EXECUTION VERSION

 
SECURITIES PURCHASE AGREEMENT
 
by and among
 
China MediaExpress Holdings, Inc.,
 
Fujian Zongheng Express Information Technology, Ltd.,
 
Fujian Fenzhong Media Co., Ltd.
 
Mr. Zheng Cheng,
 
Mr. Ou Wen Lin,
 
Mr. Qingping Lin,
 
Thousand Space Holdings Limited,
 
Bright Elite Management Limited,
 
and
 
Starr Investments Cayman II, Inc.
 
January 12, 2010

 
 

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TABLE OF CONTENTS
 

   
Page
     
1.
Definitions
2
2.
Purchase and Sale
8
3.
Closing
8
4.
Representations and Warranties of the Company
8
 
4.1
Organization, Good Standing and Qualification
8
 
4.2
Authorization; Enforceable Agreement
9
 
4.3
No Conflict
10
 
4.4
Governmental Consents
10
 
4.5
Permits and Licenses
10
 
4.6
Capital Structure
10
 
4.7
Valid Issuance of Common Stock and Preferred Stock
11
 
4.8
Financial Statements
12
 
4.9
Absence of Certain Changes or Events
12
 
4.10
Compliance with Laws
13
 
4.11
Title
13
 
4.12
Litigation
14
 
4.13
Intellectual Property
15
 
4.14
Material Contracts
15
 
4.15
Insurance
17
 
4.16
Taxes
17
 
4.17
Subsidiaries
18
 
4.18
Employment Matters
19
 
4.19
Environmental Matters
20
 
4.20
Customers and Suppliers
20
 
4.21
Transactions With Affiliates and Employees
20
 
4.22
Money Laundering Laws
21
 
4.23
Foreign Corrupt Practices Act
21
 
4.24
Economics Sanctions Laws
21
 
4.25
Additional PRC Representations and Warranties
22
 
4.26
No Material Adverse Effect
23
 
4.27
Registration Rights
23
 
4.28
Reports
24
 
4.29
Investment Company Act
24
 
4.30
Brokers’ Fees and Expenses
24
 
4.31
AMEX
24
 
4.32
Application of Takeover Protections
25
 
4.33
No Integrated Offering
25
 
4.34
Internal Accounting and Disclosure Controls
25
 
4.35
Off Balance Sheet Arrangements
25
 
4.36
Sarbanes-Oxley Act of 2002
26
 
4.37
Transfer Taxes
26

 
 

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4.38
Manipulation of Price
26
 
4.39
Anti-dilution Provisions
26
 
4.40
General Solicitation
27
 
4.41
Waiver of Section 203
27
 
4.42
Disclosure
27
5.
Representations and Warranties of the Sponsor Shareholders
27
 
5.1
Organization
27
 
5.2
Authorization; Enforceability
27
 
5.3
No Default or Violation
28
 
5.4
Governmental Consents
28
 
5.5
Good Title
28
 
5.6
Foreign Corrupt Practices Act
28
6.
Representations and Warranties of the Investor
29
 
6.1
Organization
29
 
6.2
Authorization; Enforceability
29
 
6.3
No Default or Violation
29
 
6.4
Governmental Consents
29
 
6.5
Private Placement
30
7.
Conditions to the Investor’s Obligations at Closing
30
 
7.1
Representations and Warranties
30
 
7.2
Covenants
30
 
7.3
Share Transfer
31
 
7.4
No Material Adverse Effect
31
 
7.5
FCPA Compliance
31
 
7.6
Accounting Firm Engagement
31
 
7.7
Legal Counsel Engagement
31
 
7.8
Series A Certificate of Designations and Bylaws
31
 
7.9
AMEX Registration
31
 
7.10
Ancillary Agreements
31
 
7.11
Legal Opinions
31
 
7.12
Expenses
32
 
7.13
Board of Directors
32
 
7.14
Purchased Shares; Warrants
32
8.
Conditions to the Company’s Obligations at Closing
32
 
8.1
Representations and Warranties
32
 
8.2
Purchase Price
32
 
8.3
Ancillary Agreements
32
 
8.4
AMEX Registration.
33
9.
Covenants
33
 
9.1
Asset and IP Transfer
33
 
9.2
VIE Restructuring
33
 
9.3
SARFT Approval
33
 
9.4
FCPA Compliance
33
 
9.5
Listing
34
 
9.6
Director Appointment
34
 
9.7
Business Development
34

 
 

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9.8
Compliance
34
 
9.9
Use of Proceeds
34
 
9.10
Transfer Taxes
34
 
9.11
Share Transfer
34
 
9.12
Confidentiality; Public Disclosure
34
 
9.13
Further Assurances
35
10.
Indemnification
35
 
10.1
Survival
35
 
10.2
Company Indemnification Obligation
35
 
10.3
Sponsor Shareholders Indemnification Obligation
36
 
10.4
Limitation on Indemnification
36
 
10.5
Conduct of Claims
37
11.
Miscellaneous
38
 
11.1
Governing Law
38
 
11.2
Jurisdiction; Enforcement
38
 
11.3
Termination
39
 
11.4
Successors and Assigns
39
 
11.5
No Third-Party Beneficiaries
39
 
11.6
No Personal Liability of Directors, Officers, Owners, Etc
39
 
11.7
Entire Agreement
40
 
11.8
Notices
40
 
11.9
Delays or Omissions
41
 
11.10
Expenses
41
 
11.11
Amendments and Waivers
41
 
11.12
Counterparts
41
 
11.13
Severability
41
 
11.14
Titles and Subtitles; Interpretation
42

EXHIBITS

Exhibit A – Form of Series A Certificate of Designations
Exhibit B – Form of Registration Rights Agreement
Exhibit C – Form of Investor Rights Agreement
Exhibit D – Form of Warrant
Exhibit E – Form of Legal Opinion of Hankun Law Office
Exhibit F – Form of Legal Opinion of Loeb & Loeb LLP
Exhibit G – Form of Legal Opinion of Morris, Nichols, Arsht & Tunnell
Exhibit H – Form of Legal Opinion of Gallant Y.T. Ho & Co.
Exhibit I – Disclosure Letter

 
 

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SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated January 12, 2010, by and
among China MediaExpress Holdings, Inc., a Delaware corporation (the “Company”),
Fujian Zongheng Express Information Technology, Ltd. a limited liability company
established in the PRC and a wholly-owned Subsidiary of the Company (the
“WFOE”), Zheng Cheng, a citizen of the People’s Republic of China (the “PRC”, or
“China”), identification number 350103197103110058, Ou Wen Lin, a citizen of the
Republic of Philippines, passport number G15042722, and Qingping Lin, a citizen
of the PRC, identification number 350127194911134311, Fujian Fenzhong Media Co.,
Ltd., a limited liability company operating in the media business established in
the PRC (the “PRCCo”), controlled by the WFOE through contractual agreements and
arrangements, Thousand Space Holding Limited, a company organized under the laws
of the British Virgin Islands (“Thousand”), and Bright Elite Management Limited,
a company organized under the laws of the British Virgin Islands (“Bright”) and
Starr Investments Cayman II, Inc., a company organized with limited liability
under the laws of the Cayman Islands (the “Investor”). Each of the Company and
its Subsidiaries (as defined below), Zheng Cheng, Ou Wen Lin, Qingping Lin,
Thousand and Bright is sometimes individually referred to herein as a “Company
Party,” and collectively as the “Company Parties” and each of Zheng Cheng, Ou
Wen Lin, Qingping Lin, Thousand and Bright, is sometimes individually referred
to herein as a “Sponsor Shareholder” and collectively as the “Sponsor
Shareholders.” Each of the Parties to this Agreement is individually referred to
herein as a “Party” and collectively as the “Parties.” Capitalized terms used
herein that are not otherwise defined herein shall have the meanings ascribed to
them in Section 1 hereof.
 
WHEREAS, on the terms and conditions set forth in this Agreement, the Company
desires to sell, and the Investor desires to purchase, (i) one million
(1,000,000) shares of the Company’s Series A Convertible Preferred Stock, par
value US$0.001 per share (the “Series A Preferred Stock”) and (ii) 1,545,455
warrants each entitling the Investor to purchase one share of Common Stock at
US$6.47 (the “Purchased Warrants,” and such sale and purchase, collectively, the
“Securities Purchase”);
 
WHEREAS, in connection with the Transactions, the Company, the Sponsor
Shareholders and the Investor desire to make certain representations and
warranties and enter into certain agreements; and
 
WHEREAS, in connection with the Transactions, the Parties hereto will execute
and deliver, as applicable, among other things (i) a registration rights
agreement in the form attached as Exhibit B (the “Registration Rights
Agreement”); (ii) an investor rights agreement in the form attached as Exhibit C
(the “Investor Rights Agreement”) and (iii) a warrant in the form attached as
Exhibit D (the “Warrant”) and the Company will adopt a certificate of
designations setting forth the rights and preferences of the Series A Preferred
Stock in the form attached as Exhibit A (the “Series A Certificate of
Designations”).
 

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NOW THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements set forth in this Agreement, and intending to be
legally bound by this Agreement, the Parties agree as follows:
 
1.            Definitions. As used in this Agreement, the following terms shall
have the respective meanings set forth in this Section 1:
 
“Action” shall have the meaning set forth in Section 4.12.
 
“Affiliate” of any Person shall mean any other Person directly or indirectly
controlling or controlled by or under common control with such Person. For
purposes of this definition, “control” when used with respect to any Person has
the meaning specified in Rule 12b-2 under the Exchange Act (including SEC and
judicial interpretations thereof); and the terms “controlling” and “controlled”
shall have meanings correlative to the foregoing.
 
“Agreement” shall have the meaning set forth in the preamble to this Agreement.
 
“AMEX” shall mean the NYSE Amex LLC.
 
“Board” means the Board of Directors of the Company.
 
“Bright” shall have the meaning set forth in the preamble to this Agreement.
 
“Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York, New York or
in Beijing, the PRC generally are authorized or obligated by law, regulation or
executive order to close.
 
“Bylaws” shall have the meaning set forth in Section 4.1.
 
“Certificate of Incorporation” shall have the meaning set forth in Section 4.1.
 
“Closing” shall have the meaning set forth in Section 3.
 
“Closing Date” shall have the meaning set forth in Section 3.
 
“Code” shall mean the Internal Revenue Code of 1986, together with all
regulations, rulings and interpretations thereof or thereunder by the Internal
Revenue Service.
 
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“Common Stock” shall mean the common stock, par value $0.001 per share, of the
Company.
 
“Company” shall have the meaning set forth in the preamble of this Agreement.
 
“Company Party” or “Company Parties” shall have the meaning set forth in the
preamble to this Agreement.
 
“Contract” shall mean a contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument.
 
“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
 
“FINRA” shall have the meaning set forth in Section 4.3.
 
“Governmental Authority” shall mean any foreign governmental authority, the
United States of America, any state of the United States and any political
subdivision of any of the foregoing, and any agency, instrumentality,
department, commission, board, bureau, central bank, authority, court or other
tribunal, in each case whether executive, legislative, judicial, regulatory or
administrative.
 
“In-Bound Licenses” shall have the meaning set forth in Section 4.13.
 
“Indebtedness” shall mean, as to any Person, without duplication: (i) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money or for the deferred purchase price of Property or services;
(ii) any other indebtedness that is evidenced by a promissory note, bond,
debenture or similar instrument; (iii) any obligation under or in respect of
outstanding letters of credit, acceptances and similar obligations created for
the account of such Person; (iv) all capital lease obligations of such Person;
(v) all indebtedness, liabilities, and obligations secured by any Lien on any
Property owned by such Person even though such Person has not assumed or has not
otherwise become liable for the payment of any such indebtedness, liabilities or
obligations secured by such Lien; (vi) any obligation under or in respect of
hedging agreements and (vii) any guarantees of the foregoing liabilities and
synthetic liabilities of such Person.
 
“Investor” shall have the meaning set forth in the preamble to this Agreement.
 
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“Investor Rights Agreement” shall have the meaning set forth in the recitals of
this Agreement.
 
“Intellectual Property” shall mean all tangible and intangible intellectual
property, including: (i) discoveries and inventions, patents, patent
applications (either filed or in preparation for filing) and statutory invention
registrations (including reissues, divisions, continuations, continuations in
part, extensions and reexaminations thereof) and all rights therein and all
improvements thereto; (ii) trademarks, service marks, trade names, slogans,
logos, trade dress, corporate names and other source identifiers (whether or not
registered), including all common law rights, and registrations and applications
for registration thereof and all rights therein and all renewals of any of the
foregoing; (iii) copyrightable works, copyrights (whether or not registered) and
copyright registrations and applications for registration therefor, derivative
work and all rights therein and all extensions and renewals of any of the
foregoing; (iv) electronic addresses and passwords, domain names and
registrations and applications or reservations for registration thereof, and any
similar rights and all content embodied in all websites and web pages found at
such uniform resource locators; (v) Software; (vi) confidential and proprietary
information, trade secrets, know-how, models, algorithms, processes, formulas,
and techniques, research and development information, ideas, technical data,
designs, drawings and specifications; (vii) advertising and promotional
materials; (viii) rights under all Contracts under which intellectual property
rights were granted to any Person by a third party, or to a third party by any
Person; (ix) modifications or improvements to any item described in the
immediately preceding clauses (i) through (viii); (x) copies and tangible
embodiments of any item described in the immediately preceding clauses (i)
through (ix); and (xi) other proprietary rights relating to any item described
in the immediately preceding clauses (i) through (x), including associated
goodwill, remedies against past and future infringements thereof and rights of
protection of an interest therein under the laws of all jurisdictions.
 
“Knowledge” of the Company shall mean the actual knowledge of any of Zheng
Cheng, Chunlan Bian, Qingping Lin, Ou Wen Lin, or any executive officers of the
Company or any of its Subsidiaries or members of the board of directors of the
Company or any of its Subsidiaries.
 
“Laws” shall have the meaning set forth in Section 4.10.
 
“Lien” shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions.
 
4

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“Material Adverse Effect” shall mean any circumstance, change, development,
occurrence or effect, on the Company or any of its Subsidiaries, that,
individually or in the aggregate with any other circumstance, change,
development, occurrence or effect on the Company or any of its Subsidiaries, is
or could reasonably be expected to be materially adverse to the business,
operations, assets or liabilities (including contingent liabilities), employee
relationships, customer or supplier relationships, continuing results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole.
 
“Material Permits” shall mean all Permits other than such franchises, licenses,
permits, authorizations and approvals the lack of which, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect.
 
“Out-Bound Licenses” shall have the meaning set forth in Section 4.13.
 
“PRCCo” shall have the meaning set forth in the preamble to this Agreement.
 
“Party” or “Parties” shall have the meaning set forth in the preamble to this
Agreement.
 
“Performance Adjustment Amount” shall have the meaning set forth in the Investor
Rights Agreement.
 
“Person” shall mean any individual, association, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
Governmental Authority or any other form of entity.
 
“Permits” shall mean all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable a Person to own, lease or
otherwise hold its properties and assets and to conduct its businesses as
presently conducted.
 
“Permitted Lien” shall mean (a) any restriction on transfer arising under
applicable securities law; (b) any Liens for Taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with U.S. GAAP; (c) any statutory
Liens arising in the ordinary course of business by operation of Law with
respect to a liability that is not yet due and delinquent and which are not,
individually or in the aggregate, significant; (d) zoning, entitlement, building
and other land use regulations imposed by governmental agencies having
jurisdiction over the Real Property which are not violated by the current use
and operation of the Real Property; (e) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to the Real
Property which do not materially impair the occupancy or use of the Real
Property for the purposes for which it is currently used or proposed to be used
in connection with the such relevant Person’s business; (f) Liens identified on
title policies, title opinions or preliminary title reports or other documents
or writings included in the public records; (g) Liens arising under worker’s
compensation, unemployment insurance, social security, retirement and similar
legislation; (h) Liens of lessors and licensors arising under lease agreements
or license arrangements; and (i) those Liens set forth in the Disclosure Letter.
 
5

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“Purchased Shares” shall have the meaning set forth in Section 2.
 
“Put Price” shall have the meaning set forth in the Investor Rights Agreement.
 
“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
 
“Purchase Price” shall have the meaning set forth in Section 2.
 
“Real Property” shall have the meaning set forth in Section 4.11.
 
“Real Estate Leases” shall have the meaning set forth in Section 4.11.
 
“Registration Rights Agreement” shall have the meaning set forth in the recitals
of this Agreement.
 
“SEC” shall mean the U.S. Securities and Exchange Commission or any other U.S.
federal agency then administering the Securities Act or Exchange Act.
 
“SEC Documents” shall mean the Company’s reports and forms filed with or
furnished to the SEC under Sections 12, 13, 14 or 15(d) of the Exchange Act
after June 18, 2007 and before the date of this Agreement.
 
“Securities Act” shall mean the U.S. Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
 
“Series A Certificate of Designations” shall have the meaning set forth in the
recitals to this Agreement.
 
“Series A Preferred Stock” shall have the meaning set forth in the recitals to
this Agreement.
 
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“Sponsor Shareholder” or “Sponsor Shareholders” shall have the meaning set forth
in the preamble to this Agreement.
 
“Stock Purchase” shall have the meaning set forth in the recitals to this
Agreement.
 
“Structure Agreements” shall mean, collectively, the Contracts which were
executed and delivered to enable the Company to effect control over and
consolidate with its financial statements, each of its Subsidiaries (including
the PRCCo).
 
“Subsidiary” of any Person shall mean any corporation, partnership, joint
venture, limited liability company, trust, variable interest entity or other
entity controlled by such Person directly or indirectly through one or more
intermediaries.  For the avoidance of doubt, the Subsidiaries of the Company
shall include, without limitation, the HKCo, the WFOE and the PRCCo.
 
“Tangible Personal Property” shall have the meaning set forth in Section 4.11.
 
“Tax” shall mean all forms of taxation, whenever created or imposed, and whether
of the United States or elsewhere, and whether imposed by a local, municipal,
governmental, state, foreign, federal or other Governmental Authority, or in
connection with any agreement with respect to Taxes, including all interest,
penalties and additions imposed with respect to such amounts.
 
“Tax Return” shall mean all federal, state, local, provincial and foreign Tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes
 
“Thousand” shall have the meaning set forth in the preamble to this Agreement.
 
“Transactions” shall mean the transactions contemplated by this Agreement,
including, without limitation, the Securities Purchase, the Share Transfer and
the transactions contemplated by the Investor Rights Agreement and the
Registration Rights Agreement.
 
“Transaction Documents” shall mean this Agreement, the Investor Rights
Agreement, the Series A Certificate of Designations and the Registration Rights
Agreement.
 
“United States” shall mean the United States of America.
 
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“U.S. GAAP” shall mean United States generally accepted accounting principles,
as in effect from time to time, applied on a consistent basis.
 
“US$” shall mean U.S. Dollars, the lawful currency of the United States of
America.
 
“Voting Company Debt” shall have the meaning set forth in Section 4.6.
 
“WFOE” shall have the meaning set forth in the preamble to this Agreement.
 
2.           Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, on the Closing Date (as defined below), the Company will issue,
sell and deliver to the Investor, and the Investor will purchase from the
Company, (i) one million (1,000,000) shares of Series A Preferred Stock (the
“Purchased Shares”) and (ii) the Purchased Warrants, at an aggregate purchase
price of US$30,000,000 in cash (the “Purchase Price”) to be paid in full to the
Company on the Closing Date.
 
3.           Closing. The consummation of the Transactions (the “Closing”) shall
take place on the fifth (5th) Business Day following the satisfaction or waiver
of the conditions of the obligations of the parties set forth in Sections 7 and
8 (other than such conditions as can only be satisfied contemporaneous with the
Closing) or at such time (the “Closing Date”) and place as the Company and the
Investor shall mutually agree. At the Closing, the Investor shall pay the
Purchase Price by wire transfer of immediately available funds to an account
designated by the Company in advance of the Closing Date. The Company shall,
within seven (7) Business Days after the Closing, deliver to the Investor
certificates representing the Purchased Shares and the Purchased Warrants.
 
4.           Representations and Warranties of the Company. Each of the Company
and the Sponsor Shareholders jointly and severally represents and warrants to
the Investors as of the date of this Agreement, or if a representation or
warranty is made as of a special date, as of such date, that:
 
4.1                         Organization, Good Standing and Qualification. Each
of the Company and its Subsidiaries is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation and
is duly qualified to do business in each of the jurisdictions in which the
property owned, leased or operated by it or the nature of the business which it
conducts requires qualification, except where the failure to so would not result
in a Material Adverse Effect. Except as disclosed in Section 4.1 of the
disclosure letter attached hereto as Exhibit I (the “Disclosure Letter”), each
of the Company and its Subsidiaries (i) has all requisite power and authority to
own, lease and operate its tangible assets and properties and to carry on its
business as now being conducted and (ii) has no encumbrance in obtaining any
Permits to conduct its business as required by PRC Law. The Company has
delivered to the Investor true and complete copies of its Amended and Restated
Certificate of Incorporation (the “Certificate of Incorporation”) and Bylaws
(the “Bylaws”), each as in effect as of the date of this Agreement.
 
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4.2                         Authorization; Enforceable Agreement.
 
(a)         The Company has all necessary corporate right, power and authority
and has taken all necessary corporate action on the part of the Company, its
officers, directors, and shareholders necessary for the authorization,
execution, and delivery of this Agreement, the Registration Rights Agreement and
the Investor Rights Agreement, the performance of all obligations of the Company
under this Agreement, the Registration Rights Agreement and the Investor Rights
Agreement, the filing of the Series A Certificate of Designations with the
Secretary of State of the State of Delaware, and the authorization, issuance,
sale, delivery and registration of transfer of (i) the Purchased Shares and
Purchased Warrants being sold hereunder; (ii) any shares of Common Stock to be
issued to the Investor upon the conversion of the Purchased Shares and (iii) any
shares of Common Stock to be issued pursuant to the Investor’s exercise of any
Purchased Warrants. The issuance of the Purchased Shares and the Purchased
Warrant does not require any further corporate action and is not subject to any
preemptive right or rights of first refusal under the Company’s Certificate of
Incorporation, Bylaws or any other agreement or contract to which the Company is
a party. This Agreement has been and each of the Registration Rights Agreement
and the Investor Rights Agreement will at Closing be duly executed and
delivered, and assuming due authorization, execution and delivery by the
Investor and the other parties thereto, constitutes and will constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
applicable laws relating to bankruptcy, insolvency, reorganization, moratorium
or other similar legal requirement relating to or affecting creditors’ rights
generally and except as such enforceability is subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
 
(b)         On or prior to the date of this Agreement, the Board has duly
adopted resolutions (i) evidencing its determination that as of the date of this
Agreement this Agreement and the transactions contemplated hereby are in the
best interests of the Company, (ii) approving this Agreement, the Registration
Rights Agreement, the Investor Rights Agreement and the transactions
contemplated hereby and thereby, (iii) declaring this Agreement and the issuance
and sale of the Purchased Shares and the Purchased Warrants (including the
shares of Common Stock issuable on the exercise thereof) advisable, and (iv)
adopting the Series A Certificate of Designations.
 
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4.3                         No Conflict. Except as disclosed in Section 4.3 of
the Disclosure Letter, none of the Company, nor any of its Subsidiaries is in
violation or default of any provision of its certificate of incorporation,
bylaws or other constitutional documents. The authorization, execution, delivery
and performance by the Company of this Agreement, the Registration Rights
Agreement and the Investor Rights Agreement, and the consummation by the Company
of the transactions contemplated hereby and thereby, including without
limitation the filing of the Series A Certificate of Designations and the
issuance of the Purchased Shares do not and will not: (a) violate, conflict with
or result in the breach of any provision of the certificate of incorporation and
bylaws of the Company or any of its Subsidiaries; or (b) with such exceptions
that would not have a Material Adverse Effect, whether after the giving of
notice or the lapse of time or both: (i) violate any provision of, constitute a
breach of, or default under, or result in or permit the cancellation,
termination or acceleration of any decree, judgment, order, law, treaty, rule,
regulation or determination of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or its properties or assets;
(ii) violate any provision of, constitute a breach of, or default under, any
applicable state, federal or local law, rule or regulation; (iii) result in the
creation of any Lien upon any assets of the Company or any of its Subsidiaries
or the suspension, revocation, material impairment, forfeiture or non-renewal of
any franchise, permit, license or other right granted by a governmental
authority to the Company or any of its Subsidiaries, (iv) violate the terms of
any bond, debenture, indenture, credit agreement, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, lease,
mortgage, deed of trust or other instrument to which the Company or any of its
Subsidiaries is a party, by which the Company or any of its Subsidiaries is
bound, or to which any of the properties or assets of the Company or any of its
Subsidiaries is subject, (v) violate the terms of any “lock-up” or similar
provision of any underwriting or similar agreement to which the Company or any
of its Subsidiaries is a party or (vi) violate any rule or regulation of the
Financial Industry Regulatory Authority, Inc. (“FINRA”) or AMEX (provided, with
respect to the representation and warranty made regarding the rules or
regulations of AMEX as of the date hereof only, that AMEX approves the listing
of the shares of Common Stock issuable upon conversion of the Purchased Shares
or exercise of the Purchased Warrants and the Transferred Shares).
 
4.4                         Governmental Consents. No consent, approval, license
or authorization of, or designation, declaration, or filing with, any federal,
state, or local governmental authority on the part of the Investor is required
in connection with the consummation of the Transactions, except for the
following: (i) the filing of the Series A Certificate of Designations with the
Secretary of State of the State of Delaware; (ii) those which have already been
made or granted; (iii) the filing of a current report on form 8-K with the SEC;
(iv) filings with applicable state securities commissions; (v) the listing of
the shares of Common Stock issuable upon conversion of the Purchased Shares or
exercise of the Purchased Warrants and the Transferred Shares with the NYSE
Amex; and (vi) post-Closing filings as may be required to be made with the SEC
and with any state or foreign blue sky or securities regulatory authority.
 
4.5                         Permits and Licenses. Except as set forth in Section
4.5 of the Disclosure Letter, the Company and each of its Subsidiaries possess
all Material Permits and all Material Permits are in full force and
effect.  True, complete and correct copies of the Material Permits issued to the
Company and its Subsidiaries have been delivered to the Investor.
 
4.6                         Capital Structure.
 
(a)         Section 4.6(a) of the Disclosure Letter sets forth, as of the date
hereof, the share capitalization of the Company and all the outstanding options,
warrants or rights to acquire any share capital of the Company. There are no
disputes, arbitrations or litigation proceedings involving the Company with
respect to the share capital of the Company.
 
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(b)         (i) Except as set forth in Section 4.6 (b) of the Disclosure Letter,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding and there have not been any
issuances of capital securities or options, warrants or rights to acquire the
capital securities of the Company; (ii) all outstanding shares of the capital
stock of the Company are, and all such shares that may be issued prior to the
date hereof will be when issued, duly authorized, validly issued, fully paid and
non-assessable and not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of the Delaware General Corporation Law, the
Company’s Certificate of Incorporation, Bylaws or any Contract to which the
Company is a party or otherwise bound; and (iii) there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company.
 
(c)         (i) there are no bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of Common
Stock may vote (“Voting Company Debt”); and (ii) other than as set forth in
Section 4.6 (c) of the Disclosure Letter, there are no options, warrants,
rights, convertible or exchangeable securities, “phantom” stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company is a Party or by
which it is bound (A) obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, the Company
or any Voting Company Debt, or (B) obligating the Company to issue, grant,
extend or enter into any such option, warrant, call, right, security,
commitment, Contract, arrangement or undertaking.
 
(d)         The stockholder list set forth in Section 4.6 (d) of the Disclosure
Letter is a current shareholder list generated by the Company’s stock transfer
agent, and, to the Knowledge of the Company, such list accurately reflects all
of the issued and outstanding shares of the Company’s capital stock as of the
date hereof.
 
4.7                         Valid Issuance of Common Stock and Preferred Stock.
The Purchased Shares and Warrants being purchased by the Investor hereunder, and
the shares of Common Stock to be issued upon the conversion of the Purchased
Shares or any exercise of the Purchased Warrants, when issued, sold, and
delivered in accordance with the terms of this Agreement for the consideration
expressed in this Agreement, will be duly and validly issued, fully paid, and
non-assessable, and will be free of any Liens or restrictions on transfer other
than restrictions under this Agreement, the Investor Rights Agreement and the
Series A Certificate of Designations and under applicable state and federal
securities laws. The sale of the Purchased Shares is not, and the issuance of
the shares of Common Stock upon the conversion of the Purchased Shares or
exercise of the Purchased Warrants shall not be subject to any preemptive
rights, rights of first offer or any anti-dilution provisions contained in the
Company’s Certificate of Incorporation, Bylaws or any other agreement.

 
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4.8                         Financial Statements.
 
(a)         The financial statements of the Company and Hong Kong Mandefu
Holding Limited (the “HKCo”) included in (i) the proxy statement on Schedule 14A
filed with the SEC on October 5, 2009, (ii) the Form 10-Q filed with the SEC on
November 16, 2009 and (iii) Form 8-K filed with the SEC on November 16, 2009
(such financial statements, collectively, the “Financial Statements”) fairly
present in all material respects, in accordance with U.S. GAAP, and in case of
the unaudited financial statements, subject only to normal year-end adjustments,
as of the dates thereof and the periods covered thereby, the financial condition
and the results of operations of the Company and its Subsidiaries, including,
without limitation, the HKCo, the WFOE and the PRCCo.
 
(b)         The Company and its Subsidiaries do not have any material
liabilities or obligations (accrued, absolute, contingent or otherwise) that
would be required under U.S. GAAP, as in effect on the date of this Agreement,
to be reflected on a consolidated balance sheet of the Company, other
than liabilities or obligations reflected on, reserved against, or disclosed in
the notes to, the Financial Statements.
 
4.9                        Absence of Certain Changes or Events. From the date
of the Financial Statements to the date of this Agreement, there has not been,
with respect to the Company or any of its Subsidiaries:
 
(a)        any event, situation or effect (whether or not covered by insurance)
that has had, or to the Knowledge of the Company, would have, a Material Adverse
Effect;
 
(b)        any damage, destruction or loss to, or any material interruption in
the use of, any assets (whether or not covered by insurance) that has had or
would have a Material Adverse Effect
 
(c)        any material change to a material Contract;
 
(d)        any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
 
(e)        any resignation or termination of employment of the Chief Executive
Officer, Chief Financial Officer, President or the Secretary of the Company;

 
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(f)         any mortgage, pledge, transfer of a security interest in, or Lien,
created by the Company or any of its Subsidiaries, with respect to any of its
material properties or assets, except for Permitted Liens;
 
(g)        any loans or guarantees to or for the benefit of its officers or
directors, or any members of their immediate families, or any material loans or
guarantees made to or for the benefit of any of its employees or any members of
their immediate families, in each case, other than travel advances and other
advances made in the ordinary course of its business;
 
(h)        any declaration, setting aside or payment or other distribution in
respect of any capital stock, or any direct or indirect redemption, purchase, or
other acquisition of any of such stock;
 
(i)         any material alteration of the method of accounting or any change in
the identity of its auditors;
 
(j)         any issuance of equity securities to any officer, director or
affiliate, except pursuant to existing shares option plans; or
 
(k)        any negotiations, arrangements or commitments to take any of the
actions described in this Section 4.9.
 
4.10                       Compliance with Laws. Except as disclosed in Section
4.10 of the Disclosure Letter, neither the Company nor any of its Subsidiaries
is in material violation of any applicable federal, state, local, foreign or
other law, statute, regulation, rule, ordinance, code, convention, directive,
order, judgment or other legal requirement (collectively, “Laws”) of any
Governmental Authority, except where such violation would not have a Material
Adverse Effect. To the Knowledge of the Company, neither the Company nor any of
its Subsidiaries is being investigated with respect to, or has been overtly
threatened to be charged with or given notice of any violation of, any
applicable Law, except for such of the foregoing as would not have a Material
Adverse Effect.
 
4.11                      Title.
 
(a)         Section 4.11 of the Company Disclosure Letter contains an accurate
and complete list and description of (i) all real properties owned or leased by
the Company and its Subsidiaries (collectively, the “Real Property”); provided
such list need not include leased real estate for which the annual rental
payment is less than US$100,000 and (ii) any lease under which any such Real
Property is possessed (the “Real Estate Leases”); provided such list need not
include Real Estate Leases which involve an annual rental payment of less than
US$100,000. Each of the Company and its Subsidiaries, as applicable, has good
and marketable title to its Real Property, free and clear of all Liens. None of
the Company or any of its Subsidiaries in default under any of the Real Estate
Leases, and, as of the date of this Agreement, to the Knowledge of the Company,
there has been no default by any of the lessors thereunder, except any such
default that have not had and would not have a Material Adverse Effect.

 
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(b)         Except as disclosed in Section 4.11(b) of the Disclosure Letter and
which would not have a Material Adverse Effect, the Company and its Subsidiaries
are in possession of and have good and marketable title to, or have valid
leasehold interests in or valid contractual rights to use all tangible
personal property as reflected in the Financial Statements, and tangible
personal property acquired (and not otherwise disposed of in the ordinary course
of business with a value not exceeding US$100,000) since December 31, 2008
(collectively, the “Tangible Personal Property”). All Tangible Personal Property
is free and clear of all Liens other than Permitted Liens, and is in good order
and condition, ordinary wear and tear excepted, and its use complies in all
material respects with all applicable Laws.
 
(c)         The accounts receivable of the Company and its Subsidiaries
reflected in each balance sheet included in the Financial Statements has been or
will be (as applicable) presented in accordance with U.S. GAAP applied in a
manner consistent with the accounting principles applied in the preparation of
the Financial Statements.  Neither the Company nor any of its Subsidiaries has
any inventory.
 
4.12                      Litigation. Except as disclosed in Section 4.12 of the
Disclosure Letter, as of the date of this Agreement, there is no private or
governmental action, suit, inquiry, notice of violation, claim, arbitration,
audit, proceeding (including any partial proceeding such as a deposition) or
investigation (“Action”) pending or threatened in writing against any of the
Company or any of its Subsidiaries, any of their respective executive officers
or directors (in their capacities as such) or any of their respective properties
before or by any Governmental Authority which (a) adversely affects or
challenges the legality, validity or enforceability of this Agreement or (b) if
there were an unfavorable decision, would result in a Material Adverse Effect.
As of the date of this Agreement, there is no Judgment imposed upon any of the
Company or any of its Subsidiaries or any of their respective properties, that
would prevent, enjoin, alter or materially delay any of the Transactions, or
that would have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries, nor any director or executive officer thereof (in his or her
capacity as such), is or has been the subject of any Action involving a material
claim or material violation of or material liability under the company laws and
securities laws of any Governmental Authority or a material claim of breach of
fiduciary duty.
 
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4.13                       Intellectual Property.
 
(a)         Section 4.13 of the Disclosure Letter sets forth an accurate and
complete listing of all Intellectual Property and applications for Intellectual
Property owned, used or held for use by each of the Company and its Subsidiaries
and material to the conduct of its business, including, as applicable, the
Intellectual Property that has been registered (or regarding which an
application for registration has been submitted) with any Governmental Authority
of any kind. Except as set forth in Section 4.13 (a) of the Disclosure Letter,
(i) there are no Actions before any Governmental Authority challenging the
validity or ownership of any of such Intellectual Property; (ii) all such
Intellectual Property owned by the Company or any of its Subsidiaries is owned
by it free and clear of any Liens; (iii) the Company and its Subsidiaries’
operation of their business, as such business is currently conducted, does not
infringe or misappropriate the Intellectual Property of any other Person; (iv)
none of the Company or any of its Subsidiaries has granted to any Person any
rights in any such Intellectual Property owned or controlled by the Company or
any of its Subsidiaries; (v) no claims are pending or, to the Knowledge of the
Company, threatened that any of the Company or any of its Subsidiaries is
infringing or otherwise adversely affecting the rights of any Person with regard
to any Intellectual Property set forth on Section 4.13 of the Disclosure Letter;
and (vi) to the Knowledge of the Company, no Person is infringing the rights of
any of the Company or any of its Subsidiaries with respect to any such
Intellectual Property.
 
(b)         Section 4.13 of the Disclosure Letter lists (i) all licenses,
sublicenses and other agreements (“In-Bound Licenses”) pursuant to which a third
party authorizes any of the Company or any of its Subsidiaries to use, practice
any rights under, or grant sublicenses with respect to, any Intellectual
Property owned by such third party and material to the conduct of the business
of the Company or any of its Subsidiaries, other than In-Bound Licenses that
consist solely of “shrink-wrap” and similar commercially available end-user
licenses, and (ii) all licenses, sublicenses and other agreements (“Out-Bound
Licenses”) pursuant to which any of the Company or any of its Subsidiaries
authorizes a third party to use, practice any rights under, or grant sublicenses
with respect to, any Intellectual Property owned by any of the Company or any of
its Subsidiaries and which Out-Bound Licenses are material to the business of
the Company or any of its Subsidiaries or pursuant to which any of the Company
or any of its Subsidiaries grants rights to use or practice any rights under any
Intellectual Property owned by a third party.
 
4.14                      Material Contracts.
 
(a)         The Company has made available to the Investor, prior to the date of
this Agreement, true, correct and complete copies of all of the material
Contracts, as amended and supplemented to which any of the Company or any of its
Subsidiaries is a party, including, without limitation, (i) Contracts that would
be considered a material contract pursuant to Item 601(b)(10) of Regulation S-K;
(ii) Contracts (including all advertising and advertising-related agreements)
pursuant to which any of the Company or any of its Subsidiaries has received or
has paid amounts in excess of an aggregate of US$100,000 during the fiscal year
ended December 31, 2008; (iii) Contracts that are in full force and effect with
any bus company or transportation company or authority; (iv) Contracts that are
in full force and effect with any program or content provider (including any
television stations or video press); (v) Contracts that relate to the
acquisition, disposition or transfer of any equipment; (vi) loan agreements,
indentures or similar Contracts relating to any indebtedness in excess of
US$250,000; (vii) partnership, joint venture or similar Contracts; (viii)
Contracts with a Governmental Authority or any Person affiliated with a
Governmental Authority; (ix) Contracts that relate to the acquisition or
disposition of any business (whether by merger, sale of stock, sale of assets or
otherwise); (x) the Structure Agreements; and (xi) Contracts that restrict or
purport to restrict the right of any Person to engage in any line of business,
acquire any property, develop or distribute any product or provide any service
(including geographic restrictions) or to compete with any Person or grant any
exclusive distribution rights, in any market, field or territory (each, a
“Material Contract”). A list of each such Material Contract is set forth on
Section 4.14 of the Disclosure Letter. None of the Company or any of its
Subsidiaries is party to any oral or unwritten Contracts that would be
considered a material contract pursuant to Item 601(b)(10) of Regulation S-K.
None of the Company or any of its Subsidiaries is in violation of or in default
under (nor does there exist any condition which upon the passage of time or the
giving of notice would cause such a violation of or default under) any Contract
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that would not result in a Material
Adverse Effect; and, to the Knowledge of the Company as of the date of this
Agreement, no other Person has violated or breached, or committed any default
under, any Material Contract, except for violations, breaches and defaults that,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect.

 
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(b)         Except as disclosed in Section 4.14(b) of the Disclosure Letter,
each Material Contract is a legal, valid and binding agreement and is in full
force and effect. Except as would not have a Material Adverse Effect, (i) none
of the Company or any of its Subsidiaries is in breach or default of any
Material Contract to which it is a party; (ii) no event has occurred or
circumstance has existed that (with or without notice or lapse of time), will or
would reasonably be expected to, (A) contravene, conflict with or result in a
violation or breach of, or become a default or event of default under, any
provision of any Material Contract; (B) permit any of the Company or any of its
Subsidiaries or any other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Contract; and (iii) none of the Company or any
of its Subsidiaries has received notice of the pending or threatened
cancellation, revocation or termination of any Material Contract to which it is
a party. Since December 31, 2008, none of the Company or any of its Subsidiaries
has received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Material Contract.
 
(c)         Section 4.14(c) of the Disclosure Letter sets forth all of the
Structure Agreements, which constitute all of the Contracts enabling the Company
to effect control over and consolidate with its financial statements each of its
Subsidiaries (including the PRCCo). The execution, delivery and performance of
each Structure Agreement by the parties thereto did not and is not reasonably
expected to (i) result in any material violation of the business license,
articles of association, other constitutional documents (if any) or permits of
any of the Company or any of its Subsidiaries; (ii) result in any violation of
or penalty under any PRC Law as in effect as of the date hereof; or (iii)
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any other Contract, license,
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument in effect as of the date hereof to which any of them is
a party or by which any of them is bound or to which any of their property or
assets is subject; except, in the case of clause (ii) and (iii), as would not
have a Material Adverse Effect. No breach or default under any of the Structure
Agreements by any of the Company or any of its Subsidiaries will occur as a
result of the execution, delivery and performance of this Agreement, the
Registration Rights Agreement or the Investor Rights Agreement. Consummation of
the Transactions will not (and will not give any Person a right to) terminate or
modify any rights of, or accelerate or augment any obligation of, any of the
Company or any of its Subsidiaries under any Structure Agreement.

 
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4.15                       Insurance. Section 4.15 of the Disclosure Letter (i)
sets forth an accurate and complete list of each insurance policy or contract
which covers any of the Company or any of its Subsidiaries or to which any of
the Company or any of its Subsidiaries is party, and (ii) lists all pending
claims and the claims history for each of the Company and any of its
Subsidiaries during the current year and the three (3) preceding years. All such
insurance policies are in full force and effect, all premiums due thereon have
been paid or provided for and the Company and its Subsidiaries have complied
with the material provisions of such policies. The Company and its Subsidiaries
have been advised of any defense to coverage in connection with any claim to
coverage asserted or noticed by the Company or any of its Subsidiaries under or
in connection with any of their insurance policies. The Company or any of its
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company or any of its Subsidiaries are engaged
and in the geographic areas where any of them engages in such businesses.
 
4.16                       Taxes.
 
(a)         The Company and each of its Subsidiaries have timely filed, or have
caused to be timely filed on their behalf, all Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of group of corporations, pursuant to applicable Law. All Tax Returns
filed by (or that include on a consolidated basis) the Company or any of its
Subsidiaries were (and, as to a Tax Return not filed as of the date hereof, will
be) in all respects true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax returns have not had and
would not have a Material Adverse Effect. There are no unpaid Taxes of any of
the Company or any of its Subsidiaries claimed to be due by any Governmental
Authority in charge of taxation of any jurisdiction, nor any claim for
additional Taxes of any of the Company or any of its Subsidiaries for any period
for which Tax Returns have been filed, except to the extent any failure to file
or any inaccuracies in any filed Tax Returns, individually or in the aggregate,
have not had and would not have a Material Adverse Effect.
 
(b)         Section 4.16(b) of the Disclosure Letter lists all the relevant
Governmental Authorities in charge of taxation in which Tax Returns are filed
with respect to the Company or any of its Subsidiaries, and indicates those Tax
Returns that have been audited or that are currently the subject of an audit
since January 1, 2002. Except as disclosed in Section 4.16(b) of the Disclosure
Letter, none of the Company or any of its Subsidiaries has received any notice
that any Governmental Authority will audit or examine (except for any general
audits or examinations routinely performed by such Governmental Authorities),
seek information with respect to, or make material claims or assessments with
respect to, any Taxes of the Company or any of its Subsidiaries for any period.
The Company or any of its Subsidiaries have delivered or made available to the
Investor correct and complete copies of all Tax Returns, examination reports,
and statements of deficiencies filed by, assessed against or agreed to by the
Company or any of its Subsidiaries, for and during fiscal years 2002 through
2007.

 
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(c)         The Financial Statements reflect an adequate reserve for all Taxes
payable by the Company or any of its Subsidiaries (in addition to any reserve
for deferred Taxes to reflect timing differences between book and Tax items) for
all taxable periods and portions thereof through the date of such financial
statements. None of the Company or any of its Subsidiaries is a party to or
bound by any Tax indemnity, Tax sharing or similar agreement, and the Company or
any of its Subsidiaries currently have no material liability and will not have
any material liabilities for any Taxes of any other Person under any agreement
or by the operation of any Law. No deficiency with respect to any Taxes has been
proposed, asserted or assessed against any of the Company or any of its
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
are pending, except to the extent any such deficiency or request for waiver,
individually or in the aggregate, has not had and would not have a Material
Adverse Effect.
 
(d)         None of the Company or any of its Subsidiaries has requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed. None of the Company or any of its Subsidiaries has executed
any outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns. No power of
attorney currently in force has been granted by any of the Company or any of its
Subsidiaries concerning any Taxes or Tax Return.
 
(e)         None of the Company’s Subsidiaries (i) is currently engaged in the
conduct of a trade or business within the United States; (ii) is a corporation
or other entity organized or incorporated in the United States; or (iii) has or
has ever owned any United States real property interests as described in Section
897 of the Code.
 
4.17                      Subsidiaries. Section 4.17 of the Disclosure Letter
lists, as of the date hereof, all Subsidiaries of the Company and indicates as
to each the type of entity, its jurisdiction of organization and its
stockholders or other equity holders. The Company does not directly or
indirectly own any other equity or similar interest in or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity. Except with respect to the PRCCo, the Company is the direct or indirect
owner of all outstanding shares of capital stock of its Subsidiaries, and all
such shares are duly authorized, validly issued, fully paid and non-assessable
and are owned by the Company free and clear of all Liens. There are no
outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable
or convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of any
Subsidiaries of the Company or otherwise obligating any Subsidiaries of the
Company to issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities.

 
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4.18                      Employment Matters.
 
(a)         None of the Company or any of its Subsidiaries has or maintains any
material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding (whether or not legally
binding) providing material benefits to any current or former employee, officer
or director of any of the Company or any of its Subsidiaries
(collectively, “Benefit Plans”). Except as set forth in Section 4.18 (a) of the
Disclosure Letter, neither the execution and delivery of this Agreement nor the
consummation of the Transactions will result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any payment or benefit to
any employee of any of the Company or any of its Subsidiaries. As of the date of
this Agreement, there are no severance or termination agreements or arrangements
currently in effect between any of the Company or any of its Subsidiaries and
any of its current or former employees, officers or directors, nor do any of the
Company or any of its Subsidiaries have any general severance plan or policy
currently in effect for any of its employees, officers or directors. Since
December 31, 2008 through the date hereof, there has not been any adoption or
amendment in any material respect by any of the Company or any of its
Subsidiaries of any Benefit Plan.
 
(b)         (i) There are no collective bargaining or other labor union
agreements to which any of the Company or any of its Subsidiaries is a party or
by which it is bound; (ii) no material labor dispute exists or, to the Knowledge
of the Company, is imminent with respect to any of the employees of any of the
Company or any of its Subsidiaries; (iii) to the Knowledge of the Company, none
of the Company or any of its Subsidiaries is, and no event, condition or other
circumstance exists as of the date hereof which could reasonably be expected to
cause any of the Company or any of its Subsidiaries to become, the subject of
any Actions asserting that any of the Company or any of its Subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions of employment; (iv) there is no
strike, work stoppage or other labor dispute involving any of the Company or any
of its Subsidiaries pending or, to the Knowledge of the Company, threatened; (v)
no complaint, charge or Actions by or before any Governmental Authority brought
by or on behalf of any employee, prospective employee, former employee, retiree,
labor organization or other representative of its employees is pending or, to
the Knowledge of the Company, threatened against any of the Company or any of
its Subsidiaries; (vi) no material grievance is pending or, to the Knowledge of
the Company, threatened against any of the Company or any of its Subsidiaries;
and (vii) none of the Company or any of its Subsidiaries is a party to, or
otherwise bound by, any consent decree with, or to the Knowledge of the Company,
citation by, any Governmental Authorities relating to employees or employment
practices.
 
(c)         None of the execution of, or the completion of the Transactions
(whether alone or in connection with any other event(s)), will result in (i)
severance pay or an increase in severance pay upon termination after Closing,
(ii) any payment, compensation or benefit becoming due, or increase in the
amount of any payment, compensation or benefit due, to any current or former
employee of the Company or its Affiliates, (iii) acceleration of the time of
payment or vesting or result in funding of compensation or benefits, (iv) any
new material obligation under any Benefit Plan, (v) any limitation or
restriction on the right of Company to merge, amend, or terminate any Benefit
Plan, or (vi) any payments which would not be deductible under Section 280G of
the Code.

 
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4.19                      Environmental Matters.With such exceptions that do not
have a Material Adverse Effect, each of the Company or any of its Subsidiaries
is in substantial compliance with, and has not been and is not in material
violation of or subject to any material liability under, any Environmental Law
and no proceeding involving any of the Company or any of its Subsidiaries with
respect to any Environmental Law is pending or, to the Knowledge of the Company,
is threatened.
 
4.20                      Customers and Suppliers.
 
(a)         Set forth on Section 4.20(a) of the Disclosure Letter is a true and
correct list of (i) the ten (10) largest customers (measured by revenues paid to
the Company or any of its Subsidiaries, in the aggregate, during the
twelve-month period ended December 31, 2008), together with the dollar amount of
sales made to such customers during such period, (ii) the ten (10) largest
suppliers in terms of purchases and leases by the Company or any of its
Subsidiaries during the twelve-month period ended December 31, 2008, and (iii)
any sole source suppliers of goods or services for which there is no ready
alternative to the Company or any of its Subsidiaries on comparable or better
terms, together with the dollar amount paid to such suppliers during such
period.
 
(b)         The relationships of the Company or any of its Subsidiaries with
each supplier and customer listed in Section 4.20 of the Disclosure Letter
(including each supplier and customer listed in Section 4.20 of the Disclosure
Letter party to a Contract) are good commercial working relationships. Except as
set forth in Section 4.20 (b) of the Disclosure Letter, no such supplier or
customer has canceled or otherwise terminated, or to the Knowledge of the
Company, threatened to cancel or otherwise terminate, its relationship with the
Company or any of its Subsidiaries. Since December 31, 2008, except as provided
in Section 4.20 (b) of the Disclosure letter, none of the of the Company or any
of its Subsidiaries has received any written or oral notice that any such
supplier or customer may cancel, terminate or otherwise materially and adversely
modify its relationship with the Company or any of its Subsidiaries (including
by modifying its pricing) or limit its services, supplies or materials to the
Company or any of its Subsidiaries, either as a result of the consummation of
the Transactions or otherwise.
 
4.21                      Transactions With Affiliates and Employees. Except as
disclosed in Section 4.21 of the Disclosure Letter, none of the executive
officers or directors of the Company or any of its Subsidiaries and none of the
Company’s shareholders is presently a party, directly or indirectly, to any
transaction with any of the Company or any of its Subsidiaries that is required
to be disclosed under Rule 404(a) of Regulation S-K (other than for services as
employees, officers and directors), including any Contract providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any executive
officer, director or, to the Knowledge of the Company, any entity in which any
executive officer or director has a substantial interest or is an officer,
director, trustee or partner.
 
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4.22                      Money Laundering Laws. None of the Company nor any of
its Subsidiaries has violated any money laundering statute or any rules and
regulations relating to money laundering statutes (collectively, the “Money
Laundering Laws”) and no proceeding involving any of the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
Knowledge of the Company or any of its Subsidiaries, is threatened.
 
4.23                       Foreign Corrupt Practices Act. Neither the Company
nor any of its Subsidiaries, or any director, officer, agent, employee, or any
other person acting for or on behalf of the Company or any of its Subsidiaries
(individually and collectively, a “Company Affiliate”), has violated the U.S.
Foreign Corrupt Practices Act of 1977 (the “FCPA”) or any other applicable
anti-bribery or anti-corruption laws of any jurisdiction, nor has any Company
Affiliate, in violation of any applicable law or regulation, offered, paid,
promised to pay, or authorized the payment of any money, or offered, given,
promised to give, or authorized the giving of anything of value, to any officer,
employee or any other person acting in an official capacity for any Government
Entity, as defined below, to any political party or official thereof or to any
candidate for political office (individually and collectively, a “Government
Official”) or to any person under circumstances where such Company Affiliate
knew or was aware of a high probability that all or a portion of such money or
thing of value would be offered, given or promised, directly or indirectly, to
any Government Official, for the purpose of:
 
(a)         (i) influencing any act or decision of such Government Official in
his official capacity, (ii) inducing such Government Official to do or omit to
do any act in violation of his lawful duty, (iii) securing any improper
advantage, or (iv) inducing such Government Official to influence or affect any
act or decision of any Government Entity, or
 
(b)         in order to assist the Company or any of its Subsidiaries in
obtaining or retaining business for or with, or directing business to the
Company or any of its Subsidiaries.
 
“Government Entity” as used in this Agreement means any government or any
department, agency or instrumentality thereof, including any entity or
enterprise owned or controlled by a government, or a public international
organization.
 
4.24                      Economics Sanctions Laws.
 
(a)         None of (i) the Company nor any of its Subsidiaries or (ii) any of
their respective officers, employees, directors, or agents acting for or on
behalf of the Company or any of its Subsidiaries, at the direction or Knowledge
of the Company, or who are under obligations to report to the Company or any of
its Subsidiaries ((i) and (ii) collectively, “Relevant Persons”) is in violation
of any applicable Law relating to economic sanctions administered by U.S.
Department of the Treasury’s Office of Foreign Assets Control or its successor
organization(s) from time to time (“OFAC”).

 
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(b)         No Relevant Person:
 
(i)        conducts any business with, or engaged directly or indirectly in
transactions connected with any of North Korea, Iraq, Libya, Cuba, Iran, Myanmar
or Sudan, or is otherwise engaged directly or indirectly in transactions
connected with any government, country or other entity or persons that is the
target of U.S. economic sanctions administered by OFAC, including “Specially
Designated Nationals and Blocked Persons” and no Relevant Person is any such
person or entity;
 
(ii)       deals in, or otherwise engages in any transaction relating to, any
property or interest in property blocked pursuant to the economic sanctions laws
administered by OFAC; or
 
(iii)      engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in any economic sanctions law administered by
OFAC.
 
4.25                       Additional PRC Representations and Warranties.
 
(a)         Except as disclosed in Section 4.25(a) of the Disclosure Letter, all
material consents, approvals, authorizations or licenses required under PRC Law
for the due and proper establishment and operation of the WFOE and the PRCCo
have been duly obtained from the relevant PRC Governmental Authority and are in
full force and effect.
 
(b)         Except as disclosed in Section 4.25(b) of the Disclosure Letter, all
filings and registrations with the PRC Governmental Authorities required in
respect of the WFOE and the PRCCo and their respective operations including,
without limitation, the registration with and approval by the Ministry of
Commerce, the State Administration for Industry and Commerce (the “SAIC”), the
State Administration of Foreign Exchange (the “SAFE”), the State Administration
of Taxation, the State Administration of Radio, Film and Television, the General
Administration of Customs of the PRC and their relevant local counterparts, the
tax bureau and other PRC Governmental Authorities that administer foreign
investment enterprises have been duly completed in accordance with the relevant
Laws, except where the failure to complete such filings and registrations does
not, and would not, individually or in the aggregate, have a Material Adverse
Effect.
 
(c)         Except as disclosed in Section 4.25(c) of the Disclosure Letter,
each of Zheng Cheng, Ou Wen Lin and Qingping Lin has completed all fillings and
registrations with the SAFE in accordance with all applicable PRC Laws including
without limitation the Notice on Relevant Issues Concerning Foreign Exchange
Administration for PRC Residents to Engage in Financing and Inbound Investment
Via Offshore Special Purpose Vehicles issued by the SAFE on October 21, 2005 and
effective as of November 1, 2005.

 
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(d)         Except as disclosed in Section 4.25 (d) of the Disclosure Letter,
each of the WFOE and the PRCCo has complied with all relevant Laws and
regulations regarding the contribution and payment of its registered share
capital, the payment schedule of which has been approved by the relevant PRC
Governmental Authority. There are no outstanding rights to acquire, or
commitments made by either the WFOE or the PRCCo to sell, any of its equity
interests.
 
(e)         Neither the WFOE nor the PRCCo is in receipt of any letter or notice
from any relevant PRC Governmental Authority notifying it of the revocation, or
otherwise questioning the validity, of any licenses or qualifications issued to
it or any subsidy granted to it by any PRC Governmental Authority for
non-compliance with the terms thereof or with applicable PRC laws, or the need
for compliance or remedial actions in respect of the activities carried out by
the WFOE or the PRCCo.
 
(f)         Each of the WFOE and the PRCCo have conducted its respective
business activities within its permitted scope of business or has otherwise
operated its business in compliance, in all material respects, with all relevant
legal requirements and with all requisite licenses and approvals granted by
competent PRC Governmental Authorities. As to licenses, approvals and government
grants and concessions required or material for the conduct of any part of the
WFOE or the PRCCo’s business which is subject to periodic renewal, to the
Knowledge of the Company, as of the date of this Agreement, there does not exist
any grounds on which renewals of any such licenses, approvals, grants or
concessions will not be granted by the relevant PRC Governmental Authorities.
 
(g)         With regard to employment and staff or labor, each of the WFOE and
the PRCCo has complied, in all material respects, with all applicable Laws and
regulations, including without limitation, laws and regulations pertaining to
welfare funds, social benefits, medical benefits, insurance, retirement
benefits, pensions or the like.
 
4.26                       No Material Adverse Effect. Since October 19, 2009,
no event or circumstance has occurred that has had (and continues to have) or
would have a Material Adverse Effect.
 
4.27                       Registration Rights. Except as set forth in Section
4.27 of the Disclosure Letter and in the Registration Rights Agreement, the
Company has not granted or agreed to grant, and is not under any obligation to
provide, any rights to register under the Securities Act any of its presently
outstanding securities or any of its securities that may be issued subsequently.
 
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4.28                       Reports.

 
(a)         Since June 18, 2007, the Company has timely filed all documents
required to be filed with the SEC pursuant to Sections 13(a) or 15(d) of the
Exchange Act.
 
(b)        The SEC Documents, when they became effective or were filed with the
SEC, as the case may be, complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the SEC thereunder, in each case as in effect at such
time, and none of such documents contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make such statements, in the light of the circumstances in which
they were made, not misleading.
 
(c)         The Company (i) has implemented and maintains disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are
reasonably designed to ensure that material information relating to the Company,
including its consolidated Subsidiaries, is made known to the individuals
responsible for the preparation of the Company’s filings with the SEC and (ii)
has disclosed, based on its most recent evaluation prior to the date of this
Agreement, to the Company’s outside auditors and the Board’s Audit Committee (A)
any significant deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that are reasonably likely to adversely affect the
Company’s ability to record, process, summarize and report financial information
and (B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls over
financial reporting. As of the date of this Agreement, to the Knowledge of the
Company, there is no reason that its outside auditors, its chief executive
officer and chief financial officer will not be able to give the certifications
and attestations required pursuant to the rules and regulations adopted pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when
next due.
 
4.29                       Investment Company Act. Neither the Company nor any
of its Subsidiaries is an investment company within the meaning of the
Investment Company Act of 1940, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
 
4.30                       Brokers’ Fees and Expenses. No broker, investment
banker, or financial advisor or other Person is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or commission in connection
with the Transactions.
 
4.31                       AMEX. As of the date hereof, the Company’s Common
Stock is listed on AMEX, and no event has occurred, and the Company is not aware
of any event that is reasonably likely to occur, that would result in the Common
Stock being de-listed from AMEX.  The sale and issuance of the Purchased Shares
and execution of and performance under the Investor Rights Agreement complies
with the rules and regulations of AMEX (provided, with respect to the
representation and warranty made regarding the rules or regulations of AMEX as
of the date hereof only, that AMEX approves the listing of the Purchased Shares,
the Transferred Shares and the shares of Common Stock underlying the Purchased
Warrants).
 
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4.32                       Application of Takeover Protections. As of the
Closing Date, there is no control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s charter documents or the
laws of its state of incorporation in effect as of the date hereof that is or
would become applicable to the Investor as a result of the Investor and the
Company fulfilling their obligations or exercising their rights under this
Agreement, including, without limitation, as a result of any transfer by the
Sponsor Shareholders of common stock pursuant to the terms of the Investor
Rights Agreement.
 
4.33                       No Integrated Offering. Neither the Company, nor any
Person acting on its behalf, has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause any offering contemplated by this Agreement to be
integrated with prior offerings by the Company for purposes of the Securities
Act or the rules and regulations of FINRA or AMEX.
 
4.34                       Internal Accounting and Disclosure Controls. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management’s general or specific authorization and (iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any difference.  The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the
Exchange Act) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions
regarding required disclosure.
 
4.35                       Off Balance Sheet Arrangements. There is no
transaction, arrangement, or other relationship between the Company and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in the Company’s SEC Documents and is not so disclosed
and that otherwise would have a Material Adverse Effect.

 
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4.36                      Sarbanes-Oxley Act of 2002. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) applicable to it as of the date hereof and as of the
Closing. There has been no change in the Company’s accounting policies since
inception except as described in the notes to the Financial Statements. Each
required form, report and document containing financial statements that has been
filed with or submitted to the SEC since inception, was accompanied by the
certifications required to be filed or submitted by the Company’s chief
executive officer and chief financial officer pursuant to the Sarbanes-Oxley
Act, and at the time of filing or submission of each such certification, such
certification was true and accurate and materially complied with the
Sarbanes-Oxley Act and the rules and regulations promulgated thereunder. Neither
the Company, nor to the Knowledge of the Company, any Representative of the
Company, has received or otherwise had or obtained knowledge of any complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or their respective internal accounting controls, including any
complaint, allegation, assertion or claim that the Company has engaged in
questionable accounting or auditing practices, except for (a) any complaint,
allegation, assertion or claim as has been resolved without any resulting change
to the Company’s accounting or auditing practices, procedures methodologies or
methods of the Company or its internal accounting controls, and (b) questions
regarding such matters raised and resolved in the ordinary course in connection
with the preparation and review of the Company’s financial statements and
periodic reports. To the Knowledge of the Company, no attorney representing the
Company, whether or not employed by the Company, has reported evidence of a
material violation of securities laws, breach of fiduciary duty or similar
violation by the Company or any of its officers, directors, employees or agents
to the Board or any committee thereof or to any director or officer of the
Company. To the Knowledge of the Company, no employee of the Company has
provided or is providing information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation or possible
violation of any applicable law.
 
4.37                      Transfer Taxes. On the Closing Date, all stock
transfer or other taxes (other than income or similar Taxes) which are required
to be paid in connection with the transactions contemplated hereby will be, or
will have been, fully paid or provided for by the Company or the Sponsor
Shareholders, and all laws imposing such taxes will be or will have been
complied with.
 
4.38                      Manipulation of Price. The Company has not, and, to
the Knowledge of the Company, no one acting on its behalf has, (i) taken,
directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the transactions contemplated hereby or (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases for the
transactions contemplated hereby.
 
4.39                      Anti-dilution Provisions. There is no anti-dilution
provision under any agreement to which the Company is party or to which any
assets of the Company are subject that is or would become effective as a result
of the Investors and the Company fulfilling their obligations or exercising
their rights under this Agreement.

 
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4.40                       General Solicitation. Neither the Company nor, to the
Knowledge of the Company, any person acting on behalf of the Company, has
offered or sold any of the Securities by any form of “general solicitation”
within the meaning of Rule 502 under the Securities Act.  To the knowledge of
the Company, no person acting on its behalf has offered the Securities for sale
other than to the Investor and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.
 
4.41                       Waiver of Section 203. As of the Closing Date, the
Company represents and warrants to the Investor that the Board has heretofore
taken all necessary action to approve the transactions contemplated by this
Agreement and the Investor Rights Agreement, and has approved, for purposes of
Section 203 of the Delaware General Corporation Law (including any successor
statute thereto (“Section 203”)), the Investor’s becoming an “interested
stockholder” within the meaning of Section 203 (the “Waiver”) and such action is
effective as of the date hereof.  No other state takeover, “moratorium,” “fair
price,” “affiliate transaction” or similar statute or regulation under any
applicable Law is applicable to the Transactions.
 
4.42                       Disclosure. The Company understands and confirms that
the Investor will rely on the foregoing representations in effecting
transactions in securities of the Company.  To the Knowledge of the Company, no
material event or circumstance has occurred or information exists with respect
to the Company or its business, properties, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
 
5.         Representations and Warranties of the Sponsor Shareholders. Each of
the Sponsor Shareholders jointly and severally represents and warrants to the
Investor as of the date of this Agreement that:
 
5.1                         Organization. Each of the Sponsor Shareholders that
is not an individual has been duly organized and is validly existing in the
jurisdiction of its incorporation.
 
5.2                         Authorization; Enforceability. Each of the Sponsor
Shareholders that is not an individual has all necessary power and authority to
enter into this Agreement and the Investor Rights Agreement and to consummate
the transactions contemplated by this Agreement and the Investor Rights
Agreement, including, without limitation, the payment of any Performance
Adjustment Amount and Put Price, as applicable. The execution, delivery and
performance of this Agreement and the Investor Rights Agreement, including,
without limitation, the payment of any Performance Adjustment Amount and Put
Price, as applicable, have been duly authorized by all necessary action on the
part of the Sponsor Shareholders, and assuming due authorization, execution and
delivery thereof by the other parties thereto, this Agreement and the Investor
Rights Agreement will constitute valid and binding obligation of the Sponsor
Shareholders, enforceable against them in accordance with its terms, except as
such enforceability may be limited by applicable laws relating to bankruptcy,
reorganization, moratorium or other similar legal requirements relating to or
affecting creditors’ rights generally and except as such enforceability is
subject to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).

 
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5.3                         No Default or Violation. The execution, delivery,
and performance of this Agreement and the Investor Rights Agreement and the
consummation by the Sponsor Shareholders of the transactions contemplated hereby
and thereby, including, without limitation, the payment of any Performance
Adjustment Amount and Put Price, as applicable, will not (i) result in any
default or violation of the certificate of incorporation, bylaws, limited
partnership agreement, limited liability company operating agreement or other
applicable organizational documents of the Sponsor Shareholders, (ii) result in
any violation of or constitute a breach of, with or without the passage of time
or giving of notice, any law applicable to the Sponsor Shareholders, except as
would not, individually or in the aggregate, reasonably be expected to prevent
or materially delay or materially impair the ability of the Sponsor Shareholders
to consummate the transactions contemplated by this Agreement and the Investor
Rights Agreement, including, without limitation, the payment of any Performance
Adjustment Amount and Put Price, as applicable.
 
5.4                         Governmental Consents. No consent, approval, license
or authorization of, or designation, declaration, or filing with, any federal,
state, or local governmental authority on the part of the Sponsor Shareholders
is required in connection with the consummation of the transactions contemplated
by this Agreement and the Investor Rights Agreement, including, without
limitation, the payment of any Performance Adjustment Amount and Put Price, as
applicable except for the following: (i) those which have already been made or
granted; (ii) the filing with the SEC of such reports under the Exchange Act as
may be required in connection with this Agreement and the Investor Rights
Agreement and the transactions contemplated hereby and thereby and (iii) those
where the failure to obtain such consent, approval or license would not have a
material adverse effect on the ability of the Sponsor Shareholders to perform
their obligations under this Agreement and the Investor Rights Agreement,
including, without limitation, the payment of any Performance Adjustment Amount
and Put Price, as applicable.
 
5.5                         Good Title. Upon delivery of any certificate or
certificates duly assigned, representing the same as herein contemplated and
upon registering of the Investor as the new owner of such Transferred Shares in
the share register of the Company, the Investor will receive good title to such
Transferred Shares, free and clear of all Liens.
 
5.6                         Foreign Corrupt Practices Act. None of the Sponsor
Shareholders, or, in case of each of Thousand and Bright, any director, officer,
agent, employee, or any other person acting for or on behalf of it (individually
and collectively, a “Sponsor Shareholder Affiliate”), has violated the FCPA or
any other applicable anti-bribery or anti-corruption laws of any applicable
jurisdiction, nor has any Sponsor Shareholder Affiliate, in violation of any
applicable law or regulation, offered, paid, promised to pay, or authorized the
payment of any money, or offered, given, promised to give, or authorized the
giving of anything of value, to any Government Official or to any person under
circumstances where such Sponsor Shareholder Affiliate knew or was aware of a
high probability that all or a portion of such money or thing of value would be
offered, given or promised, directly or indirectly, to any Government Official,
for the purpose of:
 
(a)      (i) influencing any act or decision of such Government Official in his
official capacity, (ii) inducing such Government Official to do or omit to do
any act in violation of his lawful duty, (iii) securing any improper advantage,
or (iv) inducing such Government Official to influence or affect any act or
decision of any Government Entity, or
 
 
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(b)      in order to assist the Company or any of its Subsidiaries in obtaining
or retaining business for or with, or directing business to the Company or any
of its Subsidiaries.
 
6.         Representations and Warranties of the Investor. The Investor
represents and warrants to the Company and the Sponsor Shareholders as of the
date of this Agreement that:
 
6.1                         Organization. The Investor has been duly organized
and is validly existing in the jurisdiction of its incorporation.
 
6.2                         Authorization; Enforceability. The Investor has all
necessary power and authority to enter into this Agreement, the Registration
Rights Agreement and the Investor Rights Agreement and to consummate the
transactions contemplated by this Agreement, the Registration Rights Agreement
and the Investor Rights Agreement. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Investor Rights
Agreement have been duly authorized by all necessary action on the part of the
Investor, and assuming due authorization, execution and delivery thereof by the
other Persons contemplated to be a party thereto, this Agreement, the
Registration Rights Agreement and the Investor Rights Agreement by the Investor,
will constitute valid and binding obligation of the Investor, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable laws relating to bankruptcy, reorganization, moratorium or
other similar legal requirements relating to or affecting creditors’ rights
generally and except as such enforceability is subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
 
6.3                         No Default or Violation. The execution, delivery,
and performance of this Agreement, the Registration Rights Agreement and the
Investor Rights Agreement and the consummation by the Investor of the
transactions contemplated hereby will not (i) result in any default or violation
of the limited partnership agreement, limited liability company operating
agreement or other applicable organizational documents of the Investor and (ii)
assuming the truth and accuracy of the representations and warranties of the
Company made in Section 4 hereof and receipt of any consent approval or license
required in connection with any subsequent issuance or transfer of Common Stock
pursuant to the Investor Rights Agreement, result in any violation of or
constitute a breach of, with or without the passage of time or giving of notice,
any law applicable to the Investor, except as would not, individually or in the
aggregate, reasonably be expected to prevent or materially delay or materially
impair the ability of the Investor to consummate the transactions contemplated
by this Agreement and the Investor Rights Agreement.
 
6.4                         Governmental Consents.No consent, approval, license
or authorization of, or designation, declaration, or filing with, any federal,
state, or local governmental authority on the part of the Investor is required
in connection with the consummation of the transactions contemplated by this
Agreement or the Investor Rights Agreement, except for the following: (i) those
which have already been made or granted; (ii) the filing with the SEC of such
reports under the Exchange Act as may be required in connection with this
Agreement and the Investor Rights Agreement and the transactions contemplated
hereby and thereby and (iii) those where the failure to obtain such consent,
approval or license would not have a material adverse effect on the ability of
the Investor to perform its obligations under this Agreement and the Investor
Rights Agreement.

 
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6.5                         Private Placement.
 
(a)      The Investor is (i) an “accredited investor” within the meaning of Rule
501(a) of Regulation D promulgated under the Securities Act;
 
(b)      The Investor has been advised by the Company that the Purchased Shares
and the Purchased Warrants have not been registered under the Securities Act,
that the Purchased Shares and the Purchased Warrants will be issued on the basis
of the statutory exemption provided by Section 4(2) under the Securities Act or
Regulation D promulgated thereunder, or both, relating to transactions by an
issuer not involving any public offering and under similar exemptions under
certain state securities laws, that this transaction has not been reviewed by,
passed on or submitted to any federal or state agency or self-regulatory
organization where an exemption is being relied upon, and that the Company’s
reliance thereon is based in part upon the representations made by such Investor
in this Agreement.  The Investor acknowledges that it has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the Securities Act and the rules and regulations thereunder on the transfer
of securities; and
 
(c)      The Investor is acquiring the Purchased Shares, Purchased Warrants and
the Transferred Shares for its own account, and solely for the purpose of
investment and not with a view to, or for offer or sale in connection with any
distribution thereof.
 
7.         Conditions to the Investor’s Obligations at Closing. The obligation
of the Investors to purchase the Purchased Shares and the Purchased Warrants at
the Closing is subject to the fulfillment or waiver on or before the Closing of
each of the following conditions:
 
7.1                         Representations and Warranties. Each of the
representations and warranties of the Company and the Sponsor Shareholders
contained in Sections 4 and 5 of this Agreement shall be true and correct in all
material respects (other than representations and warranties qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that are made as of a specific date or
time other than the date hereof or the Closing Date (which need only be true and
correct as of such date or time).
 
7.2                         Covenants. The Company shall have performed and
complied with in all material respects all covenants and agreements required by
this Agreement to be performed or complied with by it at or prior to the
Closing.

 
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7.3                         Share Transfer. The Sponsor Shareholders shall have
caused to be executed a share transfer agreement, in form and substance
reasonably acceptable to the Investor in its sole discretion, providing for the
transfer of one-hundred-fifty thousand (150,000) shares of Common Stock of the
Company (the “Transferred Shares”) to the Investor (the “Share Transfer”) and
the Share Transfer shall have been consummated and the Transferred Shares shall
have been delivered to the Investor.
 
7.4                         No Material Adverse Effect. There has, since the
date of this Agreement, occurred no event or circumstance that has had (and
continues to have) a Material Adverse Effect.
 
7.5                         FCPA Compliance. The Company shall have (i) approved
and adopted an FCPA compliance program in the form set forth in section 9.4(a)
of the Disclosure Letter (the “FCPA Compliance Program”) and made available
copies of such FCPA Compliance Program to all employees of the Company and its
Subsidiaries, (ii) appointed an FCPA compliance officer to oversee and insure
compliance with the FCPA Compliance Program and (iii) conducted FCPA training
sessions for each of the Founder and Jacky Lam with respect to the FCPA
Compliance Program.
 
7.6                         Accounting Firm Engagement. The Company shall have
engaged Deloitte Touche Tohmatsu or any of the following accounting firms
approved by the Investor as the accounting firm of the Company and its
Subsidiaries: Ernst & Young, KPMG or PricewaterhouseCoopers.
 
7.7                         Legal Counsel Engagement. The Company shall have
engaged Loeb & Loeb LLP or such other internationally recognized U.S. law firm
as the legal counsel of the Company and its Subsidiaries.
 
7.8                         Series A Certificate of Designations and Bylaws. The
Company shall have adopted and filed with the Secretary of State of the State of
Delaware the Series A Certificate of Designations and any amendments to the
Bylaws as may be reasonably requested by the Investor to reflect the terms
hereof, the Series A Certificate of Designations or the Investor Rights
Agreement.
 
7.9                         AMEX Registration. The AMEX shall have approved the
listing of the shares of Common Stock issuable upon conversion of the Purchased
Shares or exercise of the Purchased Warrants and the Transferred Shares on the
AMEX.
 
7.10                       Ancillary Agreements. The Company shall have executed
and delivered the Registration Rights Agreement, the Investor Rights Agreement
and the Warrant.
 
7.11                       Legal Opinions. The Investor shall have received (a)
from Hankun Law Offices, the PRC counsel for the Company, an opinion, dated as
of the Closing Date, in the form attached as Exhibit E; (b) from Loeb & Loeb
LLP, U.S. counsel to the Company, an opinion dated the Closing Date in the form
attached as Exhibit F; (c) from Morris, Nichols, Arsht & Tunnell, the Delaware
counsel for the Company, an opinion, dated as of the Closing Date, in the form
attached as Exhibit G; and (d) from Gallant Y.T. Ho & Co., the Hong Kong counsel
for the Company, an opinion, dated as of the Closing Date, in the form attached
as Exhibit H.

 
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7.12                       Expenses. Simultaneous with the Closing, the Company
shall have reimbursed the Investors for up to $200,000 of their reasonable
documented out-of-pocket fees and expenses incurred on or before the Closing
Date in connection with the execution of this Agreement, the Investor Rights
Agreement, the Warrant and the Registration Rights Agreement and the purchase by
the Investor of the Purchased Shares and Warrants pursuant to this Agreement,
which may be effected through an offset to the Purchase Price.
 
7.13                       Board of Directors.
 
(a)         The Sponsor Shareholders and the Board shall have taken all actions
necessary and appropriate to appoint one person designated by the Investor to
the Board effective immediately following the Closing.
 
(b)         The Company and the Sponsor Shareholders shall have taken all
actions necessary and appropriate to appoint one person designated by the
Investor to the board of directors of the HKCo effective immediately following
the Closing.
 
(c)         The Investor shall have received evidence satisfactory to it of such
actions.
 
7.14                       Purchased Shares; Warrants. The Company shall have
delivered the Purchased Shares and the Purchased Warrants to the Investor.
 
8.         Conditions to the Company’s Obligations at Closing. The obligations
of the Company to issue, sell and deliver to the Investor the Purchased Shares
and the Purchased Warrants are subject to the fulfillment or waiver on or before
the Closing of each of the following conditions:
 
8.1                         Representations and Warranties. Each of the
representations and warranties of the Investor contained in Section 6 of this
Agreement shall be true and correct in all material respects (other than
representations and warranties qualified by materiality or material adverse
effect, which shall be true and correct in all respects) on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except for representations and
warranties that are made as of a specific date or time other than the date
hereof or the Closing Date (which need only be true and correct as of such date
or time).
 
8.2                         Purchase Price. The Investor shall have paid to the
Company the Purchase Price.
 
8.3                         Ancillary Agreements. The Investor shall have
executed and delivered the Registration Rights Agreement, the Investor Rights
Agreement and the Warrant.

 
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8.4                         AMEX Registration. The AMEX shall have approved the
listing of the shares of Common Stock issuable upon conversion of the Purchased
Shares or exercise of the Purchased Warrants and the Transferred Shares on the
AMEX; provided that the condition set forth in this Section 8.4 shall be deemed
waived by the Company to the extent the failure or delay of the AMEX to approve
such listing shall have been caused by the Company.
 
9.         Covenants. The Company and its Subsidiaries, the Sponsor Shareholders
and the Investor hereby covenant and agree, for the benefit of the other parties
to this Agreement and their respective assigns, as follows:
 
9.1                         Asset and IP Transfer. Within three (3) months after
the Closing Date, (i) the Company shall use reasonable best commercial efforts
to procure the PRCCo, to the extent commercially reasonable and not materially
adverse from a tax, accounting or similar perspective, to, transfer all of the
assets currently owned by the PRCCo (other than the Intellectual Property and
those which may not, in accordance with applicable Law of the PRC, be transfer
to the WFOE) to the WFOE (the “Assets Transfer”) and all of the Intellectual
Property currently owned by the PRCCo to the HKCo (the “IP Transfer”), in each
case in accordance with all applicable Laws; (ii) the Company shall use
reasonable best efforts to procure the HKCo and the WFOE, to the extent
commercially practicable and not materially adverse from a tax, accounting or
similar perspective, to enter into commercially reasonable intellectual property
licensing agreement(s) or commercially reasonable asset leasing agreement(s)
with the PRCCo (collectively, the “Licensing and Leasing Agreements”)
contemporaneously with the Assets Transfer and the IP Transfer (as the case may
be); (iii) the Company shall procure the PRCCo to complete all registrations and
filings with respect to the Licensing and Leasing Agreements in accordance with
all applicable Laws, except where the failure to make such registration or
filing would not have a Material Adverse Effect.
 
9.2                         VIE Restructuring. Within three (3) months after the
Closing Date, the Company and the Sponsor Shareholders shall cause the
agreements, contracts and instruments enabling the WFOE to effect control over
and consolidate with its financial statements the PRCCo (collectively, the “VIE
Agreements”) to be amended to the reasonable satisfaction of the Investor.
 
9.3                         SARFT Approval. The Company shall use its reasonable
best efforts to obtain as soon as practicable and in any event no later than
December 31, 2010, from SARFT any and all approvals necessary for the broadcast
of video programming by the Company and the operation of the business as
currently contemplated (the “SARFT Approval”) to the extent obtaining such
approvals is practicable within the Company's industry.
 
9.4                         FCPA Compliance. As soon as practicable, but in no
event later than April 30, 2010, the Company shall have completed or put in
place each of the measures set forth in section 9.4(b) of the Disclosure Letter.
 
 
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9.5                         Listing. In connection with the application for the
subsequent listing on AMEX of the shares of Common Stock issuable upon
conversion of the Purchased Shares and upon exercise of the Purchased Warrants,
and the ongoing listing of such securities thereon, the parties hereto agree to
cooperate and, following good faith discussions with AMEX involving both parties
hereto, to take all necessary steps, if any, required by AMEX in connection with
the approval of such application and the continued listing of such securities,
including, without limitation, the amendment or modification of any of the
Transaction Documents and any related document.
 
9.6                         Director Appointment.Within one (1) month after the
Closing Date, the Company and the Sponsor Shareholders shall cause one person
designated by the Investor to be appointed to the board of directors of each of
the WFOE and the PRCCo.
 
9.7                         Business Development. The Company shall use its
reasonable best efforts to, within three (3) years after the Closing Date or
such longer period of time as mutually agreed by the Company and the Investor,
establish wireless uploading stations in each province of the PRC where the WFOE
or the PRCCo currently conducts business operations, provided that the costs of
establishing wireless uploading stations in any province shall be commercially
reasonable and practicable.
 
9.8                         Compliance. For so long as any share of the Series A
Preferred Stock remains outstanding, the Company will comply with the terms and
conditions of the Series A Certificate of Designations.
 
9.9                         Use of Proceeds. The Company shall apply
substantially all of the net proceeds from the issuance and sale of the
Purchased Shares for working capital and capital expenditures in connection with
expansion of the business.
 
9.10                       Transfer Taxes. The Company shall pay any and all
documentary, stamp or similar issue or transfer tax due on the issue of the
Purchased Shares at Closing. The Sponsor Shareholders shall pay any and all
documentary, stamp or similar issue or transfer tax due on the transfer of the
Transferred Shares.
 
9.11                       Share Transfer. The Sponsor Shareholders shall cause
to be executed a share transfer agreement, in form and substance reasonably
acceptable to the Investor, providing for the Share Transfer.
 
9.12                       Confidentiality; Public Disclosure. Each Party shall
hold in confidence the terms and existence of this Agreement, the Investor
Rights Agreement, the Warrant and the Registration Rights Agreement and the
transactions contemplated hereby and thereby and shall not disclose or make any
release, announcement or filing except as such disclosure, release, announcement
or filing as may be required by Law or the rules or regulations of any
securities exchange, in which case the Party required to make the release or
announcement shall, to the extent reasonably practicable, allow the other Party
reasonable time to comment on such release or announcement in advance of such
issuance.

 
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9.13                       Further Assurances. Each of the Investor and the
Company will cooperate and consult with each other and use commercially
reasonable efforts to prepare and file all necessary documentation, to effect
all necessary applications, notices, petitions, filings and other documents, and
to obtain all necessary permits, consents, orders, approvals and authorizations
of, or any exemption by, all third Persons required to consummate the
Transactions.
 
10.         Indemnification.
 
10.1                       Survival. The representations and warranties of the
Parties contained in this Agreement shall survive the Closing until the date
three (3) years after the Closing, provided, however, that (i) the
representations and warranties made pursuant to Sections 4.01, 4.02, 4.06, 4.07
and 4.23 shall survive indefinitely and (ii) the representations and warranties
dealing with Tax matters shall survive until one hundred and twenty (120) days
after the expiration of the relevant statute of limitations for the Tax
liabilities in question.  All of the covenants and obligations of the Parties
contained in this Agreement shall survive the Closing indefinitely.  Neither the
period of survival nor the liability of a Party with respect to such Party’s
representations, warranties and covenants shall be reduced by any investigation
made at any time by or on behalf of the other Parties.  If written notice of a
claim setting forth reasonable details as to the basis of the claim has been
given prior to the expiration of the applicable representations, warranties and
covenants, then the relevant representations, warranties and covenants shall
survive as to such claim, until such claim has been finally resolved.
 
10.2                       Company Indemnification Obligation. The Company
hereby agrees to indemnify the Investor and each of their respective officers,
directors and employees, and each Person that controls (within the meaning of
Section 20 of the Exchange Act) any of the foregoing Persons (each a “Investor
Indemnified Party”) against any claim, demand, action, liability, damages, loss,
cost or expense (including, without limitation, consequential damages,
diminution in value and reasonable legal fees and expenses incurred by such
Investor Indemnified Party in investigating or defending any such proceeding)
regardless of whether any of the foregoing results from a third-party claim or
otherwise (all of the foregoing, including associated costs and expenses being
referred to herein as a “Loss”), that it actually incurs in connection with any
of the transactions contemplated hereby arising out of or based upon:
 
(a)         any of the representations or warranties made by the Company in
Section 4 of this Agreement being untrue or incorrect (i) at the time such
representation or warranty was made or (ii) on the Closing Date as if given as
of the Closing Date (except, in each case, to the extent such representations or
warranties are as of a date other than the date hereof or the Closing Date, in
which case, the failure of any such representation or warranty to be true and
correct as of that date);
 
(b)         any breach by the Company of any of its covenants, agreements or
obligations under this Agreement, the Registration Rights Agreement, the
Warrant, the Series A Certificate of Designations, or the Investor Rights
Agreement;

 
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(c)         any failure of the WFOE to comply with any Law with respect to any
dividend distributions made by the WFOE, including without limitations, any
foreign exchange regulations and rules;
 
(d)         any failure to by the Company obtain outdoor advertising
registration with the SAIC or its local branches to the extent required by the
SAIC; and
 
(e)         any failure by the Company or any of its Subsidiaries (i) to timely
file any Tax Return; (ii) to timely pay any Tax as it became due, or (iii) to
comply with any applicable Law relating to Tax.
 
10.3                       Sponsor Shareholders Indemnification Obligation. The
Sponsor Shareholders hereby agree, jointly and severally, to indemnify each
Investor Indemnified Party against any Losses that it actually incurs in
connection with any of the transactions contemplated hereby arising out of or
based upon:
 
(a)         any of the representations or warranties made by the Sponsor
Shareholders in Section 5 of this Agreement being untrue or incorrect (i) at the
time such representation or warranty was made or (ii) on the Closing Date as if
given as of the Closing Date (except, in each case, to the extent such
representations or warranties are as of another date, in which case, the failure
of any such representation or warranty to be true and correct as of that date);
 
(b)         any breach by the Sponsor Shareholders of any of its covenants,
agreements or obligations under this Agreement, the Registration Rights
Agreement or the Investor Rights Agreement; and
 
(c)         any failure of any of the Founder, Ou Wen Lin or Qingping Lin
complete all filings and registrations with the SAFE in accordance with all
applicable PRC Laws including without limitation the Notice on Relevant Issues
Concerning Foreign Exchange Administration for PRC Residents to Engage in
Financing and Inbound Investment Via Offshore Special Purpose Vehicles issued by
the SAFE on October 21, 2005 and effective as of November 1, 2005.
 
10.4                       Limitation on Indemnification.
 
(a)         The foregoing indemnification as set out in Sections 10.1 and 10.2
hereof shall not apply to any Loss to the extent that it arises out of, or is
based upon, the gross negligence or willful misconduct of the Investor in
connection therewith. Except with respect to the Put Option, Section 10.1 and
Section 10.2 (and the other applicable provisions of Section 10) will be the
sole and the exclusive remedy of the Investor Indemnified Parties with respect
to the matters set forth in subsections (a) – (d) of Section 10.2 hereof, and,
to the maximum extent possible under applicable Law, the Investor hereby waives
any other rights and remedies that the Investor and the Investor Indemnified
Parties may have under applicable Law.
 
 
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(b)         Notwithstanding anything to the contrary contained in this
Agreement: (a) neither the Company nor the Sponsor Shareholders shall be liable
for any claim for indemnification pursuant to Section 10.1 or Section 10.2,
unless and until the aggregate amount of indemnifiable Losses which may be
recovered from the Company or the Sponsor Shareholders equals or exceeds
US$100,000, whereupon the Investor Indemnified Party shall be entitled to
indemnification for the full amount of such Losses, and (b) the maximum amount
of indemnifiable Losses which may be recovered from the Company or the Sponsor
Shareholders arising out of or resulting from the causes set forth in Section
10.1 or Section 10.2, as the case may be, shall be an amount equal to
US$30,000,000, provided, however, that such amount shall be (i) increased by
US$10,000,000 upon the exercise of all of the Purchased Warrants and, to the
extent the Purchased Warrants are not fully exercised, increased by a pro rata
proportion of US$10,000,000 equal to the proportion the amount of Purchased
Warrants exercised bears to the total amount of Purchased Warrants and (ii)
reduced on a dollar for dollar basis to the extent the Investor received any
amounts from its exercise of the put right pursuant to Section 7 of the Investor
Rights Agreement.
 
10.5                       Conduct of Claims.
 
(a)         Whenever a claim for indemnification shall arise under this Section
10 as a result of a third-party claim, the party seeking indemnification (the
“Indemnified Party”), shall notify the party from whom such indemnification is
sought (the “Indemnifying Party”) in writing of the claim and the facts
constituting the basis for such claim in reasonable detail.
 
(b)         Such Indemnifying Party shall have the right to retain the counsel
of its choice in connection with such claim and to participate at its own
expense in the defense of any such claim; provided, however, that counsel to the
Indemnifying Party shall not (except with the consent of the relevant
Indemnified Party) also be counsel to such Indemnified Party. In no event shall
the Indemnifying Party be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from its own counsel for all
Indemnified Parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
 
(c)         No Indemnifying Party shall, without the prior written consent of
the Indemnified Parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 10 unless such settlement,
compromise or consent (A) includes an unconditional release of each Indemnified
Party from all liability arising out of such litigation, investigation,
proceeding or claim and (B) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any Indemnified
Party.
 
 
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11.         Miscellaneous.
 
11.1                       Governing Law. This Agreement shall be governed in
all respects by the laws of the State of State of Delaware without regard to any
choice of laws or conflict of laws provisions that would require the application
of the laws of any other jurisdiction.
 
11.2                       Jurisdiction; Enforcement. Any dispute, controversy
or claim arising out of or relating to this Agreement or its subject matter
(including a dispute regarding the existence, validity, formation, effect,
interpretation, performance or termination of this Agreement) (each a “Dispute”)
shall be finally settled by arbitration.
 
(a)         The place of arbitration shall be Hong Kong, and the arbitration
shall be administered by the Hong Kong International Arbitration Centre (the
“HKIAC”) in accordance with the HKIAC Administered Arbitration Rules then in
force (the “HKIAC Rules”).
 
(b)         The arbitration shall be decided by a tribunal of three (3)
arbitrators, whose appointment shall be in accordance with the HKIAC Rules;
provided, however, that the third presiding arbitrator must be licensed to
practice Delaware state law and in good standing with the Delaware State Bar, as
of the date the Notice of Arbitration is received by the HKIAC Secretariat.
 
(c)         Arbitration proceedings (including but not limited to any arbitral
award rendered) shall be in English.
 
(d)         Subject to the agreement of the tribunal, any Dispute(s) which arise
subsequent to the commencement of arbitration of any existing Dispute(s), shall
be resolved by the tribunal already appointed to hear the existing Dispute(s).
 
(e)         The award of the arbitration tribunal shall be final and conclusive
and binding upon the parties as from the date rendered.
 
(f)         Judgment upon any award may be entered and enforced in any court
having jurisdiction over a party or any of its assets.  For the purpose of the
enforcement of an award, the parties irrevocably and unconditionally submit to
the jurisdiction of any competent court and waive any defenses to such
enforcement based on lack of personal jurisdiction or inconvenient forum.
 
 
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11.3                       Termination. This Agreement may be terminated at any
time prior to the Closing:
 
(a)         by either the Company or the Investor in the event that any
Governmental Authority restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement shall have become final and
non-appealable;
 
(b)         by the Investor if the Company or any Sponsor Shareholder shall have
breached any of its representations, warranties, covenants or agreements
contained in this Agreement which would give rise to the failure of a condition
set forth in Section 7, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice by the Investor specifying
such breach; or
 
(c)         by the mutual written consent of the Company and the Investor.
 
In the event of termination of this Agreement as provided above, this Agreement
shall forthwith become void and there shall be no liability on the part of any
party hereto except (a) as set forth in Section 12 and (b) that nothing herein
shall relieve any party from liability for any breach of this Agreement
occurring prior to such termination.
 
11.4                       Successors and Assigns. Except as otherwise provided
in this Agreement, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties; provided, however, the rights of the Investor
under this Agreement shall not be assignable to any Person without the consent
of the Company.
 
11.5                       No Third-Party Beneficiaries. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, and no Person that is not a party to this Agreement (including any
partner, member, shareholder, director, officer, employee or other beneficial
owner of any party, in its own capacity as such or in bringing a derivative
action on behalf of a party) shall have any standing as third-party beneficiary
with respect to this Agreement or the transactions contemplated by this
Agreement.
 
11.6                       No Personal Liability of Directors, Officers, Owners,
Etc. No director, officer, employee, incorporator, shareholder, managing member,
member, general partner, limited partner, principal or other agent of any of the
Investor or the Company shall have any liability for any obligations of the
Investor or the Company, as applicable, under this Agreement or for any claim
based on, in respect of, or by reason of, the respective obligations of the
Investors or the Company, as applicable, under this Agreement. Each party hereby
waives and releases all such liability. This waiver and release is a material
inducement to each party’s entry into this Agreement.

 
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11.7                       Entire Agreement. This Agreement (including the
exhibits hereto), the Registration Rights Agreement and the Investor Rights
Agreement, constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof.
 
11.8                       Notices. Except as otherwise provided in this
Agreement, all notices, requests, claims, demands, waivers and other
communications required or permitted under this Agreement shall be in writing
and shall be mailed by reliable overnight delivery service or delivered by hand,
facsimile or messenger as follows:
 
if to the Company:
 
China MediaExpress Holdings, Inc.
Room 2805
Central Plaza
Wanchai, Hong Kong
Attention: Zheng Cheng and Jacky Lam
Facsimile: +852.2827.6099
 
with a copy to:
 
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10145, U.S.A.
Attention: Mitchell S. Nussbaum / Frank J. Marinaro
Facsimile: +1.212.656.1349
 
if to the Investor
 
Starr Investments Cayman II, Inc.
Bermuda Commercial Bank Building, 5th Floor
19 Par la Ville Road
Hamilton HM 11
Bermuda
Attention: Stuart Osbourne / Jenny Barclay
 
with a copy to:
 
Starr Investments Cayman II, Inc.
c/o Beijing C.V. Starr Investment Advisors Limited Shanghai Branch
Suite 4609-4611A, Tower II, Plaza 66,
1266 Nanjing West Road,
Shanghai 200040 People’s Republic of China
Attention: John Lin / Dorothy Dong
Facsimile: +8621.6288.9773

 
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with a copy to:
 
Skadden, Arps, Slate, Meagher & Flom LLP
30th Floor, Tower 2, China World Trade Centre
No. 1 Jianguomenwai Avenue
Beijing 100004 People’s Republic of China
Attention:  Jon L Christianson
Facsimile:  +8610.6535.5577

or in any such case to such other address, facsimile number or telephone as
either party may, from time to time, designate in a written notice given in a
like manner. Notices shall be deemed given when actually delivered by overnight
delivery service, hand or messenger, or when received by facsimile if promptly
confirmed.
 
11.9                       Delays or Omissions.  No delay or omission to
exercise any right, power, or remedy accruing to any party under this Agreement
shall impair any such right, power, or remedy of such party, nor shall it be
construed to be a waiver of or acquiescence to any breach or default, or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
 
11.10                     Expenses. Each Party shall bear its own expenses
incurred on their behalf with respect to this Agreement and the transactions
contemplated hereby, except as otherwise provided in Section 7.12.
 
11.11                     Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only if such amendment or waiver is in writing and signed, in
the case of an amendment, by the Company and the Investor or, in the case of a
waiver, by the Party against whom the waiver is to be effective. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding,
each future holder of all such securities, and the Company.
 
11.12                     Counterparts. This Agreement may be executed in any
number of counterparts and signatures may be delivered by facsimile or in
electronic format, each of which may be executed by less than all the parties,
each of which shall be enforceable against the parties actually executing such
counterparts and all of which together shall constitute one instrument.
 
11.13                     Severability. If any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable, or void, portions of such provision, or such provision in its
entirety, to the extent necessary, shall be severed from this Agreement and the
balance of this Agreement shall be enforceable in accordance with its terms.
 
 
41

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11.14                     Titles and Subtitles; Interpretation. The titles and
subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. When a reference is
made in this Agreement to an Article, Section, Schedule or Exhibit, such
reference shall be to an Article, Section, Schedule or Exhibit of this Agreement
unless otherwise indicated. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to in this Agreement means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes. Each of the parties has participated in the drafting and negotiation
of this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if it is drafted by each of the
parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any of the provisions of this
Agreement.
 
 
42

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 
CHINA MEDIAEXPRESS HOLDINGS, INC.
     
By:
 /s/ Zheng Cheng    
Name: Zheng Cheng
   
Title:
     
FUJIAN ZONGHENG EXPRESS
INFORMATION TECHNOLOGY, LTD.
     
By:
/s/ Zheng Cheng
   
Name: Zheng Cheng
   
Title:
     
FUJIAN FENZHONG MEDIA CO., LTD.
     
By:
/s/ Zheng Cheng
   
Name: Zheng Cheng
   
Title:
     
ZHENG CHENG
     
/s/ Zheng Cheng
     
OU WEN LIN
     
/s/ Ou Wen Lin
     
QINGPING LIN
     
/s/ Qingping Lin

 
[Signature Page to Securities Purchase Agreement]
 
 

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THOUSAND SPACE HOLDINGS LIMITED
     
By:
/s/ Ou Wen Lin
   
Name: Ou Wen Lin
   
Title:
     
BRIGHT ELITE MANAGEMENT LIMITED
       
By:
/s/ Qingping Lin
   
Name: Qingping Lin
   
Title:
     
STARR INVESTMENTS CAYMAN II, INC.
     
By:
/s/ Stuart Osborne
   
Name: Stuart Osborne
   
Title: Director

 
[Signature Page to Securities Purchase Agreement]

 

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EXHIBIT A
 
Form of Series A Preferred Certificate of Designations

 

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EXHIBIT B
 
Form of Registration Rights Agreement

 

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EXHIBIT C
 
Form of Investor Rights Agreement

 

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EXHIBIT D
 
Form of Warrant

 

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EXHIBIT E
 
Form of Legal Opinion of Hankun Law Office

 

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EXHIBIT F
 
Form of Legal Opinion of Morris, Nichols, Arsht & Tunnell

 

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EXHIBIT G
 
Form of Legal Opinion of Loeb & Loeb LLP

 

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EXHIBIT H
 
Form of Legal Opinion of Gallant Y.T. Ho & Co.

 

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EXHIBIT I
 
Disclosure Letter

 

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