Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of May 3,
2007, by and among Millennium Quest, Inc., a Delaware corporation, and all
predecessors thereto (the “Company”) and the investors identified on the
signature pages hereto (each, an “Investor” and collectively, the “Investors”).
Hisashi Akazawa and Si Chen join as additional parties to this Agreement for
purposes of Sections 5 and 7 only (each a “Beneficial Owner” and together the
“Beneficial Owners”).

R E C I T A L S

A. Subject to the terms and conditions set forth in this Agreement and pursuant
to Section 4(2) of the Securities Act (as defined below) and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Investor,
and each Investor, severally and not jointly, desires to purchase from the
Company certain securities of the Company, as more fully described in this
Agreement.
 
B. Prior to the consummation of the purchase and sale of the Company’s
securities pursuant to this Agreement, the Company shall consummate its
acquisition (“Lorain Acquisition”) of all of the outstanding capital shares of
International Lorain Holding, Inc., a Cayman Islands company (“Lorain”), in
consideration of the Company’s issuance of 697,663 shares of its Series B Voting
Convertible Preferred Stock, pursuant to that certain Share Exchange Agreement
of even date herewith (“Share Exchange Agreement”) between the Company, Lorain
and Hisashi Akazawa.
 
A G R E E M E N T
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
 
ARTICLE 1.
DEFINITIONS
 
1.1.  Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:
 
“2007 Guaranteed ATNI” has the meaning set forth in Section 5.2(a).
 
“2007 Make Good Shares” has the meaning set forth in Section 5.2(a).
 
“2008 Guaranteed ATNI” has the meaning set forth in Section 5.2(b).
 
“2008 Make Good Shares” has the meaning set forth in Section 5.2(b).
 
“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.
 
 
 

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“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.
 
“Amendment Filing” shall mean the filing of a certificate of amendment to the
restated certificate of incorporation of the Company with the Delaware Secretary
of State for purposes of effecting (i) an increase in the number of authorized
shares of Common Stock to 200,000,000 shares, (ii) a change in the corporate
name of the Company to “Lorain International Food Group, Inc.”, and (iii) the
Reverse Split.
 
“Business Day” means any day except Saturday, Sunday and any day which is a
federal legal holiday or a day on which banking institutions in the State of New
York or the State of Utah are authorized or required by law or other
governmental action to close.
 
“Buy-In” has the meaning set forth in Section 4.1(c).
 
"Certificate of Designation" shall mean a Certificate of Designation to be filed
prior to the Closing by the Company with the Secretary of State of the State of
Delaware, setting forth the rights, preferences and privileges of the Shares, in
the form attached as Exhibit A hereto.
 
“Closing” means the closing of the purchase and sale of the Shares pursuant to
Article II.
 
“Closing Date” means the Business Day on which all of the conditions set forth
in Sections 6.1 and 6.2 hereof are satisfied, or such other date as the parties
may agree.
 
"Closing Escrow Agreement" means the Closing Escrow Agreement, dated as of the
date hereof, between the Placement Agent, the Company and the Escrow Agent
pursuant to which the Investors shall deposit their Investment Amounts with the
Escrow Agent to be applied to the transactions contemplated hereunder, in the
form of Exhibit B hereto.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any securities into which such common stock may hereafter be
reclassified or for which it may be exchanged as a class.
 
“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which entitle the holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common
Stock.
 
 
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“Company Counsel” means Thelen Reid Brown Raysman & Steiner LLP.
 
“Company Deliverables” has the meaning set forth in Section 2.2(a).
 
“Disclosure Materials” means the SEC reports, the Draft S-1 Registration
Statement and the schedules to this Agreement.
 
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
by the Company to Investors contemporaneously with this Agreement.
 
“Draft S-1 Registration Statement” means a draft registration statement on
Form S-1 under the Securities Act, draft dated April 24, 2007, to be filed by
the Company (with such changes as are needed to finalize such draft) with the
Commission, pursuant to the Registration Rights Agreement, for purposes of
registering the resale of the Underlying Shares and Warrant Shares.
 
“Effective Date” means the date that the Registration Statement required by
Section 2(a) of the Registration Rights Agreement is first declared effective by
the Commission.
 
“Escrow Agent” means Thelen Reid Brown Raysman & Steiner LLP, 701 Eighth Street
N.W., Washington, DC 20001.
 
“Evaluation Date” has the meaning set forth in Section 3.1(t).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
 
“FCPA Subsidiary” means any Subsidiary of the Company that has been subject to
the FCPA prior to the Closing Date, and specifically excluding Lorain and its
subsidiaries.
 
“GAAP” means U.S. generally accepted accounting principles, consistently
applied.
 
“Intellectual Property Rights” has the meaning set forth in Section 3.1(q).
 
“Investment Amount” means, with respect to each Investor, the Investment Amount
indicated on such Investor’s signature page to this Agreement.
 
“Investor Deliverables” has the meaning set forth in Section 2.2(b).
 
“Investor Party” has the meaning set forth in Section 4.7.
 
“Lien” means any lien, charge, encumbrance, security interest, right of first
refusal, right of participation or other restrictions of any kind.
 
“Lorain Acquisition” has the meaning set forth in Recital B to this Agreement.
 
 
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“Make Good Escrow Agreement” means the Make Good Escrow Agreement, dated as of
the date hereof, among the Company, the Placement Agent, the Securities Transfer
Corporation, as the Make Good Escrow Agent (the “Make Good Escrow Agent”) and
the Beneficial Owners, in the form of Exhibit C hereto.
 
“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s
ability to perform on a timely basis any of its obligations under any
Transaction Document.
 
“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.
 
“Outside Date” means the 15th following the date of this Agreement.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Placement Agent” means Sterne, Agee & Leach, Inc.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of this Agreement, among the Company and the Investors, in the
form of Exhibit D hereto.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Investors of the Underlying Shares and Warrant Shares.
 
“Reverse Split” means a 1 for 32.84 reverse stock split of the Company’s Common
Stock.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” has the meaning set forth in Section 3.1(h).
 
“Securities” means the Shares, Warrants, Underlying Shares and Warrant Shares.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
 
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“Series B Preferred Stock” means the Series B Voting Convertible Preferred
Stock, par value $0.001, of the Company.
 
“Share Delivery Date” has the meaning set forth in Section 4.1(c).
 
“Share Exchange Agreement” has the meaning set forth in Recital B to this
Agreement.
 
“Shares” means the shares of Series B Preferred Stock issued or issuable to the
Investors pursuant to this Agreement.
 
“Short Sales” include, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Exchange Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts, calls,
swaps and similar arrangements (including on a total return basis), and sales
and other transactions through non-US broker dealers or foreign regulated
brokers.
 
“Stockholder Approval” has the meaning set forth in Section 4.13.
 
“Subsidiary” means any subsidiary of the Company as set forth on
Schedule 3.1(a).
 
“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading
Market, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the Pink Sheets LLC (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event
that the Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.
 
“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed
or quoted for trading on the date in question.
 
“Transaction Documents” means this Agreement, the Certificate of Designation,
the Registration Rights Agreement, the Closing Escrow Agreement, the Make Good
Escrow Agreement and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
 
“Underlying Shares” means the shares of Common Stock issuable upon conversion or
exchange of the Shares.
 
“Warrants” means collectively the Common Stock purchase warrants, in the form of
Exhibit E, delivered to the Investors at the Closing in accordance with Section
2.2(a) and 6.1(e) hereof, which Warrants shall be (i) immediately exercisable
subject to Shareholder Approval at an exercise price of $0.1294153 per share
(pre-Reverse Split), (ii) have a term of exercise equal to three years, and
(iii) issued to each Investor in a number equal to 20% of the shares of common
stock issuable upon conversion of the Series B Preferred Stock purchased by such
Investor.
 
 
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“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.
 
ARTICLE 2.
PURCHASE AND SALE
 
2.1.  Closing. Subject to the terms and conditions set forth in this Agreement,
at the Closing the Company shall issue and sell to each Investor, and each
Investor shall, severally and not jointly, purchase from the Company, the number
of Shares and Warrants set forth on each respective Investor’s signature page
attached hereto, in consideration of the Investor’s payment of the Investment
Amount set forth thereon. The Closing shall take place at the offices of Escrow
Agent on the Closing Date or at such other location or time as the parties may
agree.
 
2.2.  Closing Deliveries. (a) On or prior to the Closing, the Company shall
deliver or cause to be delivered to each Investor the following (the “Company
Deliverables”):
 
(i)  this Agreement duly executed by the Company and each Beneficial Owner;
 
(ii)  a copy of the executed, filed and effective Certificate of Designation,
accompanied by a certified copy thereof issued by the Secretary of State of the
State of Delaware;
 
(iii)  a certificate, executed by the Secretary of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section 3.1(c) as
adopted by the Company's Board of Directors in a form reasonably acceptable to
the Investors, and (ii) the current certificate of incorporation, as amended,
and bylaws, as amended, of the Company;
 
(iv)  executed consents of at least a majority of (i) the shares of Common Stock
then outstanding, and (ii) the share of Common Stock and Series A Preferred
Stock then outstanding voting as a group, irrevocably approving the items set
forth in Section 4.13 herein;
 
(v)  the legal opinion of King & Wood, People’s Republic of China, Counsel to
the Company addressed to the Investors, in the form of Exhibit F attached
hereto;
 
(vi)  the legal opinion of Company Counsel addressed to the Investors, in the
form of Exhibit G attached hereto;
 
(vii)  the Closing Escrow Agreement, duly executed by all parties thereto;
 
 
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(viii)  the Make Good Escrow Agreement, duly executed by all parties thereto;
 
(ix)  the Registration Rights Agreement, duly executed by the Company; and
 
(x)  the Draft S-1 Registration Statement.
 
(b)  On or prior to the Closing Date, each Investor shall deliver or cause to be
delivered the following (the “Investor Deliverables”):
 
(i)  to the Company, this Agreement duly executed by the Investor;
 
(ii)  to the Escrow Agent for deposit and disbursement in accordance with the
Closing Escrow Agreement, Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and
 
(iii)  to the Company, the Registration Rights Agreement, duly executed by such
Investor.
 
(c)  Within three (3) Business Days following the Closing Date, the Company
shall deliver or cause to be delivered the following:
 
(i)  one or more stock certificates evidencing Shares with a stated value equal
to such Investor’s Investment Amount, registered in the name of such Investor;
and
 
(ii)  a Warrant registered in the name of such Investor evidencing the number of
Warrants set forth on such Investor’s signature page attached hereto.
 
 
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
 
3.1.  Representations and Warranties of the Company. Except as set forth under
the corresponding section of the Disclosure Schedules which Disclosure Schedules
shall be deemed a part hereof and to qualify any representation or warranty
otherwise made herein to the extent of such disclosure, the Company hereby makes
the following representations and warranties to each Investor:
 
(a)  Subsidiaries. All of the direct or indirect subsidiaries of the Company are
set forth on Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights. The
Company owns all of the outstanding capital stock of Lorain in accordance with
the Share Exchange Agreement, free and clear of all Liens. For the sake of
clarity, as used herein the term Subsidiaries includes Lorain and all direct and
indirect subsidiaries of Lorain.
 
 
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(b)  Organization and Qualification. The Company and each Subsidiary are duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
 
(c)  Authorization; Enforcement. Subject to Shareholder Approval and the
Amendment Filing, the Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution and delivery of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company, its board of directors or its stockholders in
connection therewith, other than Shareholder Approval or the Amendment Filing.
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.
 
(d)  No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
 
 
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(e)  Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of Sale
of Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the information statement referred to in Section 4.13; (v) an
information statement that complies with Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder; (vi) the Amendment Filing; and (vii) the filings required
in accordance with Section 4.5 (collectively, the “Required Approvals”).
 
(f)  Issuance of the Shares. The Shares and the Warrants have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens other than restrictions on transfer provided for in the
Transaction Documents. Upon Stockholder Approval and the Amendment Filing, the
Company will reserve from its duly authorized capital stock the shares of Common
Stock issuable upon conversion of the Shares and exercise of the Warrants.
Subject to Shareholder Approval and the Amendment Filing, the Underlying Shares
and Warrant Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens other than restrictions on transfer provided for in the Transaction
Documents.
 
(g)  Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g). No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth in Schedule
3.1(g), there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any securities of the Company or any
Subsidiary, or contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may become bound to issue additional
securities of the Company or any Subsidiary. The issue and sale of the
Securities will not, immediately or with the passage of time, obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Investors) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except for Shareholder Approval, no further approval
or authorization of any stockholder, the board of directors of the Company or
others is required for the issuance and sale of the Securities. Except for the
Transaction Documents and as set forth on Schedule 3.1(g), there are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
 
 
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(h)  SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, since January 1, 2004
(collectively, the “SEC Reports”) on a timely basis or has timely filed a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
 
(i)  Lorain Financial Statements; Draft S-1 Registration Statement. The Company
has delivered to each Investor the following financial statements: (i) audited
consolidated balance sheet of Lorain as of December 31, 2006; (ii) audited
consolidated statements of income, stockholders’ equity and cash flows of Lorain
for the period from August 4, 2006 (date of incorporation of Lorain) to December
31, 2006; and (iii) the pro forma unaudited combined balance sheet and
statements of income and cash flows of Lorain as of and for the three years
ended December 31, 2006 (collectively, the “Lorain Financial Statements”). The
Lorain Financial Statements comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto. The Lorain Financial Statements have been prepared in
accordance with GAAP, except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of Lorain and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, year-end audit adjustments.
 
The Company has delivered to each Investor the Draft S-1 Registration Statement.
After giving effect to the Lorain Acquisition and the transactions contemplated
by the Transaction Documents, the Draft S-1 Registration Statement does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 
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(j)  Press Releases. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading.
 
(k)  Material Changes.
 
(A)  Since the date of the latest balance sheet included within the SEC Reports,
except as specifically disclosed in the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate. The Company does not have pending before
the Commission any request for confidential treatment of information.
 
(B)  Lorain. Since the date of the latest balance sheet included within the
Lorain Financial Statements, except as specifically disclosed in the Draft S-1
Registration Statement, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected by the Company or Lorain to
result in a Material Adverse Effect, (ii) none of Lorain or any of its direct or
indirect subsidiaries have incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Lorain Financial Statements pursuant to GAAP or
disclosed in the Draft S-1 Registration Statement as filed with the Commission
under the Securities Act, (iii) none of Lorain or any of its direct or indirect
subsidiaries have altered their method of accounting, (iv) none of Lorain or any
of its direct or indirect subsidiaries has declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) none of Lorain or any of its direct or indirect subsidiaries has
issued any equity securities to any officer, director or Affiliate.
 
(l)  Litigation. There is no Action which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents,
the Securities or the Share Exchange Agreement or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim of violation
of or liability under U.S. or foreign federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending any investigation by the Commission involving
the Company or any current or former director or officer of the Company (in his
or her capacity as such). The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company under the Exchange Act or the Securities Act.
 
 
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(m)  Labor Relations. No material labor dispute exists or, to the knowledge of
the Company or any Subsidiary, is imminent with respect to any of the employees
of the Company or any Subsidiary which could reasonably be expected to result in
a Material Adverse Effect. Except as set forth in Schedule 3.1(m), none of the
Company's or its Subsidiaries' employees is a member of a union that relates to
such employee's relationship with the Company or such Subsidiary, and neither
the Company or any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer of the Company or any
Subsidiary, to the knowledge of the Company or any Subsidiary, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
 
(n)  Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any U.S. or foreign court, arbitrator or governmental body, or (iii) is
or has been in violation of any U.S. or foreign statute, rule or regulation of
any governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters,
except in each case as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. The Share
Exchange Agreement and the transaction contemplated thereby comply with all
applicable laws, rules and regulations of the United States and the People’s
Republic of China.
 
(o)  Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the Disclosure Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permits.
 
 
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(p)  Title to Assets. The Company and the Subsidiaries have good and marketable
title to all real property owned by them that is material to their respective
businesses and good and marketable title in all personal property owned by them
that is material to their respective businesses, in each case free and clear of
all Liens, except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
 
(q)  Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the Disclosure Documents and which the
failure to so have could, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect (collectively, the
“Intellectual Property Rights”). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
All such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
 
(r)  Insurance. The Company and the 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 and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business on terms
consistent with market for the Company’s and such Subsidiaries’ respective lines
of business without a significant increase in cost.
 
(s)  Transactions With Affiliates and Employees. Except as set forth in Schedule
3.1(s), none of the officers, directors or employees of the Company or any
Subsidiary is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement 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 officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
or (ii) reimbursement for bona fide expenses incurred on behalf of the Company
or any Subsidiary.
 
 
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(t)  Internal Accounting Controls. The Company is in compliance with all
requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it. The Company and the
Subsidiaries maintain 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 GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company’s internal controls over
financial reporting (as such term is defined in Rule 13a-15(e) under the
Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
 
(u)  Solvency. Based on the financial condition of the Company as of the Closing
Date (and assuming that the Closing shall have occurred), (i) the Company’s fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature, (ii) the Company’s
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
 
(v)  Certain Fees. Except for fees payable to the Placement Agent, no brokerage
or finder’s fees or commissions are or will be payable by the Company or any
Subsidiary to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Investors shall have no
obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by an Investor pursuant to written agreements
executed by such Investor which fees or commissions shall be the sole
responsibility of such Investor) made by or on behalf of other Persons for fees
of a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
 
 
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(w)  Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer and sale of the Securities by
the Company to the Investors under the Transaction Documents. The Company is
eligible to register its Common Stock for resale by the Investors under Form S-1
promulgated under the Securities Act. Except as set forth on Schedule 3.1(w),
the Company has not granted or agreed to grant to any Person any rights
(including “piggy-back” registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
 
(x)  Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. The Company has not during the
two years preceding the date hereof, received notice from any Trading Market to
the effect that the Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted, and no approval of the stockholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Securities contemplated by the Transaction Documents.
 
(y)  Investment Company. The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
 
(z)  Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.
 
(aa)  No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
 
 
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(bb)  Consultation with Auditors. The Company has consulted its independent
auditors concerning the accounting treatment of the transactions contemplated by
the Transaction Documents, and in connection therewith has furnished such
auditors complete copies of the Transaction Documents.
 
(cc)  Disclosure. The Company confirms that neither it nor any Person acting on
its behalf has provided any Investor or its respective agents or counsel with
any information that the Company believes constitutes material, non-public
information concerning the Company, the Subsidiaries or their respective
businesses, except insofar as the existence and terms of the proposed
transactions contemplated hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Investors regarding the Company, the
Subsidiaries or their respective businesses and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Investor has made nor makes any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
 
(dd)  No Integrated Offering. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their 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 this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated. 
 
(ee)  Tax Status. Except as set forth on Schedule 3.1(ee), and for matters that
would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened against the
Company or any Subsidiary.
 
(ff)  No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Investors and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.
 
(gg)  Foreign Corrupt Practices. Neither the Company, any FCPA Subsidiary, nor
to the knowledge of the Company or any FCPA Subsidiary, any agent or other
person acting on behalf of the Company or any FCPA Subsidiary, has (i) directly
or indirectly, used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by the
Company, any FCPA Subsidiary (or made by any person acting on its behalf of
which the Company or any FCPA Subsidiary is aware) which is in violation of law,
or (iv) violated in any material respect any provision of the FCPA, as amended.
 
 
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(hh)  Accountants. The Company’s and Lorain’s accountants are set forth on
Schedule 3.1(hh) of the Disclosure Schedule. To the knowledge of the Company,
such accountants, who the Company expects will express their opinions with
respect to the financial statements of the Company and Lorain to be included in
the Registration Statement, are each a registered public accounting firms as
required by the Securities Act and are independent of the Company and Lorain, as
the case may be, in accordance with Rule 2-01 of Regulation S-X under the
Exchange Act.
 
(ii)  Acknowledgment Regarding Investors’ Purchase of Securities. The Company
acknowledges and agrees that each of the Investors is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
no Investor is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Investor or any of
their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Investors’ purchase of the Securities. The Company further represents to each
Investor that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
 
(jj)  Acknowledgement Regarding Investors’ Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f) and 4.5 hereof), it is understood and acknowledged by the
Company (i) that none of the Investors have been asked to agree, nor has any
Investor agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that past
or future open market or other transactions by any Investor, including Short
Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Investor, and counter-parties in
“derivative” transactions to which any such Investor is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Investor shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction. The Company
further understands and acknowledges that (a) one or more Investors may engage
in hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Warrant Shares deliverable with respect to Securities are being determined
and (b) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the
hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
 
 
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(kk)  Regulation M.  The Company has not, and to its knowledge 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 sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or, paid any compensation for soliciting purchases of,
any of the Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid to
the Company’s placement agent in connection with the placement of the
Securities.
 
3.2.  Representations and Warranties of the Investors. Each Investor hereby, for
itself and for no other Investor, represents and warrants to the Company as
follows:
 
(a)  Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each of this Agreement and the Registration Rights Agreement has been duly
executed by such Investor, and when delivered by such Investor in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
 
(b)  Investment Intent. Such Investor is acquiring the Securities as principal
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
 
(c)  Investor Status. At the time such Investor was offered the Securities, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act. Such Investor is not a registered broker-dealer
under Section 15 of the Exchange Act.
 
(d)  General Solicitation. Such Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
 
 
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(e)  Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents.
 
(f)  Certain Trading Activities. Such Investor has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Investor, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the earlier to occur of (1) the time that such Investor was
first contacted by the Company or the Placement Agent regarding an investment in
the Company and (2) the 30th day prior to the date of this Agreement.
Notwithstanding the foregoing, in the case of an Investor that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor's assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor's assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Such Investor covenants that neither it nor any
Person acting on its behalf or pursuant to any understanding with it will engage
in any transactions in the securities of the Company (including Short Sales)
prior to the time that the transactions contemplated by this Agreement are
publicly disclosed.
 
(g)  Independent Investment Decision. Such Investor has independently evaluated
the merits of its decision to purchase the Securities pursuant to the
Transaction Documents, and such Investor confirms that it has not relied on the
advice of any other Investor’s business and/or legal counsel in making such
decision. Such Investor has not relied on the business or legal advice of
Placement Agent or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Investor in connection with the
transactions contemplated by the Transaction Documents.
 
 
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ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES
 
4.1.  (a)    Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.
 
(b)  Certificates evidencing the Securities will contain the following legend,
until such time as they are not required under Section 4.1(c):
 
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED]
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
 
The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Investor’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Except as otherwise provided in Section 4.1(c), any
Securities subject to a pledge or security interest as contemplated by this
Section 4.1(b) shall continue to bear the legend set forth in this Section
4.1(b) and be subject to the restrictions on transfer set forth in Section
4.1(a).
 
 
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(c)  Certificates evidencing Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) following a sale or
transfer of such Underlying Shares pursuant to an effective registration
statement (including a Registration Statement), or (ii) following a sale or
transfer of such Underlying Shares pursuant to Rule 144 (assuming the transferee
is not an Affiliate of the Company), or (iii) while such Underlying Shares are
eligible for sale under Rule 144(k). If an Investor shall make a sale or
transfer of Underlying Shares either (x) pursuant to Rule 144 or (y) pursuant to
a registration statement and in each case shall have delivered to the Company or
the Company’s transfer agent the certificate representing Underlying Shares
containing a restrictive legend which are the subject of such sale or transfer
and a representation letter in customary form (the date of such sale or transfer
and Underlying Share delivery being the “Share Delivery Date”) and (1) the
Company shall fail to deliver or cause to be delivered to such Investor a
certificate representing such Underlying Shares that is free from all
restrictive or other legends by the third Trading Day following the Share
Delivery Date and (2) following such third Trading Day after the Share Delivery
Date and prior to the time such Underlying Shares are received free from
restrictive legends, the Investor, or any third party on behalf of such
Investor, purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Investor of such
Underlying Shares (a "Buy-In"), then the Company shall pay in cash to the
Investor (for costs incurred either directly by such Investor or on behalf of a
third party) the amount by which the total purchase price paid for Common Stock
as a result of the Buy-In (including brokerage commissions, if any) exceed the
proceeds received by such Investor as a result of the sale to which such Buy-In
relates. The Investor shall provide the Company written notice indicating the
amounts payable to the Investor in respect of the Buy-In.
 
4.2.  Furnishing of Information. As long as any Investor owns the Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Investors and make
publicly available in accordance with Rule 144(c) such information as is
required for the Investors to sell the Underlying Shares under Rule 144. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell the Underlying Shares and Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
 
 
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4.3.  Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the Securities to the Investors.
 
4.4.  Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8) with the Commission with respect
to any securities of the Company.
 
4.5.  Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the
Trading Day following the Closing Date, the Company shall issue a press release
disclosing the transactions contemplated hereby and the Closing. By the fourth
Trading Day following the execution of this Agreement the Company will file a
Current Report on Form 8-K disclosing the material terms of the Transaction
Documents (and attach as exhibits thereto the Transaction Documents), and by the
fourth Trading Day following the Closing Date the Company will file a Current
Report on Form 8-K to disclose the Closing and the information and financial
statements required by Item 9.01(c) of Form 8-K. In addition, the Company will
make such other filings and notices in the manner and time required by the
Commission and the Trading Market on which the Common Stock is listed.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Investor, or include the name of any Investor in any filing with the
Commission (other than the Registration Statement and any exhibits to filings
made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Trading Market,
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or Trading Market regulations.
 
4.6.  Limitation on Issuance of Future Priced Securities
 
. During the six months following the Closing Date, the Company shall not issue
any “Future Priced Securities” as such term is described by NASD IM-4350-1.
 
4.7.  Indemnification of Investors. Subject to the provisions of this Section
4.7, the Company will indemnify and hold each Investor and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Investor (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Investor Party”) harmless from any and all actual losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any such Investor Party may suffer or incur
as a result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company or the Beneficial Owners
in this Agreement or in the other Transaction Documents or (b) any action
instituted against an Investor, or any of them or their respective Affiliates,
by any stockholder of the Company with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Investor’s representations, warranties or covenants under the
Transaction). If any action shall be brought against any Investor Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Investor Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Investor Party. Any Investor Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Investor Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Investor Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Investor
Party under this Agreement (i) for any settlement by a Investor Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Investor Party’s breach of any
of the representations, warranties, covenants or agreements made by such
Investor Party in this Agreement or in the other Transaction Documents as
determined by a final non-appealable judgment of a court of competent
jurisdiction.
 
 
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4.8.  Reimbursement. If any Investor becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except
as a result of (i) Proceedings brought by another Investor against such
Investor, (ii) sales, pledges, margin sales and similar transactions by such
Investor to or with any other stockholder or (iii) as a result of a breach of
such Investor’s representations, warranties or covenants under the Transaction
Documents or any violations by such Investor of state or federal securities laws
or any conduct by such Investor which constitutes fraud, gross negligence,
willful misconduct or malfeasance), solely as a result of such Investor’s
acquisition of the Securities under this Agreement, the Company will reimburse
such Investor for its reasonable legal and other expenses (including the cost of
any investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Investors who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of the Investor and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Investors and any such Affiliate and any such Person. The Company also agrees
that neither the Investors nor any such Affiliates, partners, directors, agents,
employees or controlling persons shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company solely as a
result of acquiring the Securities under this Agreement, except if such claim
arises primarily from a breach of such Investor’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Investor of state or federal securities laws or any conduct by such Investor
which constitutes fraud, gross negligence, willful misconduct or malfeasance.
 
 
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4.9.  Non-Public Information. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
 
4.10.  Listing of Securities. The Company agrees, (i) if the Company applies to
have the Common Stock traded on any other Trading Market, it will include in
such application the Underlying Shares and Warrant Shares, and will take such
other action as is necessary or desirable to cause the Underlying Shares and
Warrant Shares to be listed on such other Trading Market as promptly as
possible, and (ii) it will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all material respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Trading Market.
 
4.11.  Use of Proceeds. The Company will use the net proceeds from the sale of
the Shares hereunder for working capital purposes and not for the satisfaction
of any portion of the Company’s debt (other than payment of trade payables and
accrued expenses in the ordinary course of the Company’s business and consistent
with prior practices), or to redeem any Common Stock or Common Stock
Equivalents.
 
4.12.  Make Good Shares. The Company covenants and agrees that upon any transfer
under Article 5 of 2007 Make Good Shares and 2008 Make Good Shares to the
Investors in accordance with Section 5 of the Make Good Escrow Agreement, the
Company shall promptly reissue such 2007 Make Good Shares or 2008 Make Good
Shares in the applicable Investor’s name and deliver the same as directed by
such Investor.
 
4.13.  Stockholder Approval. The Company covenants and agrees to effect the
approval of its stockholders of (i) an increase in the number of authorized
shares of Common Stock to 200,000,000 shares, (ii) the change the name of the
Company from Millennium Quest, Inc. to Lorain International Food Group, Inc.,
and (iii) the Reverse Split, which stockholder approval shall be deemed to occur
on the twentieth day following the mailing by the Company of the definitive
information statement on Schedule 14C pertaining thereto (collectively
“Stockholder Approval”) in accordance with Rule 14c-2(b) under the Exchange Act.
The Company agrees to effect Stockholder Approval as soon as possible, but in no
event later than May 31, 2007.
 
4.14.  Acknowledgment of Dilution. The Company acknowledges that the issuance of
Underlying Shares upon conversion of Shares will result in substantial dilution
of the outstanding shares of Common Stock. The Company further acknowledges that
its obligation to honor conversions under the Shares is unconditional and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim that the
Company may have against any Investor.
 
4.15.  Reservation of Shares. Upon Stockholder Approval and the Amendment
Filing, the Company shall maintain a reserve from its duly authorized shares of
Common Stock to comply with its conversion obligations under the Shares and
exercise obligation under the Warrants. If on any date the Company would be, if
notice of conversion or exercise were to be delivered on such date, precluded
from issuing the number of Underlying Shares or Warrant Shares issuable upon
conversion in full of the Shares or exercise of the Warrants due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly prepare and mail to the stockholders of the Company proxy materials or
other applicable materials requesting authorization to amend the Company’s
certificate of incorporation or other organizational document to increase the
number of shares of Common Stock which the Company is authorized to issue so as
to provide enough shares for issuance of the Underlying Shares and Warrant
Shares. In connection therewith, the Board of Directors shall (a) adopt proper
resolutions authorizing such increase, (b) recommend to and otherwise use its
best efforts to promptly and duly obtain stockholder approval (including the
hiring of a nationally recognized proxy solicitor firm) to carry out such
resolutions (and hold a special meeting of the stockholders as soon as
practicable, but in any event not later than the 60th day after delivery of the
proxy or other applicable materials relating to such meeting) and (c) within
five Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company’s certificate of incorporation or other
organizational document to evidence such increase.
 
 
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4.16.  Retention of U.S. Counsel. As a further inducement to the Investors to
enter into this Agreement and purchase the Securities offered hereby, the
Company covenants and agrees to use its good faith best efforts to retain, and
rely upon, the law firm of Thelen Reid Brown Raysman & Steiner LLP as primary
counsel on matters relating to U.S. corporate and securities laws, including,
but not limited to, the representation of the Company in connection with the
preparation, filing and prosecution of the Registration Statement and all other
reports, registration statements and filings to be made by the Company with the
Commission.
 
ARTICLE 5.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE BENEFICIAL OWNERS

5.1.  Representations and Warranties of the Company. As an inducement to the
Investors to enter into this Agreement and purchase the Securities, each of the
Beneficial Owner hereby makes the following representations and warranties to,
and covenants and agreements with, each Investor:
 
(a)  Authority. Such Beneficial Owner has all individual power and authority to
enter into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly executed by such Beneficial Owner, and when delivered by
such Beneficial Owner in accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Beneficial Owner, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.
 
(b)  Record and Beneficial Ownership. Immediately prior to the closing of the
transactions under the Share Exchange Agreement, Hisashi Akazawa was the sole
record and beneficial owner of all of the outstanding capital shares of Lorain,
as the term beneficial owner is defined under Rule 13d-3(d) under the Exchange
Act, free and clear of all pledges, liens and encumbrances. Hisashi Akazawa is
the sole record owner, and Hisashi Akazawa and Si Chen are the sole beneficial
owners, of all 697,633 shares Series B Preferred Stock issued by the Company
under the Share Exchange Agreement, as the term beneficial owner is defined
under Rule 13d-3(d) under the Exchange Act, free and clear of all pledges, liens
and encumbrances.
 
 
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(c)  Share Exchange Agreement. The representations and warranties of Lorain and
Hisashi Akazawa contained in the Share Exchange Agreement were true and correct
in all material respects as of the date when made and as of the closing of the
transactions thereunder as though made on and as of such date. Lorain and
Hisashi Akazawa performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required to be performed, satisfied or
complied with by them under the Share Exchange Agreement at or prior to the
closing of the transactions thereunder.
 
5.2.  Make Good Shares.
 
(a)  2007 Make Good. The Beneficial Owners agree that if the After-Tax Net
Income for the fiscal year ended December 31, 2007 reported in the Company’s
Annual Report on Form 10-K for the fiscal year ending December 31, 2007, as
filed with the Commission (the “2007 Annual Report”) is less than $9,266,000,
inclusive of all commissions, legal fees, auditing fees and other fees and
expenses incurred in the Lorain Acquisition (the “2007 Guaranteed ATNI”), the
Beneficial Owners will transfer to each Investor, for no additional
consideration, their pro rata share of 302,337 shares of Series B Preferred
Stock or the equivalent amount of Common Stock (adjusted for the Reverse Split)
following a conversion of such shares of Series B Preferred Stock in accordance
with the Certificate of Designation (for this purpose, any such conversion to be
conducted without regard to any restrictions or caps on conversion contained in
the Certificate of Designation or otherwise applicable to such shares) (the
“2007 Make Good Shares”). If the Company’s audited consolidated financial
statements for the fiscal year ended December 31, 2007 specify that the 2007
Guaranteed ATNI shall have been achieved, no transfer of the 2007 Make Good
Shares shall be required by this Section 5.2(a) and all 2007 Make Good Shares
deposited with the Make Good Escrow Agent shall be returned to the Beneficial
Owners within seven Business Days after the date which the 2007 Annual Report is
filed with the Commission and otherwise in accordance with the Make Good Escrow
Agreement. Transfers of 2007 Make Good Shares required under this Section 5.2(a)
shall be made to Investors within seven Business Days after the date which the
2007 Annual Report is filed with the Commission and otherwise in accordance with
the Make Good Escrow Agreement.
 
(b)  2008 Make Good. The Beneficial Owners agree that, if the Company’s
After-Tax Net Income reported in the Company’s Annual Report on Form 10-K for
the fiscal year ending December 31, 2008, as filed with the Commission (the
“2008 Annual Report”) is less than $12,956,000 (the “2008 Guaranteed ATNI”), the
Beneficial Owners will transfer to each Investor for no additional
consideration, their pro rata share of 302,337 shares of Series B Preferred
Stock, or the equivalent amount of Common Stock (adjusted for the Reverse Split)
following a conversion of such shares of Series B Preferred Stock in accordance
with the Certificate of Designation (for this purpose, any such conversion to be
conducted without regard to any restrictions or caps on conversion contained in
the Certificate of Designation or otherwise applicable to such shares) (the
“2008 Make Good Shares”). If the 2008 Annual Report indicates that the Company
shall have satisfied the 2008 Guaranteed ATNI test specified above for such
period, then no transfer to Investors of 2008 Make Good Shares shall be required
by this Section 5.2(b) and all 2008 Make Good Shares deposited with the Make
Good Escrow Agent shall be returned to the Beneficial Owners within seven
Business Days after the date which the Company’s 2008 Annual Report is filed
with the Commission and otherwise in accordance with the Make Good Escrow
Agreement. Transfers of 2008 Make Good Shares required under this Section 5.2(b)
shall be made to Investors within seven Business Days after the date which the
Company’s 2008 Annual Report is filed with the Commission and otherwise in
accordance with the Make Good Escrow Agreement.
 
 
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(c)  Make Good Escrow. In connection with the foregoing, the Beneficial Owners
agree that within one Trading Day following the Closing, the Beneficial Owners
will deposit all potential 2007 Make Good Shares and 2008 Make Good Shares into
escrow in accordance with the Make Good Escrow Agreement along with undated
stock powers with Medallion guarantees (or with such other instruments of
transfer as in accordance with the requirements of the Company’s transfer
agent), in the form and number acceptable to the Investors in their reasonable
discretion, and the handling and disposition of the 2007 Make Good Shares and
2008 Make Good Shares shall be governed by this Section 5.2 and such Make Good
Escrow Agreement. The parties hereby agree that the Beneficial Owners’
obligation to transfer shares of Common Stock to Investors pursuant to this
Section 5.2 shall continue to run to the benefit of an Investor only to the
extent of the portion of such Shares or, in the case of their conversion,
Underlying Shares which have not been transferred or sold by such Investor as of
the date the Company files with the Commission the 2007 Annual Report or 2008
Annual Report, as the case may be, and that Investors shall not have the right
to assign their rights to receive all or any such shares of Common Stock to
other Persons in conjunction with negotiated sales or transfers of any of their
Securities or otherwise. The 2007 Make Good Shares or 2008 Make Good Shares, as
applicable, corresponding to Shares or, in the case of their conversion,
Underlying Shares which have been transferred or sold by an Investor, shall be
released from the Make Good Escrow and returned to the Beneficial Owners within
seven Business Days after the date which the Company’s 2007 Annual Report or
2008 Annual Report, as applicable, is filed with the Commission.
 
(d)  After-Tax Net Income. For purposes of this Section 5.2, the term After-Tax
Net Income or ATNI shall mean the after-tax net income of the Company and its
consolidated subsidiaries prepared in accordance with GAAP consistently applied;
provided in the event that the release of the 2007 Make Good Shares or the 2008
Make Good Shares to the Investors or the Beneficial Owners is deemed to be an
expense or deduction from revenues/income of the Company for the applicable
year, as required under GAAP, then such expense or deduction shall be
excluded for purposes of determining whether or not the 2007 Guaranteed ATNI or
the 2008 Guaranteed ATNI has been achieved by the Company.
 
(e)  Pro Rata Share. Each Investor’s pro rata share of the 2007 Make Good Shares
or the 2008 Make Good Shares shall be determined by dividing the 2007 Make Good
Shares or the 2008 Make Good Shares, as the case may be, by a fraction the
denominator of which is the aggregate Investment Amount of all Shares or, in the
case of their conversion, Underlying Shares held by the Investors as of the date
the Company files with the Commission the 2007 Annual Report or 2008 Annual
Report, as the case may be (each such date, a “Make Good Determination Date”),
and the numerator of which is the Investment Amount of the Shares or, in the
case of their conversion, Underlying Shares held by such Investor as of such
Make Good Determination Date.
 
 
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ARTICLE 6.
CONDITIONS PRECEDENT TO CLOSING
 
6.1.  Conditions Precedent to the Obligations of the Investors toPurchase
Securities. The obligation of each Investor to acquire the Shares and Warrants
at the Closing is subject to the satisfaction or waiver by such Investor, at or
before the Closing, of each of the following conditions:
 
(a)  Representations and Warranties. The representations and warranties of the
Company and the Beneficial Owners shall be true and correct in all material
respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which shall remain true and correct as of such specific date);
 
(b)  Performance. The Company and the Beneficial Owners shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by each of them at or prior to the Closing;
 
(c)  No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents;
 
(d)  Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably could have or result in a
Material Adverse Effect or a material adverse change with respect to the Company
or Lorain;
 
(e)  Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a); and
 
(f)  Termination. This Agreement shall not have been terminated as to such
Investor in accordance with Section 7.5.
 
6.2.  Conditions Precedent to the Obligations of the Companyto sell Securities.
The obligation of the Company to sell Shares and Warrants at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
 
(a)  Representations and Warranties. The representations and warranties of the
Investors shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which shall
remain true and correct as of such specific date);
 
 
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(b)  Performance. Each Investor shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by such
Investor at or prior to the Closing;
 
(c)  No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents;
 
(d)  Investors Deliverables. Each Investor shall have delivered its Investors
Deliverables in accordance with Section 2.2(b); and
 
(e) Termination. This Agreement shall not have been terminated as to such
Investor in accordance with Section 7.5.
 
ARTICLE 7.
MISCELLANEOUS
 
7.1.  Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Securities.
 
7.2.  Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
 
7.3.  Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 3:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 3:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
 
 
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   If to the Company: Millennium Quest, Inc.
Beihuan Road
Junan County
Shandong, China
Attn: Mr. Si Chen
Facsimile: (0086539) 7314886 7311026 
   
 
  With a copy to:  Thelen Reid Brown Raysman & Steiner LLP
701 8th Street NW
Washington, D.C. 20001
Facsimile: (202) 654-1804
Attn.: Louis A. Bevilacqua, Esq.
        If to an Investor:  To the address set forth under such Investor’s name
on the signature pages hereof;         If to the Beneficial Owners: Beihuan Road
Junan County
Shandong, China
Facsimile: (0086539) 7314886 7311026
        With a copy to: King and Wood PRC Lawyers
40th Floor, Office Tower A, Beijing Fortune Plaza,
7 Dongsanhuan Zhoulu, Chaoyang District,
Beijing 100020, China
Facsimile: (008610) 5878-5566
Attn.: Charles Law

 
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
 
7.4.  Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Investors holding a majority of the Shares or, in the event of
their conversion, Underlying Shares. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all
Investors who then hold Securities. In the event of any discrepancy between this
Agreement and the Make Good Escrow Agreement, the terms of the Make Good Escrow
Agreement shall apply to the extent of such discrepancy.
 
 
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7.5.  Termination. This Agreement may be terminated prior to Closing:
 
(a)  by written agreement of the Investors and the Company; and
 
(b)  by the Company or an Investor (as to itself but no other Investor) upon
written notice to the other, if the Closing shall not have taken place by 6:30
p.m. Eastern time on the Outside Date; provided, that the right to terminate
this Agreement under this Section 7.5(b) shall not be available to any Person
whose failure to comply with its obligations under this Agreement has been the
cause of or resulted in the failure of the Closing to occur on or before such
time.
 
In the event of a termination pursuant to this Section, the Company shall
promptly notify all non-terminating Investors. Upon a termination in accordance
with this Section 7.5, the Company and the terminating Investor(s) shall not
have any further obligation or liability (including as arising from such
termination) to the other and no Investor will have any liability to any other
Investor under the Transaction Documents as a result therefrom.
 
7.6.  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
 
7.7.  Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Shares, provided such transferee agrees in writing to
be bound, with respect to the transferred Shares, by the provisions hereof that
apply to the “Investors.”
 
7.8.  No Third-Party Beneficiaries
 
. This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.7 (as to each Investor Party).
 
7.9.  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
 
 
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7.10.  Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Shares and
Warrants.
 
7.11.  Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
 
7.12.  Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
 
7.13.  Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Investor exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Investor may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
 
7.14.  Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
 
 
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7.15.  Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
 
7.16.  Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
7.17.  Independent Nature ofInvestors’ Obligations and Rights. The obligations
of each Investor under any Transaction Document are several and not joint with
the obligations of any other Investor, and no Investor shall be responsible in
any way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Securities
pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor. Each Investor represents that it has been
represented by its own separate legal counsel in its review and negotiations of
this Agreement and the Transaction Documents.
 
7.18.  Limitation of Liability. Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of an Investor arising
directly or indirectly, under any Transaction Document of any and every nature
whatsoever shall be satisfied solely out of the assets of such Investor, and
that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
 

 
MILLENNIUM QUEST, INC.
     
By:______________________________
  Si Chen, Chief Executive Officer
 
 
Only as to Sections 5 and 7 herein:
 
____________________________
Hisashi Akazawa
 
____________________________
Si Chen
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 

 
NAME OF INVESTOR
 
_________________________________________
 
By: ______________________________________  
       Name: 
       Title: 
 
Shares Subscribed For: ______________________
 
Warrants Subscribed For:____________________
 
Investment Amount: $_______________________
 
Tax ID No.:_______________________________
 
     
ADDRESS FOR NOTICE
 
c/o: ___________________________________
 
Street: _________________________________
 
City/State/Zip:___________________________
 
Attention:______________________________
 
Tel:___________________________________
 
Fax:___________________________________
     
DELIVERY INSTRUCTIONS
    (if different from above)
 
c/o: ___________________________________
 
Street: _________________________________
 
City/State/Zip:___________________________
 
Attention:______________________________
 
Tel:___________________________________

 
 
 
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