July 1, 2010, the Company granted 40,000 five-year options to a consultant to purchase an aggregate of 40,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, all 40,000 of the options shall vest immediately.

These options were valued at US$34,000 which represents the grant date fair value of these options.  The related compensation expenses will be recognized over its vesting period.  Going forward the cost of these options will be expensed as they vest and will be recorded in general and administrative expenses as share-based compensation expenses.  Pursuant to these options, we will incur approximately $34,000 of expenses on July 1, 2010.

74

The Company estimates the fair value of these options using the Black-Scholes option pricing model with the following assumptions: an expected life equal to the contractual term of the options (five years), underlying stock price of $3.25 per share, no dividends, a risk free rate of 1.80%, which is five-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 37%. The expected volatility is calculated using historical data obtained from comparable public companies due to lack of liquidity of the Company’s underlying stock.  Exercise price of the option is the contractual exercise price of the option.

(c)   On July 27, 2010, the Company granted 420,000 three-year options to a consultant to purchase an aggregate of  420,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, 70,000 of the options shall vest immediately, 31,818 shall vest monthly beginning on September 1, 2010 and the remaining balance of 95,456 shall vest on May 1, 2011.

These options were valued at US$410,000 which represents the grant date fair value of these options.  The related compensation expenses will be recognized over its vesting period.  Going forward the cost of these options will be expensed as they vest and will be recorded in general and administrative expenses as share-based compensation expenses.  Pursuant to these options, we will incur approximately $68,000 of expenses on July 17, 2011, $31,000 per month beginning on September 1, 2010 and continuing to April 1, 2011 and remaining balance of roughly $92,000 on May 1, 2011.

The Company estimates the fair value of these options using the Black-Scholes option pricing model with the following assumptions: an expected life equal to the contractual term of the options (three years), underlying stock price of $4.00 per share, no dividends, a risk free rate of 1.02%, which is three-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 37%. The expected volatility is calculated using historical data obtained from comparable public companies due to lack of liquidity of the Company’s underlying stock.  Exercise price of the option is the contractual exercise price of the option.

(d)   On August 4, 2010, the Company granted 700,000 five-year options to 79 managers and employees to purchase in the aggregate 700,000 shares of the Company’s common stock at an exercise price of US$4.50 per share, in consideration of their services to the Company. Of these options, 30% of the Options shall vest immediately after one year of the issuance, 40% of the options shall vest immediately after two years of the issuance and 30% of the options shall vest immediately after three years of the issuance.  .

These options were valued at approximately US$1,090,000 which represents the grant date fair value of these options.  The related compensation expenses will be recognized over their vesting period.  Going forward the cost of these options will be expensed as they vest and will be recorded in general and administrative expenses as share-based compensation expenses.  Pursuant to these options, we will incur approximately $327,000 of expenses on August 4, 2011, roughly $436,000 of expenses on August 4, 2012 and remaining balance of roughly $327,000 on August 4, 2015.

The Company estimates the fair value of these options using the Black-Scholes option pricing model with the following assumptions: an expected life equal to the contractual term of the options (five), underlying stock price of $4.50 per share, no dividends, a risk free rate of 1.62%, which is five-year yield on Treasury bonds at constant (or fixed) maturity and volatility of 37%. The expected volatility is calculated using historical data obtained from comparable public companies due to lack of liquidity of the Company’s underlying stock.  Exercise price of the option is the contractual exercise price of the option.

75

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Keyuan International Group Ltd.

We have audited the accompanying consolidated balance sheets of Keyuan International Group Ltd. and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of Keyuan International Group Ltd. as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Patrizio & Zhao, LLC                          

PATRIZIO & ZHAO, LLC

Parsippany, New Jersey

February 23, 2010

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KEYUAN INTERNATIONAL GROUP LTD

Consolidated Balance Sheets

	December 31,			December 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	14,030,655		$	9,094,537
Restricted cash		6,012,690			-
Trade notes receivable		400,491			-
Inventory		32,595,045			333,187
Advance payments		7,417,202			17,849,208
Prepaid VAT taxes		15,263,949			-
Due from directors		211,493			164,304
Due from shareholders		50,000			-
Due from unrelated parties		1,068,741			-
Deferred tax assets		3,486,922			-
Other current assets		320,213			174,099
Total current assets		80,857,401			27,615,335
Property, plant and equipment, net		131,824,617			32,351,840
Other assets
Intangibles, net		6,378,316			6,646,190
Deferred tax assets		-			540,764
Total other assets		6,378,316			7,186,954
Total assets	$	219,060,334		$	67,154,129
Liabilities and stockholders’ equity
Current liabilities:
Short-term bank loans	$	82,885,500		$	-
Current portion of long-term bank loans		7,628,400			-
Accounts payable – trade and accrued expenses		2,888,860			45,000
Accounts payable – construction related		45,374,656			3,894,428
Trade notes payable		13,719,134			-
Advance from customers		16,549,644			-
Due to former shareholder		733,500			8,229,214
Due to unrelated parties		953,550			-
Other current liabilities		290,631			203,547
Total current liabilities		171,023,875			12,372,189
Long-term bank loans		37,408,500			45,036,900
Total liabilities		208,432,375			57,409,089
Stockholders’ equity:
Common stock		50,000			50,000
Additional paid-in capital		20,179,997			10,480,000
Retained earnings (deficit)		(10,664,819	)		(1,831,750	)
Accumulated other comprehensive income		1,062,781			1,046,790
Total stockholders’ equity		10,627,959			9,745,040
Total liabilities and stockholders' equity	$	219,060,334		$	67,154,129

The accompanying notes are an integral part of these financial statements

77

KEYUAN INTERNATIONAL GROUP LTD

Consolidated Statements of Operations and Comprehensive Loss

	For the Years Ended December 31,
	2009			2008
Sales	$	68,653,603		$	-
Cost of sales		75,311,595			-
Gross profit		(6,657,992	)		-
Operating expenses
Selling expenses		24,836			-
General and administrative expenses		2,714,093			1,839,253
Total operating expenses		2,738,929			1,839,253
Loss from operations		(9,396,921	)		(1,839,253	)
Other income (expenses):
Interest expense, net		(2,031,983	)		(64,584	)
Non-operating expenses		(348,515	)		(39,885	)
Total other expenses		(2,380,498	)		(104,469	)
Loss before provision (benefit) for income tax		(11,777,419	)		(1,943,722	)
Provision (benefit) for income taxes
Current year		-			-
Deferred		(2,944,350	)		(441,794	)
Total		( 2,944,350	)		(441,794	)
Net loss		(8,833,069	)		(1,501,928	)
Other comprehensive income
Foreign currency translation adjustment		15,991			649,089
Comprehensive loss	$	(8,817,078	)	$	(852,839	)

The accompanying notes are an integral part of these financial statements

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KEYUAN INTERNATIONAL GROUP LTD

Consolidated Statements of Stockholders’ Equity

								Accumulated
			Additional		Retained			other		Total
	Common		Paid-in		Earnings			Comprehensive		Stockholders’
	Stock		Capital		(Deficit)			Income		Equity
Balance at December 31, 2007	$	50,000	$	8,950,000	$	(329,822	)	$	397,701	$	9,067,879
Additional paid -in capital		-		1,530,000		-			-		1,530,000
Net loss		-		-		(1,501,928	)		-		(1,501,928	)
Other comprehensive income		-		-		-			649,089		649,089
Balance at December 31, 2008	$	50,000	$	10,480,000	$	(1,831,750	)	$	1,046,790	$	9,745,040
Additional paid -in capital		-		9,699,997		-			-		9,699,997
Net loss		-		-		(8,833,069	)		-		(8,833,069	)
Other comprehensive income		-		-		-			15,991		15,991
Balance at December 31, 2009	$	50,000	$	20,179,997	$	(10,664,819	)	$	1,062,781	$	10,627,959

The accompanying notes are an integral part of these financial statements

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KEYUAN INTERNATIONAL GROUP LTD

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2009			2008
Cash flows from operating activities:
Net loss	$	(8,833,069	)	$	(1,501,928	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization		388,505			375,207
Deferred tax assets		(2,944,350	)		(441,794	)
Changes in current assets and current liabilities:
Trade notes receivable		(400,245	)		-
Inventory		(32,242,065	)		(327,395	)
Advance payments for raw materials		(7,412,651	)		-
Prepaid VAT taxes		(15,254,584	)		-
Other current assets		(146,025	)		(90,082	)
Accounts payable – trade and accrued expenses		2,842,088			44,245
Trade notes payable		13,710,718			-
Advance from customers		16,539,489			-
Other current liabilities		87,031			155,385
Total adjustments		(24,832,089	)		(284,434	)
Net cash used in operating activities		(33,665,158	)		(1,786,362	)
Cash flows from investing activities:
Advance payments for construction in progress		-			(14,593,097	)
Advance payments for intangible – rights to use land		-			936,975
Loan to directors		(47,160	)		(60,543	)
Loan to unrelated parties		(1,068,085	)		-
Acquisition of property and equipment		(81,694,288	)		(29,946,389	)
Acquisition of intangible assets		-			(5,835,310	)
Accounts payable – construction related		41,454,808			2,941,596
Net cash used in investing activities		(41,354,725	)		(46,556,768	)
Cash flows from financing activities:
Due to former shareholder		(7,491,115	)		8,086,170
Proceeds from bank loans		82,834,650			44,254,050
Proceeds from unrelated party loans		952,965			-
Contribution from shareholders		9,665,475			1,543,405
Net cash provided by financing activities		85,961,975			53,883,625
Effect of foreign currency translation on cash		6,716			324,172
Net increase in cash and cash equivalents and restricted cash		10,948,808			5,864,667
Cash and cash equivalents at beginning of year		9,094,537			3,229,870
Cash and cash equivalents at end of year	$	20,043,345		$	9,094,537
Supplemental schedule of non cash activities
Advance payments exchanged for property and equipment	$	17,838,258		$	-

The accompanying notes are an integral part of these financial statements

80

KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Keyuan International Group Limited (“the Company”) was established in the British Virgin Islands on June 11, 2009.  Ningbo Keyuan Plastic Co., Ltd. (“Ningbo Keyuan”) was established on April 26, 2007 under the corporate laws of the People’s Republic of China (“PRC”).  On November 16, 2009 Ningbo Keyuan was acquired by Keyuan Group Limited, a wholly owned subsidiary of the Company. The business of the Company is conducted through the operations at Ningbo Keyuan. The Company’s primary business involves researching, manufacturing, and selling petrochemical products.

The acquisition was accounted for as a business combination and all entities are ultimately controlled by the same party before and after the acquisition.  As such, the accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, after elimination of all material intercompany accounts, transactions, and profits.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United Stated of America (“US GAAP”).

USE OF ESTIMATES

The preparation of consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include income taxes. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows" codified in FASB ASC Topic 230, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.

INVENTORY

Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required that could negatively impact our gross margin and operating results. The Company did not record any provision for slow-moving and obsolete inventory as of December 31, 2009 and 2008.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is calculated based on the straight-line method over the estimated useful lives of the assets as follows:

Vehicles	5years
Furniture, machinery and equipment	5 to 15 years
Buildings and improvements	45 years

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KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT (CONTINUED)

Construction in progress primarily represents the renovation costs of plant, machinery and equipment. Costs incurred are capitalized and transferred to property and equipment upon completion, at which time depreciation commences.

Cost of repairs and maintenance is expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the statements of operations.

LONG-LIVED ASSETS

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” codified in FASB ASC Topic 360-10, the Company reviews the recoverability of its long-lived assets on a periodic basis in order to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future discounted cash flows. If the total of the expected future discounted cash flows is less than the total carrying value of the assets, a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

INTANGIBLE ASSETS

Intangible assets are stated at cost. Intangible assets with finite life are amortized over their estimated useful life using straight-line method. Impairment test is performed at a minimum once a year to determine possible impairment loss. Estimated useful life of intangible assets is as follows:

Rights to use land	15-50 years
Software	10 years
Technology	9-20 years

IMPAIRMENT OF INTANGIBLE ASSETS

The Company applies the provisions of Financial Accounting Statement No. 142 “Goodwill and Other Intangible Assets “, codified in FASB ASC Topic 350, which addresses how goodwill and other acquired intangible assets should be accounted for in financial statements. In this regard, the Company tests these intangible assets for impairment annually or more frequently if indicators of potential impairment are present. Such circumstances could include, but are not limited to: (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated d iscounted future cash flows associated with it at a risk-free rate of interest.  Should the present value of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value.

The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. Based on its review, the Company believes that, as of December 31, 2009 and 2008, there were no significant impairments of its intangible assets.

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KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

The Company derives its revenues primarily from sale of petrochemicals. In accordance with the provisions of Staff Accounting Bulletin No. 104, codified in FASB ASC Topic 480, revenue should not be recognized until it is realized or realizable and earned.  Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. In this regard, the Company’s revenue is recognized when merchandise is received by customers or shipped by the Company pursuant to contractual terms of sales, title and risk of loss passes to the customers and the collectibility is reasonably assured. 

PRE-OPERATING COSTS

The Company’s cost of sales included pre-operating costs in the last quarter of 2009 before it commenced the routine production. The pre-operating costs included cost of raw materials, salary related expenses for new employees, training costs and utility costs. The Company expensed these costs as incurred during 2009, which adversely impacted the Company’s reported gross profit.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. Research and development costs for the years ended December 31, 2009 and 2008 were insignificant.

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is provided to reduce the carrying amount of deferred tax assets if it is considered more likely than not that some portion, or all, of the deferred tax assets will not be realized. No differences were noted between the book and tax bases of the Company’s assets and liabilities, respectively. Therefore, there are no deferred tax assets or liabilities for the years ended December 31, 2009 and 2008. The standard corporate income tax rate has decreased from 33% to 25% beginning on January 1, 2008, when the new Chinese tax law became effective.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash equivalents, trade notes receivable, and accounts payable, short-term debt and other financial instruments.  The carrying values of cash equivalents, trade notes receivable, and accounts payables approximate their fair value because of the short maturity of these instruments. Trade notes receivable consists of non-collateralized non-interest bearing notes issued in connection with certain customer payments for product purchases. The company can cash the notes at, or within one month from, the maturity date, or use the notes receivable as cash payment for certain raw material purchases. Trade notes payable consists of non-collateralized non-interest bearing notes issued in connection with the ac quisition of certain inventory and equipment. The company can cash the notes at, or within one month from, the maturity date, or use the notes receivable as cash payment for certain raw material purchases. The Company can cash the notes at, or within one month from the maturity date; or use the notes receivable as cash payment for purchasing certain raw materials. The carrying amounts of the Company’s bank borrowings under its credit facility approximate fair value because the interest rates are reset periodically to reflect current market rates.

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KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”) on January 1, 2008.  SFAS 157 has been codified as ASC 820-10, “Fair Value Measurements.”  ASC 820-10, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market part icipants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

The financial position and results of operations of the Company is determined using local currency (Chinese Yuan) as the functional currency. Assets and liabilities are translated at the prevailing exchange rate in effect at each year end. Contributed capital accounts are translated using the historical rate of exchange when capital is contributed. Income statement accounts are translated at the average rate of exchange during the year. Currency translation adjustments arising from the use of different exchange rates are included in accumulated other comprehensive income in shareholders' equity. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations.

COMPREHENSIVE INCOME (LOSS)

The Company has adopted SFAS No. 130, “Reporting Comprehensive Income”, codified in FASB ASC Topic 220, which establishes rules for the reporting and display of comprehensive income, its components and accumulated balances. SFAS No. 130 (ASC 220) defines comprehensive income to include all changes in equity, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on available-for-sale marketable securities, except those resulting from investments by owners and distributions to owners.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB expanded the disclosure requirements for fair value measurements relating to the transfers in and out of Level 2 measurements and amended the disclosure for the Level 3 activity reconciliation to be presented on a gross basis. In addition, valuation techniques and inputs should be disclosed for both Levels 2 and 3 recurring and nonrecurring measurements. The new requirements are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about the Level 3 activity reconciliation which are effective for fiscal years beginning after December 15, 2010. The Company adopted the new disclosure requirements on January 1, 2010 except for the disclosure related to the Level 3 reconciliation, which will be adopted on January 1, 2011. The adoption will not have an imp act on its consolidated financial condition, results of operations or cash flows. 

84

KEYUAN INTERNATIONAL GROUP LTD.

Notes To Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In October 2009, the FASB issued an amendment to the accounting and disclosure for revenue recognition. The amendment modifies the criteria for recognizing revenue in multiple element arrangements. Under the guidance, in the absence of vendor-specific objective evidence (“VSOE”) or other third party evidence (“TPE”) of the selling price for the deliverables in a multiple-element arrangement, this amendment requires companies to use an estimated selling price (“ESP”) for the individual deliverables. Companies shall apply the relative-selling price model for allocating an arrangement’s total consideration to its individual deliverables. Under this model, the ESP is used for both the delivered and undelivered elements that do not have VSOE or TPE of the selling price. The guidance is effective fo r the fiscal year beginning on or after June 15, 2010, and will be applied prospectively to revenue arrangements entered into or materially modified after the effective date. The Company intends to adopt the new guidance prospectively beginning January 1, 2011 and is currently evaluating the impact the adoption will have on its consolidated financial statements.

On July 1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched the FASB Accounting Standards Codification (“ASC”), which has become the single official source of authoritative nongovernmental US GAAP, in addition to guidance issued by the Securities and Exchange Commission. The ASC is designed to simplify US GAAP into a single, topically ordered structure. All guidance contained in the ASC carries an equal level of authority. The ASC is effective for all interim and annual periods ending after September 15, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), codified in FASB ASC Topic 855-10-05, which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 (ASC 855-10-05) also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS 165 (ASC 855-10-05) is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted this pronouncement during the year ended December 31, 2009. SFAS 165 (ASC 855-10-05) requires that public entities evaluate subsequent events through the date that the financial statement s are issued. The Company has evaluated subsequent events through February 23, 2010.

NOTE 3– RESTRICTED CASH

As of December 31, 2009 and 2008, the Company had restricted cash of $6,012,690 and $0, respectively. These restricted cash balances are reserved for settlement of trade notes payable and open letter of credit in connection with inventory purchases. The cash held in custody by bank issuing the trade notes payable and letter of credit is restricted as to withdrawal or use, and is currently earning interest.

NOTE 4 – INVENTORY

Inventory at December 31, 2009 and 2008 consists of the following:

	December 31, 2009		December 31, 2008
Raw materials	$	14,740,077	$	333,187
Work in process		1,558,588		-
Finished goods		16,296,380		-
Total	$	32,595,045	$	333,187

85

KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 5 – ADVANCE PAYMENTS

The Company makes advances to certain vendors for purchase of inventory and equipment. Advance payments at December 31, 2009 and 2008 consist of the following:

	December 31, 2009		December 31, 2008
Raw materials	$	7,417,202	$	-
Equipment		-		17,849,208
Total	$	7,417,202	$	17,849,208

NOTE 6 – DUE FORM UNRELATED PARTIES

As of December 31, 2009 and 2008, the Company had outstanding loans to unrelated parties of $1,068,741 and $0, respectively. These loans represent good faith loans bearing no interest given to third parties and are payable on demand, which is a common practice in China.

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2009 and 2008 consists of the following:

	December 31, 2009		December 31, 2008
Buildings	$	1,511,010	$	1,511,010
Machinery and equipment		130,044,758		60,405
Vehicles		305,536		129,825
Office equipment and furniture		120,367		18,132
Subtotal		131,981,671		1,719,372
Less: accumulated depreciation		157,054		36,185
		131,824,617		1,683,187
Add: construction in progress		-		30,668,653
Total	$	131,824,617	$	32,351,840

Depreciation expense for the fiscal years ended December 31, 2009 and 2008 was $120,796 and $27,902, respectively.

NOTE 8 – INTANGIBLE ASSETS

Intangible assets at December 31, 2009 and 2008 consist of the following:

	December 31, 2009		December 31, 2008
Rights to use land	$	5,613,187	$	5,613,187
Software		3,668		3,668
Technology		1,393,650		1,393,650
Subtotal		7,010,505		7,010,505
Less: accumulated amortization		632,189		364,315
Total	$	6,378,316	$	6,646,190

Amortization expense for the fiscal years ended December 31, 2009 and 2008 was $267,709 and $347,305, respectively.

86

KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 9 – DEFERRED TAX ASSETS

Deferred tax assets derived from net operating losses. Significant components of the Company’s deferred tax assets are as follows:

	December 31, 2009		December 31, 2008
Net operating loss	$	2,946,158	$	449,609
Net operating loss carryforwards		540,764		91,155
Total	$	3,486,922	$	540,764

At December 31, 2009, the Company has available unused net operating losses carryforwards that may be applied against future taxable income and expire as follows:

	Net operating losses
Year of Expiration	carryforwards
2012	$	91,155
2013		449,609
2014		2,946,158
Total	$	3,486,922

NOTE 10 – SHORT-TERM BANK LOANS

Short-term bank loans consist of the following:

	December 31,		December 31,
	2009		2008
On January 12, 2009, the Company obtained a loan from Bank of China,
of which the principal is to be paid in full by January 11, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.	$	8,802,000	$	-
On April 28, 2009, the Company obtained a loan from Bank of China,
of which the principal is to be paid in full by April 27, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.	$	5,868,000	$	-
On April 28, 2009, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by April 27, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid monthly.
The loan is guaranteed by a third party entity and two individual persons.	$	5,868,000	$	-
On May 11, 2009, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by May 10, 2010.The interest
is calculated using an annual fixed interest rate of 5.31% and paid monthly.
The loan is guaranteed by a third party entity and two individual persons.	$	8,802,000	$	-
On July 15, 2009, the Company obtained a loan from Industrial and
Commercial Bank of China, of which the principal is to be paid in full by
July 14, 2010.The interest is calculated using an annual fixed interest rate of
5.31% and paid monthly. The loan is guaranteed by a third party entity.	$	1,467,000	$	-

87

KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 10 – SHORT-TERM BANK LOANS (CONTINUED)

	December 31,		December 31,
	2009		2008
On July 21, 2009, the Company obtained a loan from Industrial Bank Co., Ltd.,
of which the principal is to be paid in full by July 20, 2010. The interest is
calculated using an annual fixed interest rate of 5.31% and paid quarterly.
The loan is guaranteed by a third party entity.	$	6,601,500	$	-
On August 12, 2009, the Company obtained a loan from Bank of China,
of which the principal is to be paid in full by August 11, 2010.The interest
is calculated using an annual fixed interest rate of 4.779% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.	$	8,802,000	$	-
On September 1, 2009, the Company obtained a loan from Industrial and
Commercial Bank of China, of which the principal is to be paid in full by
August 20, 2010. The interest is calculated using an annual fixed interest rate
of 5.31% and paid monthly. The loan is guaranteed by a third party entity.	$	1,467,000	$	-
On September 22, 2009, the Company obtained a loan from China
Construction Bank, of which the principal is to be paid in full by September 21,
2010.The interest is calculated using an annual fixed interest rate of 4.779%
and paid monthly. The loan is guaranteed by a third party entity.	$	11,736,000	$	-
On September 23, 2009, the Company obtained a loan from Huaxia Bank,
of which the principal is to be paid in full by September 22, 2010.The interest
is calculated using an annual fixed interest rate of 4.779% and paid quarterly.
The loan is guaranteed by a third party entity and an individual person.	$	7,335,000	$	-
On October 29, 2009, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal is to be paid in full by April 28,
2010.The interest is calculated using an annual fixed interest rate of 4.86%
and paid quarterly. The loan is guaranteed by a third party entity.	$	3,667,500	$	-
On November 18, 2009, the Company obtained a loan from China Merchants
Bank, of which the principal is to be paid in full by November 2, 2010.The
interest is calculated using an annual fixed interest rate of 5.31% and paid
monthly. The loan is guaranteed by a third party entity and an individual
person.	$	2,934,000	$	-
On December 1, 2009, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal is to be paid in full by May 30,
2010.The interest is calculated using an annual fixed interest rate of 4.86%
and paid quarterly. The loan is secured by a lien on the Company’s rights to use
sea areas.	$	3,667,500	$	-
On December 1, 2009, the Company obtained a loan from China Merchants
Bank, of which the principal is to be paid in full by November 2, 2010.The
interest is calculated using an annual fixed interest rate of 5.31% and paid
monthly. The loan is guaranteed by a third party entity and an individual
person.	$	5,868,000	$	-
Total short-term bank loans	$	82,885,500	$	-

88

KEYUAN INTERNATIONAL GROUP LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 11 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	December 31, 2009		December 31,  2008
Accounts payable – trade	$	2,838,860	$	-
Accounts payable – construction related		45,374,656		3,894,428
Accrued expenses		50,000		45,000
Total	$	48,263,516	$	3,939,428

The carrying value of accounts payable and accrued expenses approximates their fair value due to the short-term nature of these obligations.

NOTE 12 – TRADE NOTES PAYABLE

Trade notes payable consist of non-collateralized non-interest bearing promissory notes issued in connection with the acquisition of certain inventory and equipment. Balances outstanding under the notes as of December 31, 2009 and 2008 were $13,719,134 and $0, respectively.

NOTE 13 – ADVANCE FROM CUSTOMERS

At December 31, 2009 and 2008, the Company had advance from customers of $16,549,644 and $0, respectively. As a common business practice, the Company requires certain customers to make advance payments for sales. Such advances are interest-free and unsecured.

NOTE 14 – LONG-TERM BANK LOANS

The Company obtained long-term bank loans for plant construction. The balances are as follows:

	December 31,		December 31,
	2009		2008
On February 5, 2008, the Company obtained a loan from Bank of China,
of which the principal is to be paid in full by February 4, 2011. The interest
is calculated using floating interest rate and paid quarterly. For the fiscal year
ended December 31, 2009, the current interest rate is 7.56%. The loan is
guaranteed by a third party entity and an individual person.	$	7,335,000	$	7,335,000
On April 18, 2008, the Company obtained a loan from Bank of China, of which
the principal is to be paid in full by January 18, 2011. The interest is calculated
using floating interest rate and paid quarterly. For the fiscal year ended
December 31, 2009, the current interest rate is 7.56%. The loan is guaranteed
by a third party entity and an individual person.	$	2,934,000	$	2,934,000
On May 20, 2008, the Company obtained a loan from Industrial and
Commercial Bank of China, of which the principal is to be paid in full by
December 15, 2011. The interest is calculated using floating interest rate and
paid quarterly. For the fiscal year ended December 31, 2009, the current
interest rate is 8.127%. The loan is guaranteed by a third party entity.	$	4,401,000	$	4,401,000

89

KEYUAN INTERNATIONAL GROUP LTD.

Notes To Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 14 – LONG-TERM BANK LOANS (CONTINUED)

	December 31,		December 31,
	2009		2008
On August 15, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be paid in full by August 14, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
fiscal year ended December 31, 2009, the current interest rate is 7.74%.
The loan is guaranteed by a third party entity and an individual person.	$	4,401,000	$	4,401,000
On September 5, 2008, the Company obtained a loan from Bank of China, of
which the principal is to be paid in full by January 4, 2011. The interest is
calculated using floating interest rate and paid quarterly. For the fiscal year
ended December 31, 2009, the current interest rate is 5.40%. The loan is
guaranteed by a third party entity and an individual person.	$	2,200,500	$	2,200,500
On October 14, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be paid in full by October 12, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
fiscal year ended December 31, 2009, the current interest rate is 7.29%.
The loan is guaranteed by a third party entity.	$	10,709,100	$	10,709,100
On October 14, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be paid in full by October 12, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
fiscal year ended December 31, 2009, the current interest rate is 7.29%.
The loan is guaranteed by a third party entity.	$	880,200	$	880,200
On October 15, 2008, the Company obtained a loan from China Construction
Bank, of which the principal is to be paid in full by September 28, 2012. The
interest is calculated using floating interest rate and paid monthly. For the
fiscal year ended December 31, 2009, the current interest rate is 7.29%.
The loan is secured by a lien on the Company’s property and equipment.	$	3,080,700	$	3,080,700
On October 15, 2008, the Company obtained a loan from Industrial and
Commercial Bank of China in the amount of $6,894,900, $5,427,900 of which
is to be paid in full by October 15, 2010, and $1,467,000 of which is to be paid
In full by November 15, 2011. The interest is calculated using floating interest
rate and paid quarterly. For the fiscal year ended December 31, 2009, the
current average interest rate is 7.16%. The loan is secured by a lien on the
Company’s property and equipment and guaranteed by a third party entity.	$	6,894,900	$	6,894,900
On November 21, 2008, the Company obtained a loan from Bank of China,
of which the principal is to be paid in full by December 20, 2010. The interest
is calculated using floating interest rate and paid quarterly. For the fiscal year
ended December 31, 2009, the current interest rate is 5.40%. The loan is
guaranteed by a third party entity and an individual person.	$	2,200,500	$	2,200,500
Total	$	45,036,900	$	45,036,900
Less: Current portion		7,628,400		-
Total long-term bank loans	$	37,408,500	$	45,036,900

90

 NOTE 15 – INCOME TAXES

The Company is a British Virgin Islands and conducts all of its business through its Chinese subsidiary and its affiliated Chinese operating companies. All business is conducted in PRC. As the British Virgin Islands holding company has not recorded any income for the year ended December 31, 2009 and 2008, there was no provision or benefit for British Virgin Islands income tax purpose.

The Company’s Chinese subsidiary and affiliated operating companies based in China are governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at a new statutory rate of 25% and were, until January 2008, subject to tax at a statutory rate of 33% (30% state income tax plus 3% local income tax) on income reported in the statutory statements after appropriate tax adjustments.

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the PRC (the New CIT Law), which is effective from January 1, 2008. Under the new law, the corporate income tax rate applicable to all Companies, both domestic and foreign-invested companies, is 25%, replacing the previous applicable tax rate of 33%. For the years ended December 31, 2009 and 2008, the Company incurred operating losses and as a result earned tax credits of $2,944,350 and $441,794, respectively.  The Company is expected to be able to use these tax credits when it becomes profitable in 2010.

On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a FIE prior to January 1, 2008 to foreign investor(s) in 2008 or after will be exempt from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT. Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future.

For the year ended 2009, the Company incurred a lost and was subject to the 25% tax rate. In order to support the growth of certain local enterprises, the local government decided to give Keyuan Plastics Co., a preferential tax treatment. In the first two profitable years, the local government will credit back to the Company the entire local portion of the income tax which will amount to 40% of the whole Enterprise Income Tax the Company paid applying the 25% tax rate; in the subsequent three profitable years, the local government will return 20% of the whole income tax the Company paid. A reconciliation of the provision (benefit) for income taxes with amounts deter mined by applying the statutory rate to income before income taxes is as follows:

	June 30 , 2010			December 31, 2009
Computed tax at the statutory rate of 25%	$	3,142,556		$	(127,200	)
Non taxable loss		49,022			-
Tax credit from local government		(1,276,632	)		-
Provision (benefit) for income taxes	$	1,914,946		$	(127,200	)
Effective tax rate		15	%		(25	%)

NOTE 16 – RISK FACTORS

For the year ended December 31, 2009, five vendors accounted for approximately 70% of the Company’s purchases. Total purchases from these vendors were $82,943,376.

For the year ended December 31, 2009, five customers accounted for approximately 82% of the Company’s revenue. Total sales to these customers were $56,331,227.

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

NOTE 17 – CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to credit risk consist principally of cash on deposit with financial institutions. Management believes that the financial institutions that hold the Company’s cash and cash equivalents are financially sound and minimal credit risk exists with respect to these investments.

91

KEYUAN INTERNATIONAL GROUP LTD.

Notes To Consolidated Financial Statements

December 31, 2009 and 2008

NOTE 18 – SUPPLEMENTAL CASH FLOW DISCLOSURES

	For the Years Ended December 31,
	2009		2008
Cash paid for interest	$	2,051,021	$	102,666
Cash paid for income taxes	$	-	$	-

NOTE 19 – SUBSEQUENT EVENTS

The Company has evaluated events subsequent to the balance sheet date through July 22, 2010, which represents the date these financial statements were available to be issued.

Share Exchange

On April 22, 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Silver Pearl, Inc. (“Silver Pearl”, a company incorporated in Nevada and whose shares are listed on the Over-The-Counter Bulletin Board) and shareholders of the Company and Silver Pearl. Pursuant to the terms of the Exchange Agreement, the Company’s shareholders transferred to Silver Pearl all of the Company’s shares in exchange for the issuance of 47,658 shares of Silver Pearl’s Series M preferred stock (the “Series M Preferred Stock”), par value $0.001 per share (such transaction, the “Share Exchange”).

Prior to the Share Exchange, Silver Pearl had 5,696,800 shares of common stock issued and outstanding. Immediately prior to the Share Exchange, 3,264,000 shares of Silver Pearl’s common stock then outstanding were cancelled and retired, so that immediately after the Share Exchange Silver Pearl had 2,432,800 common shares and 47,658 Series M shares issued and outstanding. The Series M shares vote with the common stock on an as converted basis and are convertible into 47,658,000 shares of common stock upon the Company’s shareholders approving an increase in authorized common stock to at least 100,000,000 shares.  The Company also deposited $400,000 into an escrow account which amount was paid to an owner of the cancelled shares of Silver Pearl, as a result of the Share Exchange having been consummated.

The Share Exchange resulted in a change-in-control of Silver Pearl as the Company’s shareholders have acquired the majority ownership of the combined entity.

In accordance with the Accounting and Financial Reporting Interpretations and Guidance issued by the staff of the U.S. Securities and Exchange Commission (the “SEC”), the Share Exchange will be accounted for as a reverse acquisition whereby Silver Pearl (the legal acquirer) is considered the accounting acquiree and the Company (the legal acquiree) is considered the accounting acquirer. The consolidated financial statements of the combined entity will be in substance those of the Company’s, with the assets and liabilities, and revenues and expenses, of Silver Pearl being included effective from the date of consummation of the Share Exchange. Silver Pearl will be deemed to be a continuation of the Company’s business. The outstanding stock of Silver Pearl prior to the Share Exchange will be accounted for at their n et book value with no goodwill being recognized.

92

Private Placement

Immediately after the Share Exchange, we entered into a securities purchase agreement (the “Purchase Agreement”) with 120 accredited investors for the issuance and sale of 661,562 units (the “Units”) at a purchase price of $35 per Unit, consisting of, in the aggregate, (a) 5,954,058 shares of Series A convertible preferred stock, par value $0.001 per share (the “Series A Preferred Stock”) convertible into the same number of shares of Common Stock, (b) 661,562 shares of Common Stock (the “Shares”), (c) three-year Series A Warrants to purchase up to 661,562 shares of Common Stock, at an exercise price of $4.50 per share (the “Series A Warrant Shares”), and (d) three-year Series B Warrants to purchase up to 661,562 shares of Common Stock, at an exercise price of $5.25 per share ( the “Series B Warrant Shares”), for aggregate gross proceeds of approximately $23.2 million (the “Private Placement”).

Final Closing of Private Placements

On May 18, 2010, we closed on the second and final round of the private placement offering through the sale of 87,142 units (the “Units”) at a purchase price of $35 per Unit, consisting of, in the aggregate, (a) 784,278 shares of Series A convertible preferred stock, par value $0.001 per share (the “Series A Preferred Stock”) convertible into the same number of shares of Common Stock, (b) 87,142 shares of Common Stock (the “Shares”), (c) three-year Series A Warrants to purchase up to 87,142 shares of Common Stock, at an exercise price of $4.50 per share (the “Series A Warrant Shares”), and (d) three-year Series B Warrants to purchase up to 87,142 shares of Common Stock, at an exercise price of $5.25 per share (the “Series B Warrant Shares”), for aggregate gross proceeds of app roximately $3.005 million.

The Company raised an aggregate amount of approximately $26.205 million in the Offering.  

In conjunction with the Private Placement, the Company also entered into the following agreements:

·   A registration rights agreement (the “Registration Rights Agreement”) with the investors, in which we agreed to file this registration statement (the “Registration Statement”) with the SEC to register for resale the Shares, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares, within 30 calendar days of the Closing Date, and to have this registration statement declared effective within 150 calendar days of the Closing Date or within 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC.

·   A securities escrow agreement with the Investors (the “Securities Escrow Agreement”), pursuant to which, we delivered into an escrow account 5,000 shares of our Series M Preferred Stock convertible into 5,000,000 shares of Common Stock to be used as escrow shares (the “Escrow Shares”) after we amend our Articles of Incorporation to increase our authorized Common Stock to one hundred million (100,000,000) shares. With respect to the 2010 performance year, if we achieve less than 95% of the 2010 performance threshold, then the Escrow Shares for such year will be delivered to the Investors in the amount of 500,000 shares of Common Stock for each full percentage point by which such threshold was not achieved up to a maximum of 5,000,000 shares of Common Stock.

·   On the Closing Date, we and the Keyuan International Shareholder, entered into A lock-up agreement whereby Keyuan International is prohibited from selling our securities until six (6) months after the effective date of the registration statement required to be filed under the Registration Rights Agreement. For one (1) year thereafter, it will be permitted to sell up to 1/12 of its initial holdings every month.

93

 Pro Forma Combined Financial Statements

The following pro forma balance sheet has been derived from the balance sheet of Silver Pearl Enterprises, Inc. at March 31, 2010, and adjusts such information to give the effect of the acquisition of Keyuan International Group, LTD, a British Virgin Island corporation, as if the acquisition had occurred at March 31, 2010.  The following pro forma EPS statement has been derived from the income statement of Keyuan International Group, LTD,, and adjusts such information to give the effect that the acquisition by Silver Pearl Enterprises, Inc. at March 31, 2010 and December 31, 2009 and 2008, respectively.  The pro forma balance sheet and EPS statement is presented for informational purposes only and does not purport to be indicative of the financial condition that would have resulted if the acquisition had been consu mmated at March 31, 2010 and December 31, 2009 and 2008.

PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
	Keyuan International Group LTD.		Silver Pearl Enterprises, Inc.
	March 31,		March 31,
	2010		2010
	( un audited)		( un audited)		Adjustments				Proforma
ASSETS
Current assets:
Cash and cash equivalents	$	3,940,521	$	383	$	(383	)	A	$	27,648,790
					$	(400,000	)	C
						24,108,269		D
Restricted cash		15,841,590							$	15,841,590
Trade notes receivable		6,014,080							$	6,014,080
Inventory		53,295,512								53,295,512
Advance payments		14,602,726								14,602,726
Prepaid VAT taxes		21,727,804								21,787,804
Deferred tax assets		3,486,922								3,486,922
Other current assets		534,807				-				534,807
Total current assets		119,443,962		383		23,707,886			$	143,152,231
Property, plant and equipment, net	$	131,609,868		-					$	131,609,868
Other assets:
Intangible assets, net		6,452,593		-						6,452,593
Deferred tax assets		-		-		-				-
Total other assets		6,452,593		-		-				6,452,593
Total assets	$	257,506,423	$	383	$	23,707,886			$	281,214,692

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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans	$	87,286,500		$	-						$	87,286,500
Current portion of long-term bank loans		20,097,900			-							20,097,900
Accounts payable - trade and accrued expenses		44,096,280			25,900			(25,900	)	A		44,096,280
Accounts payable - construction related		37,832,639			-							37,832,639
Trade notes payable		22,374,434			-							22,374,434
Advance from customers		3,181,831			-							3,181,831
Due to related parties		-			16,500			(16,500	)	A
Other current liabilities		324,910										324,910
Total current liabilities		215,194,494			42,400			(42,400	)	A		215,194,494
Long term liabilities:
Revolving line-of-credit - related party		-			63,445			(63,445	)	A		-
Long-term bank loans		24,939,000										24,939,000
Total long-term liabilities		24,939,000			63,445			(63,445	)	A		24,939,000
Total Liabilities		240,133,494			105,845			(105,845	)	A		240,133,494
Stockholders' equity
Common stock ($1 par value; authorized -   50,000 shares; 3,181,504 issued and outstanding)		50,000			5,697							3,182
								(50,000	)	D
								(3,264	)	C
								749		D
Series A preferred stock,$0.001 par value, 20,000,000 authorized, 6,738,336 issued and outstanding		-			-			6,738		E		6,738
Series M preferred stock,$0.001 par value, 47,658 authorized, 47,658 issued and outstanding		-			-			48		B		48
Additional paid in capital		20,179,997			555,453			(561,150	)	A		43,928,298
								(48	)	B
								50,000		D
								(396,736	)	C
								24,100,782		E
Retained earning (deficit)		(3,922,147	)		(666,612	)		666,612		A		(3,922,147	)
Accumulated other comprehensive income		1,065,079			-							1,065,079
Total stockholders' equity (deficit)	$	17,372,929		$	(105,462	)	$	23,813,731			$	41,081,198
Total liabilities and stockholders' equity	$	257,506,423		$	383		$	23,707,886			$	281,214,692

See notes to financial statements

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PRO FORMA EPS (UNAUDITED)
		Keyuan International	Keyuan International Group LTD.			Keyuan International Group LTD.
		Group LTD. Three Months Ended	Year  Ended			Year Ended
		March 31,	December 31,			December 31,
		2010	2009			2008
		(unaudited)	(unaudited)			(unaudited)
Net income/(loss)	$	5,731,272	$	(8,833,069	)	$	(1,501,928	)
Other comprehensive income (loss)
Foreign currency translation gain		2,298		15,991			649,089
Comprehensive income (loss)	$	5,733,570	$	(8,817,078	)	$	(852,839	)
Net income (loss) per Share
Basic	$	1.80	$	(2.78	)	$	(0.47	)
Diluted	$	0.10	$	(2.78	)	$	(0.47	)
Weighted average shares outstanding
Basic		3,181,504		3,181,50 4			3,181,50 4
Diluted		59,794,002		3,181,50 4			3,181,50 4

See notes to financial statements

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PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
	Keyuan International Group LTD.			Silver Pearl Enterprises, Inc.
	Three Months Ended			Three Months Ended
	March 31,			March,  31,
	2010			2009
	(unaudited)			(unaudited)			Adjustments				Proforma
Sales	$	117,371,886		$	-			-			$	117,371,886
Cost of sales		108,556,442			-			-				108,556,442
Gross profit (loss)		8,815,444			-			-				8,815,444
Operating expenses:
Selling expenses		84,512			-			-				84,512
General and administrative expenses		805,532			3,932			(3,932	)	A		805,532
Total		890,044			3,932			(3,932	)	A		890,044
Income/(loss) from operations		7,925,400			(3,932)	)		3,932		A		7,925,400
Other income (expense):
Interest income (expense), net		(1,073,525	)		(749	)		749		A		(1,073,525	)
Non-operating expenses		(109,203	)		-			-				(109,203	)
Unrealized gain (loss) on securities		-			(71)			71		A		-
Dividend income		-			83			(83	)	A		-
Other income (expense), net		(1,182,728	)		(817	)		817		A		(1,182,728	)
Loss before provision (benefit) for income tax		6,742,672			(4,759	)		4,759		A		6,742,672
Provision (benefit) for income taxes
Current year		1,011,400			-							1,011,400
Deferred		-			-							-
Net income/(loss)	$	5,731,272		$	(4,759	)	$	4,759		A	$	5,731,272
Other comprehensive income (loss)
Foreign currency translation adjustment		2,298			-			-				2,298
Total comprehensive income (loss)	$	5,733,570		$	(4,759	)	$	4,759		A	$	5,733,570
Net income (loss) per Share
Basic	$	114.63		$	(0.00	)					$	1.80
Dluted	$	114.63		$	(0.00	)					$	0.10
Weighted average shares outstanding
Basic		50,000			5,696,800			(2,565,296	)	B,C,D,E		3,181,504
Diluted		50,000			5,696,800			54,047,202		B,C,D,E		59,794,002

See notes to financial statements

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PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
	Keyuan International Group LTD.			Silver Pearl Enterprises, Inc.
	Year ended			Year ended
	December 31,			December 31,
	2009			2009
	(unaudited)			(unaudited)			Adjustments				Proforma
Sales	$	68,653,603		$	-			-		A		68,653,603
Cost of sales		75,311,595			-			-				75,311,595
Gross profit (loss)		(6,657,992	)		-			-		A		(6,657,992	)
Operating expenses:
Selling expenses		24,836			-			-		A		24,836
General and administrative expenses		2,714,093			15,492			(15,492	)			2,714,093
Total		2,738,929			15,492			(15,492	)	A		2,738,929
Income/(loss) from operations		(9,396,921	)		(15,492	)		15,492				(9,396,921	)
Other income (expense):
Interest income (expense), net		(2,031,983	)		(2,473	)		2,473		A		(2,031,983	)
Non-operating expenses		(348,515	)		-			-				(348,515	)
Unrealized gain (loss) on securities		-			305			(305	)			-
Dividend income		-			8			(8	)			-
Other income (expense), net		(2,380,498	)		(2,160	)		2,160		A		(2,380,498	)
Loss before provision (benefit) for income tax		(11,777,419	)		(17,652	)		17,652		A		(11,777,419	)
Provision (benefit) for income taxes
Current year		-			-							-
Deferred		(2,944,350	)		-							(2,944,350	)
Net income/(loss)	$	(8,833,069	)	$	(17,652	)	$	17,652		A		(8,833,069	)
Other comprehensive income (loss)
Foreign currency translation adjustment		15,991			-			-				15,991
Total comprehensive income (loss)	$	(8,817,078	)	$	(17,652	)	$	17,652		A		(8,817,078	)
Net income (loss) per Share
Basic and diluted	$	(176.66	)	$	(0.00	)					$	(2.78	)
Basic and diluted	$	(176.66	)	$	(0.00	)					$	(2.78	)
Weighted average shares outstanding
Basic		50,000			5,696,800			(2,565,296	)	B,C,D,E		3,181,504
Diluted		50,000			5,696,800			(2,565,296	)	B,C,D,E		3,181,504

See notes to financial statements

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Unaudited Notes to Pro Forma Combined Financial Statements

On April 22, 2010, Silver Pearl Enterprises, Inc., (the “Silver Pearl” or the "Company"), entered into a Share Exchange Agreement (the “Exchange Agreement”), with (i) Keyuan International Group Limited a company organized under the laws of British Virgin Islands (“Keyuan International”),,”), (ii) Delight Reward Limited, the sole shareholder of Keyuan International and a company organized under the laws of the British Virgin Islands ”), and Denise Smith, our former principal stockholder (“Smith”).Pursuant to the terms of the Exchange Agreement, the Keyuan International’s Shareholders transferred to us all of the Keyuan International shares in exchange for the issuance of 47,658 shares of shares of our Series M preferred stock.  As a result of the Share Exc hange, we are now the holding company of Keyuan Plastics Co. Ltd., the operating subsidiary of Keyuan International organized in the People’s Republic of China (“China” or the “PRC”) and engaged in manufacturing and supplying various petrochemical products in China.

Immediately prior to the Share Exchange, 3,264,000 shares of our outstanding common stock were cancelled and retired.  Keyuan International also deposited $400,000 into an escrow account, which amount was paid to the Remediation Principal Shareholder, who owned the 3,264,000 shares, as a result of the Share Exchange having been consummated.

As a result of the transactions described above, we became the record and beneficial owner of 100% of the share capital of Keyuan International and therefore own 100% of the share capital of its subsidiaries.  

As a result of the Share Exchange, the cancellation of 3,264,000 shares and the closing of Series A financing, we will have 3,181,504 shares of common stock, 6,738,336 shares of Series A preferred and 47,658 shares of Series M preferred issued and outstanding.  Pursuant to the terms of the Agreement, Keyuan International’s officers and directors were appointed as our officers and directors, and Denise Smith resigned as our President, CEO and sole director.  However, the change in our board of directors will not be effective until 10 days after the mailing of a Schedule 14F Information Statement to our shareholders, which we expect to do promptly after the closing of the Share Exchange.

The transaction was regarded as a reverse merger whereby Keyuan International was considered to be the accounting acquirer as it retained control of Silver Pearl after the Share Exchange.

All amounts of Remediation were reversed as the net assets assumed by Keyuan International in the reverse merger were $0 after the Company satisfied the remaining portion of a $58,717 line of credit with part of the $400,000 escrow deposit (described above).

Operating through our wholly-owned subsidiary, Keyuan Plastics, Co. Ltd. (“Keyuan Plastics”), located in Ningbo, China, we are a leading independent manufacturer and supplier of various petrochemical products in China. Through Keyuan Plastics, our operations include (i) an annual petrochemical manufacturing capacity of 550,000 metric tons (MT) of a variety of petrochemical products, (ii) facilities for the storage and loading of raw materials and finished goods, (iii) a manufacturing technology that can support our manufacturing process with low raw material costs and high utilization and yields, (iv) a strong management team consisting of petrochemical experts with proven track records from some of China’s largest state-owned enterprises in the petrochemical industry, and (v) a robust customer base with long-te rm purchase contracts.

The consolidated financial statements reflect all predecessor statements of income and cash flow activities and include the accounts of Keyuan International, and its subsidiaries.   Keyuan International (and its historical financial statements) is the continuing entity for financial reporting purposes.

The preceding unaudited pro forma combined balance sheet represents the combined financial position of Keyuan International as of March 31, 2010, as if the reverse merger acquisition occurred on March 31, 2010.  The unaudited combined income statements give effect to the reverse acquisition of Keyuan International by Silver Pearl assuming that the reverse acquisition took place on March 31, 2010.

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The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if the reverse acquisition of Keyuan International had been consummated as of the beginning of the period indicated, nor is necessarily indicative of the result of future operations.

Assumptions and Adjustments:

A)    Per the terms of the Share Exchange, Silver Pearl was delivered with zero assets and zero liabilities at time of closing;

B)   At closing and pursuant to the Exchange Agreement, we acquired all of the issued and outstanding capital stock of Keyuan International in exchange for the issuance of 47,658 shares of Series M preferred stock; 

C)   In exchange for $400,000, the Company agreed to cancel 3,264,000 shares of common stock;

D)   At closing, common stock of Keyuan International will be reclassified to additional paid-in-capital to reflect the additional shares of Series M preferred stock issued as part of the Share Exchange; and

E)   Silver Pearl issues 6,738,336 shares of convertible Series A preferred stock and 748,704 shares of common stock at $3.50 per share to investors for net proceeds of approximately $24,100,000.

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MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion and analysis of the results of operations and financial condition of Keyuan International for the fiscal years ended December 31, 2009 and 2008 and for the quarter ended March 31, 2010 and should be read in conjunction with the Selected Consolidated Financial Data, Keyuan International’s financial statements, and the notes to those financial statements that are included elsewhere in this Memorandum. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-lookin g statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Memorandum. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

Prior to the consummation of the share exchange transaction described below, we were a shell company with nominal operations and nominal assets. Currently, we are a holding companyoperating through our wholly-owned subsidiary, Keyuan Plastics, located in Ningbo, China. We are a manufacturer and supplier of numerous petrochemical products in China. Operating through our wholly-owned subsidiary, Keyuan Plastics, we have an annual petrochemical manufacturing capacity of 550,000 MT, utilizing manufacturing technologies that lower our raw material costs while enhancing our production output. In anticipation of the growing demand in China’s refined petrochemical products, we intend to expand our manufacturing capacity to include a raw material pre-treatment facility, additional storage capacity and an asphalt production facility.

.

Our Facility and Equipment

Facility

To date, we have invested a total of approximately $132,000,000 in the construction and improvement of our production facility with a total of 1.2 million square feet, including 594,000 square feet for production and 19,500 square feet for laboratories and offices.

We have a total of 100,000 MT of storage capacity, consisting of 50,000 MT of storage capacity for raw materials and 50,000 MT for finished products. In addition, we plan to add 100,000 MT of new storage capacity.

We have an on-site ocean shipping dock with 5,000 MT of shipping capacity and a 10-truck loading facility. Approximately 90% of our feedstock and finished products use this shipping dock. In addition, we also have adjacent access to another shipping dock with an additional 50,000 MT of shipping capacity.

Equipment

Our major processing equipment includes

· heavy oil catalytic pyrolysis processing equipment- risers/generators/precipitators, fuel gas boilers, fractionating tower, absorbing re-absorbing and desorbing towers, heat exchangers, pumps, a stabilizing tower;

· gas fractionation processing equipment- de-propanizing tower, refining propylene tower, de-ethanizination tower, heat exchangers, pumps;

· ethylbenzene processing equipment- alkylation reactor, anti-alkylation reactor, dehydrogenation reactor, propylene absorbing tower, de-ethylene tower, ethylbenzene recovering tower, heating furnace for benzene, heating furnace for gas, steam overheating furnace, tail gas compressor, washing tower; and

· liquefied petroleum gas (LPG) and sulfur recovery process- LPG desulfurization extraction tower, dry gas desulfurization tower, regenerating tower, LPG de-mecaptan extraction tower.

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Our Products

We manufacture and supply a variety of petrochemical products, including BTX aromatics, propylene, styrene, LPG, MTBE and other petrochemicals.

· BTX Aromatics: consisting of benzene, toluene, xylene and other chemical components for further processing into oil resin, gasoline and solvents materials widely used in paint, ink, construction coating and pesticide.

· Propylene: a chemical intermediate as one of the building blocks for an array of chemical and plastic products that are commonly used to produce polypropylene, acrylonitrile, oxo chemicals, propylene oxide, cumene, isopropyl alcohol, acrylic acid and other chemicals for paints, household detergents, automotive brake fluids, indoor/outdoor carpeting, textile, insulating materials, auto parts and electrical appliances.

· Styrene: a precursor to polystyrene and several copolymers widely used for packaging materials, construction materials, electronic parts, home appliances, household goods, home furnishings, toys, sporting goods and others.  

· LPG:  a mixture of hydrocarbon gases used as fuel in heating appliances and vehicles. A replacement for chlorofluorocarbons as an aerosol propellant and a refrigerant which reduces damage to the ozone layer.

· MTBE & Other Chemicals: MTBE, oil slurry, sulphur and others are used for a variety of applications including fuel components, refrigeration systems, fertilizers, insecticides and fungicides, etc.

Expansion Plan

In order  to meet the increasing market demands, our management team has made plans to expand our manufacturing capacity to include additional storage capacity, a raw material pre-treatment facility, an asphalt production facility and a SBS production facility.

The increase storage capacity will allow the Company to take better advantage of price variations to our raw material costs thereby helping to further improve future gross margins. The pretreatment facility will allow us to handle lower grade raw materials thereby helping to further decrease raw material costs. The pretreatment facility will also improve efficiency in current production process as well as provide necessary feedstock for asphalt production, a production line that we plan to add with 300,000 MT annual capacities to our current facility. Management believes that these three projects will increase sales by as much as US $298 million per year and result in approximately $30 million of additional annual profits.

In addition, in the third quarter of 2010, we will begin building a new SBS production facility. SBS is commonly used in soles of shoes, tire treads and other products that require a hard rubber to remain sturdy for a long time. The construction may start in September, 2010 and will take approximately12 months to complete. The designed capacity of SBS will be 70,000 metric ton a year. China’s current domestic production capacity of SBS is approximately 600,000 tons a year with an estimated domestic demand of 750,000 tons (data source: http://www.cpi360.com/docpage/c419/200906/0603_419_546403.aspx which is set up by Eastern-China International P&C Net). The total investment of the SBS faci lity is estimated to be $17.5 million.  We expect to start the trial run in the forth quarter of 2010 and commence the production in late 2010 or early 2011.  The SBS facility will generate approximately $107 million in sales and $10million in profit annually at full capacity.

Our current estimated schedule of our expansion plan is as follows:

·   Commence construction in the quarter ended December 31, 2010;

·   Complete equipment installation by March 31, 2012;

·   Begin trial production in the quarter ended June 30, 2012;

·   Start full production and sales in the quarter ended September 30, 2012.

In order to expand our facility, we need to acquire use rights of additional land. In China, the government is responsible for overall land planning and they will often select a target company to maximize the benefits of land use for a particular area. We have been in regular communications with the Ningbo Municipal Government about the land use rights for approximately 1.2 million square feet of land adjacent to our current production facility. We submitted our application to the local government for a land bidding process slated on July 13, 2010 which is a necessary legal proceeding to acquire the land use rights in China. We were the only bidder in this process because the land is well integrated with our existing site. The bidding process was completed on August 13, 2010 and we entered into land use right tran sfer agreements with the local government on August 18, 2010.

Manufacturing and Sales

Our total production was 169,386 MT for the second quarter of 2010 and the revenue for the quarter totaled $132.0 million, based on the sale of 155,955 MT of petrochemical products, up 12% versus the first quarter of 2010. Due to lower market pricing; we decided to hold 24,000 MT of production in inventory which we anticipated selling in the third quarter of 2010, at a higher price. We also held over 27,400 tons of production as a result of a 15-day production shutdown due to a power grid upgraded by a local utility agency.

102

However, due to our low-cost and flexible manufacturing process, we are able to change the mix of raw materials and quality of products we produce based on market conditions. We have recently started using a greater amount of lower grade light oil in three of our seven production lines. This will allow us to significantly increase the amount of higher margin light aromatic products we produce without spending any additional capital expenditures to expand our production capacity.  Gross margin is expected to improve in the second half of the year due to improved production yields and favorable product mix and is expected to average 10% for the full year of 2010. First half gross margin was impacted by three factors:

·   Lower market prices due to a general economic slowdown: the European debt crisis that began in mid-May and extended to June drove down prices for all petrochemical products. The lower market prices together with higher historical inventory costs put the downward pressure on our margin.  We have seen prices start to rebound in late July.

·   Startup cost carryover: we have been ramping our production lines since the fourth quarter of 2009. We had 2009 startup costs carried over, resulting in approximately $1.8 million higher cost of goods sold at beginning of 2010. In addition, because the equipment, processes and workers are new, we have not been operating at optimal efficiency levels. The company continues to optimize product mix and improve efficiency and yield.

·   Temporary mandatory factory shutdown: in the months of March, May and June, we were forced to shut down all production lines due to a mandatory shutdown ordered by the local utility agency for power grid upgrade. Because we were forced to power down and subsequently power up our manufacturing facilities over several days, we lost a combined 23 days of production (8 days in the first quarter, 15 days in the second quarter), equating to 42,000 MT of production, approximately $33.8 million of revenues, $2.4 million in gross profit and $1.5 million in net income.

As previously stated, we decided to sell less than 100% of our production in the second quarter because we received lower prices during certain periods in the quarter. Up to date, we have sold over half of the inventory from the second quarter at higher prices than would have received had we sold toward the end of last quarter. We expect to sell the remainder of the inventory by the end of the third quarter. With a low-cost, flexible manufacturing facility and 100,000 MT of storage capacity, we will continue to adjust our selling strategies to maximize returns to our shareholders.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believes to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actua l results may differ from these estimates under different assumptions or conditions.

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We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

Inventory

Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required that could negatively impact our gross margin and operating results. The Company did not record any provision for slow-moving and obsolete inventory as of June 30 , 2010,  December 31, 2009 and 2008.

Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated based on the straight-line method over the estimated useful lives of the assets as follows:

Vehicles Furniture, machinery and equipment Buildings and improvements 5 years 5 to 10 years 45 years

Construction in progress primarily represents the renovation costs of plant, machinery and equipment. Costs incurred are capitalized and transferred to property and equipment upon completion, at which time depreciation commences.

Cost of repairs and maintenance is expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the statements of operations.

Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” codified in FASB ASC Topic 360-10, the Company reviews the recoverability of its long-lived assets on a periodic basis in order to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future discounted cash flows. If the total of the expected future discounted cash flows is less than the total carrying value of the assets, a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

Intangible Assets

Intangible assets are stated at cost. Intangible assets with finite life are amortized over their estimated useful life using straight-line method. Impairment test is performed at a minimum once a year to determine possible impairment loss. Estimated useful life of intangible assets is as follows:

Rights to use land Software Technology 15-50 years 10 years 9-20 years

Impairment of Intangible Assets

We apply the provisions of Financial Accounting Statement No. 142 “Goodwill and Other Intangible Assets”, codified in FASB ASC Topic 350, which addresses how goodwill and other acquired intangible assets should be accounted for in financial statements. In this regard, the Company tests these intangible assets for impairment annually or more frequently if indicators of potential impairment are present. Such circumstances could include, but are not limited to: (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated discounted future cash flows associated with it at a risk-free rate of interest. Should the present value of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value.

The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. Based on our review, we believes that, as of December 31, 2009 and 2008, there were no significant impairments of our intangible assets.

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Revenue Recognition

We derive our revenues primarily from sale of petrochemicals. In accordance with the provisions of Staff Accounting Bulletin No. 104, codified in FASB ASC Topic 480, revenue should not be recognized until it is realized or realizable and earned. Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. In this regard, our revenue is recognized when merchandise is received by customers or shipped by us pursuant to contractual terms of sales, title and risk of loss passes to the customers and the collectibility is reasonably assured. 

Research and Development

Research and development costs are expensed as incurred. Research and development costs for the  six months ended March 31, 2010 and the years ended December 31, 2009 and 2008 were insignificant.

Change in the Effective Tax Rate

The Company’s Chinese subsidiary and affiliated operating companies based in China are governed by the Income Tax Law of the PRC concerning the privately-run enterprises, which are subject to a statutory tax rate of 25% and were, until January 2008, subject to a statutory tax rate of 33% (30% state income tax plus 3% local income tax) on income reported in the statutory statements after appropriate adjustments for tax purposes. For the year ended 2009, the Company incurred a loss and was subject to the 25% tax rate. In order to support the growth of certain local enterprises, the local government granted Keyuan Plastics Co., a preferential tax treatment. In the first two profitable years, the local government will credit back to the Company the entire local portion of the income tax which equals to 40% of the whole Enterpri se Income Tax the Company paid applying the 25% tax rate, resulting in an effective tax rate of 15%; in the subsequent three profitable years, the local government will credit back 50% of the local income tax the Company paid under the 25% tax rate resulting in an effective tax rate of 20%.

Recently Issued Accounting Pronouncements

In October 2009, the FASB issued an amendment to the accounting and disclosure for revenue recognition. The amendment modifies the criteria for recognizing revenue in multiple element arrangements. Under the guidance, in the absence of vendor-specific objective evidence (“VSOE”) or other third party evidence (“TPE”) of the selling price for the deliverables in a multiple-element arrangement, this amendment requires companies to use an estimated selling price (“ESP”) for the individual deliverables.

On July 1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched the FASB Accounting Standards Codification (“ASC”), which has become the single official source of authoritative nongovernmental U.S. GAAP, in addition to guidance issued by the Securities and Exchange Commission. The ASC is designed to simplify U.S. GAAP into a single, topically ordered structure. All guidance contained in the ASC carries an equal level of authority. The ASC is effective for all interim and annual periods ending after September 15, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), codified in FASB ASC Topic 855-10-05, which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 (ASC 855-10-05) also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS 165 (ASC 855-10-05) is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted this pronouncement during the year ended December 31, 2009. SFAS 165 (ASC 855-10-05) requires that public entities evaluate subsequent events through the date that the financial statements are issued. The Company has evaluated subsequent events through February 23, 2010.

Results of Operations

The following table sets forth information from our statements of operations for the years ended December 31, 2009, and 2008 and the three and six months ended June 30 , 2010:

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	For the Years Ended  December 31,
	2009			2008
Sales	$	68,653,603		$	--
Cost of sales		75,311,595			-
Gross profit		(6,657,992	)		-
Operating expenses
Selling expenses		24,836			-
General and administrative expenses		2,714,093			1,839,253
Total operating expenses		2,738,929			1,839,253
Gain (loss) from operations		(9,396,921	)		(1,839,253	)
Other income (expenses):
Interest expense, net		(2,031,983	)		(64,584	)
Non-operating expenses		(348,515	)		(39,885	)
Total other expenses		(2,380,498	)		(104,469	)
Income (loss) before provision for income tax		(11,777,419	)		(1,943,722	)
Provision(benefit) for income tax		(2,944,350	)		(441,794	)
Income (net) loss		(8,833,069	)		(1,501,928	)
Other comprehensive income
Foreign currency translation adjustment		15,991			649,089
Comprehensive income (loss)	$	(8,817,078	)	$	(852,839	)

	For the three months Ended June 30,						For the six months Ended June 30,
	2010			2009			2010			2009
Sales	$	131,997,217		$	--		$	249,369,103		$	--
Cost of sales		123,351,375			-			231,907,817			-
Gross profit		8,645,842			-			17,461,286			-
Operating expenses
Selling expenses		258,901			-			343,413			-
General and administrative expenses		1,088,256			709,161			1,893,788			1,236,593
Total operating expenses		1,347,157			709,161			2,237,201			1,236,593
Gain (loss) from operations		7,298,685			(709,161	)		15,224,085			(1,236,593	)
Other income (expenses):
Interest expense, net		(1,589,937	)		(274,460	)		(2,663,462	)		(253,179	)
Non-operating expenses		118,802			(138,257	)		9,599			(140,906	)
Total other expenses		(1,471,135	)		(412,717	)		12,570,222			(394,085	)
Income (loss) before provision for income tax		5,827,550			(1,21,878	)		1.914,946			(407,669	)
Provision(benefit) for income tax		903.546			(280,469	)		-			(407,669	)
Income (net) loss		4,924,004			(841,408	)		10,655,276			(1,223,008	)
Other comprehensive income
Foreign currency translation adjustment		196,958			9,160			199,256			(4,478	)
Comprehensive income (loss)	$	5,120,962		$	(832,248	)	$	10,854,532		$	(1,227,486	)

Sales: Our sales for the year ended December 31, 2009 were $68,653,603, compared to sales of $-0- for the year ended December 31, 2008. Our sales for the three months ended June 30 , 2010 were approximately $131,997,000 as compared to sales of $-0- for the three months ending June 30 , 2009.   Our sales for the six months ended June 30,2010 were approximately $249,369,000 as compared to sales of $-o- for the six months ended June 30,2010 . The substantial increase in our sales was due to our commencement of trial production and distribution from September 2009 after a long-term construction period through the yea r 2008. Our manufacturing plant is currently operating at full capacity and has sold approximately 300,700 MT of petrochemicals products in the first six months of our 2010 fiscal year. The breakdown of volume by products sold is listed below.

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Product	Total Sale for Jan. 2010 to Jun 2010 (Unit: Metric Ton)
BTX Light Aromatics	137,304
BTX Heavy Aromatics	71,246
LPG	8,413
MTBE and Others	45,328
Styrene	18,131
Propylene	20,278
Total	300,700

Cost of Sales: Cost of sales was $75,311,595 for the year ended December 31, 2009, compared to cost of sales of $-0- for the year ended December 31, 2008. For the three months ended June 30 , 2010, our cost of sales was approximately $ 123,351,000 as compared to no cost of sales for the same period in 2009.  Our cost of sales was approximately $231,908,000 for the six months ended June 30, 2010 and we had no cost of sales for the same period in 2009.  Our cost of sales are primarily composed of the costs of direct raw materials (mainly heavy oil, benzene and carbinol), labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. This increase was due to our commencement of trial production and distribution from September 2009, which resulted in some non-recurring expenses associated with pre-running the production totaling $8,600,000.

Gross Profit: Gross profits for the year ended December 31, 2009 was ($6,657,992) compared to gross profits of $-0- for the comparable period in 2008. Our negative gross profit for the year ended December 31, 2009 was due to the non-recurring expenses described in the preceding paragraph before mass production which caused cost of sales on our trial production stage to exceed revenue. Gross profits for the three months ending June 30 , 2010 was roughly $ 8,646,000 .  We had gross profits of $0 for the comparable period in 2009.   For the six months ended June 30, 2010, we generated gross profit of approximately $17,461,000.  We had gross profit of $0 for the comparable period in 2009 .  With the beginning of my standard (or  normal) production in the first quarter of year 2010, our cost of sales was lower than our revenue and we  generated positive gross profit.  Management believes that this trend will continue during our 2010 fiscal year and beyond. Management is looking to improve overall gross margin through higher production yield and favorable product mix. In the first six months of 2010, we experienced 23 days of loss of production due to power grid upgrade enforced by local utility agency. This has led to approximately $1.5 million loss in net profit.

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Operating Expenses: Operating expenses, including selling expenses, and general and administrative expenses, were $2,738,929 for the year ended December 31, 2009 as compared to $1,839,253 for the comparable period in 2008, an increase of $899,676. Selling expenses were $24,836 for the year ended December 31, 2009, compared to selling expenses of $-0- for the comparable period in 2008. General and administrative expenses were $2,714,093 for the year ended December 31, 2009, compared to $1,839,253 for the comparable period in 2008. The increase of these major expenses was due to our commencement of production and distribution activities.

Operating expenses including selling expenses, general and administrative expenses were approximately $1,347,000 for the three months ended June 30, 2010 as compared to roughly $709,000 for the same period in 2009, an increase of $638,000 or approximately 90%. Selling expenses were approximately $259,000 for the three months ended June 30, 2010 compared to selling expenses of $-0- for the comparable period in 2009. General and administrative expenses were approximately $1,088,000 for the three months ended June 30, 2010 compared to approximately $709,000 for the comparable period in 2009. The increase of these major expenses was mainly due to our commencement of production and distribution activities.

For the six months ended June 30, 2010, operating expenses including selling expenses, and general and administrative expenses, were approximately $2,237,000 as compared to roughly $1,237,000 for the comparable period in 2009.  This was an increase of about $1,000,000 or almost 80%. Selling expenses were approximately $343,000 for the six months ended June 30, 2010, compared to selling expenses of $-0- for the comparable period in 2009. General and administrative expenses were roughly $1,894,000 and $1,237,000 for the six months ended March 31, 2010 and 2009, respectively. The increase of these major expenses was due to our commencement of production and distribution activities.  Management expects that general and administrative expenses may continue to rise as we expand operations.  Some of this expected increase will likely be due to various public company expenses including issuing stock options, stock compensations and legal expenses.

Interest Expense: Interest expense for the year ended December 31, 2009 was $2,031,983 compared to interest expense of $64,584 for the comparable period in 2008. The increase in interest expense was primarily due to the significant increase of our short-term bank loans borrowed in 2009 which were used to fund our working capital at the beginning of our production and distribution. Interest expense for the three months ended June 30, 2010 was roughly $1,590,000 compared to interest expense of $274,000 for the three months ended June 30, 2009. The increase in interest expense was primarily due to the significant increas e of our short-term bank loans borrowed in 2009 and 2010 which were used to fund our working capital at the beginning of our production and distribution. For the six months ending June 30, 2010, interest expense was roughly $2,663,000 as compared to interest income of approximately $253,000 for the comparable period in 2009. The increase in interest expense was primarily due to the significant increase of our short-term bank loans borrowed in 2009 and 2010 which were used to fund our working capital at the beginning of our production and distribution. As we move forward with full operations and production, management believes that the interest expense will be less in remainder of 2010 fiscal year. However, interest expense could increase in future years if we are forced to fund most of our expansion plans via debt as opposed to additional equity and/or reinvestment of profits.

Net Gain/loss: Net loss for the year ended December 31, 2009 was approximately ($8,833,069) compared to ($1,501,928) for the year ended December 31, 2008, an increase of ($7,331,141). The increase in net loss was due to the negative gross profit and the increase of operating and interest expenses. Net income for the three months ended June 30, 2010 was approximately $4,924,000 compared to net loss of $841,000 for the three months ended June 30, 2009, an increase of roughly $5,794,000. Net income for the six months ending June 30, 2010 was approximately $10,655,000 as compared to a net loss of approximately $1,223,000 in the same period in 2009.  This increase was the result of the beginning or norma l operations in 2010.  Management believes that this trend will continue during our 2010 fiscal year and beyond.

Foreign Currency Translation Adjustment:  Our reporting currency is the U.S. dollar. Our local currency, Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Currency translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of shareholders' equity and amounted to $15,991 as of December 31, 2009. The balance sheet amounts with the exception of equity at December 31, 2009 and 2008 were translated both at RMB 6.82 to 1.00 U.S. dollar. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the year ended December 31, 2009 and 2008 were RMB 6.82082 and RMB 6.93722 to 1.00 U.S. dollar.

Currency translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of shareholders' equity and amounted to $197,000 for the three months ended June 30, 2010. The balance sheet amounts with the exception of equity at June 30, 2010 and December 31, 2009 were translated both at RMB 6.789 and RMB 6.817 to 1.00 U.S. dollar. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the three months ended June 30, 2010 and 2009 were RMB 6.833 and RMB 6.840 to 1.00 U.S. dollar.

Currency translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of shareholders' equity and amounted to $199,000 for the six months end June 30, 2010. The balance sheet amounts with the exception of equity at June 30, 2010 were translated at RMB 6.789 to 1.00 U.S. dollar. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the six months ended June 30, 2010 and 2009 were RMB 6.817 and RMB 6.823 to 1.00 U.S. dollar.

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Liquidity and Capital Resources

As of December 31, 2009, we had an accumulated net loss of ($10,664,819) and a negative working capital of approximately ($90,166,474). At December 31, 2009, we had cash and cash equivalents of $20,043,345 as compared to $9,094,537 as of December 31, 2008.   

The following table sets forth a summary of our cash flows for the periods indicated:

	For the Years Ended December 31,
	2009			2008
Net cash provided by (used in) operating activities		(33,665,158	)		(1,786,362	)
Net cash used in investing activities		(41,354,725	)		(46,556,768	)
Net cash provided by financing activities		85,961,975			53,883,625

The following table sets forth a summary of our cash flows for the periods indicated:

	For the Six Months Ending June 30,
	2010			2009
Net cash provided by (used in) operating activities		14,415,142			(5,415,543	)
Net cash used in investing activities		(16,015,980	)		(25,770,639	)
Net cash provided by financing activities		(6,944,001	)		40,657,038

Net cash used in operating activities was ($33,665,158) for the year ended December 31, 2009, compared to net cash used in operations of ($1,786,362) for the year ended December 31, 2008. The ($31,878,796) increase was primarily due to the mass material purchases at the beginning of production.

Net cash provided by operating activities was roughly $14,415,000 for the six months ending June 30, 2010 as compared to net cash used in operations of approximately $5,416,000 for the same period in 2009. The increase in cash provided by operations was primarily due to the beginning of normal production and distribution.  During 2009, we were in the final stages of completing our long-term construction period and had yet to begin normal operations.

Net cash used in investing activities was ($41,354,725) for the year ended December 31, 2009, compared to net cash used in investing activities of ($46,556,768) for the year ended December 31, 2008. During the development stage through 2008 and 2009, large amounts of money were continuously invested in building construction and equipment installation. It is expected net cash used in investing activities will fall significantly in year 2010.

Net cash used in investing activities was approximately $16,016,000 and $25,771,000 for the six months ending June 30, 2010 and 2009. During 2010, net cash used in investing activities was primarily focused on payments for the infrastructure construction. During 2009, we were still in the final part of our development stage in which large amounts of money were continuously invested in building construction and equipment installation. As we move forward with our Expansion Plans, it is expected net cash used in investing activities could increase in the second half of our 2010 fiscal year including $9 million payment for the initial construction cost of the expansion project, $8 million for land purchases and $15 million for payments of previous construction costs.

Net cash provided by financing activities amounted to $85,961,975 for the year ended December 31, 2009, compared to net cash provided by financing activities of $53,883,625 for the year ended December 31, 2008. The increase of cash provided by financing activities was primarily a result of more loans borrowed from banks for the year ended December 31, 2009.

Net cash used in financing activities amounted to approximately $6,944,000 for the six month ended June 30, 2010.   For the six months ended June 30, 2010, net cash provided by financing activities amounted to approximately $40,657,000 for the same period in 2009. The increase in net cash used was mainly the result of letter of credit deposit for purchase of imported raw materials. In 2009, the net cash provided by financing activities was primarily the result of short-term bank Loans.

We have entered into loan agreements with our primary lenders, Bank of China, China Construction Bank, Agricultural Bank of China, etc. under which we have term loans. As of December 31, 2009, we had an aggregate principal amount of $127,922,400 outstanding under the loan agreements, with maturity dates from January 2010 to October 2012 and interest rates from 4.78% to 8.13% per annum. $82,885,500 is classified as short term bank loans, $7,628,400 as current portion of long term bank loans and $37,408,500 as long term bank loans. The loan agreements contain customary affirmative and negative covenants and were mainly guaranteed by third parties and individual persons or secured by a lien on our property and equipment. As of December 31, 2009, we were in m aterial compliance with the terms of our loan agreements. As of June 30, 2010, we had an aggregate principal amount of approximately $83,961,000 outstanding under the loan agreements, with maturity dates from July 2010 to May 2011 and interest rates from 4.46% to 5.31% per annum . The loan agreements contain customary affirmative and negative covenants and were mainly guaranteed by third parties and individual persons or secured by a lien on our property and equipment. Historically, all debts due have been paid back by the Company in a timely manner.  All Short-Term Bank Loans are revolving loans whose terms (at due date of payment) are extended by the lender. As of June 30 , 2010, we were in material compliance with the terms of our loan agreement. As such, management expects all unpaid loan balances will be extended at due date.

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At June 30, 2010, we had a cash balance of approximately $ 39,331,000 .  Prior to the completion of our initial preferred stock financing, working capital had been primarily financed with various forms of short and long bank loan as outlined above.  As of June 30,2010, we had retained deficit of roughly $9,543 as compared to a retained deficit of approximately $10,665,000 as of December 31, 2009.

In order to develop our business to meet the increasing customer purchase orders, our management team plans to expand our manufacturing capacity to include a raw material pre-treatment facility, additional storage capacity and an asphalt production facility.  The estimated cost of our facility expansion and the addition of asphalt development is approximately $ 93.3 million including $ 5.8 million for purchasing land, $20 million for facility construction, $40 million for new equipment, $ 17.5 million for SBS project and $10 million for working capital for the whole business.  We received gross proceeds of $26.2 million from the Private Placement among which $20 million will be used for the purchase of land and $6.2 million will be used for general working capital. However, we still need additional cash resources to expand our manufacturing facility to include a raw material pre-treatment facility, additional storage capacity and an asphalt production facility. We plan to be funded through short-term borrowings, cash from operations and potential equity financing. However, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including, but not limited to:

· investors’ perception of, and demand for, securities of petrochemical manufacturing and supply companies;

· conditions of the U.S. and other capital markets in which we may seek to raise funds;

· our future results of operations, financial condition and cash flow;

· PRC governmental regulation of foreign investment in petrochemical manufacturing companies in China;

· economic, political and other conditions in China; and

· PRC governmental policies relating to foreign currency borrowings.”

If  we may not be able to obtain it at acceptable terms, or at all, our ability to increase our production capacity and expand our business could be adversely affected.

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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

On April 22, 2010, the board of directors of Keyuan Petrochemicals, Inc. (f/k/a Silver Pearl Enterprises, Inc., hereinafter referred to as “we”, “us,” ‘our” or the “Company”) dismissed The Hall Group, CPAs (“Hall”) as our independent auditors and engaged Patrizio & Zhao, LLC, an Independent Registered Public Accounting Firm (“Patrizio”), to serve as our independent auditors. Pursuant to Item 304(a) of Regulation S-K under the Securities Act of 1933, as amended, and under the Securities Exchange Act of 1934, as amended, we report as follows:

(a)   (i)      Hall was terminated as our independent registered public accounting firm effective on April 22, 2010.

(ii)     For the two most recent fiscal years ended December 31, 2009 and 2008, Hall’s report on the financial statements did not contain any adverse opinions or disclaimers of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles, other than for a “going concern” uncertainty.

(iii)     The termination of Hall and engagement of Patrizio were approved by our board of directors.

(iv)     Hall and the Company did not have any disagreements with regard to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure for the audited financials for the fiscal year ended December 31, 2009 and 2008, and subsequent interim period ended March 31, 2010 and through the date of dismissal, which disagreements, if not resolved to the satisfaction of Hall, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.

(v)      During the fiscal years ended December 31, 2009 and 2008, and subsequent interim period ended March 31, 2010 and through the date of dismissal, we did not experience any reportable events, except that in its letter to us in 2009 pursuant to “Statement on Auditing Standards (SAS) 112: Communicating Internal Control Related Matters,” Hall, our former auditor, identified the following material weakness of our internal controls, which constitute a reportable event under Item 304(a)(1)(v) of Regulation S-K:

·   Reliance on financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions;

·   Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

On April 22, 2010, Silver Pearl entered into a Share Exchange Agreement, by and among Keyuan International Group Limited (“Keyuan International”), a company organized under the laws of the British Virgin Islands, Delight Reward Limited, the sole shareholder of Keyuan International and a company organized under the laws of the British Virgin Islands (the “Keyuan International Shareholder”), and Denise D. Smith, our former principal stockholder (“Smith”). Pursuant to the terms of the Exchange Agreement, the Keyuan International Shareholder transferred to us all of the issued and outstanding ordinary shares of Keyuan International (the “Keyuan International Shares”) in exchange for the issuance of 47,658 shares of our Series M preferred stock, par value $0.001 per share (the “Seri es M Preferred Stock”) (such transaction is sometimes referred to herein as the “Share Exchange”). The Series M shares vote with the common stock on an as converted basis and are convertible into 47,658,000 shares of common stock upon the Company’s shareholders approving an increase in authorized common stock to at least 100,000,000 shares. As a result of the Share Exchange, we are now the holding company of Keyuan Plastics Co., Ltd., the operating subsidiary of Keyuan International organized in the People’s Republic of China (“China” or the “PRC”) and engaged in manufacturing and supplying various petrochemical products in China.

The Share Exchange resulted in a change-in-control of Silver Pearl as the Company’s shareholders have acquired the majority ownership of the combined entity. As a result, the accounting staff of our operating entity in China became the primary accounting staff of our company. In order to remedy our accounting staff’s lack of knowledge of U.S. accounting standards and requirements, we hired a CFO with significant U.S. accounting and finance experience. Our CFO and our accounting staff are working on documenting our internal controls and we expect such documentation to be complete in 2010. Testing of internal controls will be conducted thereafter. If our market capitalization exceeds $75 million in 2011, we will be required to be in compliance with the Sarbanes-Oxley Act Section 404 in the fiscal year of 2011. However our CFO and accounting staff have already taken actions to start our Sarbanes-Oxley Action 404 compliance project. We expect this compliance project will enhance the Company’s internal controls significantly. We are also looking to fill additional financial staff positions. Specifically, we believe that one or more accounting staff trained in U.S. GAAP would improve our controls and procedures, specifically with regard to the preparation of our financial statements. Finally, we have recently appointed an audit committee comprised of independent members of our board of directors, including an audit committee chairman, whom we believe to meet the SEC’s definition of a “financial expert” in the Sarbanes-Oxley Act Section 406 and 407. . We believe that the increased oversight and experience provided by the audit committee will assist us in the establishment and oversight of our controls and procedures. Although we believe that these corrective steps will remediate the material weaknesses discuss ed above when all of the additional financial staff positions are filled, we cannot assure you that this will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in our internal control. We cannot make assurances that we will not identify additional material weaknesses in our internal control over financial reporting in the future

(b)   (i)      On April 22, 2010, we engaged Patrizio to serve as our independent registered public accounting firm.

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(ii)     Prior to engaging Patrizio, we have not consulted Patrizio regarding the application of accounting principles to a specified transaction, completed or proposed, the type of audit opinion that might be rendered on our financial statements or a reportable event, nor did us consult with Patrizio regarding any disagreements with our prior auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure, which disagreements, if not resolved to the satisfaction of the prior auditor, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports.

(iii)   We did not have any disagreements with Patrizio, and therefore, did not discuss any past disagreements with Patrizio.

(c)   We requested Hall to furnish with a letter addressed to the SEC stating whether it agrees with the statements made by us regarding Hall.

We included information about our change in auditors in our Current Report on Form 8-K that we filed on April 28, 2010 and  provided Hall with a copy of such disclosure.  Pursuant thereto, we received a letterform Hall stating that they agree with the above statements. We received an SEC Comment regarding that 8-K and filed an amendment to our 8-K to respond to same on May 21, 2010.

Directors And Executive Officers

The following table and text set forth the names and ages of all directors and executive officers as of August 31 , 2010. The Board of Directors is comprised of only one class. All of the directors will serve until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal.  There are no family relationships among our directors and executive officers. Also provided herein are brief descriptions of the business experience of each director, executive officer and advisor 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.

As of the closing of the Share Exchange on April 22, 2010, Ms. Smith resigned as Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President and Secretary, effective immediately. Our Board of Directors appointed Chunfeng Tao to serve as President, Chief Executive Officer, and Chief Financial Officer effective immediately at the closing of the Share Exchange.

Prior to the consummation of the Share Exchange, our Board of Directors was comprised of one director, Ms. Smith. Effective at the closing of the Share Exchange, Ms. Smith resigned from her position as Chairman and tendered her resignation as a member of our Board; prior to resigning as Chairman, Ms. Smith appointed Mr. Chunfeng Tao to serve as Chairman of our Board. This change in our Board was effective on May 10, 2010, which was 10 days after we mailed a schedule 14(f) to our shareholders regarding same. 

In anticipation of our growth in the China petrochemical industry, we were looking for a qualified individual to server as our Chief Financial Officer. On May 7, 2010, the Board of Directors appointed Ms. Aichun “Angela” Li as our Chief Financial Officer, effective May 7, 2010.

Set forth below is information regarding our current directors and executive officers.

Name	Age	Position
Chunfeng Tao	43	Chairman, President, Chief Executive Officer, and Secretary
Aichun Li	38	Chief Financial Officer
Gerry Goldberg	67	Independent Director
Michael J. Rosenberg	66	Independent Director
Dishen Shen	72	Independent Director
Xin Yue	46	Director

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Mr. Chunfeng Tao, Chairman, President and Chief Executive Officer.      Mr. Tao has been a member of our Board of Directors and the CFO of the Company since April 22, 2010. Mr. Tao has over 20 years’ extensive experience in the petrochemical industry. Between 2008 to 2010, he served as President of Ningbo Plastics.  Between 2005 and 2008, he served as President of Ningbo Hebang Chemical Co., a company with annual revenue of RMB 10 billion which he managed and built to an annual production capacity of 250,000 MT for aromatic and heavy oil cracking products. B etween 2002 and 2005, Mr. Tao served as Executive Vice President of Ningbo Daxie Liwan Petrochemcials Co., a company with annual revenue of RMB 6 billion. Under his management, the company’s annual production was increased to 500,000 MT of high grade asphalt. Between 1989 and 2002, Mr. Tao served in various senior management and technical positions at Sinopec Zhenhai Refining & Chemical Co., the largest base for crude oil processing and sour crude oil processing in China, and won over 30 technological innovations, management awards and distinction during his service period. Mr. Tao received his Bachelor of Science in Petroleum Processing from Guangdong Petrochemical College and Master of Science in Chemical Engineering from China University of Petrochemical.

Ms. Aichun Li, Chief Financial Officer. Ms. Li has been the CFO of the Company since May 7, 2010. Ms. Li has a decade of diverse experience in Corporate Finance, Accounting and Tax working with companies in the banking, manufacturing and consulting industries. Between 2006-2010 , Ms. Li was a member of the CFO Group with Bank of America, where she managed the financial reporting, forecasting and planning for several multi-million P&L accounts. Between 2003-2006 , Ms. Li served as a senior accountant with Nucor Corporation, one of the leading steel manufacturing companies, where she provided internal financial and tax consulting to 36 divisions and various subsidiaries. Prior to joining Nucor, Ms. Li was a consultant with Deloitte & Touche LLP in the analysis of financial reports and complex tax planning and compliance for a variety of organizations. Ms. Li also served as a member of the board of directors of Huifeng Bio-Pharmaceutical Technology Inc. in Xi’an, China. Ms. Li holds an MBA degree from the Fuqua School of Business at Duke University and a Master of Science in Accounting from Wake Forest University. Ms. Li is also a Certified Public Accountant.

Mr. Gerry Goldberg, director. Mr. Goldberg has been a member of our Board of Directors since July 1, 2010. Mr. Goldberg currently has served as senior partner in the accounting firm Schwatrz Levitsky Feldman llp, based in Toronto and ranked among the top ten accounting firms in Canada since 1993 . At the firm, he heads the US Public Company audit division, and is actively involved in the audits of various Canadian, US, Chinese and other foreign companies liste d in the US and Canada. He is or has been a director of China Wind Systems Inc. (NasdaqGM: CWS), TITE Technologies Inc. (TSX VENTURE: JTI.V.v), Baymount Inc., (TSX VENTURE: GEE.v), Sagittarius Capital Corporation (TSX VENTURE: SCX.P.v), Prime City One Capital Corp. (TSX VENTURE: PMO) (Formerly Scorpio Capital Corp.) and Pinetree Capital Ltd. ( TSX-PNP). He was a former partner in the predecessor firm to Grant Thornton for over ten years. Mr. Goldberg received his CTA from the University of South Africa and is a Licensed Public Accountant and a Member of the Institute of Chartered Accountants of Ontario, Canada.

Mr. Michael J. Rosenberg, director. Mr. Rosenberg has been a member of our Board of Directors since July 1, 2010. Starting from January, 2010 , Mr. Rosenberg has been  a managing director of Saugatuck Energy where he is responsible for identifying investment opportunities in Asia.  He currently also serves as a president at MJR Consultants from June, 2008, providing consulting service to various energy and trading companies relating to potential mergers and acquisitions. Between 2006 to 2008,  Mr. Rosenberg  managed a global trading for petrochemicals and derivatives for Semp ra Energy Trading, managed a trading organization for bulk petrochemicals and gasoline additives for MG Petrochemicals Corporation and established a global petrochemicals trading operation for Philipp Brothers, which later became Phibro Energy AG. Between 1994-2006, he was founder and chief executive officer of Swiss-based Oceana Petrochemicals.  . He received his B.S. Business Administration in Marketing from Long Island University.

Mr. Dish Shen, director. Mr. Shen has been a member of our Board of Directors since July 1, 2010. Mr. Shen is a senior petrochemical engineer with nearly 40 years of oil refining and petrochemical industry expertise and management experience and has served in a variety of progressive leadership roles in planning and economic development in Zhejiang Province, focusing primarily on development of the petrochemical industry, and serves today as a member of the People's Committee of Zhejiang Province. Since 2005, he has been serving as a senior counsel for Zhejiang Provincial Association Of Engineering Consultants, the institute providing consulting and administration service . He graduated from Beijing Petroleum Institute with a major in oil refining systems.

Mr. Xin Yue, director. Mr. Yue has been a member of our Board of Directors since July 1, 2010. Mr. Yue currently is co-founder and chief executive officer of Cmark Capital Co., Ltd from 2005.  Previously he also co-founded Golden Spider Co., Ltd., and New Shengtong Technology Co., Ltd. Mr. Yue serves as an advisor to Tianyin Pharmaceutical Co., Inc. and Jpak Group Inc. and president at a Shanghai subsidiary of Jiubai Group Co., Ltd. He received his Bachelor of Science in Economics and Management at Capital Economic and Trade University and his MBA in Finance from Baruch College at The City University of New York.

Significant Employees

The following are employees who are not executive officers, but who are expected to make significant contributions to our business:

Dr. Jingtao Ma, Executive Vice President.    Dr. Ma joined the Company in 2007 and he  has over 20 years’ experience in corporate management, research & development, sales & marketing, and business development. Dr. Ma is responsible for the sales & marketing and raw material procurement of the Company. Between 1992 and 2007, he served in management and technical positions at Sinopec Zhenhai Refining & Chemical Co. in various functions including manufacturing and operations, and chemical and technical analysis.  Dr. Ma received his Master of Science and Doctorate in Physical Chemistry from Lanzhou Chemistry & Physi cs Research Institute of CSA.

Mr. Shifa Wang, Vice President & Chief Engineer.   With 30 years’ management experience in petrochemical technology and manufacturing, and specialty in oil refining and catalytic cracking, Mr. Wang has been responsible for technology, and research and development of the Company since 2009 . Between 2007 and 2009, Mr. Wang served as General Manager at Guangdong Yingchang Heavy Road Asphalt Co., Ltd, responsible for managing and overseeing the overall business operations of the company. Between 1981 and 2002, he served as the Chief Engineer at Sinopec Anqing Refinery Co., Ltd., responsible for technology development and research and development. Between 2003 and 2006, he was the Head of Operations for Phase II production line expansion, including construction of 500,000 MT heavy oil catalytic cracking facility, 150,000 MT gas fractionation facility, 10,000 MT sulphur recovery facility and 30,000 MT polypropylene facility, at Guangdong Tianyi Group Co., Ltd.  Mr. Wang received his Bachelor of Science from Chemical Engineering Department of China Petroleum University and Master of Art in Enterprise Management from Qinghua University.

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Mr. Weifeng Xue, Vice Present of Accounting.      Mr. Xue is in charge of the accounting and financing of the Company from 2007 . He has more than 20 years experience in accounting and finance, account settlement, capital planning, commercial bank, corporate credit, loan operations and management. Between 2001 and 2006, he served as Supervisor of Accounting and Finance at Aux Group Co., Ltd., a privately-held electronics manufacturer. Between 1993 and 2001, he acted as Finance Director at China Agriculture Bank, Ningbo branch.  Mr. Xue received his Bachelor of Science in Economics from Hangzhou Electronics & Industrial Institute in 1990.

Mingliang Liu, Vice President of Manufacturing.  Mr. Liu  has been  responsible for overseeing the manufacturing by the Company since 2009 . Mr. Liu has over 30 years of experience in petrochemical manufacturing and production management and specializes in oil refining, heavy oil cracking and crude oil processing. Between 1975 and 2009, he served in various supervisory and managerial positions at Sinopec Zhenhai Refining & Chemical Co. Mr. Liu majored in Economics & Management at Zhejiang CCP Institute.

Board Committees

We do not have any independent directors and our board of directors is in the process of searching for suitable candidates. Our board of directors does not have any committees, as companies whose securities are traded on the OTC Bulletin Board are not required to have board committees. However, at such time in the future that we appoint independent directors on our board we expect to form the appropriate board committees.

Employee Agreements

We have entered into employment agreements with each of the PRC subsidiary’s employees, officers and directors.

On May 1, 2007, Keyuan Plastics entered into a non-fixed term employment agreement with Mr. Chunfeng Tao, pursuant to which, Keyuan Plastics hired Mr. Tao as its general manager effective May 1, 2007. The compensation in connection with this employment shall be commensurate with Mr. Tao’s duties and responsibility as the general manager and is subject to mutual agreement between Mr. Tao and Keyuan Plastics.  On May 10, 2007, Keyaun Plastics entered into the similar employment agreement with Dr. Jingtao Ma to hire Dr. Ma as its vice executive general manager, effective May 10, 2007. On the same day, Keyuan Plastic entered into the similar employment agreement with Mr. Weifeng Xue to hire Mr. Xue as its vice general manager.On February 2, 2009, Keyaun Plastic entered with another similar agreement with Mr. Mingliang Liu to hire him as its vice general manager. On October 21, 2009, Mr. Shifa Wang was hired by Keyuan Plastics as its vice technical general manager and chief engineer and same employment agreement was signed between Keyuan Plastics and Mr. Wang.

On May 1, 2007, Keyuan Plastics also entered into a confidentiality and non-compete agreement with Mr. Tao, pursuant to which, Mr. Tao agrees, among others, (i) that he will keep in confidence all Keyuan Plastics confidential information obtained in connection with such employment; (ii) that Keyuan Plastics has the sole ownership right to all Keyuan Plastics intellectual properties, either developed by Mr. Tao individually or collectively with other parties during his employment term or within one (1) year following the termination of his employment; and (iii) that within two (2) years following the termination of his employment, he will not, directly or indirectly, engage in any business or other activities related to Keyuan Plastics confidential information that he obtained during his last five (5) years of employment (or such l ess term) with Keyuan Plastics.  On October 21, 2009, the similar confidentiality and non-compete agreement was entered into between Keyuan Plastics and Mr. Shifa Wang.

On May 7, 2010, we entered into a three-year employment agreement with Aichun Li, our then Chief Financial Officer. The agreement was effective as of May 7, 2010,  at a base $150,000 subject to adjustment by the Board, plus the right, at the Board’s discretion, to participate in all management bonuses and incentive plan, and the right to participate in all employee benefit plans, to the extent maintained by the Company. The employment agreement also contained standard provisions concerning confidentiality, non-competition and non-solicitation.

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Executive Compensation

Summary Compensation Table of Named Executive Officers

The following table sets forth all cash compensation paid by us, as well as certain other compensation paid or accrued, in 2009 and 2008, to each of the following named executive officers.

Name and Principal Position	Fiscal Year	Salary ($)		Bonus ($)		Option Awards ($)		All Other Compensation ($)		Total ($)
Chunfeng Tao,	2009		73,147.60		-		-		-		73,147.60
(President, Chief Executive Officer,	2008		65,886.00		-		-		-		65,886.00
Chief Financial Officer)
Jingtao Ma (1)	2009		43,888.60		-		-		-		43,888.60
(Vice President)	2008		36,603.00		-		-		-		36,603.00
Weifeng Xue(1)	2009		43,888.60		-		-		-		43,888.60
(Vice President of Accounting)	2008		36,603.00		-		-		-		36,603.00

(1)    Although they are not executive officers, based on upon the compensation received, Mr. Ma and Mr. Xue qualify as named executive officers for purposes of this table.

Outstanding Equity Awards at the End of the Fiscal Year

We do not have any equity compensation plans and therefore no equity awards are outstanding as of our year fiscal year end.

Director Compensation

Our directors are reimbursed for expenses incurred by them in connection with attending Board of Directors’ meetings. They do not receive any other compensation for serving on the Board of Directors, but may participate in our incentive compensation program, once such a program is established.

Bonuses and Deferred Compensation

We do not have any bonus, deferred compensation or retirement plan. All decisions regarding compensation are determined by our Board of Directors.

Options and Stock Appreciation Rights

We do not currently have a stock option or other equity incentive plan. We may adopt one or more such programs in the future.

Payment of Post-Termination Compensation

The Company does not have change-in-control agreements with any of its directors or executive officers, and the Company is not obligated to pay severance or other enhanced benefits to executive officers upon termination of their employment.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of August 31, 2010 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of August 31, 2010, we had 3,18 1,504  shares of Common Stock issued and outstanding , 6,738,336 shares of Series A Preferred Stock issued and outstanding,  and 47,658 shares of Series M preferred stock issued and outstanding, which is convertible into 47,658,000 shares of Common Stock and votes on as converted basis with the Common Stock.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of May 20, 2010.   For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of August 31 , 2010 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.  Notwithstanding the foregoing, because the Series M Preferred Stock votes on as converted basis with the Common Stock, we have included the owners of such stock in this table.  Accordingly, we calculate beneficial ownership for pursposes of this table as follows:

A +B

_______

X + B

Where:

A = individual’s current holders of common stock

B = number of shares of common stock individual may own within 60 days

X= number of common stock currently outstanding, including the shares of common stock underlying the Series M Preferred Stock since such class votes on as converted basis with the common.

Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below isQingshi Industrial Park, Ningbo Economic & Technological Development Zone, Ningbo, Zhejiang Province, P. R. China 31580.

Name of Beneficial Owner	Amount (number of shares)			Percentage of Outstanding Shares of Common Stock
Delight Reward Limited(1)		47,658	(2)		93.74	%(2)
Chunfeng Tao(3)		0			0	%
Aichun Li		0			0	%
All Directors, Executive Officers and Director, As a Group (2 persons)

(1) Delight Reward Limited is owned by Apex Smart Limited (45.6132%), Best Castle Investments Limited (23.2523%), Chance Brilliant Holdings Limited (20.5694%), Harvest Point Limited (5.3896%) and Strategic Synergy Limited (5.1755%). Mr. Brian Pak-Lun Mok is the controlling person of Apex Smart Limited, Harvest Point Limited and Strategic Synergy Limited (subject to the share transfer agreement described in Footnote 2 and the discussion below). Mr. O. Wing Po is the controlling person of Best Castle Investments Limited (subject to the share transfer agreement described in more detail below). Mr. Lo Kan Kwan is the controlling person of Chance Brilliant Holdings Limited (subject to the share transfer agreement described in more detail below).

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(2) In connection with the Share Exchange, Delight Reward received 47,658 shares of Series M Preferred Stock that will convert into 47,658,000 shares of Common Stock at such time when we amend our Articles of Incorporation to increase the number of authorized shares to one hundred million (100,000,000).

(3) Pursuant to a share transfer agreement, Mr. Chunfeng Tao, our Chairman, Chief Executive Officer and President has an option, subject to certain performance targets, to purchase from Mr. Brian Pak-Lun Mok, the current sole shareholder of Apex Smart Limited (the current owner of 45.6132% of the share capital of Delight Reward Limited), up to 100% of Apex Smart Limited’s equity, which, upon exercise, would entitle Mr. Tao to own 45.6132% of the equity of Delight Reward Limited. Accordingly, upon exercise of such option, Mr. Tao will indirectly (through his 45.6132% ownership of Delight Reward Limited) own and control 21,738,338 shares of our Common Stock after giving effect to the conversion of the Series M Preferred Stock. However, based upon the terms of the share transfer agreement, the earliest Mr. Tao may exercise the option is October 2010.

Transactions With Related Persons, Promoters And Certain Control Persons

 Lock Up Agreements

All of the shares of Common Stock to be owned by the management shareholders of the Company will be restricted from public or private sale for a period of six (6) months following the effective date of the registration statement providing for the resale of the Registrable Shares under the Securities Act; following such six (6) month period, management shall be allowed to sell up to 1/12 of their holdings each month for the next twelve months.

Share Escrow Agreement

We also entered into an escrow agreement with the Investors of the Private Placement, pursuant to which we placed 5,000 shares of Series M Preferred Stock in an escrow account. The 5,000 shares of Series M Preferred Stock will automatically convert into 5,000,000 shares of Common Stock (the “Escrow Shares”) after we amend our Articles of Incorporation to increase our authorized Common Stock to one hundred million (100,000,000) shares.

With respect to the 2010 performance year, if we achieve less than 95% of the 2010 performance threshold, then the Escrow Shares for such year will be delivered to the Investors in the amount of 500,000 shares of Common Stock for each full percentage point by which such threshold was not achieved up to a maximum of 5,000,000 shares of Common Stock.

Share Transfer Agreements

The controlling persons of each of the five shareholders of Delight Reward Limited have entered into certain Share Transfer Agreements whereby the controlling persons have each agreed to transfer their interests to another beneficiary, subject to certain performance targets being met.  The performance targets are: at least $39 million of our gross revenue for the three months commencing from July 2010 to September 2010; at least $40 million of our gross revenue for the three months commencing from October 2010 to December 2010; and, at least $41 million of our gross revenue for the three months commencing from January 2011 to March 2011.

Pursuant to these agreement, (i) Mr. Brian Pak-Lun Mok, the sole shareholder of Apex Smart Limited, granted to Mr. Tao an option to acquire the 50,000 ordinary shares of Apex Smart Limited if the performance targets are met; (ii) Mr. O. Wing Po, the sole shareholder of Best Castle Investments Limited, granted to Mr. Jicun Wang an option to acquire the 50,000 ordinary shares of Best Castle Investments Limited if the performance targets are met; (iii) Mr. Lo Kan Kwan, the sole shareholder of Chance Brilliant Holdings Limited, Mr. Peijun Chen an option to acquire the 50,000 ordinary shares of Chance Brilliant Holdings Limited if the performance targets are met; (iv) Mr. Brian Pak-Lun Mok, the sole shareholder of Harvest Point Limited, granted to Mr. Xin Yue an option to acquire the 50,000 ordinary shares of Harvest Point Limited if t he performance targets are met; and, (v) Mr. Brian Pak-Lun Mok, the sole shareholder of Strategic Synergy Limited, granted to Mr. Yue an option to acquire the 50,000 ordinary shares of Strategic Synergy Limited if the performance targets are met. 

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Pursuant to each of these agreements, the option to acquire theses shares shall vest at a rate of one-third (1/3) for each performance target that is met.

A copy of each of these Share Exchange Agreements is attached hereto as Exhibit 10.7 – 10.11.

Review, Approval and Ratification of Related Party Transactions

Given our small size and limited financial resources, we had not adopted, prior to the Share Exchange, formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, directors and significant shareholders. However, we intend that such transactions will, on a going-forward basis, be subject to the review, approval or ratification of our board of directors, or an appropriate committee thereof.

Promoters and Certain Control Persons

None of our management or other control persons were “promoters” (within the meaning of Rule 405 under the Securities Act), and none of such persons took the initiative in the formation of our business or received any of our debt or equity securities or any of the proceeds from the sale of such securities in exchange for the contribution of property or services, during the last five years.

Director Independence

Presently, we are not required to comply with the director independence requirements of any securities exchange since we are listed on the Over the Counter Bulletin Board, which does not have any such listing standards. In determining whether our directors are independent, however, we intend to comply with the rules of the NYSE Amex (formerly the American Stock Exchange). The board of directors also will consult with counsel to ensure that the board of directors’ determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors, including those adopted under the Sarbanes-Oxley Act of 2002 with respect to the independence of audit committee members. The NYSE Alternext listing standards define an “independent director” generally as a pe rson, other than an officer of a company, who does not have a relationship with the company that would interfere with the director’s exercise of independent judgment.

Currently we do not have any independent directors serving on the board and do not satisfy the “independent director” requirements of the NYSE Amex, which requires that a majority of a company’s directors be independent. Our board of directors intends to appoint additional members, each of whom will satisfy such independence requirements.

ITEM 11 A.  MATERIAL CHANGES

None.

ITEM 12.  INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

None.

Item 12A.  DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by that director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether that indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth estimated expenses we expect to incur in connection with the sale of the shares being registered. All such expenses are estimated except for the SEC and FINRA registration fees.

SEC registration fee		3047.26
Printing expenses	$	0.00
Fees and expenses of counsel for the Company	$	15,000
Fees and expenses of accountants for Company	$	75,000
Miscellaneous	$	5,000
Total	$	98,047.26

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our officers and directors are indemnified as provided by the Nevada Revised Statutes (‘NRS”) and our bylaws.

Under the NRS, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company’s articles of incorporation that is not the case with our articles of incorporation. Excepted from that immunity are: 

(1)  a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;

(2)  a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);

(3)  a transaction from which the director derived an improper personal profit; and

(4)  willful misconduct.

 Our Articles of Incorporation permits us to indemnify our officers and directors to the fullest extent authorized or permitted by law in connection with any proceeding arising by reason of the fact any person is or was our officer or director. Notwithstanding this indemnity, a director shall be liable to the extent provided by law for any liability incurred by him by his own fraud or willful default.

Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law. Our bylaws provide that we will advance all expenses incurred to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was our director or officer, or is or was serving at our request as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request. This advance of expenses is to be made upon receipt of an undertaking by or on behalf of such person to repay said amounts should it be ultimately determined that the perso n was not entitled to be indemnified under our bylaws or otherwise.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, we effected the following transactions 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 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.

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In connection with the Exchange Agreement, on April 22, 2010, we issued an aggregate of 47,568 shares of our Series M Preferred Stock to the Keyuan International Shareholder. We received in exchange from the Keyuan International Shareholder 50,000 shares of Keyuan International, representing 100% of the issued and outstanding shares of Keyuan International, which exchange resulted in Keyuan International becoming our wholly-owned subsidiary.  The issuance of such securities was exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

As more fully described in Item 1.01 above, on April 22, 2010, immediately following the Share Exchange, we consummated the Private Placement for the issuance and sale of Units, consisting of an aggregate of (a) 5,954,058 shares of Series A Preferred Stock, (b) 661,562 Shares, (c) three-year Series A Warrants to purchase up to 661,562 Series A Warrant Shares, and (d) three-year Series B Warrants to purchase up to 661,562 Series B Warrant Shares, for aggregate gross proceeds of approximately $23.2 million.  In connection with the Final Closing on May 17, 2010, the Company issued 784,278 shares of Series A Preferred Stock, 87,142 shares of Common Stock, 87,142 Series A Warrants and 87,142 Series B Warrants to the Investors.  The issuance of the Units, the Series A Pref erred Stock, the Shares, the Series A Warrants, the Series B Warrants and the placement agent warrants pursuant to the Private Placement were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Securities Act.

On April 19, 2010, we issued 88,000 shares of common stock to Hayden Communications International, for the investor related services they will provide to us from April 19, 2010 to April 18, 2011.

The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

On April 19, 2010,  we issued 48,000 shares of common stock to Chesapeake Group, Inc, for the investor related services they will provide to us in a period of 12 months. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

On April 19, 2010,  we issued 50,000 shares of common stock to Hampton Growth Resources, LLC, for the investor related services they will provide to us for a 12 months period. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

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ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBITS

The following exhibits are filed as part of this registration statement:

Exhibit No.	Description
2.1	Share Exchange Agreement dated April 22, 2010 (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on April 28, 2010)
2.2	Agreement and Plan of Merger (incorpaoted by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on May 19, 2010)
3.1	Amended Articles of Incorporation of Keyuan Petrochemicals, Inc. (f/k/a Silver Pearls, Inc.), filed with the Secretary of State of Nevada.
3.2	Articles of Merger (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2010)
3.3	Amended Bylaws of Keyuan Petrochemicals, Inc. dated June 29, 2010 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 7, 2010)
4.1	Certificate of Designation of Rights and Preferences of Series A Preferred Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on April 28, 2010)
4.2	Certificate of Designation of Rights and Preferences of Series M Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on April 28, 2010)
5.1	Consent of Leser, Hunter, Taubman & Taubman (Filed herewith)
10.1	Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on April 28, 2010)
10.2	Registration Rights Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on April 28, 2010)
10.3	Form of Securities Escrow Agreement (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed on April 28, 2010)
10.4	Lock-up Agreement with Delight Reward Limited dated April 22, 2010 (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed on April 28, 2010)
10.5	Form of Series A Warrant (incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed on April 28, 2010)
10.6	Form of Series B Warrant (incorporated by reference to Exhibit 10.6 of the Registrant’s Form 8-K filed on April 28, 2010)
10.7	Share Transfer Agreement between Brian Pak-Lun Mok and Chunfeng Tao, dated April 2, 2010 (incorporated by reference to Exhibit 10.7 of the Registrant’s Form 8-K filed on April 28, 2010)
10.8	Share Transfer Agreement between O. Wing Po and Jicun Wang, dated April 2, 2010 (incorporated by reference to Exhibit 10.8 of the Registrant’s Form 8-K filed on April 28, 2010)
10.9	Share Transfer Agreement between Lo Kan Kwan and Peijun Chen, dated April 2, 2010 (incorporated by reference to Exhibit 10.9 of the Registrant’s Form 8-K filed on April 28, 2010)
10.10	Share Transfer Agreement between Brian Pak-Lun Mok and Xin Yue, dated April 2, 2010 (incorporated by reference to Exhibit 10.10 of the Registrant’s Form 8-K filed on April 28, 2010)
10.11	Share Transfer Agreement between Brian Pak-Lun Mok and Xin Yue, dated April 2, 2010.
10.12	Employment Agreement by and between Chunfeng Tao and Keyuan Plastics Co., Ltd., dated May 1, 2007 (English translation) (incorporated by reference to Exhibit 10.12 of the Registrant’s Form 8-K filed on April 28, 2010)
10.13	Confidentiality and Non-Compete Agreement by and between Chunfeng Tao and Keyuan Plastics Co., Ltd., dated May 1, 2007 (English translation) (incorporated by reference to Exhibit 10.13 of the Registrant’s Form 8-K filed on April 28, 2010)
10.14	Employment Agreement by and between Jingtao Ma and Keyuan Plastics Co., Ltd.,, dated May 10,2007(English translation).
10.15	Employment Agreement by and between Weifeng Xue and Keyuan Plastics Co., Ltd., dated May 10, 2007(English translation).
10.16	Employment Agreement by and between Mingliang Liu and Keyuan Plastics Co., Ltd., dated February 2, 2009(English translation).
10.17	Employment Agreement by and between Shifa Wang and Keyuan Plastics Co., Ltd., dated October 21,2009(English translation).
10.18	Confidentiality and Non-Compete Agreement by and between Shifa Wang and Keyuan Plastics Co., Ltd., dated October 21, 2009(English translation).
10.19	Employment Agreement by and between Aichun Li and Silver Pearl Enterprises, Inc, dated May 7, 2010.
10.20	Placement Agent Agreement by and between Tripoint Global Equities, LLC., and Keyuan Plastics Co., Ltd., dated March 18, 2009.

10.21	Independent Director Agreement of Gerry Goldberg, dated July 1, 2010.
10.22	Independent Director Agreement of Michael Rosenberg, dated July 1, 2010.
10.23	Independent Director Agreement of Dishen Shen, dated July 1, 2010.
10.24	Director Agreement of Yin Xue, dated July 1, 2010.
10.25	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources,  dated August 18, 2010.
10.26	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010.
10.27	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010.
10.28	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010.
10.29	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Ningbo Litong Petrochemicals Co., Ltd.
10.30	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Wenzhou Zhongyou Fuel Chemical Co., Ltd.
10.31	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Dalian West Pacific Petrochemicals Co., Ltd.
10.32	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Qingdao Lidong Chemical Co., Ltd.
10.33	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and  Mercuria Energy Trading PTE Ltd.

23.1	Consent of Leser, Hunter, Taubman & Taubman (Included in Exhibit 5.1 hereto)
23.2	Consent of Patrizio & Zhou, LLC (filed herewith)

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ITEM 17.  UNDERTAKINGS

The undersigned registrant hereby undertakes to:

(1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and

(iii) Include any additional or changed material information on the plan of distribution.

(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4) 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 foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange 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 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 its counsel the matter has been settled by controlling precedent, submit to a court of  appropriate jurisdiction 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.

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SIGNATURES

 Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has and authorized Amendment No.  2 to this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Qingdao, China on September 1 , 2010.

By:	/s/ Chunfeng Tao
	Chunfeng Tao Chief Executive Officer, Chairman and Director

By:	/s/ Aichun Li
	Aichun LI Chief Finanical Officer

In accordance with the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 was signed by the following persons in the capacities and on the dates stated.

Signature	Title	Date
/s/ Chunfeng Tao	Chairman, President, Chief Executive Officer and Director	September 1, 2010
Chunfeng Tao
/s/ Aichun  Li	Chief Financial Officer	September 1, 2010
Aichun  Li
/s/ Gerry Goldberg	Director, Audit Committee Chairman and	September 1, 2010
Gerry Goldberg	Compensation Committee Chairman

/s/ Michael Rosenberg	Director, Nominating and Corporate	September 1, 2010
Michael Rosenberg	Governance Committee Chairman
/s/ Dishen Shen	Director	September 1, 2010
Dishen Shen
/s/ Xin Yue	Director	September 1, 2010
Xin Yue

-123-

EX-5.1 2 fs1a2ex5i_keyuan.htm CONSENT OF LESER, HUNTER, TAUBMAN & TAUBMAN

Exhibit 5.1

 Leser, Hunter, Taubman & Taubman

17 State Street, Suite 2000

New York, New York 10004

(212) 732-7184 Fax: (212) 202-6380

E-mail: ltaubman@lhttlaw.com

September 1, 2010

KEYUAN PETROCHEMICALSKEYUAN PETROCHEMICALS, INC.

15 Xinghua Road

Qingdao, Shandong Province

P.R. China 266401

Ladies and Gentlemen:

We have acted as counsel to KEYUAN PETROCHEMICALS, INC. a Nevada company (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of Amendment No. 2 to this Registration Statement on Form S-1 (the “Registration Statement”), relating to the proposed sale by the selling shareholders listed therein (the “Selling shareholders”) of 9,939,203 shares of the Company’s common stock (the “Common Stock”).  

In so acting, we have examined and relied upon the originals or copies, certified or otherwise identified to our satisfaction, of such Company records, documents, certificates and other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. Based upon the foregoing and such examination of law as we have deemed necessary, we are of the opinion that the Common Stock to be offered by the Selling shareholders, when sold under the circumstances contemplated in the Registration Statement, will be legally issued, fully paid and non-assessable.

The opinions we express herein are limited to matters involving the Nevada corporate law and the federal laws of the United States and are further expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise as to any other matters relating to the Company or the Common Stock.

We consent to the use of this letter as an Exhibit to the Registration Statement and to the use of our name under the heading “Legal Matters” included in the Prospectus forming a part of the Registration Statement.

Sincerely,

Leser Hunter Taubman & Taubman

By: /s/ Louis E. Taubman

Louis E. Taubman, Partner

EX-10.21 3 fs1a2ex10xxi_keyuan.htm INDEPENDENT DIRECTOR AGREEMENT OF GERRY GOLDBERG

Exhibit 10.21

KEYUAN PETROCHEMICALS, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Gerry Goldberg, a citizen of Canada, with a permanent residence at ______________________ (the “Independent Director”).

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

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(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) posse ss an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

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4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

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(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge o f its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b)           If indemnification is requested under Section 7(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

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9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection wit h each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

12.           REMEDIES OF INDEPENDENT DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

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(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14.           INSURANCE. The Company shall obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

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(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

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20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

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26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
Keyuan Petrochemicals, Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Gerry Goldberg
Name:  Chunfeng Tao	Name: Gerry Goldberg
Title:   CEO

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SCHEDULE A

I           POSITION:

INDEPENDENT DIRECTOR.

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending in person or telephonically all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $3,000 per month during the Term (the “Base Fee”).  In addition to the Base Fee, the Company agrees to pay the Independent Director a fee in cash of $1,000 per month (the Audit Committee Fee”), as long the Independent Director remains Chairman of the A udit Committee of the Company. The Base Fee and the Audit Committee Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

STOCK. During the term of the Independent Director’s service as a director or member of any committee of the Board, the Independent Director shall be granted an option to purchase 40,000 shares of common stock of the Company on the date of execution of this Agreement, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. 50% of the option shall vest at the end of 12 months  of the Effective Date.  The remainder of the option shall vest at the end of 24 months of the Effective Date, provided that the Independent Director is re-elected for successive one year terms at the end of 12 months of the Effective Date. Any such stock grant shall be in accordance with the equity incentive plans as may be adopted by the Company, fr om time to time and shall expire 5 years from the date of the grant. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the equity incentive plans.

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  The Independent Director shall be allowed to travel Business Class or better on all flights from the United States and/or Canada  to overseas destinations with the Company prior written consent. In addition, the Independent Director shall rely on the Company to arrange all hotel accommod ations in connection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made within 30 days of receipt of the Independent Director’s expense report, including supporting receipts for such expense..

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NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Gerry Goldberg
Name:  Chunfeng Tao	Name: Gerry Goldberg

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EX-10.22 4 fs1a2ex10xxii_keyuan.htm INDEPENDENT DIRECTOR AGREEMENT OF MICHAEL ROSENBERG

Exhibit 10.22

KEYUAN PETROCHEMICALS, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Michael Rosenberg, a citizen of [the United States], with a permanent residence at _______________________ (the “Independent Director”).

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

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(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) posse ss an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

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4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

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(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge o f its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b)           If indemnification is requested under Section 7(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

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9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection wit h each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

12.           REMEDIES OF INDEPENDENT DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

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(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14.           INSURANCE. The Company shall, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

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(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

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20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

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26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
Keyuan Petrochemicals, Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Michael Rosenberg
Name:  Chunfeng Tao	Name: Michael Rosenberg
Title:   CEO

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SCHEDULE A

I           POSITION:

INDEPENDENT DIRECTOR.

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending in person or telephonically all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $3,000 per month during the Term (the “Base Fee”).  The Base Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

STOCK. During the term of the Independent Director’s service as a director or member of any committee of the Board, the Independent Director shall be granted an option to purchase 40,000 shares of common stock of the Company on the date of execution of this Agreement, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. 50% of the option shall vest at the end of 12 months  of the Effective Date.  The remainder of the option shall vest at the end of 24 months of the Effective Date, provided that the Independent Director is re-elected for successive one year terms at the end of 12 months of the Effective Date. Any such stock grant shall be in accordance with the equity incentive plans as may be adopted by the Company, fr om time to time and shall expire 5 years from the date of the grant. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the equity incentive plans.

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  .  The Independent Director shall be allowed to travel Business Class or better on all flights from the United States to overseas destinations with the Company prior written consent. In addition, the Independent Director shall rely on the Company to arrange all hotel accommodations in co nnection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made within 30 days of receipt of the Independent Director’s expense report, including supporting receipts for such expense.

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NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Michael Rosenberg
Name:  Chunfeng Tao	Name:  Michael Rosenberg
Title:   CEO

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EX-10.23 5 fs1a2ex10xxiiii_keyuan.htm INDEPENDENT DIRECTOR AGREEMENT OF DISHEN SHEN

Exhibit 10.23

KEYUAN PETROCHEMICALS, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July_, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Dishen Shen, a citizen of P.R. China, with a permanent residence a t      中国杭州市曙光路曙光公寓3-1-301室___ (the “Independent Director”).

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

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(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) posse ss an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

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4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

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(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge o f its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b)           If indemnification is requested under Section 7(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection wit h each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

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10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

12.           REMEDIES OF INDEPENDENT DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

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(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14.           INSURANCE. The Company shall, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

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15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: 中国杭州市曙光路曙光公寓3-1-301室.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

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22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

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AGREED	AGREED
Keyuan Petrochemicals, Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Dishen Shen
Name:  Chunfeng Tao	Name: Dishen Shen
Title:   CEO

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SCHEDULE A

I           POSITION:

INDEPENDENT DIRECTOR.

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $1,000 per month during the Term (the “Base Fee”).  The Base Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  In addition, the Independent Director shall rely on the Company to arrange all hotel accommodations in connection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses elig ible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred.

NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Dishen Shen
Name:  Chunfeng Tao	Name:  Dishen Shen
Title:   CEO

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EX-10.24 6 fs1a2ex10xxiv_keyuan.htm DIRECTOR AGREEMENT OF YIN XUE

Exhibit 10.24

KEYUAN PETROCHEMICALS, INC.

DIRECTOR AGREEMENT

This DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st  day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 13 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Xin Yue, a citizen of P.R. China, with a permanent residence at ____________________________________________  (the “Director”).

WHEREAS, the Company desires to engage the Director, and the Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Director with respect to the Company and the services performed by the Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Director pursuant to Section 12 of this Agreement to enforce the Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

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(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF DIRECTOR. While this Agreement is in effect, the Director shall perform duties as an Director and/or a member of the committees of the Board, be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Director will perform services as is consistent with Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Director is solely responsible for taxes arising out of any compensation paid by the Company to the Director under this Agreement.  The Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Director to the extent of any monies owing to the Company from the Director.

(d)           The rules and regulations of the Company notified to the Director, from time to time, apply to the Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF DIRECTOR. During the term of the Director’s services to the Company hereunder, Director shall observe all applicable laws and regulations relating to Directors of a public company as promulgated from to time.

4..           TERM AND TERMINATION. The term of this Agreement and the Director’s services hereunder shall be for one (1) year from the Effective Date, unless terminated as provided for in this Section 5. This Agreement and the Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

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(b)           Resignation of the Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

5.           LIMITATION OF LIABILITY. In no event shall the Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an Director of the Company, unless the Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

6.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Director as follows:

(a)           Subject to the exceptions contained in Section 7(a) below, if the Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Director’s Corporate Status, the Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

(b)           Subject to the exceptions contained in Section 7(b) below, if the Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Director’s Corporate Status, the Director shall be indemnified by the Company against all Indemnifiable Expenses.

(c)           For purposes of this Agreement, the Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an Director of the Company and/or a member of a committee of the Board of the Company, if the Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a pub lic accountant or a firm of public accountants, which the Director had reasonable grounds to believe to be true.

7.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 6(a) and 6(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 6 (a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Director failed to act in good faith and in a manner the Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Director had reasonable cause to believe that the Director’s conduct was unlawful, or (iii) the Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

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(b)           If indemnification is requested under Section 6(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Director failed to act in good faith and in a manner the Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Director, the Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Director received an improper benefit or improperly took advantage of a corporate opportunity, the Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

8.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Director is, by reason of the Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Director shall be indemnified in connection therewith. If the Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Director against those Expenses reasonably incurred by the Director or on the Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, t he termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

9.           ADVANCES AND INTERIM EXPENSES. The Company may pay to the Director all Indemnifiable Expenses incurred by the Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

10.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Director seeks payment under Section 6 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Director shall furnish such documentation and information as are reasonably available to the Director and necessary to establish that the Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

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11.           REMEDIES OF DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Director makes a request for payment of Indemnifiable Amounts under Sections 6, 8-10 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 11 (a) above, the Company shall have the burden of proving that the Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c)           EXPENSES. The Company agrees to reimburse the Director in full for any Expenses incurred by the Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Director under Section 11(a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 11 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 11 (a) above.

12.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Director in an action brought against the Director.

13.           INSURANCE. The Company may, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance, in an amount not less than $[         ], of which the Director will be named as an insured, providing the Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

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(a)           The Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 6-12 of this Agreement shall not apply, and the Company’s indemnification obligation to the Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

(b)           The Director agrees that the Company’s indemnification obligation to the Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Director due to the acts or omissions of the Director;

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 6-12 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Director with respect to the indemnification obligation of the Company to the Director under this Agreement.

14.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Director against other persons, and the Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

15.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

16.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Director. The Director has no power to assign this Agreement or any rights and obligations hereunder.

17.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

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18.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

19           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

20.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

21.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

22.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

23.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

24.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

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IN WITNESS WHEREOF, the parties hereto have executed this Director Agreement as of the day and year first above written.

AGREED	AGREED
Keyuan Petrochemicals, Inc.	Director
/s/ Chunfeng Tao	/s/ Xin Yue
Name:  Chunfeng Tao	Name: Xin Yue
Title:    CEO

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SCHEDULE A

I           POSITION:

DIRECTOR.

II.           EXPENSES:

During the term of the Director’s service as a director of the Company, the Company shall promptly reimburse the Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the Directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  In addition, the Director shall rely on the Company to arrange all hotel accommodations in connection with any such meetings the Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred.

NO OTHER BENEFITS OR COMPENSATION. The Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Director
/s/ Chunfeng Tao	/s/ Xin Yue
Name:  Chunfeng Tao	Name:  Xin Yue
Title:    CEO

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EX-10.25 7 fs1a2ex10xxv_keyuan.htm LAND USE RIGHT TRANSFER AGREEMENT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC AND NINGBO MUNICIPAL BUREAU OF NATIONAL LAND AND RESOURCES

Exhibit 10.25

Electronic Monitoring Number: 3302062010B02066

 Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

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Made by the Ministry of Land and Resources of the People’s Republic of China,

and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 056(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:。

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    40827.5    square meters (in Lower Case    40827.5    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   40827.5    square meters ( in Lower Case    40827.5  
60; square meters).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District(Keyuan Petrochemicals No.1 section)   .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J18_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is    for industrial land with an area of   industrial land (chemical material and chemical products manufacture)    hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

      1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

    2. Current Status:   no established buildings   .

      Article 7  The use term of the state-owned construction land use right under this contract is    50    years, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    18,372,375   (in Lower Case RMB    18,372,375   ) , with RMB (in Upper Case)   450    (in Lower Case RMB    450    ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is    $9,186,188    in upper case (   $9,186,188    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is      $9,186,187    in upper case (   $9,186,187    in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

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Chapter III The Development, Construction and Utilization of the Assigned Land

      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    128,610,000     (in Lower Case RMB    128,610,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;         

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       Building Height Limitation:    according to the standards of the planning   ;                                           

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   2858    square meters, and the construct ion area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundari es of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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(1). To transfer to the local government;

(2). To be purchased by the local government;

(3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

 (4).    /   ;

 (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arising from t he withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

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Chapter V  Expiration of Use Term

      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land un der this contract, the Assignor and the land user agree to conduct according toItem 1 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guarantee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned construction land use right af ter 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2    ‰ of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In case the As signer fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the    Item 2    of this article:

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      1. Submit to    /    Arbitration Commission;

      2. Prosecute to  the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in    six    originals, each party keep    three   , and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.26 8 fs1a2ex10xxvi_keyuan.htm LAND USE RIGHT TRANSFER AGREEMENT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC AND NINGBO MUNICIPAL BUREAU OF NATIONAL LAND AND RESOURCES

Exhibit 10.26

Electronic Monitoring Number: 3302062010B02058

 Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

1

Made by the Ministry of Land and Resources of the People’s Republic of China,

and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 057(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:。

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    10661.8    square meters (in Lower Case    10661.8    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   10661.8    square meters ( in Lower Case    10661.8  
60; square meters).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District (Keyuan Petrochemicals No.2 section )  .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J9_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is    for industrial land with an area of   industrial land (chemical material and chemical products manufacture)    hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

      1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

    2. Current Status:   no established buildings   .

      Article 7  The use term of the state-owned construction land use right under this contract is    50    years, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    4,797,810   ; (in Lower Case RMB    4,797,810   ) , with RMB (in Upper Case)   450    (in Lower Case RMB    450    ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is RMB   2,398,905    in upper case (RMB   2,398,905    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is RMB     2,398,905    in upper case (RMB   2,398,905    in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

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Chapter III The Development, Construction and Utilization of the Assigned Land

      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    33,590,000     (in Lower Case RMB    33,590,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;        

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       Building Height Limitation:    according to the standards of the planning   ;  

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   746    square meters, and the constructi on area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundari es of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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(1). To transfer to the local government;

(2). To be purchased by the local government;

(3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

 (4).    /   ;

 (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arising from t he withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

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Chapter V  Expiration of Use Term

      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land un der this contract, the Assignor and the land user agree to conduct according toItem 1 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guarantee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned construction land use right af ter 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2    ‰ of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In case the As signer fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the    Item 2    of this article:

18

      1. Submit to    /    Arbitration Commission;

      2. Prosecute to the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in    six    originals, each party keep    three   , and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.27 9 fs1a2ex10xxvii_keyuan.htm LAND USE RIGHT TRANSFER AGREEMENT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC AND NINGBO MUNICIPAL BUREAU OF NATIONAL LAND AND RESOURCES

Exhibit 10.27

Electronic Monitoring Number: 3302062010B02048

 Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

1

Made by the Ministry of Land and Resources of the People’s Republic of China,

and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 058(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:。

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    33008.9    square meters (in Lower Case    33008.9    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   33008.9    square meters ( in Lower Case    33008.9  
60; square meters).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District (Keyuan Petrochemicals No.3 section )  .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J9_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is    for industrial land with an area of   industrial land (chemical material and chemical products manufacture)    hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

       1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

          2. Current Status:   no established buildings   .

      Article 7  The use term of the state-owned construction land use right under this contract shall terminate on January 31, 2023, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    8,087,181   (in Lower Case RMB    8,087,181  ) , with RMB (in Upper Case)   245    (in Lower Case RMB    245    ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is RMB   4,043,591    in upper case (RMB   4,043,591    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is RMB   4,043,590    in upper case (RMB   4,043,590   in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

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Chapter III The Development, Construction and Utilization of the Assigned Land

      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    103,980,000     (in Lower Case RMB    103,980,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;       

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       Building Height Limitation:    according to the standards of the planning   ;    

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   2311    square meters, and the construct ion area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundari es of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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(1). To transfer to the local government;

(2). To be purchased by the local government;

(3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

 (4).    /   ;

 (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arising from t he withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

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Chapter V  Expiration of Use Term

      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land un der this contract, the Assignor and the land user agree to conduct according toItem 2 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guarantee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned construction land use right af ter 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2    ‰ of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In case the As signer fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the    Item 2    of this article:

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      1. Submit to    /    Arbitration Commission;

      2. Prosecute to the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in    six    originals, each party keep    three   , and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.28 10 fs1a2ex10xxviii_keyuan.htm LAND USE RIGHT TRANSFER AGREEMENT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC AND NINGBO MUNICIPAL BUREAU OF NATIONAL LAND AND RESOURCES

Exhibit 10.28

Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

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Made by the Ministry of Land and Resources of the People’s Republic of China, and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 059(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:                           .

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

  Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    27492.3    square meters (in Lower Case    27492.3    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   27492.3    square meters ( in Lower Case    27492.3    square meter s).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District (Keyuan Petrochemicals No.4 section )  .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J9_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is for industrial land with an area of industrial land (chemical material and chemical products manufacture) hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

      1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

      2. Current Status:   no established buildings.

      Article 7  The use term of the state-owned construction land use right under this contract shall terminate on January 31, 2023, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    6,735,614  (in Lower Case RMB    6,735,614  ) , with RMB (in Upper Case)  245  (in Lower Case RMB   245  ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is RMB   3,367,807    in upper case (RMB   3,367,807    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is RMB   3,367,807    in upper case (RMB   3,367,807   in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

Chapter III The Development, Construction and Utilization of the Assigned Land

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      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    86,600,000     (in Lower Case RMB    86,600,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;      

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       Building Height Limitation:    according to the standards of the planning   ;                                           

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   1924    square meters, and the c onstruction area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundaries of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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      (1). To transfer to the local government;

      (2). To be purchased by the local government;

      (3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

      (4).    /   ;

      (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arisin g from the withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

Chapter V  Expiration of Use Term

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      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land under this contract, the Assignor and the land user agree to conduct according toItem 2 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guaran tee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned con struction land use right after 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner   0.2  % of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In cas e the Assigner fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the  Item 2 of this article:

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      1. Submit to    /    Arbitration Commission;

      2. Prosecute to the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in six originals, each party keep three, and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.29 11 fs1a2ex10xxix_keyuan.htm FORM OF RAW MATERIAL PURCHASE CONTRACT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC. AND NINGBO LITONG PETROCHEMICALS CO., LTD

Exhibit 10.29

Sales and Purchase Contract

(English Translation)

                                            Contract No. ____________

                                                        Date of signing: ______

                                                           Place of signing: ______

The Buyer:                      Ningbo Keyuan Plastics Co., Ltd.

The Seller:                      Ningbo Litong Petrochemicals Co., Ltd.

According to the Law of Contract of the PRC and relative laws and regulations, on the basis of mutual benefits and sincere cooperation, after discussions, both parties agree on this contract.

1.   Subject matter (the product as being referred below), delivery time and quantity

Commodity Sepc quantity Delivery time and quantity

2.   Quality standards:  see attached technical specifications.

3.   Terms of Price (Price including VAT): ______________.

4.   Payment for goods and terms: The principle is payment upon delivery. The Buyer will make the whole payment within 5 working days upon receiving the VAT invoice in full amount issued by the seller, which has been confirmed by both parties as correct. Specific steps of payment will be discussed and settled by both parties.

5.   Delivery of products (The Buyer takes over the goods according to bill of lading by the seller):

(1)   Place of delivery: warehouse of the buyer or designated warehouse by the buyer.

6.   Relative cargo transportation fee is for to bear.

7.   Measurement and its standards:

(1) Quantity for settling accounts: use the buyer’s oil depot or shore tank at oil depot designated by the buyer as what the handover relies on. Meantime data on bill of loading by the seller will be used as a reference. In case the loss between the two is within 2‰ the buyer will bear it; if over 2‰, the seller will bear the part beyond it.

(2) Quality: before delivery is made, the seller will provide a certificate of quality for its goods leaving the factory with both parties keeping a sample in the same time. Inspection and acceptance will be done according to Item 2 of the contract. In case the buyer has a dispute about the quality of goods, it should raise the matter to the seller in writing within 15 days upon delivery. Sample test report issued by a third testing organization (SGS) will be taken as final tested results.

8. Property and risks: Risks and transfer of property take the place where the goods are put into oil depot as a border. Once the goods pass this point they finish transferring from the seller to A.

9. Terms of secrecy: Both parties are responsible for keeping business secrets of either side while implementing the contract, which include but is not limited to contracts, documents, materials, data etc provided by either party, or information that may help either gain a better position in competition. Neither party should reveal any commercial secret of the other to any third party or make ill-use of it except for what the other party has agreed in writing or laws have stipulated. The terms of secrecy of the contract remain valid regardless whether the contract is altered, discharged or terminated.

10. Terms of guarantee:

 (1)                Guarantee from the seller:

(1.1) the quality of the heavy oil to sell is in accordance with the spec in the attachment.

(1.2) The Seller has authorized its representative to sign the contract. Once effective the contract is law abiding to the seller.

(2)                Guarantee from The buyer:

(2.1) The Buyer’s setup followed legal procedure (with natural persons), the buyer remains valid in existence with all relative papers.

(2.2) The Buyer will fulfill its obligations in the contract, will not violate any regulations in its business license, setting-up agreement, articles of corporation, and similar organization documents, and will not violate any relative laws and regulations or authorized rights or approvals by any departments of government.

(2.3) The Seller is responsible for the operation qualification and validity of the transportation company for dangerous chemical cargo.

(2.4) The Buyer has authorized its representative to sign the contract. Once effective the contract is law abiding to the buyer.

11. Health, safety and environment protection: Both parties should insure that the requirements in the laws and regulations concerning safety, environment protection and health during sales, transportation, storage, processing, and utilizing should be practiced and fulfilled.

12.        Contract’s alteration and termination:

(1) The contract can be altered or terminated with an agreement by both parties in writing.

(2) In case one party’s breach causes that the contract is unable to implement partially or fully, the other party has the right to partly or fully terminate the contract. And the one with breach will bear the results of its breaches. The party who will terminate the contract is responsible to notify the other party.

13.        Terms of exemption:

(1) Due to force majeure, in case of natural disasters like fires, earthquakes, typhoons, floods etc, or other unforeseeable and inevitable and insurmountable events, or government actions, which make the contract cease partly or totally, the party or parties that have been affected by the force majeure will not be responsible for the breaches, but should do his/their upmost to minimize the damage to implementing the contract.

14.        Responsibility for breach

(1) In case force majeure or other special reasons cause the seller unable to fulfill the contract, the seller should give a timely notice to The buyer. If not, the seller is responsible for the expenses Party spends on preventing expanded losses.

(2) In case the quality of the goods by the seller is below the spec required, the buyer has the right to ask for a lower price or compensation. The Buyer will be responsible for ill-storage and ill-operation.

(3) In case other kinds of breaches occur, the breaching party should compensate the other party for its losses. If both parties breach the contract, each should bear its own responsibility.

15.        Disputes settlement:

In case a dispute occurs, both parties will discuss and negotiate for a solution. If they fail, the dispute can be referred to local People’s Court which is in the place where The buyer is located.

16.        Validity and other things:

(1) The contract comes into effect as of the date of signing and chopping by both parties. It’s valid from ______ till _______.

(2) Things yet to cover will be discussed and agreed as an attachment to the contract which is part of the contract with the same legal effect. In case an attachment differs from the contract, the attachment will be overwhelming.

(3) This contract has two copies, one for each party. And fax copies are good as well.

The Buyer (chopping)	The Seller (chopping)
Ningbo Keyuan Plastics Co., Ltd.	Ningbo Litong Petrochemical Co., Ltd.
Add: Qingshi Chemical Zone, Ningbo Economic	Add:
and Technological Development Zone
Postal Code: 315803	Postal Code:
Authorized Rep:	Authorized Rep:
Tel:                              Fax:	Tel:                              Fax:
Name of Bank:	Name of Bank:
Account No.:	Account No.:

EX-10.30 12 fs1a2ex10xxx_keyuan.htm FORM OF RAW MATERIAL PURCHASE CONTRACT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC. AND WENZHOU ZHONGYOU FUEL CHEMICAL CO., LTD

Exhibit 10.30

Sales and Purchases Contract

(English Translation)

The Seller:  Wenzhou Zhongyou Fuel Chemical Co., Ltd.	Contract No. ______
The Buyer:  Ningbo Keyuan Plastics Co., Ltd.	Place of signing: ______
	Date: _______

1.   Name of commodity, trade mark, model, quantity, sum, time of delivery

Commodity Trade mark Unit Quantity Unit price Total sum Time of delivery

2.   Payment terms:

3.   Quality requirements, technical standards, condition and period guaranteed for the quality by the seller: this product is material for 2nd processing, which cannot be used directly and the outcome of direct using will be borne by the buyer automatically. Both parties will be present at the scene for sample seal-up for safekeeping. In case a dispute arises on the quality, the sample will be examined as a standard of judging the quality. In case the buyer does not ask for sample seal-up, it means the buyer gives it up himself. If a later dispute occurs concerning the quality, the buyer will be responsible for any possible consequence.

4.   Place and terms of delivery: at ___________ The buyer picks up the goods and is in charge of the transportation. After delivery of goods all the risks of goods damage will be borne by the buyer.

5.   Terms of transportation and port of arrival and fees: The buyer will bear shipping, shipping fees, pier related fees and cargo insurance fee. If safety or environment problems occur after the ship is berthed, the seller is not responsible. The buyer should ensure that the ships are legally qualified to load and store this product with national equipment safety, quantity and quality standards in concern being fully met.

6.   Reasonable loss and calculation: Both parties sum the payment on the basis of shore tank measurements. The buyer, no matter picking-up the goods himself or via an agent, should check seriously the measurement of shore tank. After both parties – including the carrier entrusted by the buyer -have confirmed the measurement, no other dissent over measurement will be accepted. In case the carrier authorized by the buyer does not agree with the measurement and asks the seller to follow the measurement of an actual survey, any extra expenses caused will be borne by the buyer.

7.   Packaging standards supply and reclaim of packaging material: In bulk.

  8. Measurement and inspection with acceptance: The buyer will send his staff to the scene of inspection. The measurement operation will be done by the seller under the surveillance of the buyer or his agent. Any question concerning the quality or measurement should be raised prior to the ship’s leaving the pier of the seller. Otherwise, it will be considered null and void.

  9.  Terms of payment and time-limit: payment will be done according to actual goods delivered with shore tank measurement with previous payment deducted accordingly, and balances to be made by both parties. The seller will provide a VAT invoice for the whole amount of payment.

10. Terms of secrecy: Unless permitted by the seller in written form, the buyer should not reveal to any third party any secret information he gets from the seller, or make use of it, which includes but is not limited to commercial secrecy, technological secrecy, market secrecy, financial secrecy, management secrecy or other kinds of secrecy.   The buyer should urge his staff not to reveal to any other party the information of the seller and not to make use of it. The buyer promises to make sure that his staff strictly confines the secret information provided by the seller to the scope and purpose of the contract. And without a written agreement by the seller, no secret information should be used for purposes out of the contract or revealed to other companies and individuals not in the contract.

11.   Responsibility for breach of the contract: (1) In case the buyer delays the payment of goods or delays picking-up, which either is breach of the contract, the seller has the right to terminate the contract and to get a fine of 5% of contract value from the buyer. (2) In case the product delivered by the seller is not in accordance with the contract, both parties will discuss about the matter for a solution. (3) In case other breaches occur, the party that violates the contract should compensate the loss caused to the other party. If both sides make an error, each should be responsible for his own.

12.   Force majeure: (1) Due to force majeure, in case of natural disasters like fires, earthquakes, typhoons, floods etc, or other unforeseeable and inevitable and insurmountable events, which make the contract cease partly or totally, the party or parties that have been affected by the force majeure will not be responsible for breaches, but should notify the other party within 48 hours upon the occurrence of the force majeure, and provide a valid document of proof to the other party within 3 days. (2) The party or parties influenced by force majeure should do his/their upmost to minimize the damage to implementing the contract.

13.   Dispute settlement: In case a dispute occurs over the contract, both parties will discuss and negotiate. When a negotiation fails, the case will be brought to People’s Court where the seller is registered.

14.   Validity and others: (1) This contract has two copies of the same version, with one for each party. They become effective upon chopping regardless of whether a duplicated or fax copy. (2) A supplementary agreement may attach to the contract for further coverage. (3) As a supplementary or attached agreement to the contract, it has the same legal right as the contract. In case the contents of an attached document are not in accordance with the contract, the contract overwhelms the attachment. In case a supplementary document is not in accordance with the contract, the supplementary document overwhelms the contract.

The Seller (chopping)	The Buyer (chopping)
Wenzhou Zhongyou Fuel Chemical Co., Ltd.	Ningbo Keyuan Plastic Co., Ltd.
Add: Dongtou County, Zhejiang
Authorized Rep: (signature)	Authorized Rep: (signature)
Tel: 0577-89971188	Tel: 0574-86232942
Fax: 0577-89971188	Fax: 0574-86234706

EX-10.31 13 fs1a2ex10xxxi_keyuan.htm FORM OF RAW MATERIAL PURCHASE CONTRACT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC. AND DALIAN WEST PACIFIC PETROCHEMICALS CO., LTD

Exhibit 10.31

Sale and Purchase contract

(English Translation)

The Buyer:  Ningbo Keyuan Plastics Co., Ltd.

The Seller:  Dalian West Pacific Petrochemicals Co., Ltd.

Validity of the contract: ______________

The Buyer:                      Ningbo Keyuan Plastics Co., Ltd.

The Seller:                      Dalian West Pacific Petrochemicals Co., Ltd.

According to the Contract Law of the PR China and relative laws and regulations, on the basis of equality and mutual benefits and compensation of equal value, both parties agree with the items listed below.

1.   Name of subject matter:  ___________

2.   Quality and inspection specifications: __________

3.   Quantity: _____________

4.   Price of goods:  ________________

5.   Other taxes The buyer is responsible for providing a blank A Certificate of Naphtha Utilizing to the seller prior to the issue of an invoice, with the certificate being filled in alongside with the issue of the invoice by the seller and given to the buyer in time. Upon receiving the certificate and the invoice the buyer is responsible to have issued a timely tax exempt certificate for the lot of naphtha.

6.   Payment:

6.1 The buyer should pay an advance in whole by T/T into the designated account of the seller prior to the delivery of the subject matter. Since the price reference month has not come, a temporary factory price from the seller will be taken in for the payment. The buyer will clear the remaining payment by the 5th day of the month after the month scheduled for ship loading according to the actual price coming from the reference month.

6.2 Remaining payment for goods

In case a payment is due on a Saturday or a national holiday for banks which is not a Monday, the the payment due refers to the previous workday for the bank. In case the payment is due on a Sunday or a national holiday for banks on a Monday, then the payment due should be the following workday of the bank. As to national long weekends of 7 days including a Saturday and a Sunday accordingly, if the payment is due within the first 4 days, then the actual payment should be due on the previous workday while if within the last 3 days, it should be the next workday of the bank.

6.3 In case the buyer violates Item 6.2 to delay the payment, for each day delayed, the buyer should pay a delay fine of % of the payment due.

7. Delivery:

7.1 ___________

7.2 Once the contract comes into effect, the seller will prepare the goods according to the buyer’s requirements and give a timely notice to the buyer so that a transportation means can be arranged by the buyer to arrive at __________ for loading goods.

7.3 The buyer is responsible to provide 2 days’ shipping forecast 5 days prior to the ship loading, with an error of ± 24 hours; and a one day’s shipping forecast 3 days prior to the loading.

7.4 The buyer is responsible for the cargo fee, insurance fee and port miscellaneous fee etc for the goods at the pier where Dalian Port Oil Products wharf Company is.

7.5 Loading will be done according to the quantity specified on the factory measurement sheet by the seller and once the loading is completed, if a dissent arises, the buyer should keep the subject matter in good keeping and lodge a claim in writing to the seller for a double checking. Otherwise, the subject matter delivered by the seller is considered fully in accordance with the contract.

7.6 Risks bearing: taking the outside of flange end of the loading pipe line as a border, the seller takes the risks inside the flange while the buyer the outside.

8. Contract alteration and termination:

8.1 with an agreement in writing by both parties, the contract can be altered or terminated.

8.2 with an occurrence listed below, the contract can be terminated by either party:

8.2.1 Due to force majeure and the contract cannot be carried on.

8.2.2 without a consent in writing from the other party, one party transfers part or whole responsibility and liabilities to a third party.

8.3 After the termination, the items in the contract referring to payment, clearance and dispute settlement are still valid.

8.4 The party to terminate the contract should notify the other party on termination.

9. Responsibility for breach the contract

9.1 If the quality of oil handed by the seller before ship loading is not in accordance with the contract, the seller is responsible to give a timely replacement for qualified oil to the buyer. In case the buyer fails to pay as scheduled, the seller has the right to dispose of the subject matter.

9.2 In case of other breaches happen, the violating party should compensate the other party for the loss it causes. In case both parties are in error, each should take its own responsibility.

9.3 Due to the seller’s action or inaction, including delayed delivery of goods in good quality and quantity to the buyer, direct losses are caused by the seller – excluding accidents related shutdown etc as force majeure – the seller is responsible to compensate the buyer.

9.4 Due to the buyer’s action or inaction, delayed picking-up of goods causes direct losses to the seller and the buyer should compensate the seller.

10. Force majeure

10.1 Due to force majeure, in case of natural disasters like fires, earthquakes, typhoons, floods etc, or other unforeseeable and inevitable and insurmountable events, which make the contract cease partly or totally, the party or parties that have been affected by the force majeure will not be responsible for the breaches, but should notify the other party within 48 hours upon the occurrence of the force majeure, and provide a valid document of proof to the other party afterwards.

10.2 The party or parties influenced by force majeure should do his/their upmost to minimize the damage to implementing the contract.

11.  Dispute settlement:   In case a dispute occurs over the contract, both parties will discuss and negotiate. When a solution fails, the case will be referred to Dalian Arbitration Committee and then valid arbitration rules will be followed for a ruling. The arbitrary ruling will be final with abiding power to both parties. The arbitration fee will be borne by the party who loses the case unless the arbitration court rules otherwise.

12. Validity and others

12.1 This contract comes into effect upon the signatures and chopping via fax.

12.2 The contract is valid as of its coming into effect and till ________

12.3 For any issues yet to cover, both parties will sign a supplementary agreement.

12.4 The attachment and the supplementary agreement are part of the contract with equal legal power as the contract itself. In case an attachment differs from the contract, the attachment will be subject to the contract. While a supplementary agreement differs from the contract, the contract is subject to the supplementary agreement.

The Buyer:	The seller:
Ningbo Keyuan Plastics Co., Ltd.	Dalian West Pacific Petroleum Co., Ltd.
Legal person or authorized person:	Legal person or authorized person:

EX-10.32 14 fs1a2ex10xxxii_keyuan.htm FORM OF RAW MATERIAL PURCHASE CONTRACT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC. AND QINGDAO LIDONG CHEMICAL CO., LTD

Exhibit 10.32

Qingdao Lidong Chemical Co., Ltd.

(English Translation)

The Seller:  Qingdao Lidong Chemical Co., Ltd.	Contract No.: _________
The Buyer:  Ningbo Keyuan Plastics Co., Ltd.	Date: _________
	Place of signing: _________

Sales and Purchase Contract

The Seller and The Buyer, after discussions, have both agreed with the items listed below.

1.	Name of commodity:  ___________
2.	Unit price (in RMB), quantity, total sum (in RMB) :
	Unit price: _______________
	Quantity: _________________
	Total sum: RMB (unit price x actual quantity of loading)
3.	Delivery terms, time and place of delivery:
	Delivery Terms:  ________________
	Delivery Time: __________
	Place of delivery: ______________
4.	Quality specifications
	The seller provides the buyer with Inspection Results one day prior to ship loading.
5.	Packaging requirements: In bulk.
6.	Payment:
	Within 2 days after the signing of the contract the buyer telegraphic transfers one million of deposit to the seller. Two days prior to the ship loading, the buyer telegraphic transfers the whole amount of payment for goods according to the contract to the seller. The balances will be paid to either party as the actual quantity of ship loading may be.
7.	Insurance: The buyer should insure the goods according to the contract price per ship stipulated in Item 2 and pay the insurance premium.
8.	Transfer of property in goods: As the goods pass over the ship’s rail at the port of loading the transfer of property in goods occurs in effect.
9.	Inspection: The seller needs to appoint an independent inspector with an approval of the buyer. At the port of loading the inspector should inspect the shore tank for the quantity and quality of the goods. An inspection report is abiding to both parties to prevent errors or fraud. The seller should pay the commodity inspection fee at the port of loading. The buyer should pay the inspection fee at the port of unloading. Meanwhile the seller invites a third party of inspection organization to measure the actual loading capacity of the ship. In case an error of 0.3% and above occurred between shore tank quantity and ship inspection quantity, the buyer or other agents should immediately ask for a double check, with the buyer ordering the ship to get off shore at once and with both parties discussion for a solution.

10.	Obligations alongside: In case the buyer fails to find a suitable ship for loading during the stipulated period of time, the seller has the right to cancel the contract.
11.	Responsibility for breach of the contract:
	After the signing of the contract, with agreement from both parties, the contract can be modified or terminated. But in case one party violates the contract, the party that made the violation should pay the other party 100% of the contract sum as contract breach fine. Furthermore, when one party violates the contract and causes damage to the other party, the violating party should compensate the other party including, but not limited to, loss of price differentials of commodities, lawsuit fee, arbitration fee, commission of survey, lawyer’s fee, travel fee and other actual expenses related to the damage.
12.	Force majeure:
	During the contract period, in case of government control, war declared or not, embargo, law forbidding, civil chaos, riots, uprising, strikes, border closing as well as super natural events such as typhoon, floods, fire or the alike, or the seller being not able to import the material, or its material supply not being guaranteed, or it getting unscheduled stall or scheduled stall prolonged, neither party is responsible for the delay or incapability of carrying out the contract within stipulated period. Whereas both parties should do their upmost to minimize the damage to implementing the contract. In case the delay is of over three months, either party can terminate the contract in writing without any liability and responsibility.
13.	Other supplemented agreements: (if no, fill in ‘None.’)
	(1) National stimulations on safety and environment protection should be met during transportation of the goods. The buyer confirms itself as a producer of ethylene and aromatic hydrocarbon products, knowing such products only suitable for directly producing ethylene and aromatic products, not for gasoline, diesel oil or other taxable consuming products or for trading sales, which are not allowed into finished oil products markets. In case other agreement to reach, both parties will discuss it and attach the agreement to the contract, while the attachment has the same legal effect as the contract.
	(2) The buyer prior to purchasing should show to the seller a certificate of utilizing and managing naphtha to ensure a smooth declaration of exempting tax on consuming naphtha. In case the seller fails to declare consuming tax exempt, the buyer should bear all the costs related to consuming tax paid by the seller.
	(3) In case the buyer fails to pick up the goods within the designated period of delivery, the seller has the right to cancel the quantity that has not been picked up.
14.	This contract comes into effect with the signatures and chopping of both parties via fax. The fax copies are effective.
15.	In case a dissent arises during the contract period, both parties will negotiate friendly for a solution. In case a solution is failed to reach, either party can forward the dispute to Shanghai Arbitration Committee for ruling.
	Both parties confirm that they have reached agreement on all items of the contract on the basis of equal negotiations, which bears their true meanings, with both parties fully aware of the contents of each item of the contract and willing to abide by the contract. There’s no single item of the contract that has been forced upon one party by the other party using its superiority.

The Seller:	The Buyer:
Qingdao Lidong Chemical Co., Ltd.	Ningbo Keyuan Plastics Co., Ltd.
Tel: 0532-86910092	Tel: 0574-86232942
Fax: 0532-86910255	Fax: 0574-86234706
Add: 88 Liaohe Road, Qingdao economic and	Add: Qingshi Chemical Zone, Beilun District, Ningbo.
technological development zone,
Qingdao, Shandong province.

EX-10.33 15 fs1a2ex10xxxiii_keyuan.htm FORM OF RAW MATERIAL PURCHASE CONTRACT BY AND BETWEEN KEYUAN PETROCHEMICALS, INC. AND MERCURIA ENERGY TRADING PTE LTD

Exhibit 10.33

Mercuria

Sales and Purchase Contract

This is to confirm your purchase and our sales of ____ under the following terms and conditions.

1.	Seller:  Mercuria Energy Trading PTE Ltd.
	9 Raffles Place 58th Floor
	Republic Plaze Singapore 048619
2.	Buyer:  _________________
3.	Commodity: ___________
4.	Quantity:___________
5.	Quality:_____________
6.	Origin: __________
7.	Delivery:  CIF  One Safe Port/ Berth, Ningob, China: During ___ to _____
8.	Vessel:   Delivery shall perform by ______ , whose confirmation of acceptance at buyer’s terminal shall not be unreasonably withheld.
9.	Price: ________________
	Any published correction to any of the relative quotations shall be taken into account. The final price shall be rounded off to three (3) decimal places with one digit to be increased to the third decimal place, whenever the forth decimal is five or greater than five.
10.	Payment:
	In U.S. Dollars based on B/L 30 days after B/L date (B/L date counts as day one) against seller’s commercial invoice and normal shipping documents including full set of original  B/L and any other documents required in L/C. In the event normal shipping documents is temporarily not available when payment is due, buyer shall make payment against seller’s invoice and letter of indemnity.
	Buyer shall open the irrevocable letter of credit by the first class international bank acceptable to seller by _______. In case buyer fails to pen the irrevocable letter of credit by the date, seller shall have a right but not an obligation to cancel the delivery of the cargo.
	All banking charges incurred in buyer’s bank are for account of buyer. All banking charges incurred in seller’s bank are for account of seller.
	In the event that the final price is not known prior to the payment due date, seller may invoice buyer on a provisional basis. The seller shall as soon as practicable issue the final invoice thereafter to buyer. Any shortfall in payment due from the buyer to the seller or refund of overpayment due from the seller to the buyer shall be settled within five working days after receipt of the final invoice. The buyer shall pay based on the provisional invoice on the due date notwithstanding that the final price has already been determined at that point in time. The balance settlement shall be arranged within the L/C framework.

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	If payment due date falls on Saturday or any other banking holidays than Monday in Monday in New York, then payment shall be made on the immediate preceding banking day before the due date.
	If payment due date falls on Sunday or Monday banking holiday in New York, payment shall be made on the immediate following banking day after due date.
11.	Quantity and Quality Determination:
	Mutually agreed independent inspector’s finding at loading post shall be final and binding on both parties. Save for fraud or manifest error. Such inspection fee at loading port shall be born by seller.
	Laytime/ Demurrage:
12.	Laytime for discharging cargo is _____ hours shing for full cargo which starts 6 hours after nor or upon berthing whichever occurs first and ends on hose off after discharging completion. And in case of suspension/ delay of discharging due to buyer’s custom declaration matter, that waiting time will be counted as buyer’s laytime.
	Demurrage rate shall be as per actual charter party rate. And demurrage shall be settled based on the conditions of the C/P from “Absatankvoy”.
	If the vessel tenders nor before the first day of the 3-day delivry date range, laytime shall commence at ____ hours on the first day of the 3-day daterange or when vessel is all fast alongside berth whichever is earlier.
13.	Title and Risks:
	Title and risks of the cargo shall be passed from seller to buyer when the products pass the vessel’s permanent flange connection at loading port.
14.	Law & Arbitration:
	This sales contract shall be governed by the law of England. Excluding the united nations convention on contracts for the international sale of goods.
	Any dispute, controversy and/or difference which may arise between the seller and the buyer out of or in relation to or in connection with this sales contract, or the search thereof, which can not be settled by mutual accord without undue delay, shall be settled by arbitration in London, England in accordance with the rules of procedure of the London court of International Arbitration. The award thereof shall be final and binding upon the parties hereto.

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15.	Force Majeure:
	Neither party hereto shall be liable to the other party for damages or otherwise for any failure or delay to perform its obligations hereunder other than any obligation to make payment, where such failure or delay is caused by force majeure, due to the occurrence of any event beyond the reasonable control of such party and affecting its performance including, without limitation,
	1) War, hostilities, acts of the public  enemy or of belligerents, sabotage, strike, blockade, revolution, insurrection, riot or disorder;
	2) Expropriation, requisition, confiscation, nationalization or embargoes by governments;
	3) Act of god;
	4) Fire, frost, earthquake, atmospheric disturbance, storm, typhoon, tornado, lightning, flood, tidal wave, perils of the sea, landslide, soil erosion, subsidence or washout;
	5) Accidents of navigation or breakdown of or damage to vessels;
	6) Epidemic or quarantine;
	7) Explosions, breakage or accidents by fire or otherwise to plants, storage facilities, process facilities, installations, machinery and equipment, or to loading facilities or equipment;
	8) Any other similar event.

However, on the occurrence of any event of force majeure, the party whose performance in affected thereby shall give notice and full particulars thereof to the other party as soon as practicable. Should such an event of force majeure continue for more than sixty (60) days, then either party may terminate this sales contract unconditionally upon the written notice to the other party.

16.	Entire Agreement:
	This sales contract constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior or contemporaneous communications or agreements with regard to the subject matter hereof.
17.	Warranties:
	There are no guarantees or warranties, expressed or implied, of merchantantability, fitness or suitability of the oil for any particular purpose. There are no other oral or written guarantee or warranties.
18.	Liabilities:
	Neither the seller nor the buyer shall be liable, whether in contract, tort or otherwise, for any indirect, consequential or special losses, damages or expenses of any kind directly or indirectly arising out of or in any way connected with the performance of this contract.
	The seller shall in no circumstances be liable for more than the difference between the contract price and the market price, based on the nearest available market, at the date of any breach of the contract.
19.	Claims:

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	Any claim by the buyer of whatever nature arising under this contract shall be made within thirty (30) days after arrival of the commodity at the port of destination. Unless full written notice of the buyer’s claim, accompanied by sworn surveyor’s reports when the quality or quantity of the commodity is in dispute, shall arrive at the seller’s office during such thirty (30) day period. The buyer will be deemed to have waived such claim.
	In the event of a breach of this contract by the seller, the buyer’s exclusive remedy and the seller’s limit of liability shall be for the actual damages directly sustained by the buyer from such breach, which shall in no event exceed the price specified herein of the particular commodity with respect to which the damages shall have occurred.
20.	Other terms and conditions
	Incoterms 2000 for CIF sales with latest amendments to be applied.
21.	Confidentiality:
	This transaction shall be kept strictly private and confidential.
22.	ISPS Compliance:

1.   The part chartering the vessel shall procure that the vessel shall comply with the requirements of the international ship & port facility security code (“ISPS Code”) and the relevant amendments to Charpter XI of Security of Life at Sea (“SOLAS”) (hereinafter collectively referred to as “codes”) and where the discharge port is within the USA and US territories or waters, with the US Maritime Transportation Security Act 2002 (MTSA).

2.   The vessel shall when required submit a Declaration of Security (“DOS”) to the appropriate authorities prior to arrival at the discharge port.

3.   Notwithstanding any prior acceptance of the vessel, if at any time prior to the arrival of the vessel at the discharge port, the vessel ceases to comply with the requirements of the codes and where the discharge port is within the USA and US territories or waters, with the MTSA:

A)   The buyer shall have the right not to berth such nominated vessel at the discharge port and any demurrage resulting shall not be for the account of the buyer.

B)   The seller shall be obliged to substitute such nominated vessel with a vessel complying with the requirements of the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA.

4.   Buyer warrants that the discharge port/terminal/installation shall comply with the requirements of the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA.

5.   Any costs or expenses in respect of the vessel including demurrage or any additional charge, fee or duty levied on the vessel. At the discharge port and actually incurred by the seller resulting from the failure of the discharge port/terminal/installation to comply with the Codes and if located with the USA and US territories, with the MTSA, shall be for the account of the buyer, including but not limited to the time required or costs incurred by the vessel in taking any action or any special additional security measures required by the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA.

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6.   Save where the vessel has failed to comply with the requirements of the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA, the buyer shall be responsible for any demurrage actually incurred by the seller arising from delay to the vessel at the discharge port resulting directly from the vessel being required by the port facility or any relevant authority to take any action or any special or additional security measures or undergo additional inspections by virtue of the vessel’s previous ports of call.

7.   The buyer’s liability to the seller under this agreement for any costs, losses or expenses incurred by the vessel, the charterers or the vessel owners resulting from the failure of the discharge port/terminal/installation to comply with the codes and where the discharge port is within the USA and US territories or waters, with the MTSA shall be limited to the payment of demurrage and costs actually incurred by the seller in accordance with the provisions of the clause.

8.   If either party makes any payment which is for the other party’s account in accordance with this clause, the other party shall within thirty (30) days reimburse the paying party for all such payments.

9.   The party chartering the vessel shall procure that the vessel shall comply with the requirement under marpo, failing which the other party shall have the right to reject the vessel and any cost, loss and expense incurred shall be borne by the party chartering the vessel.

“Marpo” means the international convention for the prevention of pollution from ships, as amended from time to time.

Please confirm that above terms and conditions truly reflect the mutual understanding between seller and buyer.

Absence of your confirmation within maximum of four business days shall be construed as your acceptance of foregoing terms and conditions.

We thank you again for concluding the business at this time and we are looking forward to having the next business opportunity in near future.

______________________

Mercuria Energy Trading PTE Ltd.

______________________

Ningbo Keyuan Plastic Co., Ltd.

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EX-23.2 16 fs1a2ex23ii_keyuan.htm CONSENT OF PATRIZIO & ZHOU, LLC

Exhibit 23.2

Patrizio & Zhao, LLC

 Certified Public Accountants and Consultants 322 Route 46 West Parsippany, NJ 07054 Tel:  (973) 882-8810 Fax: (973) 882-0788 www.pzcpa.com

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in the Amendment to the Registration Statement (Form S-1) pertaining to the registration of 9,939,203 shares of common stock of Keyuan Petrochemicals Inc, of our report dated February 23, 2010with respect to the financial statements of Keyuan International Group Ltd. for the periods ended December 31, 2009 and 2008 and of our report dated August 10, 2010 with respect to the financial statements of Keyuan International Group Ltd. for the period ended June 30, 2010. We also consent to the reference to us under the heading “Experts” in the above referenced Registration Statement.

/s/ Patrizio & Zhao, LLC

Patrizio & Zhao, LLC

Certified Public Accountants and Consultants

Parsippany, New Jersey

September 1, 2010

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September 1, 2010
U.S. Securities and Exchange Commission
Division of Corporate Finance
100 F. Street, N.E.
Washington, D.C. 20549
Attn:           Chambre Malone

Re:	Keyuan Petrochemicals, Inc.
	Amendment No. 1 to Registration Statement on Form S-1
	Filed July 23, 2010
	File No. 333-167029

Dear Ms. Malone:
This letter is provided in response to your letter dated August 9, 2010 regarding the above-referenced filings of our client, Keyuan Petrochemicals, Inc. (the “Company”).  The Company’s responses are set forth below to the items noted by the staff in your letter.  Please note that for the convenience of the reader, the words “we”, “us”, “our” and similar terms used in the responses below refer to the Company and not our law firm.
General

1.   We have read your response to comment two from our letter dated June 17, 2010 and reissue our comment. We note the audit report in Exhibit 99.1 of Form 8-K filed April 28, 2010 is not signed. Please amend the report to provide a signed audit report.

Response: Pursuant to your comment, on August 19, 2010, we filed Amendment No. 3 to Form 8-K filed April 28, 2010 to include a signed audit report to replace Exhibit 99.1 included in Form 8-K filed on April 28, 2010, File No. 001-34834-101027379.
Cover Page of the Prospectus

2.   Please remove the first paragraph.

Response: Pursuant to your comment, we have removed the first paragraph on the cover page of the prospectus.

3.   The number of shares detailed in the second paragraph do not appear to total the amount that you claim to be registering for resale. Please advise.

Response: Pursuant to your comment, we have reviewed the numbers of shares detailed in the second paragraph and confirmed that the total of the amount matches with the number we claim to be registering for resale. We have listed below a summary chart of numbers we provided in the second paragraph.

Title of Class of Shares to be registered	Numbers of Shares	Breakdowns
Common Stock Issued	984,704
Common Stock Underlying Series A Preferred	6,738,336
Common Stock Underlying Warrants	2,216,163	Underlying Series A Warrants	748,704
		Underlying Series B Warrants	748,704
		Underlying Placement Agent Warrants, Placement Agent Series A Warrants and Placement Agent Series B Warrants	718,755
Total	9,939,203

4.   Please indicate the market price of the securities as of the latest practicable date.

Response: Pursuant to your comment, we have indicated the market price of the securities as of the latest practicable date. The revised disclosure should be read as follows:
“Our Common Stock is quoted on the Over-the-Counter Bulletin Board under the symbol “KYNP” and has very limited trading.The closing price for our Common Stock on the OTC Bulletin Board on August 31, 2010 was $4.01 per share.”
Item 3. Summary Information, Risk Factors and Ratio of Earnings…page 1
Our Company, page 1

5.   We note your use of external web sites and your statement that you are not attempting to incorporate the information on external web sites into the prospectus. Please see our Use of Electronic Media, Interpretive Release No. 33-7856 (Apr. 28, 2000) for further guidance regarding the use of hyperlinks in your prospectus at  http://www.sec.gov/rules/interp/34-42728.htm#P168_27531.

2
Response: Pursuant to your comment, we have reviewed the market information and industry date provided in this prospectus and we hereby acknowledge that we are only providing textual reference of those web sites and those web sites are not intended to be hyperlinks. Therefore, we are revising our disclosure as follows:
“ITEM 3. SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHANGES
This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our common stock, especially the risks of investing in our common stock, which we discuss later in “Risk Factors,” and our financial statements and related notes beginning on page 6 and 51, respectively. Unless the context requires otherwise, the words “we,” “us” and “our” refer to KEYUAN PETROCHEMICALS, INC. and our subsidiaries, and the word “Keyuan Petrochemicals” refers only to KEYUAN PETROCHEMICALS, INC. All market and industry data provided in this prospectus represents information that is generally available to the public and was not prepared for us for a fee. We did not fund nor were we otherwise affiliated with these sources and we are not attempting to incorporate the information on external web sites into this prospectus. We are only providing textual reference of the information of market and industry data and the web addresses provided in this prospectus are not intended to be hyperlinks and we do not assure that those external web sites will remain active and current.
…”

6.   We note your response to comment six issued in our letter dated June 17, 2010. You state that the “land bidding process is a necessary process to get land use rights.” Please revise to describe your plan for the business in the event that you do not obtain the land use rights. Please delete the statement that “no other bidder can make better use of the land than us” as it is unclear how you can adequately substantiate this claim. Please also revise your risk factor disclosure, as necessary, to discuss any significant risks to your business in the event that you do not win the bid for the land.

Response: Pursuant to your comment, we have deleted the statement that “no other bidder can make better use of the land than us” in the prospectus. In addition, the bidding process was completed on August 13, 2010 and we entered into land use right transfer agreements for the four parcels of the land with the local government on August 18, 2010. Therefore, we are revising our disclosure as follows:
“In order to expand our facilities, we need to acquire use rights of additional land. In China, the government is responsible for overall land planning and they will often select a target company to maximize the benefits of land use for a particular area. We have been in regular communications with the Ningbo Municipal Government about the land use rights for approximately 1.2 million square feet of land adjacent to our current production facility. We submitted our application to the local government for a land bidding process slated on July 13, 2010 which is a necessary legal proceeding to acquire the land use rights in China.  We were the only bidder in this process because the land is well integrated with our existing site. T he bidding process was completed on August 13, 2010 and we entered into land use right transfer agreements with the local government on August 13, 2010.”
3
Note Regarding Forward-Looking Statements, page 6

7.   We note your response to comment eight issued in our letter dated June 17, 2010. The safe harbor for forward-looking statements is not available to issuers of penny stock. Since you appear to be an issuer of penny stock, we reissue the prior comment. Please revise accordingly or advise.

Response: Pursuant to your comment, we have deleted the forward-looking statements in the prospectus.
Dividends we received from Keyuan Plastics may be subject to PRC…page 12

8.   We note your response to comment 13 issued in our letter dated June 17, 2010. We reissue the prior comment given that your disclosure indicates that you have received dividends from Keyuan Plastics.

Response: Pursuant to your comment, we have reviewed our disclosure and realized that the subtitle of the risk factor was confusing. Currently, we have not received any dividends from Keyuan Plastics; we are hereby revising our disclosure as follows:
“ If we receive any dividends from Keyuan Plastics in the future,  the dividends  may be subject to PRC withholding tax.
The New EIT Law and the Implementation Rules of the New EIT Law provides that an income tax rate of 10% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises”, which (i) do not have an establishment or place of business in the PRC, or (ii) have such establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject to withholding at the income source, with the payer acting as the obligatory withholder under the New EIT Law, and therefore such income taxes are generally called withholding tax in practice. It is currently unclear in what circu mstances a source will be considered as located within the PRC. We are an offshore holding company. Thus, if we are considered as a “non-resident enterprise” under the New EIT Law and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividends may be subject to a 10% withholding tax. Till now, we have not received any dividends paid by our subsidiary in the PRC. Furthermore, since we intend to reinvest its earnings to further expand its businesses in mainland China, our subsidiary in the PRC does not intend to declare dividends to their immediate foreign holding companies in the foreseeable future.
     …”
4
Item 7. Selling Stockholders, page 20

9.   Please clarify that at the time of the purchase of the securities to be resold, the sellers had no agreements or understandings, directly or indirectly, with any person to distribute the securities.

Response: Pursuant to your comment, we have revised our disclosure accordingly as follows:
“…
Except for Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey, none of the Selling Stockholders is an affiliate of a broker dealer. However, Each of Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey  confirmed to us that it or he bought the securities in the ordinary course of business and at the time of purchase of the securities to be sold, it or he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. None of the Selling Stockholders has any agreement or understanding to distribute any of the S hares being registered.
…”

10.   For those selling shareholders that are broker-dealers, please provide a supplemental legal analysis as to why they should not be named as underwriters, rather than “may be deemed underwriters.”

Response: Pursuant to your comment, we have reviewed the definition of an “underwriter” under Section 2(a)(11) of the1933 Securities Act, as amended. Pursuant to Section 2(a)(11), “the term ‘underwriter’ means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission . As used in this paragraph the term ‘issuer’ shall include, in addition to an issuer, any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.
”  In our April-May 2010 offering, there were investors such as Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey, which are licensed broker-dealers or affiliates of an broker-dealer. However, they confirmed to us that it or he bought the securities in the ordinary course of business and at the time of purchase of the securities to be sold, it or he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. Therefore, we consider they have purchased the securities with a view to investment rather than an inte ntion to resale or distribution. In addition, any proceeds from the resale of the common stock issued in the offering will go directly to the investors and we as the issuer or anybody under the direct or indirect controlling or controlled by us or any person under direct or indirect common control with us will not receive any proceed from the resale. With all the above facts stated and after reviewing the definition of an “underwriter” under the Securities Act, we have indicated in the prospectus that “the Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be ‘underwriters’ within the meaning of the Securities Act in connection with such sales.”
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Item 8. Plan of Distribution, page 34

11.   We note your response to comment 20 issued in our letter dated June 17, 2010. Please revise your disclosure to indicate that you will, rather than should, file a prospectus supplement revising the list of selling stockholders in the event that any successors to the currently named selling stockholders wish to sell under the prospectus.

Response: Pursuant to your comment, we have revised our disclosure as follows:
“ITEM 8.  PLAN OF DISTRIBUTION
…
The Selling Stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the amendment or supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 will be filed amending  the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this prospectus and the pledgees or secured parties may offer and sell shares of Common Stock from time to time under the supplement or  amendment to this prospectus.
…”
Item 11. Information with Respect to the Registrant, page 39

12.   We note your response to comment 22 issued in our letter dated June 17, 2010. You state that, “until now,” you did not have any material raw material purchase contract that you are dependent upon. Please file any material contract as exhibits, or alternatively, confirm to us that you do not currently have any raw material contracts that meet the criteria listed in Item 601(b)(10)(ii)(B) of Regulation S-K.

Response: Pursuant to your comment, we are filing the forms of contract being used when we enter into raw material purchase contract with our current four major raw material suppliers,  which accounted for approximately 78.55% of the Company’s raw materials for the six months ended June 30, 2010. However, please note that because the market price of raw materials fluctuates often, we currently do not have any material contract with any raw material supplier. All of our raw material contracts are short-term contracts and entered into on order-to-order basis, which is customary in the petrochemicals industry. Depending on our need for raw materials and the  prices we are able to negotiate with different suppliers, the amount of c ontracts we enter into with a given supplier and the raw materials we purchase from a given supplier varies in each quarter. For instance, for the three months ended March 31, 2010, Ningbo Litong Petrochemicals Co., Ltd., was one of the five principal suppliers and we entered into five contracts with them; however, no contract was entered into with them during the second quarter of 2010. In addition, for the three months ended June 30, 2010, we entered into eight contracts with Wenzhou Zhongyu Petrochemicals Co., Ltd purchasing three different raw materials; compared to two contracts for purchasing one raw material from them for the three months ended March 31, 2010.
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According to Item 601 (b)(10)(ii) of Regulation S-K,  “If the contract is such as ordinarily accompanies the kind of business conducted by the registrant and its subsidiaries, it will be deemed to have been made in the ordinary course of business and need not be filed unless it falls within one or more of the following categories, in which case it shall be filed except where immaterial in amount or significance:…(B) Any contract upon which the registrant’s business is substantially dependent, as in the case of continuing contracts to sell the major part of registrant’s products or services or to purchase the major part of registrant’s requirements of goods, services or raw materials or any franchise or license or other agreement to use a patent, formula, trade secret, process o r trade name upon which registrant’s business depends to be material extent;…”, we believe these raw material purchase agreements we entered into have been made in the ordinary course of business. For each contract, it is immaterial in amount or significance as we are not purchasing the major part of our requirements of raw material and our business is not substantially dependent on any one supplier contract. Therefore, we hereby confirm that we currently do not have any material contracts for purchasing raw material that meet the criteria listed in Item 601(b)(10)(ii)(B) of Regulation S-K.
However, we are provided by principle suppliers, individually, a form of contract including terms such as delivery, transportation, method of payment, quality standards with the exception of raw material, price and quantities for each specific order.  In each contract, raw material and quantity is specified based on our manufacturing needs for a particular order and price is determined based on market price. Though we do not believe that we currently have any material purchase contract for raw materials as described in Item 601 (b)(10)(ii) of Regulation S-K, we are filing the forms of contract being provided to us by the five principle suppliers for the six months ended June 30, 2010 to demonstrate what type of contracts we typically enter into when purchasing raw materials. In addition, we are amending our disclosure as follows:
7
“Note 18 – Concentrations of Credit Risk
For the six months ended June 30, 2010, five vendors accounted for approximately 78.55% of the Company’s raw materials purchase. Purchases from these vendors amounted to $184.25 million. The sales to the Company’s top five customers amounted to $116.94 million and accounted for approximately 46.89% of the Company's total sales.
…”
Our Competitive Strengths, page 45
Technology Advantage, page 45

13.   In the last paragraph, you state that you have filed two patent applications with the National Intellectual Property Bureau. Please revise to disclosure the location of this organization and the country in which you have applied for patent protection for your technologies.

Response: Pursuant to your comment, we have included in the prospectus the location of the National Intellectual Property Bureau and  the country we have applied for patent protection in. The revised disclosure shall be read as follows:
“Our Competitive Strengths
As an  independent petrochemical manufacturer and supplier, our competitive strengths include:
Technology Advantage
…
Though our manufacturing technologies and process have not been patented or registered as our property, we rely on confidentiality and license agreements with certain of our employees, customers and others to protect the confidentiality of our technologies. Our management considers our manufacturing technologies and manufacturing design critical to our business, and has taken steps to protect these technologies. On May 17, 2010, we have filed two patent applications with the National Intellectual Property Bureau in China, which is located at  No. 6 Xitucheng Road, Jimenqiao, Haidian District, Beijing City, China.
…”
Financial Statements, page 52

14.   We note the financial information presented on page 5 and pro forma combined financial statements do not agree to your unaudited financial statements for the quarter ended March 31, 2010. Please revise. For example, you report net income of $6.7 million on page 5 and $5.7 million on the Income Statement on page 54.

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Response: We agree with your comment; however, the disagreement was based on a typo contained in Amendment No. 1 to our S-1. Since the next amendment shall contain the financial statements for the quarter ended June 30, 2010, we do not believe that this is an issue.

15.   We note you restated your financial statements to report income taxes using the effective tax rate of 15%. Please amend your filing to provide the required disclosure of ASC 250-10-50-7 (paragraph 26 of SFAS 154).

Response: Pursuant to your comment, we have amended our filings to provide the required disclosure of ASC 250-10-50-7 regarding our effective tax rate of 15%.

16.   Please amend your filing to update your financial statements pursuant to Rule 8-08 of Regulation S-X.

Response: Pursuant to your comment, we have updated our financial statements pursuant to Rule 8-08 of Regulation S-X.
Consolidated Statements of Cash Flows, page 55

17.   We have read your response to comment 39 from our letter dated June 17, 2010. Please amend your filing to remove “restricted cash” from the line item description “cash and cash equivalents and restricted cash” if you have removed the restricted cash from amounts presented. Furthermore, we note that the cash ending balance on the cash flow statement of $20.0 million as of December 31, 2009 does not reconcile to the cash balance of $14.0 million on the balance sheet. It appears you continue to include restricted cash in your ending cash balance on the cash flow statement. Please revise.

Response: Pursuant to your comment, we have removed in our filing “restricted cash” from the line item description “cash and cash equivalents and restricted cash” since we have removed the restricted cash from amounts presented. The revised disclosure should be read as follows:
Basis of Presentation, page 56

18.   We have read your response to comment 42 from our letter dated June 17, 2010. You state that you consolidated financial statements include the accounts of you direct wholly-owned subsidiaries and your indirect proportionate share of subsidiaries owned by the wholly-owned subsidiaries. Please tell us what you mean by this statement. Your response should explain in detail what you mean by “indirect proportionate share of subsidiaries”.

9
Response: Pursuant to your comment, we have removed the statement of “indirect proportionate share of subsidiaries” from our disclosure to clarify that the Company does not consolidate any entities in which the Company owns less than 51% of the voting stock.
Pro Forma Combined Financial Statements, page 84

19.   You labeled your pro forma balance sheet as of March 31, 2010 as “audited” for Keyuan International and Silver Pearl. Please amend your filing to remove the “audited” label if this information is in fact unaudited.

Response: Pursuant to your comment, we have revised the filing to remove the “audited” label.
Pro Forma Combined Financial Statements, page 86

20.   Please explain to us how you calculated the weighted average shares outstanding for your EPS of 57.6 million shares. Please address the appropriateness of using the common stock outstanding after the offering of 12,136,003 from page 4.

Response: Pursuant to your comment, given that consummation of the private placement was conditioned upon execution of the Share Exchange, we revised the pro forma EPS data to include the private placement securities in the calculations for all periods presented as per the guidance of Article 11-02(b)(6) of Regulation SX.  As such, the 57,577,840 million shares used as the denominator for the diluted earnings per share include the effect of the convertible preferred stock both the Series A (that was issued as part of the private placements) and the Series M (that was issued as a result of the reverse merger).  As a result, the Series A and Series M preferred shares, or the dilutive equity securities, add an additional 6,738,336 and 4 7,658,000 common shares respectively.
The 12,136,003 common shares listed as outstanding after the offering on page 4 of our prospectus include the 3,181,504 shares currently outstanding (including 984,704 shares of common stock issued as part of the financing), 6,738,336 shares of our Common Stock (the “Conversion Shares”) issuable upon the conversion of our Series A Preferred Stock, and 2,216,163 shares of our Common Stock issuable upon exercise of Warrants. The Warrant Shares are comprised of (i) 748,704 shares of Common Stock issuable upon exercise of Series A Warrants to purchase our Common Stock, (ii) 748,704 shares of Common Stock issuable upon exercise of Series B Warrants to purchase our Common Stock and (iii) 718,755 shares of Common Stock issuable upon exercise of placement agent Warrants to purchase our Common Stock issued to TriP oint Global Equities, LLC, as placement agent in connection with the Private Placement, and certain of its designees as set forth in this prospectus.
10
As such, the calculation of dilutive equity securities did not include the effect of 2,216,162 shares of common stock issuable upon exercise of the warrants.   As a result, we are revising the denominator for the diluted earnings per share to include the effect of the warrants.  The revised denominator of diluted earnings per share will now be 59,794,002.
In summary, the pro forma earning per share on a basic and diluted basis for the three months ending March 31, 2010 will be calculated as follows:

Net income	$	5,731,672
Weighted average common shares
(denominator for basic earnings per share)		3,181,504
Effect of dilutive securities:
Convertible Series A preferred stock		6,738,336
Convertible Series M preferred stock		47,658,000
Warrants		2,216,162
Weighted average common shares
(denominator for diluted earnings per share)		59,794,002
Basic earnings (loss) per share	$	1.80
Diluted earnings (loss) per share	$	0.10

As a result, the Pro Forma EPS presented on page 86 of our prospectus will now be as follows:
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PRO FORMA EPS (UNAUDITED)
		Keyuan International Group LTD.	Keyuan International Group LTD.			Keyuan International Group LTD.
		Three Months Ended	Year  Ended			Year Ended
		March 31,	December 31,			December 31,
		2010	2009			2008
		(unaudited)	(unaudited)			(unaudited)
Net income/(loss)	$	5,731,272	$	(8,833,069	)	$	(1,501,928	)
Other comprehensive income (loss)
Foreign currency translation gain		2,298		15,991			649,089
Comprehensive income (loss)	$	5,733,570	$	(8,817,078	)	$	(852,839	)
Net income (loss) per Share
Basic	$	1.80	$	(2.78	)	$	(0.47	)
Diluted	$	0.10	$	(2.78	)	$	(0.47	)
Weighted average shares outstanding
Basic		3,181,504		3,181,504			3,181,504
Diluted		59,794,002		3,181,504			3,181,504

Management’s Discussion and Analysis, page 91
Our Products, page 92

21.   We note your disclosure in the last paragraph in the “Our Company” section on page 1 in which you state that the local government has orally reassured you over the past two years that the land reservation for your program is “available.” In this section, you state that you have been reassured that the land is “reserved” for your expansion program. Since you must bid on the available land, it is unclear how you could have been reassured that the land was reserved for your expansion. Please revise these sections to eliminate the inconsistency in disclosure.

Response: Pursuant to your comment, we have updated the status of the land acquisition process. The bidding process for the land was completed on August 13, 2010 and we entered into land use right transfer agreements with the local government on August 18, 2010. Therefore, we are revising our disclosure as follows:
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“In order to expand our facilities, we need to acquire use rights of additional land. In China, the government is responsible for overall land planning and they will often select a target company to maximize the benefits of land use for a particular area. We have been in regular communications with the Ningbo Municipal Government about the land use rights for approximately 1.2 million square feet of land adjacent to our current production facility. We submitted our application to the local government for a land bidding process slated on July 13, 2010 which is a necessary legal proceeding to acquire the land use rights in China. We were the only bidder in this process because the land is well integrated with our existing site. The bidding process was completed on August 13, 2010 and we entered into land use right transfer agreement with the local government on August 18, 2010.”
Results of Operations, page 94

22.   Please amend your filing to include in MD&A a discussion of the reasons for the changes in the effective tax rate for all periods presented.

Response: Pursuant to your comment, we have included in MD&A a discussion of the reason for the changes in the effective tax rate for all periods presented. The revised disclosure shall be read as follows:
“The Company is a Nevada corporation and conducts all of its business through its Chinese subsidiary and its affiliated Chinese operating companies. All business is conducted in PRC. As the U.S. holding company has not recorded any income for the six months ended June 30, 2010 and 2009, there was no provision or benefit for U.S. income tax purpose.
Keyuan International was incorporated in the British Virgin Islands. Under the laws of British Virgin Islands, the Company is not subject to tax on income or capital gain.
The Company’s Chinese subsidiary and affiliated operating companies based in China are governed by the Income Tax Law of the PRC concerning the privately-run enterprises, which are subject to a statutory tax rate of 25% and were, until January 2008, subject to a statutory tax rate of 33% (30% state income tax plus 3% local income tax) on income reported in the statutory statements after appropriate adjustments for tax purposes.For the year ended 2009, the Company incurred a loss and was subject to the 25% tax rate. In order to support the growth of certain local enterprises, the local government granted Keyuan Plastics Co., a preferential tax treatment. In the first two profitable years, the local government will credit back to the Company the entire local portion of the income tax which equ als to 40% of the whole Enterprise Income Tax the Company paid applying the 25% tax rate, resulting in an effective tax rate of 15%; in the subsequent three profitable years, the local government will credit back 50% of the local income tax the Company paid under the 25% tax rate resulting in an effective tax rate of 20%.”
Directors and Executive Officers, page 100

23.   Please note that you are required to disclose each director’s and officer’s business experience during the past five years. Please revise each business description to provide the years during which each position was held.

Response: Pursuant to your comment, we have revised each business description to provide the years during which each position was held for each director’s and officer’s business experience during the past five years.
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Item 16. Exhibits and Financial Statement Schedules, page 109

24.   You entered into Independent Director Agreements with each of your independent directors and a Director Agreement with Mr. Yue on July 1, 2010. We note that you filed the agreements as exhibits to the Form 8-K filed on July 7, 2010. Please file these agreements as exhibits to your registration statement. Please refer to Item 601(b)(10)(iii)(A) of Regulation S-K.

Response: Pursuant to your comment, we have included the Independent Director Agreements with each of our independent directors and the Director Agreement with Mr. Yue on July 1, 2010 as exhibits to the prospectus. The revised Item 16. Exhibits and Financial Statement Schedules should be read as follows:
“ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS
The following exhibits are filed as part of this registration statement:

Exhibit No.	Description
2.1	Share Exchange Agreement dated April 22, 2010 (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on April 28, 2010)
2.2	Agreement and Plan of Merger (incorpaoted by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on May 19, 2010)
3.1	Amended Articles of Incorporation of Keyuan Petrochemicals, Inc. (f/k/a Silver Pearls, Inc.), filed with the Secretary of State of Nevada.
3.2	Articles of Merger (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2010)
3.3	Amended Bylaws of Keyuan Petrochemicals, Inc. dated June 29, 2010 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 7, 2010)
4.1	Certificate of Designation of Rights and Preferences of Series A Preferred Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on April 28, 2010)
4.2	Certificate of Designation of Rights and Preferences of Series M Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on April 28, 2010)
5.1	Consent of Leser, Hunter, Taubman & Taubman (Filed herewith)
10.1	Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on April 28, 2010)
10.2	Registration Rights Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on April 28, 2010)
10.3	Form of Securities Escrow Agreement (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed on April 28, 2010)
10.4	Lock-up Agreement with Delight Reward Limited dated April 22, 2010 (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed on April 28, 2010)
10.5	Form of Series A Warrant (incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed on April 28, 2010)
10.6	Form of Series B Warrant (incorporated by reference to Exhibit 10.6 of the Registrant’s Form 8-K filed on April 28, 2010)
10.7	Share Transfer Agreement between Brian Pak-Lun Mok and Chunfeng Tao, dated April 2, 2010 (incorporated by reference to Exhibit 10.7 of the Registrant’s Form 8-K filed on April 28, 2010)
10.8	Share Transfer Agreement between O. Wing Po and Jicun Wang, dated April 2, 2010 (incorporated by reference to Exhibit 10.8 of the Registrant’s Form 8-K filed on April 28, 2010)

14

10.9	Share Transfer Agreement between Lo Kan Kwan and Peijun Chen, dated April 2, 2010 (incorporated by reference to Exhibit 10.9 of the Registrant’s Form 8-K filed on April 28, 2010)
10.10	Share Transfer Agreement between Brian Pak-Lun Mok and Xin Yue, dated April 2, 2010 (incorporated by reference to Exhibit 10.10 of the Registrant’s Form 8-K filed on April 28, 2010)
10.11	Share Transfer Agreement between Brian Pak-Lun Mok and Xin Yue, dated April 2, 2010.
10.12	Employment Agreement by and between Chunfeng Tao and Keyuan Plastics Co., Ltd., dated May 1, 2007 (English translation) (incorporated by reference to Exhibit 10.12 of the Registrant’s Form 8-K filed on April 28, 2010)
10.13	Confidentiality and Non-Compete Agreement by and between Chunfeng Tao and Keyuan Plastics Co., Ltd., dated May 1, 2007 (English translation) (incorporated by reference to Exhibit 10.13 of the Registrant’s Form 8-K filed on April 28, 2010)
10.14	Employment Agreement by and between Jingtao Ma and Keyuan Plastics Co., Ltd.,, dated May 10,2007(English translation).
10.15	Employment Agreement by and between Weifeng Xue and Keyuan Plastics Co., Ltd., dated May 10, 2007(English translation).
10.16	Employment Agreement by and between Mingliang Liu and Keyuan Plastics Co., Ltd., dated February 2, 2009(English translation).
10.17	Employment Agreement by and between Shifa Wang and Keyuan Plastics Co., Ltd., dated October 21,2009(English translation).
10.18	Confidentiality and Non-Compete Agreement by and between Shifa Wang and Keyuan Plastics Co., Ltd., dated October 21, 2009(English translation).
10.19	Employment Agreement by and between Aichun Li and Silver Pearl Enterprises, Inc, dated May 7, 2010.
10.20	Placement Agent Agreement by and between Tripoint Global Equities, LLC., and Keyuan Plastics Co., Ltd., dated March 18, 2009.
10.21	Independent Director Agreement of Gerry Goldberg, dated July 1, 2010.
10.22	Independent Director Agreement of Michael Rosenberg, dated July 1, 2010.
10.23	Independent Director Agreement of Dishen Shen, dated July 1, 2010.
10.24	Director Agreement of Yin Xue, dated July 1, 2010.
10.25	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources,  dated August 18, 2010.
10.26	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010.
10.27	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010.
10.28	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010.
10.29	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Ningbo Litong Petrochemicals Co., Ltd.
10.30	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Wenzhou Zhongyou Fuel Chemical Co., Ltd.
10.31	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Dalian West Pacific Petrochemicals Co., Ltd.
10.32	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Qingdao Lidong Chemical Co., Ltd.
10.33	Form of raw material purchase contract by and between Keyuan Petrochemicals, Inc. and Mercuria Energy Trading PTE Ltd.
23.1	Consent of Leser, Hunter, Taubman & Taubman (Included in Exhibit 5.1 hereto)
23.2	Consent of Patrizio & Zhou, LLC (filed herewith)

15

25.   We note that Exhibit 23.2, the consent of Independent Registered Public Accounting Firm, references a May 21, 2010 audit report. However, this report is not included in the filing. Please advise.

Response: Pursuant to your comment, we have reviewed our disclosure and noticed that the May 21, 2010 audit report was mistakenly left out. However, since we have updated our prospectus with the latest financial statement for the three months ended June 30, 2010 and filed Exhibit 23.2, the consent of Independent Registered Public Accounting Firm referring to a August 6, 2010 audit report, we have included in the filing the August 6, 2010 audit report.
Item 17. Undertaking, page 110

26.   We note your response to comment 58 in our letter dated June 17, 2010. However, the undertakings in paragraphs 4, 5, and 7 do not appear to be applicable to your offering. Please advise.

Response: Pursuant to your comment, we have removed the undertaking not applicable to our offering. The revised undertakings should be read as follows:
“ITEM 17.  UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and
(iii) Include any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
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(4) 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 foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange 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 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 register ed, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of  appropriate jurisdiction 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.”
Annual Report on Form 10-K for the year ended December 31, 2009
Exhibits 31.1 and 31.2

27.   We note your response to comment 61 in our letter dated June 17, 2010. Please confirm that you will delete “amended” before “report” in paragraph 2 of the certifications in future filings.

Response: Pursuant to your comment, we hereby confirm that we will delete “amended” before “report” in paragraph 2 of the certifications in future filings.
We understand that you may have additional comments and thank you for your attention to this matter.
Very truly yours,
LESER HUNTER TAUBMAN & TAUBMAN
 /s/ Louis Taubman
By: Louis Taubman,
Attorney at Law
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-----END PRIVACY-ENHANCED MESSAGE-----

EX-5.1

Exhibit 5.1

 Leser, Hunter, Taubman & Taubman

17 State Street, Suite 2000

New York, New York 10004

(212) 732-7184 Fax: (212) 202-6380

E-mail: ltaubman@lhttlaw.com

September 1, 2010

KEYUAN PETROCHEMICALSKEYUAN PETROCHEMICALS, INC.

15 Xinghua Road

Qingdao, Shandong Province

P.R. China 266401

Ladies and Gentlemen:

We have acted as counsel to KEYUAN PETROCHEMICALS, INC. a Nevada company (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of Amendment No. 2 to this Registration Statement on Form S-1 (the “Registration Statement”), relating to the proposed sale by the selling shareholders listed therein (the “Selling shareholders”) of 9,939,203 shares of the Company’s common stock (the “Common Stock”).  

In so acting, we have examined and relied upon the originals or copies, certified or otherwise identified to our satisfaction, of such Company records, documents, certificates and other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. Based upon the foregoing and such examination of law as we have deemed necessary, we are of the opinion that the Common Stock to be offered by the Selling shareholders, when sold under the circumstances contemplated in the Registration Statement, will be legally issued, fully paid and non-assessable.

The opinions we express herein are limited to matters involving the Nevada corporate law and the federal laws of the United States and are further expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise as to any other matters relating to the Company or the Common Stock.

We consent to the use of this letter as an Exhibit to the Registration Statement and to the use of our name under the heading “Legal Matters” included in the Prospectus forming a part of the Registration Statement.

Sincerely,

Leser Hunter Taubman & Taubman

By: /s/ Louis E. Taubman

Louis E. Taubman, Partner

EX-10.21

Exhibit 10.21

KEYUAN PETROCHEMICALS, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Gerry Goldberg, a citizen of Canada, with a permanent residence at ______________________ (the “Independent Director”).

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

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(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) posse ss an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

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4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

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(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge o f its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b)           If indemnification is requested under Section 7(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

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9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection wit h each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

12.           REMEDIES OF INDEPENDENT DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

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(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14.           INSURANCE. The Company shall obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

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(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

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20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

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26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
Keyuan Petrochemicals, Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Gerry Goldberg
Name:  Chunfeng Tao	Name: Gerry Goldberg
Title:   CEO

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SCHEDULE A

I           POSITION:

INDEPENDENT DIRECTOR.

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending in person or telephonically all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $3,000 per month during the Term (the “Base Fee”).  In addition to the Base Fee, the Company agrees to pay the Independent Director a fee in cash of $1,000 per month (the Audit Committee Fee”), as long the Independent Director remains Chairman of the A udit Committee of the Company. The Base Fee and the Audit Committee Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

STOCK. During the term of the Independent Director’s service as a director or member of any committee of the Board, the Independent Director shall be granted an option to purchase 40,000 shares of common stock of the Company on the date of execution of this Agreement, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. 50% of the option shall vest at the end of 12 months  of the Effective Date.  The remainder of the option shall vest at the end of 24 months of the Effective Date, provided that the Independent Director is re-elected for successive one year terms at the end of 12 months of the Effective Date. Any such stock grant shall be in accordance with the equity incentive plans as may be adopted by the Company, fr om time to time and shall expire 5 years from the date of the grant. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the equity incentive plans.

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  The Independent Director shall be allowed to travel Business Class or better on all flights from the United States and/or Canada  to overseas destinations with the Company prior written consent. In addition, the Independent Director shall rely on the Company to arrange all hotel accommod ations in connection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made within 30 days of receipt of the Independent Director’s expense report, including supporting receipts for such expense..

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NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Gerry Goldberg
Name:  Chunfeng Tao	Name: Gerry Goldberg

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EX-10.22

Exhibit 10.22

KEYUAN PETROCHEMICALS, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Michael Rosenberg, a citizen of [the United States], with a permanent residence at _______________________ (the “Independent Director”).

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

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(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) posse ss an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

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4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

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(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge o f its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b)           If indemnification is requested under Section 7(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

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9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection wit h each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

12.           REMEDIES OF INDEPENDENT DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

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(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14.           INSURANCE. The Company shall, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

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(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

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20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

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26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
Keyuan Petrochemicals, Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Michael Rosenberg
Name:  Chunfeng Tao	Name: Michael Rosenberg
Title:   CEO

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SCHEDULE A

I           POSITION:

INDEPENDENT DIRECTOR.

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending in person or telephonically all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $3,000 per month during the Term (the “Base Fee”).  The Base Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

STOCK. During the term of the Independent Director’s service as a director or member of any committee of the Board, the Independent Director shall be granted an option to purchase 40,000 shares of common stock of the Company on the date of execution of this Agreement, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. 50% of the option shall vest at the end of 12 months  of the Effective Date.  The remainder of the option shall vest at the end of 24 months of the Effective Date, provided that the Independent Director is re-elected for successive one year terms at the end of 12 months of the Effective Date. Any such stock grant shall be in accordance with the equity incentive plans as may be adopted by the Company, fr om time to time and shall expire 5 years from the date of the grant. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the equity incentive plans.

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  .  The Independent Director shall be allowed to travel Business Class or better on all flights from the United States to overseas destinations with the Company prior written consent. In addition, the Independent Director shall rely on the Company to arrange all hotel accommodations in co nnection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made within 30 days of receipt of the Independent Director’s expense report, including supporting receipts for such expense.

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NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Michael Rosenberg
Name:  Chunfeng Tao	Name:  Michael Rosenberg
Title:   CEO

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EX-10.23

Exhibit 10.23

KEYUAN PETROCHEMICALS, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July_, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Dishen Shen, a citizen of P.R. China, with a permanent residence a t      中国杭州市曙光路曙光公寓3-1-301室___ (the “Independent Director”).

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

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(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) posse ss an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

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4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

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(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge o f its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b)           If indemnification is requested under Section 7(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection wit h each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

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10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

12.           REMEDIES OF INDEPENDENT DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

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(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14.           INSURANCE. The Company shall, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

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15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: 中国杭州市曙光路曙光公寓3-1-301室.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

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22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

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AGREED	AGREED
Keyuan Petrochemicals, Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Dishen Shen
Name:  Chunfeng Tao	Name: Dishen Shen
Title:   CEO

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SCHEDULE A

I           POSITION:

INDEPENDENT DIRECTOR.

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $1,000 per month during the Term (the “Base Fee”).  The Base Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  In addition, the Independent Director shall rely on the Company to arrange all hotel accommodations in connection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses elig ible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred.

NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Independent Director
/s/ Chunfeng Tao	/s/ Dishen Shen
Name:  Chunfeng Tao	Name:  Dishen Shen
Title:   CEO

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EX-10.24

Exhibit 10.24

KEYUAN PETROCHEMICALS, INC.

DIRECTOR AGREEMENT

This DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st  day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 13 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Xin Yue, a citizen of P.R. China, with a permanent residence at ____________________________________________  (the “Director”).

WHEREAS, the Company desires to engage the Director, and the Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Director, intending to be legally bound, hereby agree as follows:

1.           DEFINITIONS.

(a)           “Corporate Status” describes the capacity of the Director with respect to the Company and the services performed by the Director in that capacity.

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Director pursuant to Section 12 of this Agreement to enforce the Director’s rights hereunder.

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

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(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2.           SERVICES OF DIRECTOR. While this Agreement is in effect, the Director shall perform duties as an Director and/or a member of the committees of the Board, be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a)           The Director will perform services as is consistent with Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b)           The Director is solely responsible for taxes arising out of any compensation paid by the Company to the Director under this Agreement.  The Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c)           The Company may offset any and all monies payable to the Director to the extent of any monies owing to the Company from the Director.

(d)           The rules and regulations of the Company notified to the Director, from time to time, apply to the Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3.           REQUIREMENTS OF DIRECTOR. During the term of the Director’s services to the Company hereunder, Director shall observe all applicable laws and regulations relating to Directors of a public company as promulgated from to time.

4..           TERM AND TERMINATION. The term of this Agreement and the Director’s services hereunder shall be for one (1) year from the Effective Date, unless terminated as provided for in this Section 5. This Agreement and the Director’s services hereunder shall terminate upon the earlier of the following:

(a)           Removal of the Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

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(b)           Resignation of the Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

5.           LIMITATION OF LIABILITY. In no event shall the Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an Director of the Company, unless the Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

6.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Director as follows:

(a)           Subject to the exceptions contained in Section 7(a) below, if the Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Director’s Corporate Status, the Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

(b)           Subject to the exceptions contained in Section 7(b) below, if the Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Director’s Corporate Status, the Director shall be indemnified by the Company against all Indemnifiable Expenses.

(c)           For purposes of this Agreement, the Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an Director of the Company and/or a member of a committee of the Board of the Company, if the Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a pub lic accountant or a firm of public accountants, which the Director had reasonable grounds to believe to be true.

7.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 6(a) and 6(b) above in all circumstances other than the following:

(a)           If indemnification is requested under Section 6 (a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Director failed to act in good faith and in a manner the Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Director had reasonable cause to believe that the Director’s conduct was unlawful, or (iii) the Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

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(b)           If indemnification is requested under Section 6(b) and

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Director failed to act in good faith and in a manner the Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Director, the Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Director received an improper benefit or improperly took advantage of a corporate opportunity, the Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

8.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Director is, by reason of the Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Director shall be indemnified in connection therewith. If the Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Director against those Expenses reasonably incurred by the Director or on the Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, t he termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

9.           ADVANCES AND INTERIM EXPENSES. The Company may pay to the Director all Indemnifiable Expenses incurred by the Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

10.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Director seeks payment under Section 6 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Director shall furnish such documentation and information as are reasonably available to the Director and necessary to establish that the Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

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11.           REMEDIES OF DIRECTOR.

(a)           RIGHT TO PETITION COURT. In the event that the Director makes a request for payment of Indemnifiable Amounts under Sections 6, 8-10 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 11 (a) above, the Company shall have the burden of proving that the Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c)           EXPENSES. The Company agrees to reimburse the Director in full for any Expenses incurred by the Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Director under Section 11(a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 11 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 11 (a) above.

12.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Director in an action brought against the Director.

13.           INSURANCE. The Company may, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance, in an amount not less than $[         ], of which the Director will be named as an insured, providing the Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

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(a)           The Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 6-12 of this Agreement shall not apply, and the Company’s indemnification obligation to the Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

(b)           The Director agrees that the Company’s indemnification obligation to the Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Director due to the acts or omissions of the Director;

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 6-12 of this Agreement; and

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Director with respect to the indemnification obligation of the Company to the Director under this Agreement.

14.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Director against other persons, and the Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

15.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

16.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Director. The Director has no power to assign this Agreement or any rights and obligations hereunder.

17.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

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18.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

19           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

20.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

21.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

22.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

23.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

24.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

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IN WITNESS WHEREOF, the parties hereto have executed this Director Agreement as of the day and year first above written.

AGREED	AGREED
Keyuan Petrochemicals, Inc.	Director
/s/ Chunfeng Tao	/s/ Xin Yue
Name:  Chunfeng Tao	Name: Xin Yue
Title:    CEO

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SCHEDULE A

I           POSITION:

DIRECTOR.

II.           EXPENSES:

During the term of the Director’s service as a director of the Company, the Company shall promptly reimburse the Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the Directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  In addition, the Director shall rely on the Company to arrange all hotel accommodations in connection with any such meetings the Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred.

NO OTHER BENEFITS OR COMPENSATION. The Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
Keyuan Petrochemicals., Inc.	Director
/s/ Chunfeng Tao	/s/ Xin Yue
Name:  Chunfeng Tao	Name:  Xin Yue
Title:    CEO

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EX-10.25

Exhibit 10.25

Electronic Monitoring Number: 3302062010B02066

 Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

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Made by the Ministry of Land and Resources of the People’s Republic of China,

and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 056(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:。

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    40827.5    square meters (in Lower Case    40827.5    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   40827.5    square meters ( in Lower Case    40827.5  
60; square meters).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District(Keyuan Petrochemicals No.1 section)   .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J18_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is    for industrial land with an area of   industrial land (chemical material and chemical products manufacture)    hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

      1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

    2. Current Status:   no established buildings   .

      Article 7  The use term of the state-owned construction land use right under this contract is    50    years, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    18,372,375   (in Lower Case RMB    18,372,375   ) , with RMB (in Upper Case)   450    (in Lower Case RMB    450    ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is    $9,186,188    in upper case (   $9,186,188    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is      $9,186,187    in upper case (   $9,186,187    in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

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Chapter III The Development, Construction and Utilization of the Assigned Land

      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    128,610,000     (in Lower Case RMB    128,610,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;         

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       Building Height Limitation:    according to the standards of the planning   ;                                           

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   2858    square meters, and the construct ion area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundari es of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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(1). To transfer to the local government;

(2). To be purchased by the local government;

(3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

 (4).    /   ;

 (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arising from t he withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

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Chapter V  Expiration of Use Term

      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land un der this contract, the Assignor and the land user agree to conduct according toItem 1 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guarantee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned construction land use right af ter 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2    ‰ of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In case the As signer fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the    Item 2    of this article:

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      1. Submit to    /    Arbitration Commission;

      2. Prosecute to  the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in    six    originals, each party keep    three   , and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.26

Exhibit 10.26

Electronic Monitoring Number: 3302062010B02058

 Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

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Made by the Ministry of Land and Resources of the People’s Republic of China,

and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 057(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:。

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    10661.8    square meters (in Lower Case    10661.8    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   10661.8    square meters ( in Lower Case    10661.8  
60; square meters).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District (Keyuan Petrochemicals No.2 section )  .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J9_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is    for industrial land with an area of   industrial land (chemical material and chemical products manufacture)    hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

      1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

    2. Current Status:   no established buildings   .

      Article 7  The use term of the state-owned construction land use right under this contract is    50    years, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    4,797,810   ; (in Lower Case RMB    4,797,810   ) , with RMB (in Upper Case)   450    (in Lower Case RMB    450    ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is RMB   2,398,905    in upper case (RMB   2,398,905    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is RMB     2,398,905    in upper case (RMB   2,398,905    in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

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Chapter III The Development, Construction and Utilization of the Assigned Land

      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    33,590,000     (in Lower Case RMB    33,590,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;        

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       Building Height Limitation:    according to the standards of the planning   ;  

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   746    square meters, and the constructi on area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundari es of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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(1). To transfer to the local government;

(2). To be purchased by the local government;

(3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

 (4).    /   ;

 (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arising from t he withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

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Chapter V  Expiration of Use Term

      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land un der this contract, the Assignor and the land user agree to conduct according toItem 1 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guarantee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned construction land use right af ter 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2    ‰ of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In case the As signer fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the    Item 2    of this article:

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      1. Submit to    /    Arbitration Commission;

      2. Prosecute to the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in    six    originals, each party keep    three   , and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.27

Exhibit 10.27

Electronic Monitoring Number: 3302062010B02048

 Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

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Made by the Ministry of Land and Resources of the People’s Republic of China,

and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 058(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:。

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    33008.9    square meters (in Lower Case    33008.9    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   33008.9    square meters ( in Lower Case    33008.9  
60; square meters).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District (Keyuan Petrochemicals No.3 section )  .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J9_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is    for industrial land with an area of   industrial land (chemical material and chemical products manufacture)    hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

       1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

          2. Current Status:   no established buildings   .

      Article 7  The use term of the state-owned construction land use right under this contract shall terminate on January 31, 2023, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

Article 8 The assignment charge for the state-owned construction land use right under this contract is RMB (in Upper Case)    8,087,181   (in Lower Case RMB    8,087,181  ) , with RMB (in Upper Case)   245    (in Lower Case RMB    245    ) for per square meter.

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Article 9 The advance deposit for the assigned land under this contract is 10% of the assignment charges of the land parcel. The advance deposit shall be regarded as a part of the payment for the assignment charge.

Article 10 The Assignee agrees to pay the assignment charge in a lump-sum payment for the state-owned construction land use right according to   Item 2    of this article

1. The assignment charge for the state-owned construction land use right shall be paid up in lump-sum payment within    / days after this contract is signed.

2. The assignment charge for the state-owned construction land use right shall be paid in installments according to the following time and amount.

      First installment  50% of the assignment charge which is RMB   4,043,591    in upper case (RMB   4,043,591    in lower case) shall be paid prior to    August 20, 2010   . The security deposit of listing shall be set off against the assignment charge.

      Second installment  The Assignee shall pay up the rest of the assignment charge which is RMB   4,043,590    in upper case (RMB   4,043,590   in lower case) prior to    September 18, 2010   .

      Article 11 After paying up all the assignment charges of the land parcel in accordance with this contract, the Assignee may apply for the Certificate of State-owned Construction Land Use Right Assignment by presenting this contract and payment receipt of the assignment charge.

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Chapter III The Development, Construction and Utilization of the Assigned Land

      Article 12  The Assignee agrees the investment intensity to develop the assigned land under this contract shall be meet the criteria stipulated in    Item 1    of this article:

      1. Where the assigned land under this contract is used for construction of industrial projects, the Assignee agrees the fixed assets invested in the land under this contract are not less than the approved amount or the amount put on file, RMB (in Upper Case)    103,980,000     (in Lower Case RMB    103,980,000    ) and the investment intensity is not less than RMB (in Upper Case)    3150   (in Lower Case RMB    3150    ) per square meter. The investment of fixed assets to the assigned land under this contract shall include buildings, fixtures and their auxiliary facilities as well as the assignment charge.

2. Where the assigned land under this contract is used for construction of non-industrial projects, the Assignee guarantees the total investment to the assigned land under this contract is not less than RMB (in Upper Case)    /     (in Lower Case RMB    /    ).

Article 13 The new buildings, fixtures and their auxiliary facilities established on the assigned land under this contract shall be satisfied with the planning conditions for the assigned land regulated by the municipal (county) planning administrations. (Please see Appendix III).

       The nature of the main building    industrial manufactory   ;

       The nature of the affiliated buildings    office building   ;

       The total construction area:   according to the tender document and standards of the planning   .

       The floor area ratio (FAR) is not more than   2.0  not less than   0.6  ;       

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       Building Height Limitation:    according to the standards of the planning   ;    

       Building Density is not more than    45%     not less than    30%   ;    

       Greening Rate:    20%   ;      

       Other requirements for the land use:    according to the standards of the planning   .                       

Article 14  The Assignee agrees to develop the assigned land under this contract according to    Item 1 of this article:

      1. The assigned land under this contract is used for construction of industrial projects. In accordance with the planning and designing conditions regulated by the planning departments, within the boundaries of the assigned land under this contract, the land used for office buildings and life and service facilities shall not be more than 7 % of the total area of the assigned land, that is, not more than   2311    square meters, and the construct ion area shall not be more than    10   square meters. The Assignee agrees not to build unproductive facilities on the assigned land under this contract, including residential packages, experts’ floor, hotel, guest house or training center etc.

      2. The assigned land under this contract is used for construction of residential projects. In accordance with the planning and construction conditions regulated by the planning and construction departments, within the boundaries of the assigned land under this contract, the total number of apartments shall not be less than    /    sets, of which, the apartments with the construction area of less than 90 square meters shall not be less than    /    sets, the requirements for the housing are    /    . Within the boundari es of the assigned land under this contract, the land area used for developing apartments under 90 square meters shall not less than    /   % of the total area of the assigned land. In case the economically affordable housing and low-rent housing are developed within the boundaries of the assigned land under this contract, the Assignee agrees to do according to Term    /   of this item upon completion of construction.

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(1). To transfer to the local government;

(2). To be purchased by the local government;

(3). To implement relevant administrative regulations on construction and sales of economically affordable housing and low-rent housing;

 (4).    /   ;

 (5).    /   .

Article 15The Assignee agrees to construct the following necessary facilities within the boundaries of the assigned land under this contract, and voluntarily transfer to the government upon completion of construction:

      (1).   /   ;

      (2).   /   ;

      (3).   /   .

      Article 16  The Assignee agrees that the construction projects on the assigned land under this contract shall commence in accordance with the design drawings within 6 months and complete within 24 months after the delivery date for the assigned land. In case the commencement of construction needs to be deferred, the Assignee shall submit the application for deferral to the Assignor 30 days in advance. After the deferral of commencement is approved by the Assignor, the time of completion shall be deferred accordingly. But the deferral shall not exceed one year.

      Article 17  During the construction on the assigned land under this contract, where water supply, gas supply, power supplies, sewage disposal, and other facilities need to be connected with the main pipelines outside of the assigned land, the Assignee agrees to do according to relevant rules.

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      The Assignee agrees the entering, passing and crossing of any kind of pipelines laid by the government for public purposes. However, in case where the land use functions are affected, the government or relevant departments shall make reasonable compensations.

Article 18 The Assignee shall utilize the land according to this contract. Any alteration of land-use purpose and plot ration is prohibited. Within the assignment term, where the land use purpose needs to be altered, both parties agree to do according toItem 1     of this article.

      1. The Assignor shall withdraw the construction land use right with compensation to the Assignee;

      2. To go through the approval formalities of altering the land use purpose in accordance with laws, to sign an alteration agreement on the state-owned construction land use right assignment or sign a new contract on the state-owned construction land use right assignment. The Assignee shall make a supplementary payment for the balance between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose. The evaluated market price shall subject to the time when the alteration of the land use purpose is approved. The registration of altering the land use right shall be undertaken.

      Article 19  Within the use term of the assigned land under this contract, the government reserves its right to adjust the planning of the assigned land under this contract. In case the original planning needs to be modified, it shall not affect the existing buildings on the assigned land parcel. But in case the transformation, renovation and rebuilding of the buildings, fixtures and their affiliated facilities on the assigned land within its use term, or when applying for renewal of the contract upon expiration of use term, the adjusted planning shall prevail.

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      Article 20  The Assignee shall utilize the state-owned construction land use right in accordance with law. The Assignor shall not withdraw before the use term in this contract expires. Under special circumstances, where the Assignor needs to withdraw the state-owned construction land use right for the purpose of social public interests before expiration of use term, approval formalities shall be needed in accordance with laws. And the Assignor shall compensate the Assignee according to the value of buildings, fixtures and their affiliated facilities on the assigned land at the time of withdrawal; the evaluated market price of the remained use term of the state-owned construction land use right; and the evaluated direct loss arising from t he withdrawal.

 Chapter IV  The Transfer, Lease and Mortgage of the State-Owned Construction Land Use Right

Article 21 After paying up the assignment charge of the state-owned construction land use right in accordance with this contract, and obtains the Certificate for the Use of State-owned Land, the Assignee is entitled to transfer, lease or mortgage all or part of the state-owned construction land use right to a third party. Where the first transfer occurs, it shall meet the conditions regulated in theItem 1    of this article:

1. The investment and development to the assigned land shall have begun in accordance with this contract and 25% or above of the total investment have been made;

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      2. The investment and development shall have begun in accordance with this contract, and the assigned land has formed conditions for industrial purpose or other construction purposes.

      Article 22 The contracts on transfer, lease and mortgage of the state-owned construction land use right shall not go against the laws and regulations of the country and the articles of this contract.

      Article 23  Where all or part of the state-owned construction land use right is transferred, the rights and obligations specified in this contract and in the land registration documents shall be transferred accordingly. The use term of the transfer contract for the assigned land is the remainder of the use term specified in this contract minuses the number of the years in which the Assignee has used the land.

      Where all or part of the state-owned construction land use right is leased, the rights and obligations specified in this contract and in the land registration documents shall be still borne by the Assignee.

      Article 24  Where the state-owned construction land use right is transferred or mortgaged, both parties related to the transfer and mortgage shall apply for registration of changes for the land use right at the land and resources administrative department by presenting this contract, contract on transfer or contract on mortgage, and the Certificate for the Use of State-owned Land.

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Chapter V  Expiration of Use Term

      Article 25 When the use term agreed in this contract expires, and the land user continues using the assigned land under this contract, an application for renewal shall be submitted to the Assignor not less than one year prior to the use term expires. The Assignor shall approve the renewal unless the Assignor needs to withdraw the assigned land under this contract for the purposes of social and public interests.

      In respect of the construction land use right for residential purpose, when the use term expires, it shall be renewed automatically.

      When the Assignor agrees on the renewal, the land user shall handle the compensable land-use formalities in accordance with laws. The compensable land use contract on assignment or lease shall be signed again. And, the assignment charge or rental shall be paid.

Article 26 In case the use term of the assigned land expires and the land user applies for renewal, but fails to get approved by the Assignor for the purpose of social and public interests, the land user shall return back the Certificate for the Use of State-owned Land. The cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The state-owned construction land use right shall be taken back by the Assignor without compensation. In respect of the buildings, fixtures and their affiliated facilities on the assigned land un der this contract, the Assignor and the land user agree to conduct according toItem 2 of this article:

      1. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land, and give reasonable compensation to the land user based on the residual value of these buildings, fixtures and their affiliated facilities at the time of taking back;

      2. The Assignor shall take back the above-ground buildings, fixtures and their affiliated facilities on the assigned land without compensation.

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Article 27 In case the use term of the assigned land expires, the land user fails to apply for renewal, the land user shall return back the Certificate for the Use of State-owned Land. And the cancellation of registration for the state-owned construction land use right shall be undertaken in accordance with regulations. The Assignor shall take back the state-owned construction land use right without compensation. The above-ground buildings, fixtures and their affiliated facilities on the assigned land shall be taken back by the Assignor without compensation. The land user shall guarantee the normal functions of the above-ground buildings and other objects thereon. Deliberate destructions are not allowed. Where the above-ground buildings, fixtures and their affiliated facilities lost their normal functions, the Assignor may request the land user to remove or dismantle the above-ground buildings, fixtures and their affiliated facilities to restore the leveled ground on the assigned land.

 Chapter VI  Force Majeure

Article 28 Either of the parties shall exempt from responsibility in case when force majeure occurs, all or part of this contract cannot be implemented. But the concerned party shall take any necessary remedial measures to reduce the losses caused by the force majeure. The concerned party shall not be exempted from responsibilities when force majeure occurs during delay of performance.

Article 29 When force majeure occurs, the prevented party shall notify the other party in written form by mail, cable or fax within 7 days to provide the detailed information of the events, and within 15 days after the occurrence of force majeure, a valid document for evidence shall be provided to the other party to explain its inability to implement or delay the execution of all or part of this contract.

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 Chapter VII  Liabilities for Breach of the Contract

 Article 30 The Assignee shall pay in due time the assignment charge of the state-owned construction land use right according to the terms of this contract. In case the Assignee fails to pay on schedule the assignment charge of the state-owned construction land use right, the daily penalty to the Assignee is to pay to the Assignor    1    ‰ of the deferred payment starting from the first day after exceeding the time limit. In case the Assignee fails to pay the assignment charge of the state-owned construction land use right af ter 60 days, and neglects the Assignor’s urges for payment, the Assignor has the right to terminate this contract, and the Assignee has no right to request the Assignor to refund the advance deposit. The Assignor may claim damages to the Assignee. 

      Article 31 In case the Assignee terminates its investment and construction on the assigned land for any reason whatsoever attributable to the Assignee, and proposes to the Assignor to request to terminate the contract and return back the assigned land, the Assignor shall report for approval to the people’s government which approves the land use right assignment plan. After approval, the Assignor shall, according to the following agreements, refund all or part of the assignment charge of the state-owned construction land use right (without interest) except for the advance deposit determined in this contract, and withdraw the state-owned construction land use right. All the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land shall not be compensated while the Assignor may request the Assignee to remove or dismantle the established buildings, fixtures and their affiliated facilities to restore the leveled ground. But in case the Assignor is willing to take advantage of the established buildings, fixtures and their affiliated facilities within the boundaries of the assigned land, the Assignor shall make reasonable compensation to the Assignee.

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      1. Where the Assignee makes an application to the Assignor not less than 60 days before one year expires after the commencement date of construction determined in this contract, the Assignor shall refund all the paid assignment charge of the state-owned construction land use right except for the advance deposit.

      2. Where the Assignee makes an application to the Assignor not less than 60 days before the first expires but the second year doesn’t expire after the commencement date of construction determined in this contract, the Assignor shall refund the reminder of the assignment charge of the state-owned construction land use right after the advance deposit and the charges for idle land are deducted in accordance with regulations.

      Article 32  The assigned land is left unused for more than one year but less than two years for any reason whatsoever attributable to the Assignee, the Assignee shall pay the charge for idle land in accordance with laws. In case the construction on the assigned land doesn’t commence, resulting in the land left unused, for more than two years, the Assignor has the right to take back the state-owned construction land use right without compensation.

      Article 33 In case the Assignee fails to commence on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2   ‰ of the assignment charge of the state-owned construction land use right. The Assigner has the right to request the Assignee to continue performance.

      In case the Assignee fails to complete on the determined date according to the terms of this contract, or the deferred date determined under the contract, the daily penalty for the Assignee is to pay the Assigner    0.2    ‰ of the assignment charge of the state-owned construction land use right.

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Article 34  In case the total investment in fixed assets, the investment intensity and the total investment do not meet the standers of this contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right, according to the actual difference accounts for the proportion of the total investment and the investment intensity. In addition, the Assigner has the right to request the Assignee to continue performance.

Article 35  In case the floor area ratio, the building density or any other indicator of the assigned land is below the minimum standards agreed in the contract, the Assigner has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the minimum standard determined in the contract, and has the right to request the Assignee to continue performance. In case the floor area ratio, the building density or any other indicator of the assigned land exceeds the maximum standards agreed in the contract, the Assigner has the right to withdraw the area that exceeds the maximum standards, and has the right to request the Assignee to pay a penalty of the assignment charge of the state-owned construction land use right according to the actual difference accounts for the proportion of the standard determined in the contract.   

Article 36  In case the Greening rate, the proportion of office buildings and life and service facilities, the construction area of office buildings and life and service facilities or any other indicator does mot meet the standards in this contract, the Assignee shall pay the Assigner    50    ‰ of the assignment charge of the state-owned construction land use right, and remove or dismantle the greening area, above-building and affiliated facilities.

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Article 37Where the Assignee pays the assignment charge of the state-owned construction land use right in accordance with this contract, the Assigner shall deliver the assigned land on schedule. In case the delivery is delayed because of the responsibility of the Assigner, the daily penalty for the Assignee is to pay the Assigner    1    ‰ of the assignment charge of the state-owned construction land use right. Land-use period is from the actual delivery date. In case the As signer fails to deliver the assigned land after 60 days of the determined date in accordance with this contract, and neglects the Assignee’s urges for the delivery, the Assignee has the right to terminate this contract. The Assigner shall double the advance deposit refunded to the Assignee, and refund the rest of the assignment charge of the state-owned construction land use right. The Assignee may claim damages to the Assigner.

Article 38  In case the Assigner fails to deliver the assigned land on schedule, or the delivered assigned land does not meet the standards determined in this contract, or make unilateral changes in land use, the Assignee has the right to request the Assigner to fulfill their obligations in accordance with the terms under this contract, and to compensate the Assignee the direct loss caused by the delay of delivery. Land-use period starts from the date when the assigned land reached the land condition determined in this contract.

 Chapter VIII  Applicable Law and Dispute Resolution

      Article 39  The sighing, validity, interpretation, fulfillment and settlement of disputes of this agreement are applicable to the PRC law.

Article 40  Any dispute arising from this agreement shall be firstly resolved by consultation between the parties. If no resolution can be reached through consultation, the two concerned parties shall follow the    Item 2    of this article:

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      1. Submit to    /    Arbitration Commission;

      2. Prosecute to the People’s Court lawfully.

Chapter IX  Supplementary Provisions

      Article 41  The land use right assignment plan under this contract has been approved by    Ningbo    Municipal Government.

      Article 42  The concerned parties of this contractare to ensurethe names, mailing addresses, telephone numbers, facsimiles, banks, agents and other information are valid and accurate. In case of any change of the information from one side, the other side has to be informed within 15 days from the effective date of the change by writing. Otherwise, the party who can not timely inform the other side is responsible for any consequences resulting from the change of information.

      Article 43  The contract along with the appendix is    20    pages, written in Chinese.

      Article 44  The payment, amount, area and other terms shall be written both in upper case and lower case which have to match. In case of abhorrent amount, it will go by upper case.

      Article 45  Any unsettled matter shall be subject to further consultation between the parties and both parties shall enter into a supplement agreement. The supplement agreement shall have the same effect as this contract.

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      Article 46  This contract shall be executed in    six    originals, each party keep    three   , and the six originals shall have the same effect.

Assigner (Stamped):  Ningbo Municipal Bureau of National Land and Resources   Representative (Signed):  Feng Gu Assigner (Stamped): Keyuan Petrochemcials, Inc.     Representative (Signed): Xiaoying Chen 

              August 18, 2010

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EX-10.28

Exhibit 10.28

Contract for State-Owned Construction Land Use Right Assignment

(English Translation)

1

Made by the Ministry of Land and Resources of the People’s Republic of China, and the State Administration for Industry and Commerce of the People’s Republic of China.

Contract Number: 330206 2010 A21 059(KAI)

Contract for State-Owned Construction Land Use Right Assignment

The Concerned Parties of this Contract:

Assignor:   Ningbo Municipal Bureau of National Land and Resources, Zhejiang Province, the People’s Republic of China   ;

Mailing Address:   Tower B Floor 3, Administrative Center, Beilun District, Ningbo City   ;           

Zip Code:    315800   ；

Telephone:   0574-86782468   ；

Facsimile:   0574-86782461   ；

Name of Opening Bank:；

Account Number:。

Assignee:   Ningbo Keyuan Petrochemicals, Inc.   ;

Mailing address:   Beilun Qingzhi Industrial District   ;

Zip Code:   315803   ；

Telephone Number:   0574-86232939   ；

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Facsilime: ;

Name of Opening Bank: ;

Account Number:                           .

Chapter I  General Provisions

      Article 1  In accordance with the Real Right Law of the People’sRepublic of China, the Contract Law of the People’s Republic of China,the Law of Land Administration of the People’s Republic of China, theLaw of the People’s Republic of China on Administration of the Urban Real Estate, relevant administrative regulations and rules on land supply policies, the two parties enter this contract based on the principles of equality, voluntariness, compensation, honesty and credibility.

      Article 2  The ownership of the assigned land belongs to the People’s Republic of China. The Assignor can only assign the state-owned construction land use right to the Assignee in accordance with laws. The resources and objects buried there under shall continue to be owned by the State.

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      Article 3  The holder of the right to use construction land (the Assignee) has the right to possess, use and seek proceeds from the land owned by the state, and shall be entitled to the construction of buildings, fixtures and their auxiliary facilities by making use of such land.

 Chapter II  Delivery of the Assigned Land and Payment of the Assignment Charge

  Article 4  The Registered Number of the land parcel under this contract is:  / , with a total area of (in Upper Case)    27492.3    square meters (in Lower Case    27492.3    square meters). Of which, the assigned land area of the land parcel is (in Upper Case)   27492.3    square meters ( in Lower Case    27492.3    square meter s).

      The assigned land under this contract is located at   Beilun Qingzhi Industrial District (Keyuan Petrochemicals No.4 section )  .

      The ichnographic boundaries of the assigned land under this contract: _____J1-J9_____. Please see the Sketch of Ichnographic Boundaries of the Assigned Land (Appendix I).

      The vertical limits of the assigned land under this contract are to take_____/_____as its upper limit while to take_____/_____its lower limit, with the altitude difference of_____/_____meters. Please see the Sketch of Vertical Limits of the Assigned Land (Appendix II).

      The spatial extent of the assigned land refers to the closed space formed by the above-said boundary points posed by the vertical plane and the upper and lower elevation level.

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      Article 5  The use purpose of the assigned land under this contract is for industrial land with an area of industrial land (chemical material and chemical products manufacture) hectares.

      Article 6  The Assignor agrees to deliver the assigned land to the Assignee after the Assignee pay up all the assignment charges of the land parcel in accordance with this contract. And the Assignor agrees that the assigned land shall meet the following land conditions regulated in    Item 2   of this article upon delivering the land.

      1. To level the land and make it meet the conditions of    /   ; The infrastructure around the land shall include:   /   ;

      2. Current Status:   no established buildings.

      Article 7  The use term of the state-owned construction land use right under this contract shall terminate on January 31, 2023, counting from the date when the assigned land is delivered according to the Article 6 of this contract. In case applying for completion of the formalities on state-owned construction land use right which is previously allotted (or leased), the use term shall be counted from the date when the contract is signed.

EX-10.29

Exhibit 10.29

Sales and Purchase Contract

(English Translation)

                                            Contract No. ____________

                                                        Date of signing: ______

                                                           Place of signing: ______

The Buyer:                      Ningbo Keyuan Plastics Co., Ltd.

The Seller:                      Ningbo Litong Petrochemicals Co., Ltd.

According to the Law of Contract of the PRC and relative laws and regulations, on the basis of mutual benefits and sincere cooperation, after discussions, both parties agree on this contract.

1.   Subject matter (the product as being referred below), delivery time and quantity

Commodity Sepc quantity Delivery time and quantity

2.   Quality standards:  see attached technical specifications.

3.   Terms of Price (Price including VAT): ______________.

4.   Payment for goods and terms: The principle is payment upon delivery. The Buyer will make the whole payment within 5 working days upon receiving the VAT invoice in full amount issued by the seller, which has been confirmed by both parties as correct. Specific steps of payment will be discussed and settled by both parties.

5.   Delivery of products (The Buyer takes over the goods according to bill of lading by the seller):

(1)   Place of delivery: warehouse of the buyer or designated warehouse by the buyer.

6.   Relative cargo transportation fee is for to bear.

7.   Measurement and its standards:

(1) Quantity for settling accounts: use the buyer’s oil depot or shore tank at oil depot designated by the buyer as what the handover relies on. Meantime data on bill of loading by the seller will be used as a reference. In case the loss between the two is within 2‰ the buyer will bear it; if over 2‰, the seller will bear the part beyond it.

(2) Quality: before delivery is made, the seller will provide a certificate of quality for its goods leaving the factory with both parties keeping a sample in the same time. Inspection and acceptance will be done according to Item 2 of the contract. In case the buyer has a dispute about the quality of goods, it should raise the matter to the seller in writing within 15 days upon delivery. Sample test report issued by a third testing organization (SGS) will be taken as final tested results.

8. Property and risks: Risks and transfer of property take the place where the goods are put into oil depot as a border. Once the goods pass this point they finish transferring from the seller to A.

9. Terms of secrecy: Both parties are responsible for keeping business secrets of either side while implementing the contract, which include but is not limited to contracts, documents, materials, data etc provided by either party, or information that may help either gain a better position in competition. Neither party should reveal any commercial secret of the other to any third party or make ill-use of it except for what the other party has agreed in writing or laws have stipulated. The terms of secrecy of the contract remain valid regardless whether the contract is altered, discharged or terminated.

10. Terms of guarantee:

 (1)                Guarantee from the seller:

(1.1) the quality of the heavy oil to sell is in accordance with the spec in the attachment.

(1.2) The Seller has authorized its representative to sign the contract. Once effective the contract is law abiding to the seller.

(2)                Guarantee from The buyer:

(2.1) The Buyer’s setup followed legal procedure (with natural persons), the buyer remains valid in existence with all relative papers.

(2.2) The Buyer will fulfill its obligations in the contract, will not violate any regulations in its business license, setting-up agreement, articles of corporation, and similar organization documents, and will not violate any relative laws and regulations or authorized rights or approvals by any departments of government.

(2.3) The Seller is responsible for the operation qualification and validity of the transportation company for dangerous chemical cargo.

(2.4) The Buyer has authorized its representative to sign the contract. Once effective the contract is law abiding to the buyer.

11. Health, safety and environment protection: Both parties should insure that the requirements in the laws and regulations concerning safety, environment protection and health during sales, transportation, storage, processing, and utilizing should be practiced and fulfilled.

12.        Contract’s alteration and termination:

(1) The contract can be altered or terminated with an agreement by both parties in writing.

(2) In case one party’s breach causes that the contract is unable to implement partially or fully, the other party has the right to partly or fully terminate the contract. And the one with breach will bear the results of its breaches. The party who will terminate the contract is responsible to notify the other party.

13.        Terms of exemption:

(1) Due to force majeure, in case of natural disasters like fires, earthquakes, typhoons, floods etc, or other unforeseeable and inevitable and insurmountable events, or government actions, which make the contract cease partly or totally, the party or parties that have been affected by the force majeure will not be responsible for the breaches, but should do his/their upmost to minimize the damage to implementing the contract.

14.        Responsibility for breach

(1) In case force majeure or other special reasons cause the seller unable to fulfill the contract, the seller should give a timely notice to The buyer. If not, the seller is responsible for the expenses Party spends on preventing expanded losses.

(2) In case the quality of the goods by the seller is below the spec required, the buyer has the right to ask for a lower price or compensation. The Buyer will be responsible for ill-storage and ill-operation.

(3) In case other kinds of breaches occur, the breaching party should compensate the other party for its losses. If both parties breach the contract, each should bear its own responsibility.

15.        Disputes settlement:

In case a dispute occurs, both parties will discuss and negotiate for a solution. If they fail, the dispute can be referred to local People’s Court which is in the place where The buyer is located.

16.        Validity and other things:

(1) The contract comes into effect as of the date of signing and chopping by both parties. It’s valid from ______ till _______.

(2) Things yet to cover will be discussed and agreed as an attachment to the contract which is part of the contract with the same legal effect. In case an attachment differs from the contract, the attachment will be overwhelming.

(3) This contract has two copies, one for each party. And fax copies are good as well.

The Buyer (chopping)	The Seller (chopping)
Ningbo Keyuan Plastics Co., Ltd.	Ningbo Litong Petrochemical Co., Ltd.
Add: Qingshi Chemical Zone, Ningbo Economic	Add:
and Technological Development Zone
Postal Code: 315803	Postal Code:
Authorized Rep:	Authorized Rep:
Tel:                              Fax:	Tel:                              Fax:
Name of Bank:	Name of Bank:
Account No.:	Account No.:

EX-10.30

Exhibit 10.30

Sales and Purchases Contract

(English Translation)

The Seller:  Wenzhou Zhongyou Fuel Chemical Co., Ltd.	Contract No. ______
The Buyer:  Ningbo Keyuan Plastics Co., Ltd.	Place of signing: ______
	Date: _______

1.   Name of commodity, trade mark, model, quantity, sum, time of delivery

Commodity Trade mark Unit Quantity Unit price Total sum Time of delivery

2.   Payment terms:

3.   Quality requirements, technical standards, condition and period guaranteed for the quality by the seller: this product is material for 2nd processing, which cannot be used directly and the outcome of direct using will be borne by the buyer automatically. Both parties will be present at the scene for sample seal-up for safekeeping. In case a dispute arises on the quality, the sample will be examined as a standard of judging the quality. In case the buyer does not ask for sample seal-up, it means the buyer gives it up himself. If a later dispute occurs concerning the quality, the buyer will be responsible for any possible consequence.

4.   Place and terms of delivery: at ___________ The buyer picks up the goods and is in charge of the transportation. After delivery of goods all the risks of goods damage will be borne by the buyer.

5.   Terms of transportation and port of arrival and fees: The buyer will bear shipping, shipping fees, pier related fees and cargo insurance fee. If safety or environment problems occur after the ship is berthed, the seller is not responsible. The buyer should ensure that the ships are legally qualified to load and store this product with national equipment safety, quantity and quality standards in concern being fully met.

6.   Reasonable loss and calculation: Both parties sum the payment on the basis of shore tank measurements. The buyer, no matter picking-up the goods himself or via an agent, should check seriously the measurement of shore tank. After both parties – including the carrier entrusted by the buyer -have confirmed the measurement, no other dissent over measurement will be accepted. In case the carrier authorized by the buyer does not agree with the measurement and asks the seller to follow the measurement of an actual survey, any extra expenses caused will be borne by the buyer.

7.   Packaging standards supply and reclaim of packaging material: In bulk.

  8. Measurement and inspection with acceptance: The buyer will send his staff to the scene of inspection. The measurement operation will be done by the seller under the surveillance of the buyer or his agent. Any question concerning the quality or measurement should be raised prior to the ship’s leaving the pier of the seller. Otherwise, it will be considered null and void.

  9.  Terms of payment and time-limit: payment will be done according to actual goods delivered with shore tank measurement with previous payment deducted accordingly, and balances to be made by both parties. The seller will provide a VAT invoice for the whole amount of payment.

10. Terms of secrecy: Unless permitted by the seller in written form, the buyer should not reveal to any third party any secret information he gets from the seller, or make use of it, which includes but is not limited to commercial secrecy, technological secrecy, market secrecy, financial secrecy, management secrecy or other kinds of secrecy.   The buyer should urge his staff not to reveal to any other party the information of the seller and not to make use of it. The buyer promises to make sure that his staff strictly confines the secret information provided by the seller to the scope and purpose of the contract. And without a written agreement by the seller, no secret information should be used for purposes out of the contract or revealed to other companies and individuals not in the contract.

11.   Responsibility for breach of the contract: (1) In case the buyer delays the payment of goods or delays picking-up, which either is breach of the contract, the seller has the right to terminate the contract and to get a fine of 5% of contract value from the buyer. (2) In case the product delivered by the seller is not in accordance with the contract, both parties will discuss about the matter for a solution. (3) In case other breaches occur, the party that violates the contract should compensate the loss caused to the other party. If both sides make an error, each should be responsible for his own.

12.   Force majeure: (1) Due to force majeure, in case of natural disasters like fires, earthquakes, typhoons, floods etc, or other unforeseeable and inevitable and insurmountable events, which make the contract cease partly or totally, the party or parties that have been affected by the force majeure will not be responsible for breaches, but should notify the other party within 48 hours upon the occurrence of the force majeure, and provide a valid document of proof to the other party within 3 days. (2) The party or parties influenced by force majeure should do his/their upmost to minimize the damage to implementing the contract.

13.   Dispute settlement: In case a dispute occurs over the contract, both parties will discuss and negotiate. When a negotiation fails, the case will be brought to People’s Court where the seller is registered.

14.   Validity and others: (1) This contract has two copies of the same version, with one for each party. They become effective upon chopping regardless of whether a duplicated or fax copy. (2) A supplementary agreement may attach to the contract for further coverage. (3) As a supplementary or attached agreement to the contract, it has the same legal right as the contract. In case the contents of an attached document are not in accordance with the contract, the contract overwhelms the attachment. In case a supplementary document is not in accordance with the contract, the supplementary document overwhelms the contract.

The Seller (chopping)	The Buyer (chopping)
Wenzhou Zhongyou Fuel Chemical Co., Ltd.	Ningbo Keyuan Plastic Co., Ltd.
Add: Dongtou County, Zhejiang
Authorized Rep: (signature)	Authorized Rep: (signature)
Tel: 0577-89971188	Tel: 0574-86232942
Fax: 0577-89971188	Fax: 0574-86234706

EX-10.31

Exhibit 10.31

Sale and Purchase contract

(English Translation)

The Buyer:  Ningbo Keyuan Plastics Co., Ltd.

The Seller:  Dalian West Pacific Petrochemicals Co., Ltd.

Validity of the contract: ______________

The Buyer:                      Ningbo Keyuan Plastics Co., Ltd.

The Seller:                      Dalian West Pacific Petrochemicals Co., Ltd.

According to the Contract Law of the PR China and relative laws and regulations, on the basis of equality and mutual benefits and compensation of equal value, both parties agree with the items listed below.

1.   Name of subject matter:  ___________

2.   Quality and inspection specifications: __________

3.   Quantity: _____________

4.   Price of goods:  ________________

5.   Other taxes The buyer is responsible for providing a blank A Certificate of Naphtha Utilizing to the seller prior to the issue of an invoice, with the certificate being filled in alongside with the issue of the invoice by the seller and given to the buyer in time. Upon receiving the certificate and the invoice the buyer is responsible to have issued a timely tax exempt certificate for the lot of naphtha.

6.   Payment:

6.1 The buyer should pay an advance in whole by T/T into the designated account of the seller prior to the delivery of the subject matter. Since the price reference month has not come, a temporary factory price from the seller will be taken in for the payment. The buyer will clear the remaining payment by the 5th day of the month after the month scheduled for ship loading according to the actual price coming from the reference month.

6.2 Remaining payment for goods

In case a payment is due on a Saturday or a national holiday for banks which is not a Monday, the the payment due refers to the previous workday for the bank. In case the payment is due on a Sunday or a national holiday for banks on a Monday, then the payment due should be the following workday of the bank. As to national long weekends of 7 days including a Saturday and a Sunday accordingly, if the payment is due within the first 4 days, then the actual payment should be due on the previous workday while if within the last 3 days, it should be the next workday of the bank.

6.3 In case the buyer violates Item 6.2 to delay the payment, for each day delayed, the buyer should pay a delay fine of % of the payment due.

7. Delivery:

7.1 ___________

7.2 Once the contract comes into effect, the seller will prepare the goods according to the buyer’s requirements and give a timely notice to the buyer so that a transportation means can be arranged by the buyer to arrive at __________ for loading goods.

7.3 The buyer is responsible to provide 2 days’ shipping forecast 5 days prior to the ship loading, with an error of ± 24 hours; and a one day’s shipping forecast 3 days prior to the loading.

7.4 The buyer is responsible for the cargo fee, insurance fee and port miscellaneous fee etc for the goods at the pier where Dalian Port Oil Products wharf Company is.

7.5 Loading will be done according to the quantity specified on the factory measurement sheet by the seller and once the loading is completed, if a dissent arises, the buyer should keep the subject matter in good keeping and lodge a claim in writing to the seller for a double checking. Otherwise, the subject matter delivered by the seller is considered fully in accordance with the contract.

7.6 Risks bearing: taking the outside of flange end of the loading pipe line as a border, the seller takes the risks inside the flange while the buyer the outside.

8. Contract alteration and termination:

8.1 with an agreement in writing by both parties, the contract can be altered or terminated.

8.2 with an occurrence listed below, the contract can be terminated by either party:

8.2.1 Due to force majeure and the contract cannot be carried on.

8.2.2 without a consent in writing from the other party, one party transfers part or whole responsibility and liabilities to a third party.

8.3 After the termination, the items in the contract referring to payment, clearance and dispute settlement are still valid.

8.4 The party to terminate the contract should notify the other party on termination.

9. Responsibility for breach the contract

9.1 If the quality of oil handed by the seller before ship loading is not in accordance with the contract, the seller is responsible to give a timely replacement for qualified oil to the buyer. In case the buyer fails to pay as scheduled, the seller has the right to dispose of the subject matter.

9.2 In case of other breaches happen, the violating party should compensate the other party for the loss it causes. In case both parties are in error, each should take its own responsibility.

9.3 Due to the seller’s action or inaction, including delayed delivery of goods in good quality and quantity to the buyer, direct losses are caused by the seller – excluding accidents related shutdown etc as force majeure – the seller is responsible to compensate the buyer.

9.4 Due to the buyer’s action or inaction, delayed picking-up of goods causes direct losses to the seller and the buyer should compensate the seller.

10. Force majeure

10.1 Due to force majeure, in case of natural disasters like fires, earthquakes, typhoons, floods etc, or other unforeseeable and inevitable and insurmountable events, which make the contract cease partly or totally, the party or parties that have been affected by the force majeure will not be responsible for the breaches, but should notify the other party within 48 hours upon the occurrence of the force majeure, and provide a valid document of proof to the other party afterwards.

10.2 The party or parties influenced by force majeure should do his/their upmost to minimize the damage to implementing the contract.

11.  Dispute settlement:   In case a dispute occurs over the contract, both parties will discuss and negotiate. When a solution fails, the case will be referred to Dalian Arbitration Committee and then valid arbitration rules will be followed for a ruling. The arbitrary ruling will be final with abiding power to both parties. The arbitration fee will be borne by the party who loses the case unless the arbitration court rules otherwise.

12. Validity and others

12.1 This contract comes into effect upon the signatures and chopping via fax.

12.2 The contract is valid as of its coming into effect and till ________

12.3 For any issues yet to cover, both parties will sign a supplementary agreement.

12.4 The attachment and the supplementary agreement are part of the contract with equal legal power as the contract itself. In case an attachment differs from the contract, the attachment will be subject to the contract. While a supplementary agreement differs from the contract, the contract is subject to the supplementary agreement.

The Buyer:	The seller:
Ningbo Keyuan Plastics Co., Ltd.	Dalian West Pacific Petroleum Co., Ltd.
Legal person or authorized person:	Legal person or authorized person:

EX-10.32

Exhibit 10.32

Qingdao Lidong Chemical Co., Ltd.

(English Translation)

The Seller:  Qingdao Lidong Chemical Co., Ltd.	Contract No.: _________
The Buyer:  Ningbo Keyuan Plastics Co., Ltd.	Date: _________
	Place of signing: _________

Sales and Purchase Contract

The Seller and The Buyer, after discussions, have both agreed with the items listed below.

1.	Name of commodity:  ___________
2.	Unit price (in RMB), quantity, total sum (in RMB) :
	Unit price: _______________
	Quantity: _________________
	Total sum: RMB (unit price x actual quantity of loading)
3.	Delivery terms, time and place of delivery:
	Delivery Terms:  ________________
	Delivery Time: __________
	Place of delivery: ______________
4.	Quality specifications
	The seller provides the buyer with Inspection Results one day prior to ship loading.
5.	Packaging requirements: In bulk.
6.	Payment:
	Within 2 days after the signing of the contract the buyer telegraphic transfers one million of deposit to the seller. Two days prior to the ship loading, the buyer telegraphic transfers the whole amount of payment for goods according to the contract to the seller. The balances will be paid to either party as the actual quantity of ship loading may be.
7.	Insurance: The buyer should insure the goods according to the contract price per ship stipulated in Item 2 and pay the insurance premium.
8.	Transfer of property in goods: As the goods pass over the ship’s rail at the port of loading the transfer of property in goods occurs in effect.
9.	Inspection: The seller needs to appoint an independent inspector with an approval of the buyer. At the port of loading the inspector should inspect the shore tank for the quantity and quality of the goods. An inspection report is abiding to both parties to prevent errors or fraud. The seller should pay the commodity inspection fee at the port of loading. The buyer should pay the inspection fee at the port of unloading. Meanwhile the seller invites a third party of inspection organization to measure the actual loading capacity of the ship. In case an error of 0.3% and above occurred between shore tank quantity and ship inspection quantity, the buyer or other agents should immediately ask for a double check, with the buyer ordering the ship to get off shore at once and with both parties discussion for a solution.

10.	Obligations alongside: In case the buyer fails to find a suitable ship for loading during the stipulated period of time, the seller has the right to cancel the contract.
11.	Responsibility for breach of the contract:
	After the signing of the contract, with agreement from both parties, the contract can be modified or terminated. But in case one party violates the contract, the party that made the violation should pay the other party 100% of the contract sum as contract breach fine. Furthermore, when one party violates the contract and causes damage to the other party, the violating party should compensate the other party including, but not limited to, loss of price differentials of commodities, lawsuit fee, arbitration fee, commission of survey, lawyer’s fee, travel fee and other actual expenses related to the damage.
12.	Force majeure:
	During the contract period, in case of government control, war declared or not, embargo, law forbidding, civil chaos, riots, uprising, strikes, border closing as well as super natural events such as typhoon, floods, fire or the alike, or the seller being not able to import the material, or its material supply not being guaranteed, or it getting unscheduled stall or scheduled stall prolonged, neither party is responsible for the delay or incapability of carrying out the contract within stipulated period. Whereas both parties should do their upmost to minimize the damage to implementing the contract. In case the delay is of over three months, either party can terminate the contract in writing without any liability and responsibility.
13.	Other supplemented agreements: (if no, fill in ‘None.’)
	(1) National stimulations on safety and environment protection should be met during transportation of the goods. The buyer confirms itself as a producer of ethylene and aromatic hydrocarbon products, knowing such products only suitable for directly producing ethylene and aromatic products, not for gasoline, diesel oil or other taxable consuming products or for trading sales, which are not allowed into finished oil products markets. In case other agreement to reach, both parties will discuss it and attach the agreement to the contract, while the attachment has the same legal effect as the contract.
	(2) The buyer prior to purchasing should show to the seller a certificate of utilizing and managing naphtha to ensure a smooth declaration of exempting tax on consuming naphtha. In case the seller fails to declare consuming tax exempt, the buyer should bear all the costs related to consuming tax paid by the seller.
	(3) In case the buyer fails to pick up the goods within the designated period of delivery, the seller has the right to cancel the quantity that has not been picked up.
14.	This contract comes into effect with the signatures and chopping of both parties via fax. The fax copies are effective.
15.	In case a dissent arises during the contract period, both parties will negotiate friendly for a solution. In case a solution is failed to reach, either party can forward the dispute to Shanghai Arbitration Committee for ruling.
	Both parties confirm that they have reached agreement on all items of the contract on the basis of equal negotiations, which bears their true meanings, with both parties fully aware of the contents of each item of the contract and willing to abide by the contract. There’s no single item of the contract that has been forced upon one party by the other party using its superiority.

The Seller:	The Buyer:
Qingdao Lidong Chemical Co., Ltd.	Ningbo Keyuan Plastics Co., Ltd.
Tel: 0532-86910092	Tel: 0574-86232942
Fax: 0532-86910255	Fax: 0574-86234706
Add: 88 Liaohe Road, Qingdao economic and	Add: Qingshi Chemical Zone, Beilun District, Ningbo.
technological development zone,
Qingdao, Shandong province.

EX-10.33

Exhibit 10.33

Mercuria

Sales and Purchase Contract

This is to confirm your purchase and our sales of ____ under the following terms and conditions.

1.	Seller:  Mercuria Energy Trading PTE Ltd.
	9 Raffles Place 58th Floor
	Republic Plaze Singapore 048619
2.	Buyer:  _________________
3.	Commodity: ___________
4.	Quantity:___________
5.	Quality:_____________
6.	Origin: __________
7.	Delivery:  CIF  One Safe Port/ Berth, Ningob, China: During ___ to _____
8.	Vessel:   Delivery shall perform by ______ , whose confirmation of acceptance at buyer’s terminal shall not be unreasonably withheld.
9.	Price: ________________
	Any published correction to any of the relative quotations shall be taken into account. The final price shall be rounded off to three (3) decimal places with one digit to be increased to the third decimal place, whenever the forth decimal is five or greater than five.
10.	Payment:
	In U.S. Dollars based on B/L 30 days after B/L date (B/L date counts as day one) against seller’s commercial invoice and normal shipping documents including full set of original  B/L and any other documents required in L/C. In the event normal shipping documents is temporarily not available when payment is due, buyer shall make payment against seller’s invoice and letter of indemnity.
	Buyer shall open the irrevocable letter of credit by the first class international bank acceptable to seller by _______. In case buyer fails to pen the irrevocable letter of credit by the date, seller shall have a right but not an obligation to cancel the delivery of the cargo.
	All banking charges incurred in buyer’s bank are for account of buyer. All banking charges incurred in seller’s bank are for account of seller.
	In the event that the final price is not known prior to the payment due date, seller may invoice buyer on a provisional basis. The seller shall as soon as practicable issue the final invoice thereafter to buyer. Any shortfall in payment due from the buyer to the seller or refund of overpayment due from the seller to the buyer shall be settled within five working days after receipt of the final invoice. The buyer shall pay based on the provisional invoice on the due date notwithstanding that the final price has already been determined at that point in time. The balance settlement shall be arranged within the L/C framework.

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	If payment due date falls on Saturday or any other banking holidays than Monday in Monday in New York, then payment shall be made on the immediate preceding banking day before the due date.
	If payment due date falls on Sunday or Monday banking holiday in New York, payment shall be made on the immediate following banking day after due date.
11.	Quantity and Quality Determination:
	Mutually agreed independent inspector’s finding at loading post shall be final and binding on both parties. Save for fraud or manifest error. Such inspection fee at loading port shall be born by seller.
	Laytime/ Demurrage:
12.	Laytime for discharging cargo is _____ hours shing for full cargo which starts 6 hours after nor or upon berthing whichever occurs first and ends on hose off after discharging completion. And in case of suspension/ delay of discharging due to buyer’s custom declaration matter, that waiting time will be counted as buyer’s laytime.
	Demurrage rate shall be as per actual charter party rate. And demurrage shall be settled based on the conditions of the C/P from “Absatankvoy”.
	If the vessel tenders nor before the first day of the 3-day delivry date range, laytime shall commence at ____ hours on the first day of the 3-day daterange or when vessel is all fast alongside berth whichever is earlier.
13.	Title and Risks:
	Title and risks of the cargo shall be passed from seller to buyer when the products pass the vessel’s permanent flange connection at loading port.
14.	Law & Arbitration:
	This sales contract shall be governed by the law of England. Excluding the united nations convention on contracts for the international sale of goods.
	Any dispute, controversy and/or difference which may arise between the seller and the buyer out of or in relation to or in connection with this sales contract, or the search thereof, which can not be settled by mutual accord without undue delay, shall be settled by arbitration in London, England in accordance with the rules of procedure of the London court of International Arbitration. The award thereof shall be final and binding upon the parties hereto.

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15.	Force Majeure:
	Neither party hereto shall be liable to the other party for damages or otherwise for any failure or delay to perform its obligations hereunder other than any obligation to make payment, where such failure or delay is caused by force majeure, due to the occurrence of any event beyond the reasonable control of such party and affecting its performance including, without limitation,
	1) War, hostilities, acts of the public  enemy or of belligerents, sabotage, strike, blockade, revolution, insurrection, riot or disorder;
	2) Expropriation, requisition, confiscation, nationalization or embargoes by governments;
	3) Act of god;
	4) Fire, frost, earthquake, atmospheric disturbance, storm, typhoon, tornado, lightning, flood, tidal wave, perils of the sea, landslide, soil erosion, subsidence or washout;
	5) Accidents of navigation or breakdown of or damage to vessels;
	6) Epidemic or quarantine;
	7) Explosions, breakage or accidents by fire or otherwise to plants, storage facilities, process facilities, installations, machinery and equipment, or to loading facilities or equipment;
	8) Any other similar event.

However, on the occurrence of any event of force majeure, the party whose performance in affected thereby shall give notice and full particulars thereof to the other party as soon as practicable. Should such an event of force majeure continue for more than sixty (60) days, then either party may terminate this sales contract unconditionally upon the written notice to the other party.

16.	Entire Agreement:
	This sales contract constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior or contemporaneous communications or agreements with regard to the subject matter hereof.
17.	Warranties:
	There are no guarantees or warranties, expressed or implied, of merchantantability, fitness or suitability of the oil for any particular purpose. There are no other oral or written guarantee or warranties.
18.	Liabilities:
	Neither the seller nor the buyer shall be liable, whether in contract, tort or otherwise, for any indirect, consequential or special losses, damages or expenses of any kind directly or indirectly arising out of or in any way connected with the performance of this contract.
	The seller shall in no circumstances be liable for more than the difference between the contract price and the market price, based on the nearest available market, at the date of any breach of the contract.
19.	Claims:

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	Any claim by the buyer of whatever nature arising under this contract shall be made within thirty (30) days after arrival of the commodity at the port of destination. Unless full written notice of the buyer’s claim, accompanied by sworn surveyor’s reports when the quality or quantity of the commodity is in dispute, shall arrive at the seller’s office during such thirty (30) day period. The buyer will be deemed to have waived such claim.
	In the event of a breach of this contract by the seller, the buyer’s exclusive remedy and the seller’s limit of liability shall be for the actual damages directly sustained by the buyer from such breach, which shall in no event exceed the price specified herein of the particular commodity with respect to which the damages shall have occurred.
20.	Other terms and conditions
	Incoterms 2000 for CIF sales with latest amendments to be applied.
21.	Confidentiality:
	This transaction shall be kept strictly private and confidential.
22.	ISPS Compliance:

1.   The part chartering the vessel shall procure that the vessel shall comply with the requirements of the international ship & port facility security code (“ISPS Code”) and the relevant amendments to Charpter XI of Security of Life at Sea (“SOLAS”) (hereinafter collectively referred to as “codes”) and where the discharge port is within the USA and US territories or waters, with the US Maritime Transportation Security Act 2002 (MTSA).

2.   The vessel shall when required submit a Declaration of Security (“DOS”) to the appropriate authorities prior to arrival at the discharge port.

3.   Notwithstanding any prior acceptance of the vessel, if at any time prior to the arrival of the vessel at the discharge port, the vessel ceases to comply with the requirements of the codes and where the discharge port is within the USA and US territories or waters, with the MTSA:

A)   The buyer shall have the right not to berth such nominated vessel at the discharge port and any demurrage resulting shall not be for the account of the buyer.

B)   The seller shall be obliged to substitute such nominated vessel with a vessel complying with the requirements of the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA.

4.   Buyer warrants that the discharge port/terminal/installation shall comply with the requirements of the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA.

5.   Any costs or expenses in respect of the vessel including demurrage or any additional charge, fee or duty levied on the vessel. At the discharge port and actually incurred by the seller resulting from the failure of the discharge port/terminal/installation to comply with the Codes and if located with the USA and US territories, with the MTSA, shall be for the account of the buyer, including but not limited to the time required or costs incurred by the vessel in taking any action or any special additional security measures required by the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA.

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6.   Save where the vessel has failed to comply with the requirements of the Codes and where the discharge port is within the USA and US territories or waters, with the MTSA, the buyer shall be responsible for any demurrage actually incurred by the seller arising from delay to the vessel at the discharge port resulting directly from the vessel being required by the port facility or any relevant authority to take any action or any special or additional security measures or undergo additional inspections by virtue of the vessel’s previous ports of call.

7.   The buyer’s liability to the seller under this agreement for any costs, losses or expenses incurred by the vessel, the charterers or the vessel owners resulting from the failure of the discharge port/terminal/installation to comply with the codes and where the discharge port is within the USA and US territories or waters, with the MTSA shall be limited to the payment of demurrage and costs actually incurred by the seller in accordance with the provisions of the clause.

8.   If either party makes any payment which is for the other party’s account in accordance with this clause, the other party shall within thirty (30) days reimburse the paying party for all such payments.

9.   The party chartering the vessel shall procure that the vessel shall comply with the requirement under marpo, failing which the other party shall have the right to reject the vessel and any cost, loss and expense incurred shall be borne by the party chartering the vessel.

“Marpo” means the international convention for the prevention of pollution from ships, as amended from time to time.

Please confirm that above terms and conditions truly reflect the mutual understanding between seller and buyer.

Absence of your confirmation within maximum of four business days shall be construed as your acceptance of foregoing terms and conditions.

We thank you again for concluding the business at this time and we are looking forward to having the next business opportunity in near future.

______________________

Mercuria Energy Trading PTE Ltd.

______________________

Ningbo Keyuan Plastic Co., Ltd.

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EX-23.2

Exhibit 23.2

Patrizio & Zhao, LLC

 Certified Public Accountants and Consultants 322 Route 46 West Parsippany, NJ 07054 Tel:  (973) 882-8810 Fax: (973) 882-0788 www.pzcpa.com

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in the Amendment to the Registration Statement (Form S-1) pertaining to the registration of 9,939,203 shares of common stock of Keyuan Petrochemicals Inc, of our report dated February 23, 2010with respect to the financial statements of Keyuan International Group Ltd. for the periods ended December 31, 2009 and 2008 and of our report dated August 10, 2010 with respect to the financial statements of Keyuan International Group Ltd. for the period ended June 30, 2010. We also consent to the reference to us under the heading “Experts” in the above referenced Registration Statement.

/s/ Patrizio & Zhao, LLC

Patrizio & Zhao, LLC

Certified Public Accountants and Consultants

Parsippany, New Jersey

September 1, 2010

CORRESP

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