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Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of  August 14,
2008 among Fashion Tech International, Inc., a Nevada corporation (collectively
with all predecessors thereof, the “Company”), Fezdale Investments Limited, a
British Virgin Island Company (together with its direct and indirect
subsidiaries “BVI”), Daqing Longheda Food Company Limited, a wholly
foreign-owned enterprise organized under the laws of the People’s Republic of
China (“WFOE”), and the investors listed on the Schedule of Buyers attached
hereto as Annex A and identified on the signature pages hereto (each, an
“Investor” and collectively, the “Investors”).

WHEREAS, on August 14, 2008, the Company entered into a Share Exchange Agreement
(the “Exchange Agreement”), with BVI and the BVI Shareholders (as defined in
Section 1.1 below), pursuant to which the Company acquired all of the equity
interest of BVI and, indirectly, all of BVI’s direct and indirect subsidiaries,
in exchange for 91.3% of the total outstanding shares of the Common Stock (as
defined in Section 1.1 below) on a fully diluted basis as and immediately after
the closing of the exchange under the Exchange Agreement (the “Exchange”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to the Securities Act (as defined below), 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.

AGREEMENT

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:

“2009 Annual Report” means the Annual Report of the Company for the fiscal year
ending March 31, 2009, as filed with the Commission on Form 10-K (or such other
form appropriate for such purpose as promulgated by the Commission).

“2009 Guaranteed ATNI” has the meaning set forth in Section 4.7.

“2009 Make Good Shares” has the meaning set forth in Section 4.7.

 

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“2010 Annual Report” means the Annual Report of the Company for the fiscal year
ending March 31, 2010, as filed with the Commission on Form 10-K (or such other
form appropriate for such purpose as promulgated by the Commission).

“2010 Guaranteed ATNI” has the meaning set forth in Section 4.7.

“2010 Make Good Shares” has the meaning set forth in Section 4.7.

“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 or
local), stock market, stock exchange or trading facility.

“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.

“After Tax Net Income” shall have the meaning set forth in Section 4.7.

“Business Day” means any day except Saturday, Sunday and any day which is a
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to close.

“BVI” has the meaning set forth in the recitals to this Agreement.

“BVI Shareholders” means KUNG Yiu Fai and NG Kwan Mo.

“Closing” means the closing of the purchase and sale of the Shares pursuant to
Article 2.

“Closing Date” means the Business Day on which all of the conditions set forth
in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties
may agree.

“Closing Escrow Agreement” means that certain Escrow Agreement, dated as of the
date hereof, among the Investors, Thelen Reid Brown Raysman & Steiner LLP, as
escrow agent, WLT Brothers Capital, Inc., as investor agent (the “Investor
Agent”) and the Company, in the form of Exhibit A 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.

“Company Deliverables” has the meaning set forth in Section 2.2(a).

“Company Entities” means the Company, BVI, WFOE and all existing Subsidiaries of
any such entities and any other entities which hereafter become Subsidiaries of
any such entities.

“Disclosure Materials” means the Schedules to this Agreement.

 

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     "Effectiveness Period" means, as to any registration statement required to
be filed pursuant to Section 4.2 of this Agreement, the period commencing on the
date when such registration statement is declared effective by the Commission
and ending on the earliest to occur of (a) the second anniversary of such
effective date, (b) such time as all of the Registrable Securities covered by
such registration statement have been publicly sold by the Investors included
therein, or (c) such time as all of the Registrable Securities covered by such
registration statement may be sold by the Investors without volume restrictions
pursuant to Rule 144 as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Investors.

“Escrow Agent” means Thelen Reid Brown Raysman & Steiner LLP.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Existing Company Entities” means the Company, BVI, WFOE and their respective
Subsidiaries and "Existing Company Entity" means any of the Company, BVI, WFOE
and any of their respective Subsidiaries.

“GAAP” means U.S. generally accepted accounting principles.

“Governmental Body” shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental or administrative division, department, agency, commission,
instrumentality, official, organization, unit, body or entity) and any court or
other tribunal.

“Holdback Escrow Agreement” means the Holdback Escrow Agreement, dated as of the
date hereof, by and among the Company, the Investor Agent and Securities
Transfer Corporation, as escrow agent, in the form of Exhibit B hereto.

“Intellectual Property Rights” has the meaning set forth in Section 3.1(o).

“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).

"Legal Requirement" shall mean any federal state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Body (or under the authority of any
national securities exchange upon which the Common Stock is then listed or
traded).  Reference to any Legal Requirement means such Legal Requirement as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, and reference to any section or other provision of any
Legal Requirement means that provision of such Legal Requirement from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other provision.

 

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“Lien” means any lien, charge, encumbrance, security interest, or other charge
of any kind.

“Lockup Agreement” means the Lockup Agreement, dated as of the date hereof, by
and between the Company and each person listed as a signatory thereto, in the
form attached as Exhibit C hereto.

“Make Good Escrow Agreement” means the Make Good Escrow Agreement, dated as of
the date hereof, among the Company, the Investor Agent, the escrow agent
identified therein (the “Make Good Escrow Agent”) and the Make Good Pledgor, in
the form of Exhibit D hereto, as may be amended from time to time pursuant to
this Agreement.

“Make Good Pledgor” means KUNG Yiu Fai.

“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, except for results or consequences attributable
to the effects of, or changes in, general economic or capital markets conditions
or effects and changes that generally affect the industries in which the Company
Entities operate, such as regulatory action by the PRC or municipal governments
or (iii) an adverse impairment to the Company’s ability to perform on a timely
basis 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 forty-fifth (45th) calendar day (if such calendar day
is a Trading Day and if not, then the first Trading Day following such
forty-fifth (45th) calendar day) following the date of this Agreement.

“PRC” means, for the purpose of this Agreement, the People’s Republic of China,
not including Taiwan, Hong Kong and Macau.

“Per Share Purchase Price” equals $2.78.

“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 Agents” means collectively, Roth Capital Partners, LLC and WLT
Brothers Capital, Inc.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

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“Registrable Securities” means the Shares, 2009 Make Good Shares and 2010 Make
Good Shares.

“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.

“Securities” means the Shares, 2009 Make Good Shares and 2010 Make Good Shares.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” means the shares of Common Stock issued, issuable or transferable to
the Investors pursuant to this Agreement.

“Short Sales” include 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.

“Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of
Regulation S-X promulgated by the Commission under the Exchange Act.

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market, or (ii) 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) and (ii) 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 Closing Escrow Agreement, the
Make Good Escrow Agreement, the Holdback Escrow Agreement, the Lockup Agreement
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

“Transfer Agent” means Securities Transfer Corporation, and any successor
transfer agent of the Company.

“WFOE” has the meaning set forth in the recitals to this Agreement.

 

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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 Shares
representing such Investor’s Investment Amount.  The Closing shall take place at
the offices of Winston & Strawn LLP, counsel to Roth Capital Partners, LLC, 200
Park Avenue, New York, NY 10166 on the Closing Date or at such other location or
time as the parties may agree.

2.2.

Closing Deliveries.

(a)

At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following (the “Company Deliverables”):

(i)

Irrevocable instruction letter, in agreed form, to the Transfer Agent directing
the Transfer Agent to issue a certificate evidencing a number of Shares equal to
such Investor’s Investment Amount divided by the Per Share Purchase Price,
registered in the name of such Investor or its nominee; and

(ii)

an officer’s certificate, in agreed form, certifying the satisfaction of each of
the conditions precedent to the Investors’ obligation to purchase Shares;

(iii)

the Closing Escrow Agreement, duly executed by the Company and the Escrow Agent;

(iv)

the Make Good Escrow Agreement, duly executed by all parties thereto (other than
the Investors);

(v)

the Holdback Escrow Agreement, duly executed by all parties thereto (other than
the Investors); and

(vi)

Lockup Agreements, duly executed by the Company and each officer of the Company
and each member of the Board of Directors of the Company.

(b)

At or prior to the Closing, each Investor shall deliver or cause to be delivered
to the Escrow Agent its Investment Amount, in immediately available funds, by
wire transfer to the account designated in the Closing Escrow Agreement (the
“Investor Deliverables”).

ARTICLE 3.
REPRESENTATIONS AND WARRANTIES

3.1.

Representations and Warranties of the Company.  

Subject to exceptions set forth in the disclosure schedule of the Existing
Company Entities, the Company, BVI and WFOE hereby jointly and severally make
the following representations and warranties to each Investor:

 

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(a)

Subsidiaries.  The Existing Company Entities have no direct or indirect
Subsidiaries other than as disclosed in 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.

(b)

Organization and Qualification.  Each of the Existing Company Entities is 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.  No
Existing Company Entity is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.  Each Existing Company Entity is duly
qualified to conduct its respective businesses and is 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.  Each Existing Company Entity which is or is to
become party to any Transaction Document has the requisite corporate and other
power and authority to enter into and to consummate the transactions
contemplated by each such Transaction Document to which it is a party and
otherwise to carry out its obligations thereunder.  The execution and delivery
of the Transaction Documents, by each of the Existing Company Entities to be
party thereto and the consummation by each of them of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of such Existing Company Entity, and no further action is required by any
of them in connection with such authorization.  Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and each
other Existing Company Entity required to execute the same (to the extent any of
them is a party thereto) and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company and such
Existing Company Entity, enforceable against the Company and the Existing
Company Entity, as the case may be, each in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar Legal Requirement relating
to, or affecting generally the enforcement of, creditors’ rights and remedies or
by other equitable principles of general application.

(d)

No Conflicts.  Except as set forth on Schedule 3.1(d), the execution, delivery
and performance of the Transaction Documents by the Company, and each other
Existing Company Entity (to the extent a party thereto) and the consummation by
the Company and such other Existing Company Entities of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company’s, or such Existing Company Entity's certificate of
incorporation or bylaws, 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 any of the debt of any
Existing Company Entity's debt or otherwise) or other understanding to which any
of the Existing Company Entities is a party or by which any property or asset of
any of the Existing Company Entities is bound or affected, or (iii) result in a
violation of any Legal Requirement, 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 any
Existing Company Entity 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.  None of the Existing Company Entities is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any Governmental Body in
connection with the execution, delivery and performance by the Company and each
of the other Existing Company Entities to the extent it is a party thereto of
the Transaction Documents, other than (i) the filing with the Commission of one
or more Registration Statements in accordance with the requirements of this
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 filings required in accordance with Section 4.5 and
(v) those that have been made or obtained prior to the date of this Agreement.

(f)

Issuance of the Shares.  The Shares have been duly authorized and are, with
respect to the Shares to be delivered to the Investors on the Closing Date, 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.
 The Company has reserved from its duly authorized capital stock the shares of
Common Stock issuable pursuant to this Agreement in order to issue the Shares.
 The Make Good Pledgor is the record owner of the 2009 Make Good Shares and 2010
Make Good Shares.

(g)

Capitalization.  The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock
reserved for issuance under the Company’s various option and incentive plans, is
specified on Schedule 3.1(g).  Except as specified on Schedule 3.1(g), no
securities of the Company are entitled to preemptive or similar rights, and 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 specified on 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 shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
 The sale of Shares to the Investors 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) or result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities.

 

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(h)

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, for the twelve months preceding the date hereof (or such
shorter period as the Company was required by law to file such reports) (the
foregoing materials being collectively referred to herein as the “SEC Reports”
and, together with the Schedules to this Agreement (if any), the “Disclosure
Materials”) 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 and each Subsidiary 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)

 Material Changes.  Since the date of the latest audited financial statements of
the Company, except as disclosed on Schedule 3.1(i), (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 Existing Company
Entities have not incurred any liabilities (contingent or otherwise) other than
(A) trade payables, accrued expenses and other liabilities 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, (iii) the Existing Company Entities have not altered its method of
accounting or the identity of its auditors, and (iv) the Existing Company
Entities have 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.

(j)

Litigation.  There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Shares or (ii) except as disclosed on Schedule 3.1(j), 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 Existing Company
Entities, nor to the knowledge of the Existing Company Entities, 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 federal or state
securities laws or a claim of breach of fiduciary duty, except as disclosed on
Schedule 3.1(j).  There has not been, and to the knowledge of the Company, there
is not pending any investigation by the Commission involving any Existing
Company Entity or any current or former director or officer of an Existing
Company Entity (in his or her capacity as such).

 

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(k)

Labor Relations.  No material labor dispute exists or, to the knowledge of the
Existing Company Entities, is imminent with respect to any of the employees of
the Existing Company Entities.

(l)

Compliance.  None of the Existing Company Entities (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 an Existing
Company Entity under), nor has any Existing Company Entity 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
court, arbitrator or governmental body, or (iii) is or has been in violation of
any statute, rule or regulation of any governmental authority, including all
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, such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.

(m)

Regulatory Permits.  The Existing Company Entities possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses,
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 the Existing Company Entities have not received any notice of
proceedings relating to the revocation or modification of any such permits.

(n)

Title to Assets.  The Existing Company Entities own or have valid land use
rights to all real property 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 Existing Company Entities.  Any real property and
facilities held under lease by the Existing Company Entities are held by them
under valid, subsisting and enforceable leases.

(o)

Patents and Trademarks.  The Existing Company Entities have, or have rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
(collectively, the “Intellectual Property Rights”) that are necessary or
material for use in connection with their respective businesses 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.  No Existing Company Entity
has received a written notice that the Intellectual Property Rights used by such
Existing Company Entity violates or infringes upon the rights of any Person.
 Except as set forth on Schedule 3.1(o), to the knowledge of the Existing
Company Entities, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the Intellectual
Property Rights.

(p)

Insurance.  The Existing Company Entities 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 Existing Company
Entities are engaged.

 

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(q)

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 Shares by the
Company to the Investors or the transfer of the 2009 Make Good Shares or 2010
Make Good Shares by the Make Good Pledgor to the Investors under the Transaction
Documents.  The Company is eligible to register its Common Stock for resale by
the Investors under the Securities Act.

(r)

Certain Fees.  Except as described in Schedule 3.1(r), no brokerage or finder’s
fees or commissions are or will be payable by the Existing Company Entities to
any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement.  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.

(s)

Transactions With Affiliates and Employees; Customers.  Except as described in
Schedule 3.1(s), none of the officers, directors or 5% or more shareholders of
any of the Existing Company Entities, and, to the knowledge of the Company, none
of the employees of any of the Existing Company Entities, is presently a party
to any transaction with any of the Existing Company Entities (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 such Person or, to the knowledge of the
Company, any entity in which any officer, director, or such employee or 5% or
more shareholder has a substantial interest or is an officer, director, trustee
or partner.  None of the Existing Company Entities owes any money or other
compensation to any of their respective officers or directors or shareholders,
except to the extent of ordinary course compensation arrangements.  No material
customer of any of the Existing Company Entities has indicated their intention
to diminish their relationship with such Existing Company Entity and none of the
Existing Company Entities has any knowledge from which it could reasonably
conclude that any such customer relationship may be adversely affected.

(t)

No Additional Agreements.  None of the Existing Company Entities has 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.

(u)

Foreign Corrupt Practices Act.  None of the Existing Company Entities nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Existing Company Entities, has, directly or indirectly, (i) used any funds, or
will use any proceeds from the sale of the Shares, 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, or any such Existing Company Entity (or made
by any Person acting on their behalf of which the Company is aware) or, to the
knowledge of the Existing Company Entities, any members of their respective
management which is in violation of any Legal Requirement, or (iv) has violated
in any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended, and the rules and regulations thereunder which was applicable
to the Existing Company Entities.

 

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(v)

Other Representations and Warranties Relating to WFOE.

(i)

All material consents, approvals, authorizations or licenses requisite under PRC
Legal Requirements for the due and proper establishment and operation of WFOE
have been duly obtained from the relevant PRC Governmental Bodies and are in
full force and effect.  

(ii)

All filings and registrations with the PRC Governmental Bodies required in
respect of WFOE and its capital structure and operations including, without
limitation, the registration with the Ministry of Commerce, the China Securities
Regulatory Commission, the State Administration of Industry and or their
respective local divisions of Commerce, the State Administration of Foreign
Exchange, tax bureau and customs authorities have been duly completed in
accordance with the relevant PRC Legal Requirements, except where, the failure
to complete such filings and registrations does not, and would not, individually
or in the aggregate, have a Material Adverse Effect.

(iii)

WFOE has complied with all relevant PRC Legal Requirements regarding the
contribution and payment of its registered share capital, the payment schedule
of which has been approved by the relevant PRC Governmental Bodies.  There are
no outstanding commitments made by the Company or any Subsidiary (or any of
their shareholders) to sell any equity interest in WFOE.

(iv)

WFOE has not received any letter or notice from any relevant PRC Governmental
Body notifying it of revocation of any licenses or qualifications issued to it
or any subsidy granted to it by any PRC Governmental Body for non-compliance
with the terms thereof or with applicable PRC Legal Requirements, or the lack of
compliance or remedial actions in respect of the activities carried out by WFOE,
except such revocation as does not, and would not, individually or in the
aggregate, have a Material Adverse Effect.

(v)

WFOE has conducted its business activities within the permitted scope of
business or has otherwise operated its business in compliance with all relevant
Legal Requirements and with all requisite licenses and approvals granted by
competent PRC Governmental Bodies other than such non-compliance that do not,
and would not, individually or in the aggregate, have a Material Adverse Effect.
 As to licenses, approvals and government grants and concessions requisite or
material for the conduct of any material part of WFOE’s business which is
subject to periodic renewal, the Company has no knowledge of any reasons related
to the WFOE for which such requisite renewals will not be granted by the
relevant PRC Governmental Bodies.

(vi)

With regard to employment and staff or labor, WFOE has complied with all
applicable PRC Legal Requirements in all material respects, including without
limitation, those pertaining to welfare funds, social benefits, medical
benefits, insurance, retirement benefits, pensions or the like, other than such
non-compliance that do not, and would not, individually or in the aggregate,
have a Material Adverse Effect.

 

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(w)

Disclosure.  All disclosure provided to the Investors regarding the Company
Entities and their respective businesses and the transactions contemplated
hereby, furnished by or on behalf of the Company Entities (including their
respective representations and warranties set forth in this Agreement and the
disclosure set forth in any diligence report or business plan provided by any
Company Entity or any Person acting on such Company Entity’s behalf) are true
and correct in all material aspects 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.

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.  If such Investor is a business entity, 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 Transaction Document to which it is a party 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 towards, or
resale in connection with, a public sale or distribution of 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
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.

 

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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 any Short Sales involving the Company’s securities) since the time
that such Investor was first contacted by the Company, any Placement Agent, or
any other Person acting on behalf of the Company regarding the investment in the
Company contemplated 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 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 the Placement
Agents or any of their respective 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.

(h)

Rule 144.  Such Investor understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available.  Such Investor acknowledges that it
is familiar with Rule 144 and that such Investor has been advised that Rule 144
permits resales only under certain circumstances.  Such Investor understands
that to the extent that Rule 144 is not available, such Investor will be unable
to sell any Securities without either registration under the Securities Act or
the existence of another exemption from such registration requirement.

(i)

General.  Such Investor understands that the Securities are being offered and
sold in reliance on a transactional exemption from the registration requirements
of federal and state securities laws and the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the Securities.  Such Investor understands that no United States federal or
state agency or any Governmental Body has passed upon or made any recommendation
or endorsement of the Securities.

 

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(j)

Regulation S.  If such Investor is not a U.S. Person (as such term is defined in
Section 902(a) of Regulation S), such Investor (i) acknowledges that the
certificate(s) representing or evidencing the Securities contain a customary
restrictive legend restricting the offer, sale or transfer of any Securities
except in accordance with the provisions of Regulation S, pursuant to
registration under the Securities Act, or pursuant to an available exemption
from registration, (ii) agrees that all offers and sales by such Investor of
Securities shall be made pursuant to an effective registration statement under
the Securities Act or pursuant to an exemption from, or a transaction not
subject to the registration requirements of, the Securities Act, (iii)
represents that the offer to purchase the Securities was made to such Investor
outside of the United States, and such Investor was, at the time of the offer
and will be, at the time of the sale and is now, outside the United States, (iv)
has not engaged in or directed any unsolicited offers to purchase Securities in
the United States, (v) is neither a U.S. Person nor a Distributor (as such terms
are defined in Section 902(a) and 902(c), respectively, of Regulation S), (vi)
has purchased the Securities for its own account and not for the account or
benefit of any U.S. Person, (vii) is the sole beneficial owner of the Shares
specified on Schedule 3.2(j) opposite his name and has not pre-arranged any sale
with a purchaser in the United States, and (ix) is familiar with and understands
the terms and conditions and requirements contained in Regulation S,
specifically, without limitation, each Investor understands that the statutory
basis for the exemption claimed for the sale of the Securities would not be
present if the sale, although in technical compliance with Regulation S, is part
of a plan or scheme to evade the registration provisions of the Securities Act.

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

ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES

4.1.

Compliance with Securities Laws.

 

(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, pursuant to Rule 144, or 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
substance of which opinion shall be reasonably acceptable to the Company, to the
effect that such transfer does not require registration of such transferred
Securities under the Securities Act.  Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books of the Company and with
its transfer agent, without any such legal opinion, any transfer of Securities
by an Investor to an Affiliate of such Investor, provided that the transferee
certifies to the Company that it is an “accredited investor” as defined in Rule
501(a) under the Securities Act and provided that such Affiliate does not
request any removal of any existing legends on any certificate evidencing the
Securities.

 

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Certificates evidencing the Securities will contain the following legend, until
such time as they are not required under Section 4.1(c):

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 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).

(b)

Certificates evidencing Securities shall not contain any legend (including the
legend set forth in Section 4.1(b)):

(i)

following a sale or transfer of such Securities pursuant to an effective
registration statement (including a Registration Statement), or

(ii)

following a sale or transfer of such Securities pursuant to Rule 144 (assuming
the transferee is not an Affiliate of the Company), or

(iii)

while such Securities are eligible for sale under Rule 144 without volume
restriction.

4.2.

Registration Obligation.  The Company shall file a registration statement as
soon as commercially reasonable, but in any event within forty-five (45) days of
the Closing Date, on Form S-1, or such other form that is appropriate, covering
the resale of the Shares.  The Company shall file a registration statement as
soon as commercially reasonable, but in any event within forty-five (45) days of
the date the 2009 Make Good Shares or 2010 Make Good Shares, as applicable, are
issuable to Investors, on Form S-1, or such other form that is appropriate,
covering the resale of the, the 2009 Make Good Shares and the 2010 Make Good
Shares, as applicable.    

 

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(b)

If at any time prior to the one (1) year anniversary of the Closing Date, the
Company or any shareholder of the Company proposes to register any of its Common
Stock or any securities convertible into Common Stock under the Securities Act
(other than pursuant to an offering of securities in connection with an employee
benefit, share dividend, share ownership or dividend reinvestment plan or
registration of securities in connection with a business combination
transaction) and the registration form to be used may be used by the Company for
the registration of the Registrable Securities, the Company shall give prompt
written notice to the Investors of its intention to effect such a registration
(each a “Piggyback Notice”) and shall, if commercially practicable, include in
such registration statement all Registrable Securities then required to be
registered that are not then covered by an effective registration statement with
respect to which the Company has received written request from the Investors for
inclusion therein within ten (10) days after the date of sending the Piggyback
Notice (the “Piggyback Registration”) to the Investors.

(c)

In connection with any registration, the Company will:

(i)

prepare and file with the Commission a registration statement in a commercially
reasonable time with respect to such securities and use its commercially
reasonable efforts to cause such registration statement to become and remain
effective for the Effectiveness Period;

(ii)

prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities covered by such registration statement until the such time as
all of such securities have been disposed of in a public offering;

(iii)

furnish to the Investors, at the option of the Company in electronic format,
such number of copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents, as the Investors may reasonably request;

(iv)

register or qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as the Investors shall reasonably request (provided,
however, that it shall not be obligated to qualify as a foreign corporation to
do business under the laws of any jurisdiction in which it is not then qualified
or to file any general consent to service or process);

 

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(v)

furnish, at the request of the Investors, a legal opinion of the counsel
representing the Company for the purposes of such registration, addressed to the
Investors, in customary form and covering matters of the type customarily
covered in such legal opinions;

(vi)

otherwise use its commercially reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, at the option of the Company in electronic format, as soon as
reasonably practicable, but not later than eighteen (18) months after the
effective date of the Registration Statement, an earnings statement covering the
period of at least twelve (12) months beginning with the first full month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; provided,
however, that the Company shall have no such obligation if the Effectiveness
Period has expired;

(vii)

notify the Investors, at any time when the offering documents include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and at the request of the Investors,
prepare and furnish to such person(s) such reasonable number of copies of any
amendment or supplement to the offering documents as may be necessary so that,
as thereafter delivered to the Investors of such shares, such offering documents
shall not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and to
deliver to Investors of any other securities of the Company included in the
offering copies of such offering documents as so amended or supplemented;

(viii)

 keep the Investors informed of the Company’s best estimate of the earliest date
on which the offering documents will become effective, and promptly notify the
Investors of (A) the effectiveness of such offering documents, (B) a request by
the Commission for an amendment or supplement to such offering documents, (C)
the issuance by the Commission of an order suspending the effectiveness of the
offering documents, or of the threat of any proceeding for that purpose, and (D)
the suspension of the qualification of any securities to be included in the
offering documents for sale in any jurisdiction or the initiation or threat of
any proceeding for that purpose; and

(ix)

before filing any registration statement as contemplated by Section 4.2 hereof
and any amendment or supplement thereto (including any documents incorporated by
reference therein), the Company shall furnish to the Investors copies of all
such offering documents, at the option of the Company in electronic format,
which offering documents shall be subject to the review of such Investors and,
where feasible, the Company shall make such changes in the offering documents as
are promptly and reasonably requested by an Investor.  The Investors shall
provide their comments to the offering documents, if any, within 2 business days
after the receipt of such offering documents.

(d)

All registrations (piggyback or otherwise) made by the Investors will be made
solely at the Company’s expense, other than (i) if an underwritten offering is
consented to by the Company, the underwriters’, broker-dealers’ and placement
agents’ selling discounts, commissions and fees relating to the sale of the
Investors’ securities, (ii) any costs and expenses of counsel, accountants or
other advisors retained by the Investors and (iii) all transfer, franchise,
capital stock and other taxes, if any, applicable to the Investors’ securities
(collectively, “Investors’ Expenses”) which shall be paid by the Investors.

 

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(e)

In the event of any registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, the Company shall indemnify and hold
harmless each Investor holding such Registrable Securities, such Investor's
directors and officers, and each other person (including each underwriter) who
participated in the offering of such Registrable Securities and each other
person, if any, who controls such Investor or such participating person within
the meaning of the Securities Act, against any losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees), or expenses, joint or several, to
which such Investor or any such director or officer or participating person or
controlling person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement or any alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, (ii) any omission or any
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any other
violation of any applicable securities laws, and in each of the foregoing
circumstances shall reimburse such Investor or such director, officer or
participating person or controlling person for any legal or any other expenses
reasonably incurred by such Investor or such director, officer or participating
person or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any actual or alleged
untrue statement or actual or alleged omission made in such registration
statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Investor specifically for use therein.  

(f)

In the event of any registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, each Investor holding Registrable
Securities agrees to indemnify and hold harmless the Company, its directors and
officers and each other person, if any, who controls the Company within the
meaning of the Securities Act and any other Investor against any losses, claims,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees), or expenses, joint or several, to
which the Company or any such director or officer or any such person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or any alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any omission or any alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in either case only to the extent that such untrue
statement or omission is (A) made in reliance on and in conformity with any
information furnished in writing by such Investor to the Company concerning such
Investor specifically for inclusion in the offering documents relating to such
offering, and (B) is not corrected by such Investor and distributed to the
Investors within a reasonable period of time.  Notwithstanding the provisions of
this paragraph, no Investor shall be required to indemnify any person pursuant
to this paragraph or to contribute pursuant to paragraph (g) below in an amount
in excess of the amount of the aggregate net proceeds received by such Investor
in connection with any such registration under the Securities Act.

 

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(g)

If the indemnification provided for above from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
 The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action.  The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.  The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this paragraph were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

(h)

In order to permit the Investors to sell the Registrable Securities, if so
desired, pursuant to any applicable resale exemption under applicable securities
laws and regulations, the Company shall:

(i)

comply with all rules and regulations of the Commission in connection with use
of any such resale exemption;

(ii)

make and keep available adequate and current public information regarding the
Company;

(iii)

file with the Commission in a timely manner, all reports and other documents
required to be filed under the Securities Act, the Exchange Act, or other
applicable securities laws and regulations;

(iv)

upon written request from any Investor, furnish to such Investor copies of
annual reports required to be filed under the Exchange Act and other applicable
securities laws and regulations; and

 

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(v)

upon written request from any Investor, furnish to such Investor, upon written
request (A) a copy of the most recent quarterly report of the Company and such
other reports and documents filed by the Company with the Commission and (B)
such other information as may be reasonably required to permit the Investors to
sell pursuant to any applicable resale exemption under the Securities Act or
other applicable securities law and regulations, if any.

(vi)

All rights of the Investors under this Section 4 are unique to and limited to
the Investors and may not be transferred or inure to the benefit of the
Investors’ successors and assigns or any other transferee who obtains
Registrable Securities.

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.  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 prior to the time that all Shares are registered pursuant to one or
more effective registration statement(s), and the prospectuses forming a portion
of such registration statement(s) is available for the resale of all Shares,
except that if an Investor declines in writing to include their Shares in a
registration statement, then this Section 4.4 hereafter ceases to apply to the
Shares of such Investor (other than if such Investor declines to include its
Shares because such Investor was unwilling to be named as an underwriter in such
Registration Statement).

4.5.

Securities Laws Disclosure; Publicity.  By (i) 9:30 a.m. (New York time) on the
Trading Day following the Closing Date, the Company shall issue a press release,
disclosing the transactions contemplated by the Transaction Documents
(including, without limitation, details with respect to the make good provision
and thresholds (i.e. After Tax Net Income) contained in Section 4.7 herein as
well as projected revenue estimates for the Company for each of the fiscal years
ending March 31, 2009 and March 31, 2010) and the Closing and by (ii) 5:30 p.m.
(New York time) on the Trading Day following the Closing Date, the Company will
file a Current Report on Form 8-K, disclosing the material terms of the
Transaction Documents, including details with respect to the make good provision
and thresholds (i.e. After Tax Net Income) contained in Section 4.7 herein (and
attach as exhibits thereto all existing Transaction Documents) and the Closing.
 The Company covenants that following such disclosure, the Investors shall no
longer be in possession of any material, non-public information with respect to
any of the Existing Company Entities.  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.

 

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4.6.

Use of Proceeds. The Company will use the net proceeds from the sale of the
Shares hereunder for working capital purposes, acquisitions and/or capital
expenditures.

4.7.

Make Good Shares.  

(a)

The Make Good Pledgor agrees that in the event that the After Tax Net Income
reported in the 2009 Annual Report is less than $13,919,707 (the “2009
Guaranteed ATNI”), a number of 2009 Make Good Shares (as defined and calculated
below) shall be transferred in accordance with the Make Good Escrow Agreement to
the Investors on a pro rata basis (determined by dividing each Investor’s
Investment Amount by the aggregate of all Investment Amounts delivered to the
Company by the Investors hereunder) for no consideration other than payment of
their respective Investment Amount paid to the Company at Closing and without
the need of any Investor to take any action with respect thereto.  The aggregate
number of “2009 Make Good Shares” means a number of shares of Common Stock equal
to 50% of the Aggregate Shares issued pursuant to this Agreement (as equitably
adjusted for any stock splits, stock combinations, stock dividends or similar
transactions).  The number of 2009 Make Good Shares issuable to Investors shall
be equal to:

[(2009 Guaranteed ATNI – actual After Tax Net Income of the Company for the
fiscal year ended March 31, 2009)/2009 Guaranteed ATNI]*aggregate number of 2009
Make Good Shares.

The Make Good Pledgor agrees that in the event that the After Tax Net Income
reported in the 2009 Annual Report is less than $18,495,315 (the “2010
Guaranteed ATNI”), a number of 2010 Make Good Shares (as defined and calculated
below) shall be transferred in accordance with the Make Good Escrow Agreement to
the Investors on a pro rata basis (determined by dividing each Investor’s
Investment Amount by the aggregate of all Investment Amounts delivered to the
Company by the Investors hereunder) for no consideration other than payment of
their respective Investment Amount paid to the Company at Closing and without
the need of any Investor to take any action with respect thereto.  The aggregate
number of “2010 Make Good Shares” means a number of shares of Common Stock equal
to 50% of the Aggregate Shares issued pursuant to this Agreement (as equitably
adjusted for any stock splits, stock combinations, stock dividends or similar
transactions).  The number of 2010 Make Good Shares issuable to Investors shall
be equal to:

[(2010 Guaranteed ATNI – actual After Tax Net Income of the Company for the
fiscal year ended March 31, 2010)/2010 Guaranteed ATNI]*aggregate number of 2010
Make Good Shares.  

In the event that the After Tax Net Income reported in the 2009 Annual Report is
equal to or greater than the 2009 Guaranteed ATNI, no transfer of the 2009 Make
Good Shares shall be required by the Make Good Pledgor to the Investors and such
2009 Make Good Shares shall be returned to the Make Good Pledgor in accordance
with the Make Good Escrow Agreement.  In the event that the After Tax Net Income
reported in the 2010 Annual Report is equal to or greater than the 2010
Guaranteed ATNI, no transfer of the 2010 Make Good Shares shall be required by
the Make Good Pledgor to the Investors and such 2010 Make Good Shares shall be
returned to the Make Good Pledgor in accordance with the Make Good Escrow
Agreement.  Any such transfer of the 2009 Make Good Shares or the 2010 Make Good
Shares shall be made to the Investors or the Make Good Pledgor, as applicable,
within 10 Business Days after the date which the 2009 Annual Report or 2010
Annual Report, as applicable, is filed with the Commission without any further
action on the part of the Investors.  “After Tax Net Income” shall mean the
Company’s operating income after taxes for the fiscal year ending March 31, 2009
or March 31, 2010 (as applicable) in each case determined in accordance with
GAAP as reported in the 2009 Annual Report or 2010 Annual Report (as
applicable).  Notwithstanding the foregoing or anything else to the contrary
herein, for purposes of determining whether or not the 2009 Guaranteed ATNI and
2010 Guaranteed ATNI have been met, (i) expenses incurred as a result of the
Company's fulfillment of its obligations under Section 4.8 hereunder shall be
excluded (i.e., costs for hiring the independent directors (including
compensation for such independent directors and costs for director’s and
officer’s insurance coverage in an amount and scope that is customary for a
company of the Company’s size and nature) and hiring of the investor relations
firm); (ii) the release of any of the 2009 Make Good Shares and/or 2010 Make
Good Shares to the Make Good Pledgor as a result of the operation of this
Section 4.7 shall not be deemed to be an expense, charge, or any other deduction
from revenues even though GAAP may require contrary treatment or the Annual
Report for the respective fiscal years filed with the Commission by the Company
may report otherwise; and (iii) expenses (including interests and fees) incurred
as a result of the issuance of debt for an amount no greater than the difference
between $20 million and the aggregate Investment Amount should be excluded.
 Other than as set forth in this Section 4.7(a), no other exclusions shall be
made for any non-recurring expenses of the Company in determining whether any of
the 2009 Guaranteed ATNI or 2010 Guaranteed ATNI have been achieved.  If prior
to the second anniversary of the filing of either of the 2009 Annual Report or
the 2010 Annual Report (as applicable), the Company or their auditors report or
recognize that the financial statements contained in such report are subject to
amendment or restatement such that the Company would recognize or report
adjusted After Tax Net Income of less than either of the 2009 Guarantee ATNI or
the 2010 Guaranteed ATNI (as applicable), then notwithstanding any prior return
of 2009 Make Good Shares or 2010 Make Good Shares to the Make Good Pledgor, the
Make Good Pledgor will, within 10 Business Days following the earlier of the
filing of such amendment or restatement or recognition, deliver the relevant
2009 Make Good Shares or 2010 Make Good Shares to the Investors without any
further action on the part of the Investors.  

 

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(b)

In connection with the foregoing, the Make Good Pledgor agrees that within five
Trading Days following the Closing, the Make Good Pledgor will deposit all 2009
Make Good Shares and 2010 Make Good Shares into escrow in accordance with the
Make Good Escrow Agreement along with stock powers executed in blank (or such
other signed instrument of transfer acceptable to the Company’s transfer agent),
and the handling and disposition of the 2009 Make Good Shares and 2010 Make Good
Shares shall be governed by this Section 4.7 and the Make Good Escrow Agreement.
 The Company shall notify the Investors as soon as the 2009 Make Good Shares and
2010 Make Good Shares have been deposited with the Make Good Escrow Agent.  The
Make Good Pledgor understands and agrees that the Investors’ right to receive
2009 Make Good Shares and 2010 Make Good Shares pursuant to this Section 4.7 and
the Make Good Escrow Agreement shall continue to run to the benefit of each
Investor even if such Investor shall have transferred or sold all or any portion
of its Shares, and that each Investor shall have the right to assign its rights
to receive all or any such shares of Common Stock to other Persons in
conjunction with negotiated sales or transfers of any of its Shares.  The Make
Good Pledgor represents and warrants that it has carefully considered and
understands its obligations and rights under this Section 4.7 and the Make Good
Escrow Agreement, and in furtherance thereof (x) has consulted with its legal
and other advisors with respect thereto and (y) hereby forever waives and agrees
that it may not assert any equitable defenses in any Proceeding involving either
of the 2009 Make Good Shares and/or 2010 Make Good Shares.

 

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(c)

The Company covenants and agrees that upon any transfer of 2009 Make Good Shares
or 2010 Make Good Shares to the Investors in accordance with the Make Good
Escrow Agreement, the Company shall promptly instruct its Transfer Agent to
reissue such 2009 Make Good Shares or 2010 Make Good Shares in the applicable
Investor’s name and deliver the same as directed by such Investor.

(d)

If any term or provision of this Section 4.7 contradicts or conflicts with any
term or provision of the Make Good Escrow Agreement, the terms of the Make Good
Escrow Agreement shall control.

4.8.

Closing Escrow Holdback.  The Company and Investors agree that, from the
aggregate Investment Amounts to be delivered into escrow pursuant to the Closing
Escrow Agreement, at the Closing $450,000 (“Total Holdback Amount”) shall be
deposited into escrow and administered in accordance with the Holdback Escrow
Agreement in order to incentivize the Company to satisfy the following
conditions:

(a)

Independent Board of Directors.  The Company covenants and agrees that no later
than 180 days following the Closing Date, the Board of Directors of the Company
shall be comprised of a minimum of five members (at least two of whom shall be
fluent English speakers who possess experience such that he or she can fulfill
its fiduciary obligations and other responsibilities as a director of a United
States publicly listed company incorporated in the United States), a majority of
which shall be “independent directors” as such term is defined in NASDAQ
Marketplace Rule 4200(a)(15) and a meeting of such full Board of Directors shall
be convened within such 180 days following the Closing Date.  The Board of
Directors shall appoint Board committees, which shall include, but not be
limited to, an Audit Committee, Nominating Committee and Compensation Committee.
 The Company agrees that $250,000 (the “Board Holdback Escrow Amount”) of the
Total Holdback Amount delivered to the Escrow Agent pursuant to the Closing
Escrow Agreement shall remain in escrow post Closing pursuant to and subject to
the provisions of the Holdback Escrow Agreement until such time as the Company
complies with the conditions precedent to its release in accordance with the
Holdback Escrow Agreement.

(b)

Investor Relations Firm.  The Company covenants and agrees that no later than
thirty (30) days following the Closing Date, the Company shall have hired either
of CCG Elite, Hayden Communications, or Integrated Corporate Relations as its
investor relations firm.  Subject to the provisions of this Section 4.8(b), the
Company agrees that $200,000 (the “IR Holdback Amount”) of the Total Holdback
Amount delivered to the Escrow Agent pursuant to the Closing Escrow Agreement
shall remain in escrow post Closing pursuant to and subject to the provisions of
the Holdback Escrow Agreement, it being understood that such IR Holdback Amount
will be used by the Company to pay such firm.  

 

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4.9.

Right of First Refusal.  

(a)

From the date hereof until the one (1) year anniversary of the effective date of
a registration statement registering the resale of all the Shares (the “Trigger
Date”), the Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its or its
Subsidiaries’ equity or equity equivalent securities, including, without
limitation, any debt, preferred stock or other instrument or security that is,
at any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a “Subsequent Placement”) unless the Company shall have first
complied with this Section 4.9.  

(b)

The Company shall deliver to each Investor hereunder a written notice
(the ”Offer Notice”) of any proposed or intended issuance or sale or exchange
(the ”Offer”) of the securities being offered (the “Offered Securities”) in a
Subsequent Placement, which Offer Notice shall (v) identify and describe the
Offered Securities, (w) include the final form of documents and agreements
governing the Subsequent Placement, (x) specify the price and other terms upon
which the Offered Securities are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the persons or entities (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such Investors all of the Offered Securities,
allocated pro-rata among such Investors in accordance with their Investment
Amount relative to the aggregate Investment Amount of all Investors (the “Basic
Amount”), and (b) with respect to each Investor that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Investors as such Investor shall indicate it will
purchase or acquire should the other Investors subscribe for less than their
Basic Amounts (the “Undersubscription Amount”), which process shall be repeated
until the Investors shall have an opportunity to subscribe for any remaining
Undersubscription Amount.

(c)

To accept an Offer, in whole or in part, such Investor must deliver a written
notice to the Company prior to the end of the fifth Business Day after such
Investor’s receipt of the Offer Notice (the “Offer Period”), setting forth the
portion of such Investor’s Basic Amount that such Investor elects to purchase
and, if such Investor shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Investor elects to purchase (in
either case, the “Notice of Acceptance”).  If the Basic Amounts subscribed for
by all Investors are less than the total of all of the Basic Amounts, then each
Investor who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for; provided,
however, that if the Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription Amount”), each Investor who has
subscribed for any Undersubscription Amount shall be entitled to purchase only
that portion of the Available Undersubscription Amount as the Basic Amount of
such Investor bears to the total Basic Amounts of all Investors that have
subscribed for Undersubscription Amounts, subject to rounding by the Company to
the extent its deems reasonably necessary.

 

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(d)

The Company shall have twenty Business Days from the expiration of the Offer
Period above to (i) offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Investors (the “Refused Securities”), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement (as defined below), and
(b) either (x) the consummation of the transactions contemplated by such
Subsequent Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, which shall be filed with the Commission on a Current
Report on Form 8-K with such Subsequent Placement Agreement and any documents
contemplated therein filed as exhibits thereto.  If no disclosure has been made
by the Company by the end of the twenty Business Day period referred to in this
subsection (d), the Subsequent Placement shall be deemed to have been abandoned
and the Investors shall no longer be deemed to be in possession of any
non-public information with respect to the Company.

(e)

In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in this
Section 4.9), then each Investor may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified in
its Notice of Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that such Investor elected to purchase pursuant
to Section 4.9(c) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Investors pursuant to Section 4.9(c) above prior to such reduction)
and (ii) the denominator of which shall be the original amount of the Offered
Securities.  In the event that any Investor so elects to reduce the number or
amount of Offered Securities specified in its Notice of Acceptance, the Company
may not issue, sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been offered to
the Investors in accordance with Section 4.9(b) above.

(f)

Upon the closing of the issuance, sale or exchange of all or less than all of
the Refused Securities, the Investors shall acquire from the Company, and the
Company shall issue to the Investors, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section 4.9(e)
above if the Investors have so elected, upon the terms and conditions specified
in the Offer.  The purchase by the Investors of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Investors of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Investors and their
respective counsel (such agreement, the “Subsequent Placement Agreement”).

(g)

Any Offered Securities not acquired by the Investors or other persons in
accordance with Section 4.9(f) above may not be issued, sold or exchanged until
they are again offered to the Investors under the procedures specified in this
Agreement.

(h)

In exchange for the Company’s willingness to agree to these procedures, each
Investor hereby irrevocably agrees that it will hold in strict confidence any
and all Offer Notices, the information contained therein, and the fact that the
Company is contemplating a Subsequent Placement, until such time as the Company
is obligated to make the disclosures required by Section 4.9(d), or unless it
notifies the Company in writing that it no longer desires to receive Offer
Notices.

 

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(i)

The rights contained in this Section shall not apply to the issuance and sale by
the Company of :

(i)

shares of Common Stock or Common Stock Equivalents to employees, officers, or
directors of the Company, as compensation for their services to the Company or
any of its direct or indirect Subsidiaries pursuant to arrangements approved by
the Board of Directors of the Company (including, but not limited to, any stock
or option plan duly adopted by the Board of Directors of the Company),

(ii)

shares of Common Stock or Common Stock Equivalents issued as consideration for
the acquisitions of or strategic transactions with another company or business
where the primary purpose is not to raise capital for the Company or any
Subsidiary, which acquisition or strategic transaction has been approved by the
Board of Directors of the Company,

(iii)

up to an aggregate of $500,000 worth of shares of Common Stock or Common Stock
Equivalents issued to non-Affiliates in connection with services rendered to the
Company pursuant to arrangements approved by the Board of Directors of the
Company,

(iv)

securities upon the exercise or exchange of or conversion of any Common Stock
Equivalents issued hereunder or to any placement agents in connection with the
transactions contemplated hereby and/or Common Stock Equivalents issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of any such
securities, or

(v)

shares of Common Stock or Common Stock Equivalents issued as part of a primary
underwritten public offering (which shall not include a shelf takedown) with
proceeds to the Company equal to or greater than $20,000,000.

4.10.

Agency.  

(a)

The Investors hereby appoint WLT Brothers Capital, Inc. ("WLT") and WLT hereby
accepts such appointment as agent on behalf of and for the Investors for the
purpose of rendering certain instructions in accordance with the Make Good
Escrow Agreement and Holdback Escrow Agreement.

(b)

WLT shall be entitled in its capacity as agent to take such actions in
connection with monitoring and enforcing the Make Good Escrow Agreement and
Holdback Escrow Agreement as WLT shall determine is reasonably necessary.  WLT
is not charged with any obligation to conduct any investigation into the
financial reports or make any other investigation related to the Make Good
Escrow Agreement and Holdback Escrow Agreement.  In the event of any actual or
alleged mistake or fraud of any Existing Company Entity, its auditors or any
other person (other than WLT) in connection with such financial reports of the
Company, WLT shall have no obligation or liability to any Investor hereunder.  

 

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(c)

WLT is not a party to, and is not bound by or charged with notice of any
agreement out of which the Make Good Escrow Agreement or Holdback Escrow
Agreement may arise.  WLT acts under this Agreement as agent only and is not
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness or validity of the subject matter of the escrow, or any part
thereof, or for the form or execution of any notice given by any other party
hereunder or thereunder, or for the identity or authority of any person
executing any such notice.  WLT will have no duties or responsibilities other
than those expressly set forth in the Make Good Escrow Agreement and Holdback
Escrow Agreement.  WLT will be under no liability to anyone by reason of any
failure on the part of any party hereto or the Make Good Escrow Agreement or
Holdback Escrow Agreement or any maker, endorser or other signatory of any
document to perform such person's or entity's obligations hereunder or under any
such document, including the Make Good Escrow Agreement and Holdback Escrow
Agreement.  Except for this Agreement, the Make Good Escrow Agreement and
Holdback Escrow Agreement and instructions provided by WLT to the Escrow Agent
pursuant to the terms of such agreements, WLT will not be obligated to recognize
any agreement between or among any or all of the persons or entities referred to
herein, notwithstanding its knowledge thereof.

(d)

WLT will not be liable for any action taken or omitted by it, or any action
suffered by it to be taken or omitted, in good faith and in the exercise of its
own best judgment, and may rely conclusively on, and will be protected in acting
upon, any order, notice, demand, certificate, or opinion or advice of counsel,
statement, instrument, report or other paper or document (not only as to its due
execution and the validity and effectiveness of its provisions, but also as to
the truth and acceptability of any information therein contained) which is
reasonably believed by WLT to be genuine and to be signed or presented by the
proper person or persons.  The duties and responsibilities of WLT hereunder
shall be determined solely by the express provisions of this Agreement and the
Make Good Escrow Agreement and Holdback Escrow Agreement and no other or further
duties or responsibilities shall be implied, including, but not limited to, any
obligation under or imposed by any laws of the State of New York upon
fiduciaries.

(e)

The Investors hereby, jointly and severally, indemnify and hold harmless WLT and
its principals, partners, agents, employees and affiliates from and against any
expenses, including reasonable attorneys' fees and disbursements, damages or
losses suffered by WLT in connection with any claim or demand, which, in any
way, directly or indirectly, arises out of or relates to this Agreement or the
Make Good Escrow Agreement or the Holdback Escrow Agreement or the services of
WLT hereunder; except, that if WLT is guilty of willful misconduct or fraud
under this Agreement, then WLT will bear all losses, damages and expenses
arising as a result of such willful misconduct or fraud.  Promptly after the
receipt by WLT of notice of any such demand or claim or the commencement of any
action, suit or proceeding relating to such demand or claim, WLT will notify the
other parties hereto in writing.  For the purposes hereof, the terms "expense"
and "loss" will include all amounts paid or payable to satisfy any such claim or
demand, or in settlement of any such claim, demand, action, suit or proceeding
settled with the express written consent of the parties hereto, and all costs
and expenses, including, but not limited to, reasonable attorneys' fees and
disbursements, paid or incurred in investigating or defending against any such
claim, demand, action, suit or proceeding.  The provisions of this Section shall
survive the termination of this Agreement and the Make Good Escrow Agreement and
the Holdback Escrow Agreement.

 

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(f)

Should any controversy arise among the parties hereto with respect to this
Agreement or the Make Good Escrow Agreement or the Holdback Escrow Agreement,
WLT shall have the right to consult counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties.

(g)

At any time, upon five days written notice to the Investors, WLT may resign and
be discharged from its duties as agent hereunder.  If, by the end of the
five-day period following the giving of notice of resignation by WLT, the
Investors shall have failed to appoint a successor agent, WLT may appoint an
agent who in its good faith judgment shall be satisfactory to perform as agent
hereunder.

ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING

5.1.

Conditions Precedent to the Obligations of the Investors to Purchase Shares.
 The obligation of each Investor to acquire Shares 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 contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date;

(b)

Performance.  The Company 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 it 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;

(e)

Company Deliverables.  The Company shall have delivered the Company Deliverables
in accordance with Section 2.2(a);

(f)

Opinion of Company Counsel.  The Investors shall have received an opinion of
counsel to the Company in form and substance reasonably satisfactory to the
Investors; and

(g)

Termination.  This Agreement shall not have been terminated as to such Investor
in accordance with Section 6.5.

5.2.

Conditions Precedent to the Obligations of the Company to sell Shares.  The
obligation of the Company to sell Shares at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:

 

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(a)

Representations and Warranties.  The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date;

(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 6.5.

ARTICLE 6.
MISCELLANEOUS

6.1.

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 issuance and/or transfer of
the Securities.

6.2.

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.

6.3.

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 5:30 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 5:30
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:   

 

Fashion Tech International, Inc.

Daqing LongHeDa Food Co., Ltd.

No. 2 Wenhua Street

Dongfeng New Village, Daqing

Heilongjiang, China 163311

Facsimile: (86) 459-4609488

Attention:  Chief Executive Officer

 

With a copy to:

 

Thelen Reid Brown Raysman & Steiner LLP

701 8th Street NW

Washington, D.C.

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;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

6.4.

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 subscribed for by
Investors (excluding any Investors that are Affiliates of the Company).  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
Shares.  Notwithstanding anything contained herein to the contrary, a Person
can, without the need for approval by any other Investors to this Agreement,
become a Party to this Agreement by executing and delivering a joinder signature
page hereto before the Outside Date, whereupon such Person will be deemed an
Investor for all purposes of this Agreement and will be automatically added to
Exhibit A hereto.

6.5.

Termination.  This Agreement may be terminated prior to Closing:

(a)

by written agreement of an Investor (as to itself but no other Investor) and the
Company; and

 

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(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 6.5(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 6.5, 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.  

6.6.

Construction; Language, Interpretation. 

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.  The words “including,” “include” and other words of
similar import shall be deemed to be followed by the words “without limitation.”

This Agreement is written in both English and Polish. Where there are
differences of interpretation between the versions, the English version shall
control.

6.7.

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 Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the Investors.

6.8.

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.

6.9.

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 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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6.10.

Survival.  The representations, warranties, agreements and covenants contained
herein shall survive the Closing and the delivery of the Securities for 18
months following the Closing Date.

6.11.

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.

6.12.

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.

6.13.

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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6.14.

Independent Nature of Investors’ 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 Shares 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 Shares or enforcing
its rights under the Transaction Documents.  Each Investor shall be entitled to
independently protect and enforce its rights, including 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.

6.15.

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.

 

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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.

 

FASHION TECH INTERNATIONAL, INC.     By: ________________________ Name: Jinglin
Shi Title: Chief Executive Officer     Only as to Sections 3.1 and Article 6
herein:   FEZDALE INVESTMENTS LIMITED     By: ________________________ Name:
KUNG Yiu Fai Title:     DAQING LONGHEDA FOOD COMPANY LIMITED     By:
________________________ Name: Jinglin Shi Title: Chief Executive Officer    
Only as to Section 4.7 herein:   KUNG YIU FAI  

 

[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:   Investment
Amount: $                                                     Tax ID No.:    
ADDRESS FOR NOTICE   c/o:   Street:   City/State/Post code:   Attention:   Tel:
  Fax:       DELIVERY INSTRUCTIONS (if different from above)   c/o:   Street:  
City/State/Post code:   Attention:   Tel:

 

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